Legal Papers of John Adams, volume 1

Editorial Note Editorial Note
Editorial Note

Although there was no court of equity in provincial Massachusetts, the law courts were able to develop the real estate mortgage into an effective and flexible instrument of finance. In the usual transaction the mortgagor gave the mortgagee an obligation in the form of a bond or note for the amount borrowed; this obligation was secured by the mortgage itself, a deed to the mortgaged premises in fee simple, conditioned on the repayment of the sum covered by the obligation. Both the liability of the land and the general personal liability of the mortgagor were thus established. In the event of default the mortgagee could bring an action on either obligation or mortgage, but he could proceed only at law.1 If common law forms had been followed literally in these suits, injustice might have resulted. In some cases at least, the plaintiff could have recovered both land and money, and, in an action on a sealed obligation such as a bond, payment other than according to the precise terms of the instrument would not have been a bar. Further, the common law did not recognize the mortgagor's right, protected by the court of equity in England, to redeem the lands by tender of the debt and costs after the time for payment had run.2

Such defects might have discouraged potential borrowers from offering their lands as security, had it not been for a Massachusetts Act of 1698 which gave the common-law courts the equity powers necessary to overcome them. Under the statute in actions brought on sealed instruments and on mortgages when judgment or verdict was for the plaintiff, the court was empowered “to moderate the rigour of the law and on consideration of such cases, according to equity and good conscience to chancer the forfeiture, and enter up judgment for the just debt and damages.” In real 232actions on mortgages the judgment was “to be conditional,—that the mortgager or vender, or his heirs, executors or administrators do pay unto the plaintiff such sum as the court shall determin to be justly due thereupon, within two months time after judgment entred up for discharging of such mortgage or sale, or that the plaintiff recover possession of the estate sued for, and execution to be awarded for the same.”3 By the same Act, “where any mortgagee or vendee of any houses or lands granted on condition hath recovered, or entred into and taken possession of the same for the condition broken,” the mortgagor within three years after entry could tender the unpaid balance and costs and disbursements in court and have possession restored by quitclaim deed from the mortgagee or a purchaser, or by judgment.4

Thus, under the statute if the mortgagee sued upon his bond, he could recover the actual debt, but not the penalty of double the face value usually attached to such instruments; moreover, the debtor presumably was credited with any partial satisfaction which he had made. If the mortgagee wished to proceed against the land, he might either enter peaceably, or sue for it in ejectment, asserting his title under the mortgage deed. In the latter event he could enter under a judgment in his favor if the mortgagor did not pay the debt within two months. In either case the mortgagee's title became absolute if the mortgagor did not redeem within three years after entry. This was the process of strict foreclosure, still substantially in effect in Massachusetts. It resembled the procedure at equity in England, with the significant difference that there the court had unlimited discretion to open up the foreclosure for redemption if justice required.5

There was the further difference that in England, if the mortgagee re-233covered the land through foreclosure, a subsequent action against the mortgagor on his personal obligation opened up the right to redeem, although the land might be worth less than the debt. The cases are not clear, but there even seems to have been some 18th-century authority for the proposition that foreclosure barred an action on the bond altogether, unless the premises had been sold by the mortgagee. In England and in many of the United States, these problems were ultimately met by the device of foreclosure by sale, the usual modern practice, in which on a bill to foreclose the court will order a sale of the property and adjudge any deficiency against the mortgagor, but will allow him to take a surplus.6 Prout v. Minot shows that, although provincial Massachusetts had not developed foreclosure by sale, the courts were able to accommodate the conflict between recovery on the land and recovery on the debt through flexible use of the statutory procedures just discussed.

The case arose out of a complicated series of transactions. Timothy Prout borrowed £100 from Christopher Minot in December 1753, giving a mortgage of his real estate on Milk Street in Boston and a bond in the penal sum of £200 to secure the loan. In October 1755 Prout gave a second bond and mortgage on the same property to one William Brown for a loan of £184. Two years later Brown foreclosed in an action on the second mortgage and was awarded possession in December 1757. In December 1758 Minot assigned to Brown his rights in Prout's first bond and mortgage for a consideration of £112, the sum of the principal and unpaid interest. Brown, having rid himself of this encumbrance, was apparently content with his bargain until the house on the mortgaged premises was destroyed in the great fire of March 1760, which significantly reduced the value of his investment.7


