
    Rebecca Woollen and William Rogers, Exc’rs of Zachariah Woollen and Mary Kurtz, vs. Solomon Hillen, Exc’r of Thomas Hillen.
    
    December 1850.
    There are many decisions both at law and in equity, which decide that receipts in deeds are only prima facie evidence of payment, and that parol evidence is admissible to contradict such receipts, but where fraud is out of the question, there is no decision which goes so far as to decide that parol evidence is admissible, to vary, contradict and render utterly void a solemn deed.
    A release, of a mortgage recited that the mortgagor had fully paid and satisfied the debt to the mortgagees. On the same day the mortgagor executed a new mortgage to one of the same mortgagees. Held: That this release could not be explained by parol proof, and that, by it the mortgagee lost his lien under the first mortgage, and the second mortgage must be postponed to those prior to it in date, though junior to the first morí, gage.
    It is well settled, that where there are two mortgagees under separate and distinct mortgages from the same mortgagor, and the prior mortgagee has a lien on two distinct funds, and the second on one of them only, equity will, for the protection of the subsequent incumbrancer, compel the prior incumbrancer to resort to that fund on which the second has no lien.
    But this rule does not apply to a case where the prior mortgagee has a lien on two distinct estates of two separate and distinct mortgagors, and tho subsequent mortgagee holds a lien on one only of these estates, encumbered by the prior mortgage.
    Appeal from the equity side of Baltimore county court.
    This appeal was taken by the appellants from two orders of the court below, the one, of the 2d of March, 1849, directing the auditor of that court to state an account, allowing priority to a mortgage held by the testator of the appellee, in the distribution of the funds arising from the sale of certain mortgaged real estate, sold under a decree obtained upon a bill filed by the executor of Woollen, one of the appellants; the other dated 29th of March, 1849, ratifying the account, stated in conformity with the preceding order.
    The facts of the case are fully stated in the opinion of this court, and in the following opinion of the county court, delivered by Le Grand, J., accompanying the first of the above orders.
    “The facts of this case are as follows: on the 27th July, 1826, Tschudy, executed a mortgage to th e defendants, Thomas Hillen and one Brice, as therein stated, to secure the payment of certain sums of money. This mortgage only covered a portion of the land belonging to Tschudy, in Baltimore county. On the 2nd June, 1827, he executed another mortgage to Mary Kurtz, to secure the payment of $1000. This mortgage included not only the whole ninety acres lying in Baltimore county, but also, certain lots of ground belonging to the wife of Tschudy, lying within the limits of the city; on the 2nd June, 1827, a similar mortgage was executed to House, Woollen df Co., on the same property. On the 20th of August', 1829, Hillen 8f Brice released their mortgage, which had been executed, on the 27th July, 1826, and on the same day Hillen took another mortgage on the same property, to secure the payment of the sum of $3000, being the same sum which the mortgage of 1826 was designed to secure the payment of to him. In 1830 the mortgagees, Kurtz, and Woollen, and others, released the town lots embraced in their mortgages. The fund which is now in court for distribution, has been brought here as the proceeds of sale made under a decree, passed in this case, which originated in a bill filed by the executors of Woollen. Under this state of facts, the question is, which of the mortgagees are entitled, first to be paid out of the fund arising from the sale of that portion of the land lying in Baltimore county, covered by the mortgage to Hillen'i To enable the court to . understand the matter, the testimony of Mr. McCulloh, the gentleman who drafted the release from Hillen and Brice, and the mortgage to Hillen in 1829, has been taken, and read, subject to all legal exception. He states that the inducementsand considerations for the execution of the release, and of the mortgage, were to free the lands, (fee., therein described, from the lien given thereon, by the mortgage to Hillen and Brice, to the heirs of Nicholas Carroll, and to give to Thomas Hillen, as was done simultaneously by the execution of the mortgage of 1829, (expressly under the act of 1826, chapter 192.) power to enforce the punctual payment, semi-annually, of interest, &c., and that the principal sura of $3000, mentioned in the original mortgage, was not paid at the time of the execution of the release by Hillen. There have been several questions discussed by the counsel, which, in the view taken by the court, it is unnecessary to decide. It may not however be out of place to say, that none of those urged on behalf of Hillen, accord with the opinions of the court, except the one on which this case must be decided, and that is the the equity of Hillen, growing out of the original mortgage, which was released in 1829.
    The first object of courts is to do justice, and this, when it can be accomplished in conformity with the rules which have been prescribed for their government, is an indispensable duty. Now what is the real state of this case? It is this: Kurtz and
    
