BIRD, V. C.
(Syllables by the Cowrt.)
On bill to foreclose mortgage.
William H. Morrow and Herbert Gedney, for complainant. Henry S. Harris and J. M. Roseberry, for defendants.
BIRD, V. C. This bill is filed to foreclose a mortgage. The mortgagor, D. K. Howell, resided in this state, and was the owner of two farms, one containing 105 acres, and one of 102 acres. He gave a first mortgage on these farms to Albert Wells, who then resided in the county of Orange, in the stateright than to keep safely these assets as a protection for the bondsmen against all loss by the default of Baldwin, the administrator. Very soon after this transaction, in the month of February, 1872, D. K. Howell, the mortgagor, became anxious to secure further loans upon his said two farms, and for that purpose made application to the Mutual Life Insurance Company of New York for a loan of $10,000. It was discovered, of course, that this Albert Wells mortgage of $4,500 was upon the property, and also that there were two other mortgages, one to John A. Miller, dated March 20, 1868, for $5,000, including both farms, and one to McKane, dated March 25, 1870, for $5,000. The Wells mortgage, being the one now in dispute, was certainly a first lien on the land now sought to be sold, if not also on the tract covered by the other two mortgages. Whether it was prior on the other tract or not, with respect to all liens, does not satisfactorily appear. All of these incumbrances the insurance company required to be canceled before it would make any loan. The chief actor in procuring this loan and the pretended cancellation of these mortgages was John E. Howell. It appears that he was no relation of David K. Howell, who had given said mortgages. This John E. Howell had secured the loan of the $4,500, on the mortgage now in suit, from Albert Wells. Beyond all question, he knew of the arrangement between John Baldwin, as administrator of George Nyce, deceased, and Edwin A. Van Sikle, Baldwin's attorney, and also of the arrangement between Baldwin and his sureties as to the manner in which they were to be protected. About the 1st day of April, 1872, this John E. Howell, in order to assist the said David K. Howell in carrying out his purpose to secure a first lien on one of said farms for $4,000 to the insurance company, and on the other for $6,000, had the said D. K. Howell execute a mortgage to said insurance company, on the farm now in question, for $4,500, which was afterwards, on —theday of March of the same year, recorded. At the time of the recording of this mortgage, as will be observed, all the mortgages above named were uncanceled, and so remained until the 20th day of July, 1872. Before this, however, and in the month of February in that year, this John E. Howell procured, to be executed by said D. K. Howell, a mortgage on the "Hope Farm," as it is called, being one of the farms mentioned in the complainant's mortgage, for $4,000, made to secure a bond given to the said insurance company, and also another mortgage upon the other, the Frelinghuysen farm, made to the same company, to secure a bond for $6,000. Both of these mortgages were recorded in the month of March, 1872, as the mortgage in question was sent to the clerk's office by the said John E. Howell for cancellation in July following. After such cancellation it is in evidence that the said company advanced the sum of $10,000 to the said David K. Howell. What became of that money does not appear. There is not the slightest pretense that any of it was applied, in any way, to the benefit of the estate of George Nyce, deceased.
It should be noted that the mortgage which was so given by the said D. K. Howell about April 1, 1872, and which was intended to operate as a substitute for the original Alfred Wells mortgage, included the said Hope farm, and also pretended to include 40 acres of other land, which, as will hereafter appear, was said to be valuable timber land. But the truth seems to be, if there be any such 40 acres, it has never yet been discovered. At the time of these transactions between the Howells and Van Sikle and the insurance company, Van Sikle and John E. Howell resided at Goshen, in the county of Orange, in the state of New York, and John Baldwin, the present complainant, resided in Pike county, Pa. There is no evidence to satisfy me in the slightest degree that Baldwin had any knowledge of these transactions at the time of their completion. The testimony leads me to the conviction that he was wholly ignorant of what had been done until a month afterwards. I am fully satisfied that when he first obtained any information respecting the subject-matter, he was not only not fully informed, but was actually misled.would justify him in the belief that he had a right to bid for Baldwin. Whatever instructions he may have had from other sources before telegraphing Baldwin, it cannot be said that he could bind Baldwin by such instructions, when Baldwin, if bound at all by anything in the case, was present as the principal, prepared to speak and act for himself. The premises in dispute were offered for sale that day; but an adjournment was made, resting on the bid of Mr. Anderson. Whether all the bidding was made in presence of Baldwin or not is a disputed point, but in the view which I take of the case this brunch of it is of no great importance. He admits that he was present in the room where he supposes the bidding took place, but says that he was outside of the building at the time the bidding was made, and at the time of the adjournment. He also says that he was informed of the bidding and of the adjournment. The adjournment was made on the bid of Mr. Anderson. At the expiration of the time fixed for the completion of the sale, Mr. Anderson and Isaac L. Howell were present. Baldwin was not there. It was arranged that Howell should accept the property at Anderson's bid, and it was accordingly struck off to him. The sheriff executed his deed to Howell. About $30 were realized above the amount due to the insurance company, but there is no proof that any of it ever reached the hands of Baldwin. At that time Baldwin had not seen this cancellation, nor had he heard of it; nor did he know anything about it until the year 1882, when he procured a search of the title of the lands described in the bill to be made. The bill on which the present suit rests was filed in October, 1886.
