
    Dutchess Special Term,
    December, 1847.
    
      Barculo, Justice. tract of sale was never consummated. 4. Peter Bush, the mortgagee, held the mortgage for the benefit of James Smith, who was in fact the real mortgagee. Bush was present at, and a party to, the agreement by which the mortgaged premises were conveyed to James Smith in satisfaction of the mortgage debt. This conveyance operated as a release of the equity of redemption to James Smith, who was in fact the mortgagee. 5. James Smith having re-entered and resumed the possession as mortgagee or under the mortgagee, with a conveyance of James Cunningham’s equity of redemption, (if he had any,) and the defendant William Knight deducing a regular title from James Smith, the complainant is not entitled to be endowed of the one third part of the premises until she pays, or offers to pay, a due proportion of the mortgage debt. (Van Dyne v. Thayer, 19 Wend. 164; S. C. 12 Id. 234. Bell v. Mayor of New-York, 10 Paige, 50, 67. 4 Kent's Com. 44, 45. Sioain v. Perine, 5 John. Ch. 482.) 6. The proof shows that James Cunningham, the husband of the complainant, never paid any part of the purchase money. In equity, therefore, he never had any seisin or property in the premises in question. 7. The admissions and declarations of the husband are competent evidence in bar of the widow’s claim for dower, as they would be in bar of her title as heir or grantee. (Van Dyne v. Thayer, 14 Wend. Rep. 233.)
    
    
      Barnes vs. Camack and wife, and others.
    The testimony of the wife can never be received against her husband, except in proceedings instituted against him on her behalf.
    This rule holds not only during the coverture, but also continues to apply after a dissolution of the marriage contract, as regards transactions which took place previous to such dissolution.
    The only safe and correct practice is, to adhere to the rule that whatever passes between the husband and wife, in confidence, shall forever remain sacred.
    Where a mortgage is cancelled by the mortgagee, and discharged of record, without actual satisfaction, at the request of the mortgagor and in consequence of his fraudulent representations, and a new mortgage is substituted in its place;—the mortgagor concealing from the mortgagee the fact that, intermediate the date of the cancelled mortgage and the giving of the substituted security, he has given to a third person a mortgage upon the same premises, which has been recorded—a court of equity has the power either to revive the cancelled mortgage, or to give the substituted security a priority over the mortgage given to such third person.
    A court of equity will keep an incumbrance alive, or consider it extinguished, as will • best serve the purposes of justice.
    A subsequent mortgagee who takes his conveyance with notice of a prior mortgage upon the premises, and who subsequently acquires a superior legal title to the premises, by the cancelling of the prior mortgage through mistake, without having parted with any property or right, or placing himself in any worse condition in consequence of the cancelling of the prior mortgage, is not a bona fide mortgagee within the meaning of the recording act and the adjudged cases; and he will not be permitted by a court of equity to retain such superior legal title, to the injury of the prior mortgagee.
    Where the legal rights of parties have been changed by mistake, equity restores them to their former condition, when it can be doné without interfering with any new rights, acquired on the faith and strength of the altered condition of the legal rights, and without doing injustice to other persons.
    In Equity. On the 3d of May, 1841, the defendants Moses Camack and wife executed a mortgage to the plaintiff, to secure $300, upon a lot of land in Newburgh, thirty feet front and rear, and ninety feet deep. On the 6th of September, 1841, the same parties executed a mortgage to the defendant Brown for $1000, upon a portion of the same premises, and upon other lands. On the 1st of March, 1842, Moses Camack applied to the plaintiff to release from her mortgage a strip of ten feet on the westerly side of the lot mortgaged to her, alleging as a reason, that he had sold it to his brother James Camack and given a warranty deed. He informed her also, that the proper and only mode of doing the business was to cancel the first mortgage and take a new one upon the remaining portion of the lot, which he assured her would preserve her lien perfect as it then was upon that portion of the lot. She believing his statements, and being ignorant of the mortgage to Brown, acknowledged satisfaction of the first mortgage, and took another upon the remaining twenty feet, for the same sum, dated March 1st, 1843.
    The plaintiff insists that she never intended to release the twenty feet; and that, if Brown’s mortgage is preferred to hers, she will lose her debt. The cause came to a hearing on the bill and the separate answer of Moses Camack and John Brown, and upon proofs.
    
      M. I Townsend & J. W. Brown, for the plaintiff.
    1. The plaintiff’s mortgage was the oldest lien on the premises in question; and unless the same is to be regarded as extinguished or satisfied in equity, it is still entitled to priority over all the other incumbrances. It is neither satisfied nor extinguished, even if no fraud has been practised on the plaintiff. (1 Cowen, 125. 1 Roofs Rep. 500. 2 New Hamp. Rep. 525. 9 Mass. Rep. 242. Roll. Abr. 470. Cro. Car. 86. 8 John. Rep. 54. Boc. Abr. Extinguishment, D. 20 John. Rep. 407. 11 Id. 513,16,17. 4 Har & McHenry, 482. 6 Coke, 44, Higgins’ case. 6 Jurist Rep. 987. 2 Harr. Dig. 3903.) 2. The certificate of satisfaction of the plaintiff’s mortgage having been obtained by the defendant Camack by fraud and misrepresentation, as to all persons except bona fide purchasers, the rights of the parties are to be settled in the same manner as if the mortgage had never been cancelled of record. (Livingston v. The Peru Iron Company, 2 Paige, 390. Champlin v. Laytin, 6 Id. 189. Livingston v. Hubbs, 2 John. Ch. Rep. 512.) 3. If no actual fraud has been perpetrated upon the plaintiff, the representations made by Camack as to the mode of transacting the business led her to do what she did not intend to do; and she is for that reason entitled to relief. (2 Cowen & Hill’s 
      
