The La Farge Fire Insurance Company v. Bell. 14 of the small lots on the map, Nos. 81 to 94 inclusive. The other was for $4000, and was upon all of the original lots 33 and 34, to which Bell then held title, that is, all of those lots except the subdivision lots Nos. 95, 96, 97, 98, which had then in fact been sold and conveyed to Bancker. In March, 1854, Bancker and wife executed a mortgage to the defendant John L. McKnight, for $2000, upon these lots Nos. 95, 96, 97, 98, and also upon another lot not part of this property, and worth about $500. The plaintiffs have taken an assignment of Bell's first mortgage to Candee, and have brought this suit for the foreclosure of all three of the mortgages made by Bell, but of course the rights: of all of these parties are to be considered as if these mortgages were all represented by their original holders. The amount due on these various incumbrances is not in dispute, and the only question in the case, or which was argued at the hearing, is raised by the prayer of the complaint, and the answer of the defendant McKnight, and relates to the order in which these various lots of land should be sold or their proceeds applied to satisfy those incumbrances. The defendants Bancker and McKnight claim that as the lots Nos. 95, 96, 97, 98, were aliened in fact before any other charge or conveyance had been made of the residue of the property by Bell, these lots should not be sold or their proceeds applied to pay the original Candee mortgage, except to the extent of the $640 expressly charged upon them by the deed to Bancker, until all the residue of the property covered by that mortgage has first been sold and applied to its payment. And this would unquestionably be the rule under the well settled principle of inverting the order in which the property has been aliened, unless that rule, or its application between different subsequent alienees depends, not merely upon the fact of the prior alienation of one parcel of the mortgaged premises, but also upon notice or knowledge of such alienation by subsequent grantees or mortgagees! of the whole or any portion of the residue. I do not think the plaintiffs can be charged with constructive notice of the deed of Bell to Bancker, because Bell was at the date of that deed, and at the date of the mortgages made by him The La Farge Fire Insurance Company v. Bell. to the plaintiffs, a director of the company. Nothing like notice in fact is shown. Bell attended but two meetings of the board, one in May, 1853, and one in January, 1854; and it is not pretended that he gave the company, or any of its officers, actual notice of his conveyance to Bancker, which was made after the former and before the latter of these meetings. And it must be observed that the mortgages, as to which the plaintiffs are to be affected with notice of this conveyance of Bell, were made by him to them, the loan was obtained by him from them, and he was acting for himself directly and not for them, in these transactions. And if his position as a director could make him the agent, or rather identify him entirely with the plaintiffs in such sort as to charge them with construetive notice of all the facts with which he was personally acquainted, as to the title to lands in which they had any interest, in any case, it could not be so when he did not become concerned as their especial agent, or transact business in their behalf. Most clearly it cannot be the case where the facts concerned his own private affairs, and the transaction was one in which he was dealing with the company as a third party on his own behalf, and acting for himself with and against them. The deed from Bell to Bancker was not recorded until after the mortgages from Bell to the plaintiffs had been put on record, and no possession, or notice in fact of that conveyance, is alleged in the case, except as inferred from Bell's relation to the company; and therefore the question to be determined is whether the defendant Bancker and his mortgagee McKnight are enti tled, without any proof of notice of the deed from Bell to Bancker to the holders of these mortgages on these two parcels of the property, to have all the lots not embraced in the conveyance to Bancker, including the lots covered by these second mortgages, sold, before resorting to Bancker's property to satisfy the first mortgage, according to the ordinary rule when all the conveyances are recorded or known, or when one conveyance has been made by the mortgagor. This involves the question how far the registry act applies to the case; and whether the recording of this deed of lots Nos. 95, 96, 97 and 98, if it had been made The La Farge Fire Insurance Company v. Bell. in season, would have been notice to the subsequent grantees or mortgagees of any of the residue of the property, so as to postpone their equities to those growing out of the prior conveyance of these lots. Of course, as between the mortgagor and his grantee of a portion of the mortgaged premises, the rule is well settled. There no question of notice can arise, and all that is to be done is to apply the equity which grows out of the relation which the parties necessarily bear to each other. But the right which a grantee with warranty of a portion of the mortgaged premises has to have the mortgage satisfied first out of the part remaining unsold, is an equitable and not a legal right, and therefore any rights of the holder of the first mortgage on the whole premises are not affected, nor are any obligations imposed on him unless he has notice of the subsequent partial alienation. The holder of the first mortgage has two funds for the payment of his debt-the portion of the mortgaged premises sold and conveyed, and the residue remaining in