Dyson v. Simmons

Alvey, J., delivered the opinion of the Court. The bill in this case was filed by the appellee as assignee of Elizabeth A, Simmons, of a mortgage and single bill, for $2500; the single bill being executed by John L. T. Jones, and the mortgage by the said Jones and his wife; both instruments bearing date the 19th of April, 1871. The mortgage was in all respects duly executed and acknowledged by the mortgagors, and the consideration sworn to by the mortgagee ; and it was filed for record within the time prescribed by law, and actually recorded, in Montgomery County, where the land mortgaged is situate; but the acknowledgment and affidavit having been made before a justice of the peace in Frederick County, there was an omission to obtain the clerk's certificate of the official character and qualification of the justice, as required by the Code, Art. 24, sec. 3. The ²¹⁴ mortgagor, Jones, being largely indebted on contracts made both before and since the date of the mortgage, upon which a large number of judgments have been recovered ■subsequent to that date, the present bill is filed to enforce the mortgage, thus ineffectually recorded, upon the footing of a contract, and as an equitable charge upon the land embraced in it.

This is resisted by the judgment creditors, upon the ground that their judgments have created liens upon the land, and that such liens cannot be displaced or interfered with by a prior unrecorded or equitable mortgage, which should only be enforced as against the mortgagor, and his ordinary or non-lien creditors, existing at the date of the mortgage. Two questions arise: 1st, whether the lien of a judgment can be displaced or subordinated to that of a prior equitable mortgage or charge ? and, 2ndly, if such mortgage or charge can be enforced as against judgment liens, in what order are the creditors to be affected thereby ? 1. The principle is now so well settled, that it would seem to be beyond all question and controversy, that if a party makes a mortgage, or affects to make one, but it proves to be defective, by reason of some informality or omission, such as failure to record in due time, defective acknowledgment, or the like, though even by the omission of the mortgagee himself, as the instrument is at least evidence of an agreement to convey, the conscience of the mortgagor is bound-, and it will be enforced by a Court of equity. Taylor vs. Wheeler, 2 Vern., 565 ; Mestaer vs. Gillespie, 11 Ves., 621, 624; Price & Bevan vs. McDon ald, 1 Md., 414 .

As against the mortgagor himself this proposition was never regarded as questionable, (Carson & Vickery vs. Phelps, 40 Md., 73 ,) but as against judgment creditors of the mortgagor, obtaining their judgments subsequent to the date of the mortgage, there was formerly some dispute. The question, however, both in England and in this State, has been long since settled; and the ²¹⁵ cases, without an exception, so far as we are informed, hold that a judgment, being but a general lien, must be subordinated to the superior equity of a prior specific lien, created by a defective mortgage or conveyance. Judgments create liens only because the land is made liable by statute to be seised and sold on execution; (Miller vs. Allison, 8 Gill & John., 38 ; Combs vs. Jordan, 3 Bland, 284 , 298-310; Eschbach vs. Pitt, 6 Md., 77 ; Tayloe vs. Thompson, 5 Pet., 358 ; ) but such lien secures to the creditor neither jus in re nor jus ad rem: Ex parte Knott, 11 Ves., 609, 617; Lacy vs. Fugle, 2 Phill., 442 ; Conrad vs. The Atlantic Ins. Co., 1 Pet., 442 -3.

At the time of the execution of this mortgage the mortgagor had full and complete power of conveying or charging the land, provided it was bona fide as against existing creditors, and the general principle is, that if a party has power to charge certain lands, and agrees to charge them, in equity he has actually charged then ; and a Court of equity will enforce the charge. Alexander vs. Ghiselin, 5 Gill, 187 ; Rolleston vs. Morton, 1 Dr. & War., 195. And the fact that judgments have been subsequently recovered against the party agreeing to convey or charge the land, will in no manner defeat the right to have the agreement executed. As has been very properly said, a judgment has relation to the time when it is entered up.

