Schock v. Lesley

The papers establish this state of circumstances, surrounding the parties at the time ofthe contract out of which this litigation grows,and which is proper to be considered in ascertaining what that contract was. Dr. Lesley had a farm in Kent county, which he was willing to sell for $4500. Schock had a debt to that amount due him from John Fleming, secured by the bond of Fleming and a mortgage by Fleming and wife of a farm in Sussex. Lesley was willing to take that debt for his farm, but required an additional security for part of it. Schock agreed to mortgage the Kent farm for $1500, in order to secure payment of the first three installments of Fleming’s mortgage; and Lesley agreed he should have the benefit of what could be collected from Fleming on these first three installments, to indemnify him for what he should pay on his mortgage, and that he should have the use of these securities, one or both, to enforce the payment of these three installments from Fleming. In pursuance of this agreement a letter of attorney was made by Lesley, *310authorizing Schock to collect the said first three installments due or to become due on the Fleming mortgage. After that, the balance was to be held by Lesley for his own use, at his risk. And here commences the first dispute. On the part of Dr. Lesley it is said that this power of attorney docs not extend to the Fleming judgment, does not even mention it; and that the agreement did not extend to it; and it is argued by his solicitors (with great force, if their premises are correct) that, unless this is so by the terms of the agreement, he cannot be taken to have intended to give Schock the power to execute the judgment against the mortgaged farm, for that would remove the lien of the mortgage. On the othei; side, it is said that the power to collect the first three installments of the Fleming debt includes the use of the judgment security as well as the mortgage; that this was the very matter about which they were dealing ; that without it Schock had no power to collect the installments, since he could not sue on the mortgage, which was not due; and that an execution of the judgment, even against the mortgaged farm, to collect these installments would not remove the mortgage lien as to the balance.

This, therefore, is an important consideration in ascertaining the extent of the agreement.

Schock mortgaged his farm to guaranty to Lesley the payment of $1500 and interest, being the first three installments of the Fleming debt; and Lesley agreed he should have these installments to indemnify himself, if they could be collected, aud that he should have power to collect them from Fleming. He held two securities, viz : a mortgage, recorded in February, 1857, not yet due, and also a judgment, entered in March, 1857, on which one or more of the installments were due. How, on principles of general equity independently of express agreement, Schock, being *311the surety of Fleming to the amount of these three installments, would have the right to use all the securities in Lesley’s hands; and by the contract Lesley agreed he should have some power to collect them from Fleming for his own indemnity.' But, he could give no power to use the mortgage for this purpose until it was due; and all this bargaining about giving such power and the making of the letter of attorney itself was about nothing and useless unless it extended to the judgment. With that construction it executed precisely the object of the party, unless such a use of the judgment removed the mortgage lien for the residue. It secured to Dr. Lesley $1500, the first three installments, or their equivalent, from Schock’s mortgage, gave Schock his indemnity, and left Lesley his lien under the Fleming mortgage for the balance.

The effect of a sale of the Fleming land under the judgment is then proper to be considered.

' A mortgage is merely a security for payment of the mortgage money. This is granted. It is a specific lien on the mortgaged premises for that purpose, while the judgment security is a general lien on all the land of the debtor. But the mortgage, though a security for the payment of money, is a security by way of conveyance of title to land, giviugthe mortgagee the power,through a purchase,to complete his title to the land. Before forclosure the mortgagor has only the right to redeem, on payment of the mortgage money—a right so valuable and so distinct that he is in some respects, while in possession, regarded as the owner of the land. But his right is only an equity of redemption. By the terms of the mortgage he admits this tobe the position of himself and the mortgagee in relation to the land; and this mere security for the payment of money,as it is almost sneeringly called, is after all a serious dealing with the title, and carries with it the property unless the money is paid.

*312The judgment against Fleming bound all the title he had in any land in Sussex county—this, as well as other land. His title to this was an equity of redemption only— a right liable to be sold by execution of this judgment; and when Lesley agreed to give SchockthejDowerto “ collect” these installments of the assigned mortgage he could have referred to no other means of executing that power than by an execution of the judgment. On such an execution the sheriff would sell only the right which Fleming had, which was a right to have the land back on payment of the balance of the mortgage money, which is usually called selling subject to the mortgage.

I note the fact, though I do not wish to lay stress upon it, that the Fleming mortgage is older than the judgment; and it is the general rule that land sold on a judgment is subject to prior mortgages, and is so sold. But I wish to decide the naked question raised in this cause, that land sold on a judgment accompanying a mortgage, for one installment of the mortgage money, is sold subject to the remaining installments of the mortgage. A different opinion destroys the value of a double security for the payment of mortgage money. It is the constant practice to sell laud and secure the purchase money by a bond payable in installments and a mortgage of the premises at the same time. The installments can be collected on the bond, as they fall due. If they cannot be thus collected, without destroying the. mortgage lien for the balance, it were better- not to have the bond.

A case illustrating this point occurred recently in this county. A. sold to B. a farm for $1800, and took security by bond and mortgage. The payments were fixed atlong intervals. A. executed the bond for the first installment of $300, and the land sold (supposed to be subject to the mortgage) for $35. Ifit were not so subject, the purchaser *313would take the farm for $35, and the mortgage security, not yet due, would be worthless.

It is important, therefore, for it to be known whether the principal security on which the people of this State usually rely for their large investments is any security at all, binding on the land mortgaged or pledged to secure it, or whether it can be defeated and its value destroyed by the collection of any other debt of the mortgagor or even by the enforcement of another security for a part of the same debt.

Let decrees be entered in accordance with this opinion, that is, dismissing Lesley’s bill; and in the case of the bill filed by Schock restraining Lesley from revoking his power of attorney, or otherwise interfering with Schoclc’s right to collect by legal process the first three installments of the Fleming mortgage and judgment; Lesley to pay the costs in both cases.

These decrees were reversed by the Court of Errors and Appeals, at the June T. 1865. The appellate Court considered that, upon the true construction of the power of attorney given by Lesley to Schock, the latter was authorized to collect the first three installments of the Fleming mortgage and judgment only by receiving voluntary payments from Fleming, and not by legal process upon the mortgage or judgment. See 3 Houston’s Del. Repts., 130.