the mortgagor-to either of which he may resort. The mortgagor having aliened a part, covenanting to protect his grantee against the mortgage, that grantee becomes a surety for the mortgage, as to the portion of the premises conveyed to him. He has a right, therefore, as against the mortgagee, to insist that he shall not deal with the lands not aliened which are by the covenant of the mortgagor with him the primary fund for the payment of the debt, so as to increase his own liability or diminish that fund, provided however the mortgagee have notice of the facts out of which these equities arise. A release, by the mortgagee, of all or any of the property remaining in the mortgagor, after he has had notice of an alienation of a portion, is a discharge, pro tanto, of that portion of the premises. (Guion v. Knapp, 6 Paige, 42. Stuyvesant v. Hall, 2 Barb. Ch. 151.) But it never operates as such a discharge without such notice. If, in this case, the plaintiffs or Candee had released a portion of these premises after the conveyance to Bancker, or had covenanted not to resort to any such specified portion until after the residue, including the lands so sold and conveyed, had been applied and The La Farge Fire Insurance Company v. Bell. exhausted, still that would not have operated to discharge Bancker, or the lots purchased by him, unless it had been done by the mortgagee after notice or with knowledge of the fact of the conveyance to Bancker. Now at the time of the execution of the two mortgages hy Bell to the plaintiffs, in December, 1853, neither the plaintiffs nor Candee, then the holder of the prior mortgage, knew that the deed of the four lots had been made to Bancker. If, therefore, on that day Candee had released from his mortgage, to the plaintiffs, the lots included in their two mortgages, or had coveInanted with them that he would not seek to collect his mortgage from their lots until all the residue of the lands had been exhausted, it is plain that Bancker could never have complained of such a transaction, nor avoided the effect of it either in respect to the original mortgage of Candee or the subsequent mortgages to the plaintiffs on the lands included in them. It is true this was not done in form, but the plaintiffs took their two mortgages, knowing that the original mortgage to Candee covered much more land, in addition to that on which their security rested, and supposing that all that land remained subject to that mortgage. They therefore acted upon the faith that equity would compel the holder of the larger mortgage to resort to all the residue of the premises covered by his mortgage before resorting to that on which they loaned their money. They advanced the money, took their mortgages, and recorded them so as to give the holder of the first mortgage at least all the notice which their registry would afford, of their rights so as to affect his conscience, and create the equity of parties standing in the relation of sureties with reference to the residue of the lands. They thus became in effect sureties for the mortgagor, as to the residue of his lands, and they became such sureties without notice of the existenee of any other suretiship or similar equitable rights of any other party. Thus they obtained an equitable right and created an equitable charge of that nature upon the residue of the lands included in the first mortgage, eo instanti. The defendant McKnight, who stands in the shoes of Bancker, by a mortgage executed to him by Bancker, sets The La Farge Fire Insurance Company v. Bell. up an equitable right of precisely the same nature as this by virtue of the alienation by Bell to Bancker. Both Bancker and the plaintiffs occupied the position of sureties for Bell, and if either should be called to pay Bell's debt, or any part of it, out of any portion of this property belonging to him, he would be able to call upon the other for contribution, unless one of them possesses a prior equity to the other. (Gill v. Lyon and others, 1 John. Ch. 447.) That priority depends not only upon the actual date of the conveyances under which they hold, but also upon the knowledge, by a notice to them respectively at the time of these conveyances, of the true state of facts and of the equities arising out of them. Any other rule would produce the most serious injustice. Second mortgages upon portions of mortgaged premises are rarely taken without considering and relying upon the equity which will arise in favor of the second mortgagee to have the first mortgage charged upon the residue of the property; and if these equities could be defeated or postponed by secret conveyances, the greatest hardship and injury would take place. The counsel for McKnight argued, with great ingenuity and ability, that the case was not within the recording act, because the unrecorded deed to Bancker was not a conveyance of the same or any part of the same premises included in the two mortgages made by Bell to the plaintiffs, (see 1 R. S. 756, § 1,) and therefore that a record of Bancker's conveyance would not have been notice to the La Farge Insurance Company, and the failure to record it could not prejudice Bancker or his grantees or mortgagees. If I am right in the view which I have taken of this case, the only result of the learned counsel's argument upon the registry act would be to show that in all cases between subsequent grantees of property foreclosed by a prior mortgage, actual notice is requisite to create or enforce these equities of purchasers among themselves, and the record of the mesne conveyances will not suffice in its place. I think, however, this would not be a proper view of the recording act. The obvious answer to the defendant's argument is that it is VOL. XXII. 9 |