Thus, in brief, have I given the facts by which this case must be judged, independently of the question which arises from the alleged cancellation of the mortgage. It will be seen that the loss to the estate which Baldwin represented was the whole amount due on the mortgage, no evidence being produced to show that he ever was paid one dollar. Under these circumstances, who shall suffer the loss? Shall the administrator of George Nyce, the present complainant, or Isaac L. Howell, the purchaser at the sale under the foreclosure of the mortgage given to the insurance company, or his grantee, one of the defendants, suffer this loss? On this branch of the case, Baldwin and the purchaser cannot be said to stand on equal equities. In this particular the purchaser has the advantage, in that he did nothing towards the surrender and cancellation of the Wells mortgage, while it was undoubtedly so surrendered and canceled by the aid and connivance of Baldwin's attorney, Edwin A. Van Sikle. By placing this mortgage in the hands of Van Sikle, he made it possible for him to commit such a fraud. It is true, Baldwin did not trust Van Sikle, as his attorney, for any such purpose, but only as the simple custodian of the assets, for another particular object; but, nevertheless, by so doing he gave him the power to use them as he did, and so through the instrument which Baldwin had selected this wrong was committed. There is nothing in the case to show that the purchaser had any knowledge of this wrong at the time he took his deed from the sheriff. See Cooper v. Headley, 12 N. J. Eq. 48; Van Hook v. Manufacturing Co., 5 N. J. Eq. 633; Putnam v. Clark, 29 N. J. Eq. 412; Westervelt v. Scott, 11 N. J. Eq. 80; Harrison v. Johnson, 18 N. J. Eq. 420, 428, 430, 431. Although this case was reversed, on appeal, to the extent here cited, it was not disturbed. As I think Baldwin chargeable with the misconduct of Van Sikle, so also I am constrained to conclude that he is chargeable with negligence from and after the sale on the 30th day of March, 1876. On that day, and for several years thereafter, he acted like a man who felt that he was inextricably bound in toils formed with his own consent, or who had such a total disregard of his interests and duties as to be moved by no considerations to look after them, or to so much as to inquire concerning them. Passing by the preceding period, and taking it for granted that his confidence in Van Sikle was unshaken up to the time of the sale, how is it possible that he could rest in any sort of security after thatabsolute surprise and confusion when he reached the place of sale, that he ought not to be subjected to the ordinary rules of estoppel, that it may be I am required to carry the discussion to the point which is admitted to be of deep interest and of great public importance. Hence I am led to inquire whether the cancellation of the Wells mortgage, made by the clerk, was authorized, and is a protection to the purchaser, or not. At this stage of the dispute there seems to be some ground on which to challenge the claims of the purchaser to a superior equity to the complainant. The many cases which are to be found in our reports, in which it appears that the aid of the courts have been invoked to set aside illegal cancellations, need only to be mentioned to show how important the question is. Have the requirements of the statute been complied with? The language is: "When any mortgage, registered as aforesaid, shall be redeemed, paid, and discharged, it shall be the duty of the said clerk, on application to him made by the mortgagor or the person redeeming, paying, and discharging the said mortgage, and producing to him the said mortgage canceled, or a receipt thereon, signed by the mortgagee or his executors, administrators, or assigns, to enter in a margin to be left for that purpose, opposite to the said abstract, a minute of the said redemption, payment, and discharge, which minute shall be a full and complete bar to and discharge of the said entry, registry, and mortgage." Revision, p. 707, § 23. From this it will be seen that the mortgage must be paid, redeemed, or discharged; that the application to have it canceled must be made to the clerk by the person redeeming, paying, or discharging it; and that he must also produce the mortgage canceled, or with a receipt thereon, signed by the mortgagor, his executors, administrators, or assigns. In this case, as the record shows, the clerk certifies that when the mortgage was presented to him the seals were off. It may be that the removal of the seals from such an instrument is a cancellation, provided a cancellation be intended. I think that the act of tearing off the seals is an act within the common signification given to the word "cancellation." When that mode only is used of showing that an instrument has been paid, the difficulties which lie in the proof of the intention to the clerk, so as to satisfy him that the act of tearing off the seals was the act of the mortgagee, are increased. That this is a serious difficulty is made plain by the facts of this case and the facts in the case of Harrison v. Johnson, 18 N. J. Eq. 420, and by the cases therein referred to, as well as by the case of Harrison v. Johnson, on appeal, 19 N. J. Eq. 488. But while these cases make it so manifest that this branch of the registry act shows a serious imperfection, or that under it most serious mischief may be done, however unintentional on the part of the officer, the danger in this direction is not so great as would at first appear, when all of the provisions of the act are considered. I think this can be demonstrated, in part at least, by the case now in hand.
