McKelway v. New England Manufacturing Co.

The Hargous mortgage covers seventeen acres of land, in the county of Burlington. It was made to secure $3000, and is dated the 27th November, 1835.

The bank mortgage is next in priority. It embraces the seventeen-acre tract, and all the real estate of the Falls company, both in the counties of Burlington and Hunterdon.

Next is the bank judgment.- The mortgage and judgment together were for the sum of $11,938.87.

Then come the two mortgages of the complainants — one for the sum of $9220.92, the other for $7395.45. These mortgages embraced all the lands of the Falls company in Ilubterdon and Burlington counties, which had been purchased and appropriated by the company, by virtue of their act of incorporation.

It does not appear by the bill that there were any other encumbrances on the real estate of the Falls company, nor that the company owed any debts, except those thus secured by these liens.

The funds in the hands of the receivers, for distribution among the creditors of the company, amounted to $49,751.82. *377The receivers paid out of this sum $24,091.89 in liquidation of the Hargous mortgage and the bank mortgage and judgment. This left a balance in their hands of $25,659.95 — an amount much more than sufficient to satisfy the claims of the complainants. It thus appears by the hill that there is a fund in court, raised out of the property of the mortgagors by a decree of this court, for the very purpose of paying, with other debts of the company, those due to these complainants. Why, then, should the complainants have the relief they now ask? Why should the court grant them aid, to enforce their liens against property in the hands of the grantees of this company, when sufficient money has already been raised to satisfy the complainants’ debt. There is no account given in the bill as to the disposition of the balance of the fund. The bill alleges that the court decreed the priority of the Hargous mortgage, and the bank mortgage and judgment, and ordered them paid, and that they were accordingly satisfied by the receivers. Why the complainants were not paid out of the fund does not appear. If the bill be true, they are entitled to payment, and the fund is on hand for the purpose.

It may he that the fund has been otherwise distributed. But in deciding the cause, as it is before me on a general demurrer to the bill, I must take the case as the complainants have made it. The facts as stated are to be considered as true, and no extrinsic circumstances of explanation can be considered, either on behalf of the complainants or defendants. In this view, the complainants themselves show that it would be inequitable to permit them to enforce their claims against other lands, when sufficient land of the mortgagors have already been sold, under a decree of this court, to satisfy their mortgages.

But there are other difficulties, apparent by the bill, to prevent the complainants obtaining the relief they seek.'

All the mortgages in question cover the seventeen-acre tract in the county of Burlington. Subsequent to the execution of these mortgages, the Hew England Manufacturing Company, by several mesne conveyances under the Falls *378company, became seized of a small portion of this tract, Xenophon J. Maynard of another small portion, and John Sheppard of another. ' The fund in the hands of the receivers was made out of that portion of the seventeen acres not conveyed to these grantees, and out of other real (¡state of the company in Burlington and Hunterdon counties, covered by the bank’s and complainants’ mortgages, but not covered by the Hargous mortgage. This fund having been raised in part out of property, which the complainants’ mortgage did embrace, and the Hargous mortgage did not, the complainants insist an equity attaches in their favor to enforce the Hargous mortgage against the land held by “The New England Manufacturing Company,”. Sheppard and Maynard.

It is true the principle is, as the complainants insist, that where two creditors having liens, the one on two funds of a debtor and the other on one of them only, the creditor having the lien on the two will, in equity, not be permitted to invade the common fund until he has exhausted the other. It is the application .of this principle that the complainants seek by their bill to enforce} and unless it can, in some way, be made applicable to the case, this suit cannot be maintained.

How is it applicable, as between the complainants and the Hargous mortgage ? The complainants insist the Hargous mortgage was paid out of a fund which belonged to them, and which was the proceeds of land in the county of Hunterdon. But how does this appear ? The Hargous mortgage had the first lien on the fund which was realized from the sale of that part of the seventeen acres sold by the receivers. There is no allegation in the bill that the portion of the seventeen acres so sold did not bring enough to pay off this mortgage. If it did, then the money taken out of the common fund to pay this mortgage will, in equity, be taken as that jjortion of the fund realized from the seventeen acres. To obviate this difficulty, the complainants amended their bill. But the amended bill is as deficient in this particular as the original bill. By their *379amendment, the complainants allege, “that the residue of the land belonging to the said ' The Trenton Delaware Falls Company/ in the county of Burlington, after the sale and release of the said lots so sold to the said David S. Brown, William E. Hansen, and John C. Benson, and Xenophon J. Maynard, &c., were not sufficient to pay and satisfy the said mortgage to the said Peter A. Hargous and the said two mortgages to the said 'The Trenton Banking Company/ with the interest due thereon at the time of the sale and release of the said lots respectively.” But the question is not whether, at the time of the sale and release of those respective lots by " The Trenton Delaware Falls Company,” the residue of the company’s land in the county of Burlington was of sufficient value to satisfy the Hargous and bank mortgages; but was the portion of the seventeen aeres sold by the receivers, of sufficient value, or did they raise out of it enough to pay the Hargous mortgage ? Unless the complainants show the negative of this inquiry on the face of their bill, they have no equity.

As to the equities existing between the bank mortgages and the mortgages of the complainants. These mortgages all covered the same property. The bank mortgages were entitled to priority of payment, out of the funds in the receivers’ hands. They have been paid, without resorting to the lands conveyed to “ The New England Manufacturing Company,” Maynard and Stryker. The complainants ask that they may enforce the bank’s mortgages for their benefit against the lands held by these grantees, or that their equities may, in some way, be established, upon the ground that as between the bank mortgages and their own, the former should have been first satisfied out of these lands. But why ? All the complainants now ask is that they may have the benefit of these lands to satisfy their mortgages. Why is “ The Trenton Banking Company ” brought into court for that purpose ? The complainants’ mortgages cover this land, as well as the bank mortgages; and if the land is liable at all for the complainants’ debts, it must be appropriated for the purpose, by enforcing their own mortgages. It is no *380ground of complaint against the bank, that it has left a fund untouched, upon which the complainants, as well as they, had liens in common. This was to the complainants’ benefit. By their original bill, the complainants placed themselves upon this equity; they alleged that their mortgages were not liens on the land in the hands of the grantees of the Falls company, because the mortgages had not been recorded in the county of Burlington, where the lands were located. With regard to their mortgages, therefore, they insisted that, with the bank mortgages, they were liens upon the fund in the hands of the receivers, a fund common to both as creditors ; but that in addition, the bank mortgages were liens upon the lands held by the grantees before named, and, in equity, these lands ought to have been appropriated to pay the bank mortgages before the common fund was resorted to. But by their amendment to the original bill, the complainants allege that the grantees of “ The Trenton Delaware Falls Company ” had notice, both actual and constructive, of the complainants, mortgages. How, then, can the complainants claim the equitable interference of this court for their relief, upon the ground that their mortgages were not liens upon the land in question ?

I am aware that all these amendments were made upon the suggestion of the late Chancellor, after he had sustained a general demurrer to the original bill. But these matters are now submitted to my decision, and I must dispose of them according to my best judgment. I do not dissent from the opinion of the late Chancellor, that the original bill was deficient for want of equity. But I do not think any amendments could help it.

The demurrer must be sustained, and the bill dismissed, with costs.