At the July 1761 Suffolk Inferior Court an action of debt on the first bond was commenced against Prout in Minot's name, a procedure made necessary by the common-law rule against assignments of “choses in action,” that is, rights legally accrued but not reduced to possession. That Brown, rather than Minot, was the real party in interest seems certain from the fact that the instrument by which the bond was assigned gave the former power to sue upon it and keep the proceeds. At the April 1762 term, after argument on the pleadings, the court held Prout's plea in confession and avoidance bad and awarded Minot “chancery” of £136 6s., the actual amount of the debt plus interest.8

Prout appealed to the Superior Court, where at the August 1762 term argument was again had on the lower court pleadings. Prout's plea, which had been filed by Oxenbridge Thacher, averred Minot's assignment of bond and mortgage to Brown, and alleged that on the day of the assignment Brown had elected to enter upon the premises for nonpayment of the sum secured, rather than to sue upon the bond. Minot's replication, by Richard Dana, denied that the entry was for nonpayment as alleged. Thacher demurred, asserting that the replication contained a negative pregnant (a denial of a particular allegation which implicitly admits the rest). Dana, joined by Jeremy Gridley, countered by attacking the plea, a permissible tactic at common law, because a demurrer at any stage made all of the pleadings fair game for either side. The ground of the attack was that Brown's election was not a bar to the action, since an entry under the 235mortgage did not discharge the bond. The court in a unanimous opinion upheld this contention and found the plea bad. Prout, however, was not content with the usual procedure by which the court chancered the bond to the debt appearing in the record. He asked for and was granted leave to be heard further “in chancery” at the next term.9

Accordingly, he filed a “Bill in Chancery” (Document I), at the February 1763 session of the court, setting forth the facts and praying relief from what he urged was an inequitable double recovery in Brown's behalf. The matter was continued term by term until it finally came on in August 1766. Samuel Fitch now argued for Prout against Dana and Gridley. Adams was not of counsel, but made brief minutes of the argument and opinion, which are printed as Document II.

Fitch produced authorities to show that assignments of choses in action are invalid at law but convey a right which the assignee alone can enforce in equity. His point seems to have been that since this was in effect an equitable proceeding, the court should treat Brown as the real party in interest, even though the action was in Minot's name. This position could have been the basis for an argument that Brown should not recover because he did not have a claim to the bond which a court of equity would recognize. His acquisition of the mortgagee's title by assignment after he had acquired the mortgagor's equity through foreclosure could be said to have effected a merger which extinguished the debt. Adams' notes do not show whether Fitch pressed such a contention, but he must at least have argued that if Brown had an equitable claim, his entry on the land had satisfied it, and there could be no recovery in his behalf against the bond. Implicit in these positions was the basic equitable argument, expressly made in Prout's bill (Document I), that, even if merger and entry were not absolute bars, the action should not lie because at the time of entry the land had been worth more than both bonds together.

According to Adams, Gridley “Seem'd to conceed” that the action was really in Brown's behalf, probably because there were ample grounds on which to argue that he was not barred. The court apparently found these grounds adequate, since, despite the concession, it entered judgment against Prout for £176 10s., the principal of the bond, with 6 percent interest from the date of the last payment in 1756.10

Although it is not clear that the merger argument was raised, the result in this case is consistent with later authority on the question. In 1849 Chief Justice Shaw of Massachusetts, in an opinion synthesizing earlier English and American decisions, announced the proposition that a merger of the 236equity and the mortgage takes place when the purchaser of the mortgage is under a duty to clear the equity from the encumbrance, or, in the absence of such a duty, the purchaser has no proper interest in keeping mortgage and equity separate.11 Under this theory one who purchases the equity of redemption at its actual value and then takes an assignment of the mortgage cannot maintain an action on the obligation against the mortgagor, because the gist of the purchaser's bargain is that, having bought the equity for less than the full value of the land, he will pay the rest of the price by indemnifying the mortgagor against the debt. This he does either by paying to the mortgagee the amount due, or by allowing the land to be taken in satisfaction. He is doing no more than fulfilling his bargain when he pays the mortgagee for an assignment. It would be inequitable if he could also recover the amount so paid against the mortgagor personally, because he would end up with clear title, but would be out of pocket only what he had bargained to pay for an encumbered title.12