      
      'Woollen, with full knowledge of the existence of the mortgage to Hillen and Brice, take the mortgages to them, embracing not only the land included in that mortgage, but also addi- ■ tional land in the county, and certain lots in Baltimore city, .clearly shew they took subject to the prior legal estate of Hillen, and subordinate to the equities it created. Had there never been any release executed by Hillen, there could have been no doubt of his priority. The question then is, does that release change the aspect of the affair? I think not. The case in, 5 Rawle, 51, does not, in my judgment, touch the real question here involved. It was there decided, that as between creditor and debtor, it was competent for the holder of a judgment binding real estate, to discharge by covenant or release a portion of the estate from the lien, preserving it in force against the rest, and that this lien on the residue would not be destroyed, because of the release, if the holder of the judgment had not knowledge of a subsequent mortgage, and that he was not bound to know of the existence of subsequent incumbrances. This may be all true, and yet does not meet the facts in this case. The question here is, has the equity growing out of a prior incumbrance been discharged? To answer this question reference must be had, not to a portion only, but to all the facts. The mortgagees, Kurtz and Woollen, knew of the mortgage of 1826, and took subsequently, and of course subject to it. The release of that mortgage and the execution of the one bearing date in 1829, were simultaneous acts. They were placed on the records of the county at the same time, and were also executed at the same time. This being so they must be regarded as part of the same transaction. Kurtz and Woollen, could by the release acquire, in the absence of fraud or injuiy, no right, other than those which Tschudy acquired. There cannot be a question as between him and Hillen, that he took subject to all the equities growing out of the simultaneous execution of the release and new mortgage. In such a case no court of equity would allow of dower in such an estate as against the mortgagee. If this be so, and the decisions of our pourt of Appeals, in my apprehension, go to this extent, how is it that those mortgagees who advanced their money, with a full knowledge that there was a prior incumbrance, can be in any other position than that of Tschudy himself? They could get nothing except through him, and if he was not by these simultaneous transactions vested wilh the legal estate to the prejudice of Hillen, they cannot be, unless the acts of Hillen have been such as to work a fraud, or do them an injury. There is no pretence of fraud, and all the injury which has been, or can be to Kurtz and Woollen, grows out of their partial releases. It is said they were not bound to ascertain the existence of the second mortgage.
    This might be so if this mortgage stood alone, and the case in 5 Rawle doubtless goes to this extent. But the facts of the case show it did not. There is no affirmative evidence that they had no knowledge of the second mortgage, or the inducements and considerations which moved to the execution of the release and mortgage. In the absence of any such proof, it is not unreasonable to suppose, that before the execution of the partial releases by Kurtz and Woollen, they had the records examined. There is certainly sufficient evidence to authorize such a finding by a jury, on issues submitting such a question, and if such examination took place, then there was such notice to them as will subject them to all the equities growing out of the simultaneous execution of the release by Hillen, and the execution of the mortgage to him. The acts of Hillen, at the time they were done, did no injury to the other incumbrancers, whilst their acts, if the views of their counsel be adopted, worked, practically, a total destruction of the lien of Hillen. No court of equity will deprive a man of his lien, in favor of another holding a lien of no higher dignity, unless compelled to do so by the circumstances of the particular case. In this case the mortgagees, Kurtz and Woollen, get what they contracted for. Any loss they may sustain is to be attributed entirely to their own acts. Had they retained the security which was given them when they advanced their money, they would now be fully protected. Equity requires they should suffer the consequences of their own indiscretion. This case being before the court, by consent of counsel, with the view that all its equities may be ascertained, it is not necessary that the particular motions, &c., heretofore made, should be particularly noticed, because the direction of the court to the auditor will cover the whole ground. The same reason applies to the exceptions filed, The testimony of McCulloh is admitted, simply for the purpose of showing that no money passed at the execution of the release. For such a purpose our Court of Appeals have decided that parol evidence is admissible.”