      Notes to Phil. Ev. 1485, note 998. 1 Story’s Eq. 131 to 160. 18 Wend. 409. Champlin v. Laytin, 6 Paige, 189.) 4. John Brown the defendant, whose mortgage bears date September 6th, 1841, is not a bona fide purchaser as against the plaintiff in this cause. He took his mortgage with actual notice. His mortgage is therefore not entitled to a priority, but is in equity to be postponed to the mortgage of the plaintiff dated May 3d, 1841. (Padgett v. Lawrence, 10 Paige, 170, 180. Dickerson v. Tillinghast, 4 Id. 215. Wardell v. Howell, 9 Wend. 170. Rosa v. Brotherson, 10 Id. 85. Coddington v. Bay, 20 John. 637. 2 Story’s Eq. 590, 591, n.) 5. The complainant is entitled to a decree declaring that the certificate of satisfaction of her mortgage of the 3d of May, 1841, was obtained by fraud and misrepresentation, and that such certificate is of no effect as against the defendants; and for a foreclosure and sale upon the mortgage of 3d of May, 1841, as to the twenty feet.
    
      D. B. Boice, for the defendants.
    1. The plaintiff cannot set up any acts of fraud or misrepresentations on the part of Moses Camack to induce her to discharge her mortgage, to which acts J. Brown was not a party, and of which he was ignorant; because (1) Even if true, such acts (if the certificate of satisfaction should be invalid) would be prejudicial to the rights of the defendant Brown. The equities are equal, and the law must prevail. (2) The plaintiff relied upon the statements of Moses Camack personally, and by her own act (if the satisfaction was invalid) misled the defendant John Brown, and prejudiced his rights. Her intentions do not alter the case. (See Ferris v. Hendrickson, 1 Edw. Ch. Rep. 133.) 2. The plaintiff received a valid consideration for the satisfaction of her first mortgage; and the certificate of satisfaction cannot be set aside nor declared void, except upon direct proof of fraud, or undue influence exercised by the party to be benefitted. The rights of third persons cannot be affected by it. Fraud cannot be presumed; it must be proved, and expressly found. (Clark v. White, 12 Peters’ Rep. 178. Barton v. Rushton, 4 Dess. 373. Ex’rs 
      
      of Chouler v. Smith, 3 Id. 12.) 3. The answer of the defendant Moses Camack, so far as it is responsive to the bill, is evidence for John Brown, and cannot be overthrown except by the testimony of two witnesses. (Daniel v. Mitchell, 1 Story, 172. Neville v. Demerritt, 1 Green’s Ch. Rep. 322. Lenox v. Prout, 3 Wheat. Rep. 527.) 4. The proofs do not sustain the charges of fraud, or misrepresentations made by Camack to the plaintiff to induce her to acknowledge satisfaction of her mortgage, as alleged in the bill.
   Barculo, J.

The first question arising in this case is, whether the testimony of Hannah Camack was properly received. The objection was distinctly taken before the examiner, and, although not insisted on at length on the argument, it is undoubtedly a valid one, according to well settled principles. The witness was the wife of the defendant Moses Camack, and was divorced from him, by a decree of the court of chancery made on the 28th' day of May, 1846, for the adultery of the husband committed in the year 1843. Her testimony relates to occurrences which took place in the years 1841 and 1842, while she was living with her husband. When the objection was taken before the examiner, the decree was produced, and thereupon the testimony was taken.

The authorities, I think, establish the proposition fully, that the testimony of the wife can never be received against her husband, except in proceedings instituted against him on her behalf. This rule holds, not only during the coverture, but also continues to apply after a dissolution of the marriage contract, as regards transactions which took place previous to such dissolution. Mr. Phillipps thus lays down the law on this subject : This general rule of evidence, which has been adopted for the purpose of promoting a perfect union of interests, and of securing mutual confidence, is so strictly observed, that even after a dissolution of marriage for adultery, the wife is not admitted to give any evidence of what occurred during the marriage, which would have been excluded, if the marriage had continued. This, as Lord EHenborough has said, is on the ground that the confidence, which subsisted between them at the time, shall not be violated in consequence of any future separation. Thus one great cause of distrust is removed, by making the confidence which once subsists, ever afterwards inviolable in courts of law.” (1 Phil. Ev. 83. See also Cowen & Hill’s Notes, 1554; State v. Phelps, 2 Tyler’s Rep. 374.) In Ratcliff v. Wales, (1 Hill, 63,) Bronson, Justice, in delivering the opihion of the court, distinctly recognizes this doctrine. Indeed, a contrary rule would be productive of intolerable evils. If the law were that a divorce a vinculo matrimonii would admit the wife 'to take the stand as a witness, and allow her to disclose all the transactions of the husband’s life which had been intrusted to her in the days of unbounded faith, it would tend to impair that mutual confidence between man and wife which society requires, and which the law ought to protect. Designing men might even become instrumental in procuring a divorce, for the very purpose of using the testimony of the wife to penetrate the secret affairs of her husband. The only safe and correct practice is, to adhere to the rule, that whatever passes between htisband and wife in confidence, shall forever remain sacred. The testimony of the wife, therefore, must be laid out of this case. Fortunately for the plaintiff, the main facts are substantiated by other witnesses.