Brown, however, did not purchase the equity outright, but obtained it only in an effort to satisfy the mortgagor's debt to him. The bargain out of which that debt arose was that Brown should get back the money which he had loaned, not that he should become obligated to pay out further sums. Thus, when Brown bought the first mortgage, he was not performing a contractual duty to the mortgagor, but was acting to protect his own investment from the effects of the mortgagor's default. Since he had not bargained to pay the debt, it would have been inequitable if he could not have recovered what he had paid out both on his own loan to Prout and for the assignment from Minot.13 If the value of the land had been 237sufficient to provide this recovery, there still would have been a merger, because Brown would have had no valid interest in preserving the obligation. If there was a deficiency, however, the obligation would survive as a basis for action against the mortgagor.14

Adams' notes show that the court did deal with the question of recovery against the bond after recovery of the land. Justice Benjamin Lynde apparently recalled the court's earlier ruling on demurrer that an entry under the mortgage did not bar an action on the bond. The result here carried the principle further, asserting the mortgagee's right not only to pursue both remedies, but to take satisfaction out of both sources up to the amount of the debt. The complexities of English practice were rejected in favor of a simple rule, focused on the debt rather than the security, which was characteristic of later American mortgage law.15


The questions whether Prout's personal obligation survived in Brown's hands and, if it did, whether Brown could pursue it despite his entry under the mortgage, both turned on the value of the land. If this figure exceeded the amount of the debt, Prout's complaint was justified and Brown should have been barred. If there was a deficiency, however, it was equitable for Prout to be responsible for all of his indebtedness. The total of principal and interest on the two debts was at least £481.16 Prout alleged in his bill (Document I) that in 1758, when Brown entered, the premises were worth more than the debt, but the only figures which he set forth were 1760 values of £200 for the house and “at least” £133 6s. 8d. for the land. Accepting these figures and adding in Prout's figures of £50 for rent at £20 a year from Brown's first entry in December 1757 until the fire in March 1760, there would still have been a deficiency of nearly £100.17 Thus, even by Prout's calculations, Brown was entitled to recover against the bond, and the only question open was the amount. The court's actual award of £176, the maximum possible on the bond, was probably based on the value of the land after the fire, when the deficiency would have been nearly £300. This valuation seems harsh from Prout's standpoint, but it could have been justified by the fact that Brown's title was subject to Prout's right to redeem until December 1761. It might have been argued that in the determination of a deficiency the mortgagee's interest cannot fairly be valued until foreclosure is complete and his title is absolute in equity as well as at law.18


Even today a mortgage may be given without a note, thus freeing the mortgagor from personal liability. Dual liability is the general rule, however, as it was both in Massachusetts and England in the 18th century. See note 6 below. See also Symes v. Hill, Adams Papers, Microfilms, Reel No. 185, Quincy, Reports 318 (SCJ Middlesex, 1771); Ivers v. Hooper, et al., 4 Dane, Abridgment 184 (SJC Essex, 1801); Charles A. Jackson, A Treatise on the Pleadings and Practice in Real Actions 50–51 (Boston, 1828); Garrard Glenn, Mortgages, Deeds of Trust and Other Security Devices as to Land, 1:25–28 (Charlottesville, Va., and N.Y., 1943).


As to the nonavailability of the equitable defenses of payment and accord and satisfaction at common law, see James Barr Ames, Lectures on Legal History 109–111 (Cambridge, Mass., 1913). As to the equity of redemption, see 1 Glenn, Mortgages 11–17, 234–313; R. W. Turner, The Equity of Redemption, passim (Cambridge, 1931).


Act of 10 Dec. 1698, c. 22, §1, 1 A&R 356. See Watts v. Hasey, Quincy, Reports 194 (SCJ Suffolk, Aug. 1765). This statute was the first to provide specifically for mortgages, although after 1648 the judges of the Court of Assistants in the Massachusetts Bay Colony had had power to determine “any matter of apparent equitie, as upon the forfeiture of an Obligation, breach of Covenant without damage, or the like.” The Laws and Liberties of Massachusetts 32 (Cambridge, Mass., 1929). Under this act the court would “chancery” a bond, presumably to the actual amount of the debt. See, for example, Bennet v. Gridley (1677), Records of the Court of Assistants of the Colony of Massachusetts Bay, 1630–1692, 1:82 (Boston, ed. John Noble, 1901); Dyre v. Hutchinson (1684), id. at 261. After 1692 in several Province Acts, rejected by the Privy Council on various grounds, the common-law judges were given power to chancer penal bonds. See, for example, Act of 25 Nov. 1692, c. 33, §14, 1 A&R 75. Relief on penal bonds was accorded at law in England by 8 & 9 Will. 3, c. 11, §8 (1698). See Samuel Williston and George J. Thompson, A Treatise on the Law of Contracts, §§774, 775 (Boston, rev. edn., 1936).