    The cause was argued before Spence, Magruder, Martin and Frick, J.
    William F. Frick, and Thos. S. Alexander, for the appellants contended,
    1st. That Hillen is not entitled to priority of payment out of the fund in court, by virtue of his mortgage of 1826, because that has been released; nor by virtue of his mortgage of 1829, because that is posterior in date to those of the appellants.
    2nd. That all the evidence in the cause offered by Hillen to contradict or explain the averment of payment, contained in his release of 1829, with a view to set up a still subsisting claim under his mortgage of 1826, and so to prejudice the claims and equities of the appellants, is entirely inadmissable.
    3rd. That the release by Hillen to Tschudy, of the mortgage of 1826, even if the debt secured thereby be still unpaid, enured to the benefit of the appellants; and gave them the prior title, both legal and equitable, to the mortgaged property.
    4th. That Hillen had no equity to be substituted, in any event, to the appellants’ lien upon the city lots; inasmuch as said lots, when mortgaged to the appellants, were not the property of Tschudy, but of his wife; and Hillen had therefore no right to object to the release of said lots, by the appellants, or to claim any advantage from such release, under any circumstances.
    5th, That if Hillen had an equity to be substituted to the appellants’ lien upon the city lots, by reason of their having two securities, and he but one, the appellants had still a valid right, under the circumstances of this case, to release those lots without any responsibility to Hillen for the act. That the recording of Hillen’s mortgage of 1829, (which was posterior to those of the appellants,) did not operate as a constructive notice to them of its existence; that they had no actual notice of its existence, nor notice of any kind from Hillen, imposing on them an equity to retain those lots, for his ultimate security. And that he has theiefore no right or equity to complain of the release of said lots by the appellants, or to claim any advantage or priority over them, by reason of the same.
    6th. That Hillen, by the release of his prior mortgage in ] 829, gave to Tschudy the means of rightfully demanding from the appellants a release of the city lots; because the appellants could not reasonably withhold such a release from Tschudy, when he made it lawfully appear to them, that the prior liens upon the county lands, (by reason of which they had originally demanded a mortgage of the city lots, as additional security for their claims,) had all been discharged. That the said releases were executed by the appellants, only because of the record admission by Hillen, and in the belief thereby induced, that his prior mortgage had been paid: and it is therefore contrary to equity, that Hillen should be permitted to deprive the appellants of their prior lien upon the county lands, when, by his own acts, he has caused them to release the other ample security which they held in the city lots.
    T. P. Scott, contended for the appellee:
    1st. That his lien being in fact the oldest, and the appellants having taken their liens with knowledge of, and subject to, his lien, he was entitled to payment, in preference over them, out of the proceeds of the sale of the mortgaged property.
    2nd. That he did not lose his priority by the arrangement of the 20th August, 1829, because it is in proof by the documentary evidence, viz: the deed of ?Tith July, 1826, and the two deeds of 20th August, 1829,, as well as by the testimony of Me Culloh, that the debt due to the appellee mentioned in the mortgage of 20th August, 1829, is the same debt mentioned in the mortgage of 2Jth July, 1826; and because the arrangement of 20th August, 1S29, was neither designed or liable to prejudice or mislead the appellants.
    3rd.- That the deeds referred to in the second point, and the deposition of McCulloh, are admissible and competent evidence to prove the identity of the debt due the appellee, mentioned in the mortgage of 20th August, 1829, with the debt mentioned in the mortgage of the 21th July, 1826.
    4th. That if the eourt should consider that the appellee lost his priority by the arrangement of the 20th August, 1829, yet he is still entitled to priority of payment out of the sales of the mill-seat, over the appellants, because the appellants had two securities or sources of payment to look to, vis: the mill seat and the' city lots, whereas the appellee could only look to the mill seat for payment of his claim.
    • 5th. That the city lots embraced in the mortgage to Woollen and to Kurtz, were sufficient in value to have paid each of their claims; and that the deposition of Brown is admissible and competent to prove the fact, and that the appellants having voluntarily and without the assent of the appellee, given up their security on the city lots, cannot thereby be permitted to prejudice the equity of the appellee, as contended for in the fourth point.
   Spence, J.,