Let us inquire, was the simple fact that the mortgage came to the clerk with seals off sufficient evidence for him to act upon, in discharging the mortgage of record? I think not. There is nothing in the act to warrant any such conclusion. No possible construction of the section above quoted will bring the mind to such conclusion. The section expressly provides that the application to the clerk for the cancellation of the record must be made by the mortgagor, or person redeeming or discharging the mortgage. And such person must also produce the mortgage. In this case the testimony of the clerk establishes the fact that on the day of the cancellation of this mortgage he received a letter from the said John E. Howell, including the mortgage in question and the two other mortgages, which were the other liens, which the insurance company also desired to have removed. This letter contained a request from said John E. Howell to the clerk to cancel said mortgages. Now, the testimony is most complete that said Howell had not the shadow of right to have the possession or control of said mortgage. He knew that it was assigned, to George Nyce by Alfred Wells. He knew that Nyce was dead, andwhat it says. Nor is it to be overlooked that the absence of important facts from such records often demand the first attention. Both what was in this record and what was not, certainly challenged the scrutiny of every one interested. As 1 have already intimated, the clerk himself was not satisfied with an ordinary entry of cancellation, and so made the extra recital in the record which I have quoted above. This was a warning to all who examined it. Mr. Cook took pains to establish the fact that he examined the record, and that he procured the aid of counsel for that purpose. Now, when it is remembered that the statute must be our guide, and also the protection of all parties interested, including, not only subsequent purchasers or mortgagees, but also the mortgagee who is prior, I think it will be conceded that with this unusual entry before them, showing that the mortgage had been presented for cancellation, without disclosing by whom, it became at once the plain duty of the interested inquirer to look further for the truth concerning the authenticity of that attempted cancellation. It seems to me that, under the provisions of our statute, the person examining that entry had sufficient notice to put him on inquiry. Had he asked the clerk who it was that presented the mortgage for cancellation, he would have learned that it was presented by a person who had no authority whatsoever. A cautious man would have made such inquiry. I think this view is sustained by reason and authority. As to the various conditions of facts which will put a prudent man on inquiry, see Swarthout v. Curtis, supra; Van Boren v. Robinson, 16 N. J. Eq. 256; Smallwood v. Lewin, 15 N. J. Eq. 61; McPherson v. Rollins, 14 N. E. Rep. 411; Converse v. Blumrich, 14 Mich. 109, 90 Amer. Dec. 230; Hoy v. Bramhall, 19 N. J. Eq. 563; Tantum v. Green, 21 N. J. Eq. 364; Gale v. Morris, N. J. Eq. 285, 289. The great amount of testimony produced in this case, on the various points to which I have adverted, and the very great attention given to them by counsel, seemed to make it my duty to give the whole case a reasonable consideration. It may be, sitting as a trial judge, that this is a very proper course, although requiring a great deal of time. Yet I am convinced that there is a single view of the case which must effectually dispose of and settle, on a proper basis, the rights of all concerned. I refer to the rights and the title which the purchaser took under the foreclosure of the in surance company mortgage. I speak of this with diffidence because it was not opened at the hearing. However, the principle seems to be so well settled that I am quite sure I will be doing nearer right not to let it pass unobserved. Under and by virtue of the sale made in pursuance of the decree entered in that cause, the purchaser became invested with and seized of all the rights, interests, and estate which the complainant (the insurance company) had in the premises by force of its mortgage. I believe that this has been held to be the law by every court which has been called on to consider the question. Indeed, a moment's reflection will satisfy the candid inquirer that this must inevitably be so, or else there can be no certainty in attempting to pass titles by judicial sales. I refer to Mount v. Manhattan Co., 43 N. J. Eq. 25, 9 Atl. Rep. 114; Vroom v. Ditmas, 4 Paige, 526, 531; McGee v. Smith, 16 N. J. Eq. 462; McMillan v. Richards, 9 Cal. 365, 70 Amer. Dec. 655, 665; Andrews v. Doe, 6 How (Miss.) 554, 38 Amer. Dec. 450; Rogers v. Brent, 5 Gilman, 573, 50 Amer. Dec. 422; Bumpus v. Platner, 1 Johns. Ch. 213; Den v. Small, 20 N. J. Law, 151; Rector v. Mack, 93 N. Y. 488; Haynes v. Welling ton, 25 Me. 458, 461; Taylor v. Kearn, 68 Ill. 339, 343; Poweshiek v. Dennison, 36 Iowa, 244; Carter v. Walker, 2 Ohio St. 339; De Haven v. Landell, Pa. St. 120; Bank v. Chester, 11 Pa. St. 282; Zollman v. Moore, 21 Grat. 313; Gillett v. Eaton, 6 Wis. 30, proceeds on the same principle; Tallman v. Ely, 6 Wis. 244.
The mortgage given to the insurance company has not been in any manner attacked, nor has it been intimated that it was subject to impeachment by any one. I think the bill should be dismissed, with costs.