Act of 10 Dec. 1698, c. 22, §§4, 5, 1 A&R 357, as amended by Act of 25 March 1713, c. 8, §2, 1 A&R 703.


For the present Massachusetts provisions, which carry forward without substantial change much of the Act of 1698, see Mass. G.L., c. 244, §§1–10, 18–36. Foreclosure may also be had by sale when the mortgage contains a power of sale. Id. at §§11–17C. The Massachusetts courts now have broad equitable powers, but the essentially equitable remedy given at law by these statutes is deemed adequate, except in unusual cases. See 1 Glenn, Mortgages 435. For the English practice of opening up a foreclosure for redemption, see id. at 403–405.


For the development of foreclosure by sale, See 1 Glenn, Mortgages 405–407, 460–467. The Massachusetts practice of sale under a power of sale in the mortgage, also utilized in England and elsewhere, achieves similar results. Id. at 433–434, 610–614. See note 5 above. As to the action on the bond after foreclosure, it was first held that since a mortgage was a pledge, the mortgagee had to be content with the land while he held it, but that if he sold it and it produced a deficiency he could proceed on his bond. Tooke v. Hartley, Dickens 785, 21 Eng. Rep. 476 (Ch. 1784). Later the position was reversed and an action on the bond permitted only before sale, on the theory that since the action opened the right to redeem, the mortgagee could bring it only if he was still capable of reconveying the premises to the redeeming mortgagor. Perry v. Barker, 8 Ves. Jun. 527, 32 Eng. Rep. 459 (Ch. 1803); Lockhart v. Hardy, 9 Beav. 349, 50 Eng. Rep. 378 (Ch. 1846); see Dashwood v. Blythway, 1 Eq. Cas. Abr. 317, 21 Eng. Rep. 1072 (1729). If there had been provision for the award of a surplus of the sale proceeds over the debt to the mortgagor, these problems need not have arisen. See John J. Powell, A Treatise on the Law of Mortgages, 2:1001–1006 (London, 6th edn., T. Coventry, 1826). Even without such a provision, they did not arise in Massachusetts. See note 15 below.


For the facts, see Doc. II and SF 100777. The lot, on the northerly side of Milk Street, and bounded by lands belonging to Andrew Oliver Jr. and Joseph Dowse, measured about 63 × 128 × 48 × 138 feet. Ibid. Brown's foreclosure action is in Min. Bk., Inf. Ct. Suffolk, Oct. 1757, No. 44. No files have been located. The fire of 20 March 1760 destroyed 349 houses and other buildings in the area bounded by the present Washington, State, and Milk streets, and the waterfront (Commercial Street), extending along the latter to the South Battery, near the corner of present Broad Street and Atlantic Avenue. No lives were lost, but damage was estimated at £100,000 sterling. Drake, History and Antiquities of Boston 649–653. As to compensation for the sufferers, see note 21 3 below. For the consequences of a later fire, see No. 33.