The testimony shows very clearly, that her son in law, Moses Camack, by gross and fraudulent misrepresentations, induced the plaintiff to. execute a satisfaction piece, on which her first mortgage was cancelled of record; and the second mortgage, of March, 1842, was substituted in its place. By this operation the mortgage of the defendant Brown, having been given in September, 1841, would stand first upon the record and be entitled to priority, unless this court can revive the first mortgage of the plaintiff, or give her second mortgage priority over Brown’s. I have no doubt of the power of the court to do either, if the case will warrant its interference.

It is a familiar doctrine, that a court of equity will keep an incumbrance alive, or consider it extinguished, as will best serve the purposes of justice. (Forbes v. Moffatt, 18 Ves. 384. Starr v. Ellis, 6 John. Ch. Rep. 393. Neville v. Demeritt, 1 Green’s Ch. Rep. 321.) In Miller v. Wack, (Saxton’s Ch. Rep. 204,) the chancellor of New-Jersey held, that the simple cancellation of a mortgage on the record was not an absolute bar, unless there had been actual satisfaction; that the cancel-ling is evidence sufficient to sustain the rights of all persons interested, unless the party setting up the cancelled mortgage should shew satisfactorily some accident, fraud or mistake. (See also Jackson v. Stockholm, 1 Cowen, 125; Cornell v. Lamb, 20 John. 407.) Hence there is no difficulty in reviving the first mortgage as against the mortgagor; it having been cancelled by his fraud, and without any actual satisfaction. The principal question is, whether the plaintiff is entitled to a decree as against Brown.

Brown does not appear to have been a participator in the fraud. The facts of the case-entirely acquit him of any actual connection with the misrepresentations of Camack. Nevertheless the plaintiff was induced to acknowledge satisfaction of her first mortgage by those misrepresentations, and under a mistake of facts in regard to the existence of any other incumbrances. Is the defendant Brown in a situation where he can be permitted to take advantage of the mistake or fraud 1

The plaintiff’s first mortgage was given some months before Brown’s. It was on record, and he also had actual notice of it, when his mortgage was executed. Six months after his mortgage was taken, the first mortgage was cancelled. He has not loaned any money, or done any act on the faith or strength of the cancellation. He is not, therefore, a bona fide mortgagee within the meaning of the recording act and the adjudged cases. In Dickerson v. Tillinghast, (4 Paige, 221, 2,) the chancellor remarks, “ so if a subsequent purchaser merely takes the legal estate in payment of, or as security for, a previous debt, without giving up any security, or divesting himself of any right, or placing himself in a worse condition than he would have been in, if he had received notice of the prior equitable title, or lien, previous to his purchase, the court will not permit him to retain the legal title he has thus obtained, to the injury of another.” In like manner Brown, not having parted with any property or right, nor having placed himself in any worse condition, in consequence of the plaintiff’s having cancelled her first mortgage, but having acquired a superior legal title by reason of her mistake, this court cannot permit him to retain it, to the injury of the plaintiff; but must give preference to the equity of the latter. (Padgett v. Lawrence, 10 Paige, 170. Millspaugh v. McBride, 7 Id. 509. Daniel v. Mitchell, 1 Story’s Rep. 172. McCarthy v. Decaix, 1 Russ. & Mylne, 614.)

Hyde v. Tanner, [ante, p. 75,) was in some respects similar to this case. In that case a mortgage to the plaintiff had been given by an intestate, and after his death it was cancelled and a new mortgage taken from the heir, on the same premises, in its stead. This court set up the old mortgage and gave it priority, as against the creditors at large of the deceased, upon the ground that the first mortgage had been cancelled under a mistake of fact in regard to the existence of debts beyond the amount of assets; and that the creditors had not, in any way, been prejudiced by the cancellation. The difference between that case and the present is, that in the former the mistake was inferred, here it is proved. The principle on which both are decided, and which runs through all cases of this description, is, that when the legal rights of the parties have been changed by mistake, equity restores them to their former condition, when it can be done without interfering with any new rights acquired on the faith and strength of the altered condition of the legal rights, and without doing injustice to other persons.

The plaintiff is therefore entitled to a decree, declaring the satisfaction piece void for fraud and mistake, and for the foreclosure and sale of the mortgaged premises under her two mortgages. The proceeds of the sale are to be first applied in payment of the debt and costs of the plaintiff. The surplus, if any, is to be applied towards the payment of the defendant Brown’s debt.  