It will not affect any bona fide conveyance made for value before that time, for it only attaches upon that which is then, or after-wards becomes the property of the debtor. The fact that the debtor may retain the property at law does not change the principle upon which a Court of equity proceeds. If the propert) is charged in equity before the entry of the judgment, the judgment will not affect such charge. Whitworth vs. Gaugain, 1 Phill., 728 , 729.

The judgment creditor therefore stands in the place of his debtor, and he can only take the property of his debtor, subject to the equitable charges to which it was justly liable in the ²¹⁶ hands of the debtor, at the time of the rendition of the judgment, — except in those cases where the principle may have been modified by express statute. Taylor vs. Wheeler, 2 Vern., 565; Finch vs. Earl of Winchelsea, 1 P. Wms., 277, 282; Sir Simeon Stewart’s case, cited in Burn vs. Burn, 3 Ves., 573, and stated and approved in Alexander vs. Ghiselin, 5 Gill, 185 . In no case to he found in the boots is the question more directly and strongly presented than in that of Whitworth vs. Gaugain, 3 Hare, 416. In that case, an equitable mortgagee of lands was held to be entitled in equity to enforce his charge on the lands in priority to a creditor of the mortgagor, who, without notice of the equitable mortgage, had, subsequently thereto, recovered judgment against the mortgagor, and obtained actual possession of the lands by writ of elegit and attornment of the tenants.

A stronger case than that could hardly he stated ; and yet it was held, upon full review of the cases, that, notwithstanding the judgment had been executed to the extent of obtaining actual possession of the land, under the elegit, the equitable mortgagee had the superior equity, and, consequently, was entitled to priority. That case was affirmed on appeal, upon full review of the authorities by the Lord Chancellor, ( 1 Phill., 728 ,) and it has been fully approved in subsequent cases. Abbott vs. Strattan, 3 Jones & Lat., 614; Eyre vs. McDowell, 9 H. L. Cas., 619, 642; Beavan vs. Lord Oxford, 6 De G. M. & Gord., 507. These cases are the stronger, as they involve the consideration of the Act of 1 & 2 Vict., ch. 110, as applicable to England, and the similar Act of 3 & 4 Vict., ch. 105, as applicable to Ireland, which enacted that a judgment shall operate as a charge on all lands of which the judgment debtor shall, at the time of entering up judgment or afterwards, be seized or possessed, or over which such judgment debtor shall, at the time of entering up judgment or afterwards, havo any disposing power which he might, without the consent ²¹⁷ of any other person, exercise for his own benefit.

These statutes, it was decided, contained nothing to vary the rule as to the equities to which the property may be subject. For, as said by Lord Cranworth, in Eyre vs. McDowell, supra, the debtor could not have appropriated the land in question to the liquidation of his debt, without first satisfying the claim of his equitable mortgagee, and the Legislature did not intend to enable the creditor by judgment to take what his debtor could not give. This well established principle of the English cases has been fully adopted in our owm; and the cases to which we are about to refer are, we think, quite decisive of the question under consideration. The first of these is the case of Hampson vs. Edelen, 2 H. & J., 64 , where there was a contract of purchase, and a part only of the purchase money paid; it was held, that a judgment recovered by a third person against the vendor, in the interval between the making the contract and the full payment of the purchase money, or the conveyance of the estate, could not defeat or impair the equitable interest of the vendee ; and that the judgment constituted no lien on the land to affect the right of the cestui que trust, the purchaser.

Then we have the case of Repp vs. Repp, 12 Gill & John., 341. There a father deeded his land to his son, and took from the latter an agreement in writing, though neither acknowledged nor recorded, to pay certain amounts to his other children. For these amounts, the son executed his bonds, and left the father in possession of the land. The son afterwards became insolvent, and deeded the land to his insolvent trustee for the benefit of his creditors, among whom were various judgment creditors.

On this state of case, it was held, that a lien existed for the payment of the bonds out of the proceeds of the land, as against the son, his trustee, and judgment and general creditors. And in the still later