For authorities on the assignability of choses in action, see notes 23 2 , 24 3 , below. The bond and Inferior Court judgment are in SF 100777. The reasons for Brown's proceeding on Minot's bond, rather than on his own, are not known but may include the following: Brown had entered under the judgment on his own mortgage in Dec. 1757, so that the process of foreclosure was complete in Dec. 1760, before he had brought suit. If the English theory which deemed recovery on the bond tantamount to redemption (see note 6 above) were observed in Massachusetts he may have feared that, since under the local statute redemption was absolutely barred, he would not now be allowed to recover on the bond. Further, even if the court had permitted such a recovery, it might also have permitted redemption, and Brown, for reasons unconnected with the land's present market value, may have wished to retain possession. Even if the court had denied redemption because the land was worth less than the debt, it might have allowed Prout to set off the value of the foreclosure in “chancery,” limiting Brown's total recovery to the face value of his bond. A suit on Minot's bond was not subject to these drawbacks. Although Brown, being already in possession, could be said to have “entered” peaceably under Minot's mortgage on the day he took the assignment, this entry would not ripen into a foreclosure until Dec. 1761. Since the right to redeem was still open, there was no bar to recovery. Redemption was not a danger, however, because Brown as junior mortgagee could effectively block it on the grounds that the mortgagor was primarily liable for the debt to the first mortgagee and thus had a duty to save the land harmless (see note 13 below). Finally, since the foreclosure was not yet ripe, there was no recovery that could be set off against this bond.


SCJ Rec. 1766, fol. 78; Min. Bk. 79, SCJ Suffolk, Aug. 1762, N–8; SF 100777. The 1762 argument and pleadings are reported sub nom. Minot v. Prout, Quincy, Reports 9. Compare Burnell v. Martin, 2 Doug. 417, 99 Eng. Rep. 268 (K.B. 1780). As to the negative pregnant, see Stephen, Pleading 381–384; No. 9. For the rule that on demurrer the court will look to the whole record, see Stephen, Pleading 162–164.


SCJ Rec. 1766, fol. 78; Min. Bk. 81, SCJ Suffolk, Aug. 1766, C–1. For the computation of interest, see the bond in SF 100777.


Brown v. Lapham, 3 Cush. (Mass.) 551 (1849). For earlier American cases basing merger on the purchaser's duty, see Tice v. Annin, 2 Johns. Ch. (N.Y.) 125 (1816); Eaton v. George, 2 N.H. 300 (1820). These cases cite no authority. They are in effect a particular application of the interest theory, since if the purchaser has a duty to redeem, equity would not recognize as valid a contrary interest in pursuing the mortgage. See Gibson v. Crehore, 3 Pick. (Mass.) 475 (1826); Gardner v. Astor, 3 Johns. Ch. (N.Y.) 53 (1817); compare Bassett v. Mason, 18 Conn. 131 (1846). The latter cases, which are based on interest, rely on English authority espousing the general equitable doctrine that where the holder of any equitable charge on an estate acquires the legal title, there will be a merger, unless the party has a valid interest in preserving the equitable title, usually for protection against intervening interests. See Forbes v. Moffatt, 18 Ves. Jun. 384, 390, 34 Eng. Rep. 362, 364 (Ch. 1811); Powell v. Morgan, 2 Vern. 90, 23 Eng. Rep. 668 (Ch. 1688); Thomas v. Kemeys, 2 Vern. 348, 352, 354, 23 Eng. Rep. 821, 822–823 (Ch. 1697); compare 15 Viner, Abridgment 369.


See 2 Glenn, Mortgages 1159–1160; George E. Osborne, Handbook on the Law of Mortgages 770–771 (St. Paul, 1951); Tice v. Annin, 2 Johns. Ch. (N.Y.) 125 (1816); Lydon v. Campbell, 198 Mass. 29 (1908). Compare Darcy v. Hall, 1 Vern. 49, 23 Eng. Rep. 302 (Ch. 1682).