delivered the opinion' of this court.

The prominent facts in this case, and those upon Which it must be decided, are as follows.

On the 27th day of July, 1826, Tschudy executed a mortgage to Hillen and Brice to secure the payment of certain sums of money. This mortgage to Hillen and Brice, included only a part of the land owned by Tschudy in Baltimore county. On the 2nd of June 1827, Tschudy and wife executed a-mortgage to Mary Kurtz, to secure the payment of $1000. This mortgage included the ninety acres of land in Baltimore county, and certain lots of ground in- Baltimore city, which belonged to the wife of Tschudy. On the 17th day of June 1828, a similar mortgage was executed by Tschudy, on the same real estate to House, Woollen, Co.

On the 20th day of August 1829, Hillen and Brice, by their deed, regularly executed afid acknowledged, released their mortgage of the 27th July 1826, and on the same day the deed of release was executed by Hillen and Brice to Tschudy, Tschudy executed to Hillen, a mortgage of the same land which had been thus released to him by Hillen and Brice.

In the year 1830, the mortgagees Kurtz and Woollen and otheis, executed a deed of release of the city lots which had been included in their mortgages.

The land included in Hillen’s mortgage lying in Baltimore county, has been sold under a decree passed in this case, on a bill filed by the executors of Woollen, and the question is, which of the mortgagees are entitled to priority, or to be first paid out of the fund?

This question necessarily brings up for consideration and decision, the effect and operation of the deed of release of the 20th day of August 1829 of the mortgage of the 27th July 1826, from Hillen and Brice to Tschudy. On the part of the appellants it is insisted, that this deed was an entire and absolute release on the part of Hillen and Brice, of their hen under the mortgage of 1826, and consequently deprived them of any priority. This conclusion is denied on the part of the appellees, and they insist that the deed of release of 1829, when taken in connection with the parol testimony of McCulloh, cannot in equity have the operation and effect to deprive HU. len of his priority upon the fund in question.

MeCuHolds testimony out of the case, and there could be no question as to the operation and effect of Hillen’s and Brice’s deed of release.

It may be conceded, that there are many decisions in which courts both of law and equity have determined, that receipts in deeds are only prima facie evidence of payment, and that parol evidence is admissible to contradict such receipts, but we have never yet seen the decision, fraud out of the question, which went so far as to decide that parol evidence was admissible, to vary, contradict and render utterly void a solemn deed.

On what other imaginable ground, can it be insisted in this case, that Hillen is the prior incumbrancer? If he had never secured any lien before the mortgage of 1829, it could not be said, that his lien was prior to Kurtz’ mortgage of 1827, and if the release of 1829 released his lien of 1826, his lien arises Under the mortgage of 1829, more than two years subsequent to Kurtz’ deed of 3827.

But the appellee’s solicitor insisted in the argument, that the deed of release and the mortgage of 1829, having been executed simultaneously, Hillen did not thereby lose his priority as incumbrancer, and cases of dower, in which courts have adjudged that in cases of instantaneous seizin, where the husband had or took no beneficial interest, the widow was not dowable, were referred to. We think such cases are clearly distinguishable from the one under consideration. In the former cases, there never was any such estate in the husband, upon which the widow’s right of dower could attach; in this case there was a lien under the mortgage to Kurtz of 1827, subject to be defeated only by Hillen'’s prior mortgage of 1826, and if the lien of Hillen’s mortgage of 1826, was released by his deed of 1829, we can see no ground upon which Kurtz’ priority can be defeated.

It is insisted by the appellee’s solicitor, that if the court should consider, that the appellee lost his priority, by the arrangement of the 20lh August 1829, yet he is still entitled to priority of payment out. of the sales of the mill seat over the appellants, “because the appellants had two securities or sources of payment to look to, viz: the mill seat and the city lots, whereas the appellee could only look to the mill seat for payment of his claim.”

It must be borne in mind that the city lots were the property of Tsehudy’s wife, and that Hillen was not a creditor of Mrs. Tschudy, and had no claim upon them as a creditor. The doctrine seems to be well settled in courts of equity, that where there are two mortgagees under separate and distinct mortgages, and one and the same mortgagor and the prior mortgagee, have a lien on two distinct funds or estates, and the second have a lien on one only of these funds or estates, that courts of equity will coerce the prior incumbrancer to resort to that fund, for the satisfaction of his lien, on which the subsequent mortgagee has no lien, and this for the protection of the subsequent incumbrancer.

This case now under consideration differs in an essential particular from the one supposed. In this case the prior mortgagee, Kurtz, had a lien on two separate and distinct estates, of two separate and distinct mortgagors, and the subsequent mortgagee, held in lien on one only of the estates incumbered by the prior mortgagee, and the estate released by the prior mortgagee, was the estate on which the subsequent mortgagee had no lien, it being the estate of Tschudy’s wife. If the prior mortgagee, Kurtz, foreclose his mortgage on the estate of Mrs. Tschudy by sale, a court of equity considering her as a security of her husband, would substitute her to Kurtz’ equities on the estate of her husband, and thereby exclude the subsequent mortgagee. Vide 2 Story’s Eq., sec. 1373.

The orders of the court in this case, of the 2nd March 1849, and the 29th of March 1849, are reversed with costs to the appellants, and the case remanded.

ORDERS REVERSED AND CASE REMANDED.  