Although few cases in point have been found, modern authorities agree that a second mortgagee can insist that, as between himself and the mortgagor, the latter rather than the land shall bear primary liability for the mortgage debt, on the theory that the second mortgagee has received no reduction as consideration for the prior encumbrance. See A. James Casner, ed., American Law of Property, vol. 4, §16.127 (Boston, 1952); Osborne, Mortgages 697; Herbert T. Tiffany, The Law of Real Property, 5:371 (Chicago, 3d edn., 1939); Glenn, “Purchasing Subject to Mortgage. First Phase: Mortgagor's Rights Against Grantee,” 27 Va. L. Rev. 853, 855 (1941). Compare Samuel Carter, Lex Vadiorum 100–103 (London, 2d edn., 1728). In holding that even where a second mortgagee had assumed the senior mortgage debt by express agreement, the senior mortgagee could not join him as defendant in a deficiency suit, the Court of Appeals of New York stated as a general proposition underlying this result that “Where a party, taking from his debtor a lien on property subject to prior liens, assumes and pays them off, he is certainly entitled to add the amounts so paid to his original debt; the payments, though made in pursuance of his agreement, are made for the benefit of the debtor, and upon his debts, and to protect him and his property.” Garnsey v. Rogers, 47 N.Y. 233, 240 (1872). In Bassett v. Mason, 18 Conn. 131 (1846), however, the court held the mortgagor entitled to an injunction barring a junior mortgagee who had foreclosed his own mortgage and then had bought in two prior encumbrances from suing on the note secured by the first mortgage. This result may be reconcilable with Prout. Although the Connecticut court seems to have assumed that the land was worth less than the face value of the encumbrances, the amounts which the mortgagee actually paid for them do not appear and may well have been less than the land value. If the cases are not reconcilable, Prout is more consistent with the general principles of strict foreclosure. In Bassett the court seems to have based its conclusion that the land was the primary fund for payment of the debt upon New York cases, cited by counsel, in which the junior encumbrancer had acquired his title by buying in at his own foreclosure sale, rather than through entry and foreclosure. 18 Conn. 131, at 134, 137. See Cox v. Wheeler, 7 Paige 248 (N.Y. Ch. 1838); McKinstry v. Curtis, 10 Paige 503 (N.Y. Ch. 1844). A similar result has been reached in a modern view, on the theory that by virtue of the conditions of sale the junior encumbrancer in such a situation is like any other purchaser and so agrees that the land will be primarily liable. See Osborne, Mortgages 768–769. Compare text at note 12 above.


In Bassett v. Mason, note 13 above, the court indicated that it would have found no merger if the value of the land had been less than the note sued upon.


See Amory v. Fairbanks, 3 Mass. 562 (1793); Coit v. Fitch, 1 Kirby (Conn.) 254 (Super. Ct. 1787); 1 Glenn, Mortgages 436–437. Since 1836, a Massachusetts statute has provided that if the mortgagee recovers on a deficiency after foreclosure, the right to redeem is reopened for a year. Mass. G.L., c. 244, §35. Later construction of this Act indicates that it created a right not previously known at common law. Fennyery v. Ransom, 170 Mass. 303, 49 N.E. 620 (1898). It has not given rise to the difficulties about deficiency suits found in England. See note 6 above; compare Ely v. Ely, 6 Gray (Mass.) 439 (1856). By Act of 1818, now Mass. G.L., c. 244, §36, it was provided that a mortgagor could recover a surplus in an action at law. Presumably at common law any surplus was a windfall to the mortgagee. Thus, the mortgagor could not ordinarily open the foreclosure merely because of a surplus. See John J. Powell, Mortgages 457–461 (London, 1st edn., 1785).


As to the right of the assignee to interest, see Darcy v. Hall, 1 Vern. 49, 23 Eng. Rep. 302 (Ch. 1682); compare 1 Glenn, Mortgages 542–544. The sum might have been increased by a rule that interest paid by the assignee to the mortgagee could be asserted as principal (and so itself subject to interest) against the mortgagor. Under the English rule this could not be done without the consent of the mortgagor, but it was done without consent in a later Massachusetts case. See Swinerton v. Fuller, 4 Dane, Abridgment 185 (SJC Essex, 1792); compare id. at 176; Carter, Lex Vadiorum 108–110.


By the Massachusetts Act of 1698, note 4 above, the mortgagee was required to account for rents and profits on redemption. It has been assumed that the successor of this statute, Mass. G.L., c. 244, §20, is equally applicable in a suit on a deficiency. See Hadley Falls Trust Co. v. United States, 22 F. Supp. 346, 352 (D. Mass. 1938), reversed on other grounds, 110 F. 2d 887 (1st Cir. 1940).


The Massachusetts courts have held that foreclosure is not complete until the three-year redemption period has run, and have stated that the value of the land for purposes of deficiency is to be taken as of that time, West v. Chamberlin, 8 Pick. (Mass.) 336 (1829); McLaughlin v. Cosgrove, 99 Mass. 4 (1868); Morse v. Merritt, 110 Mass. 458 (1872). In one early case, however, in which a barn on the mortgaged property was destroyed after entry, although in determining a deficiency the property was appraised after the time for redemption had run, the value of the barn was included in the appraisal. Amory v. Fairbanks, 3 Mass. 562 (1793); SF 106460.