Case ID: ad_154/html/0292-01.html
Source: Caselaw Access Project
Author: {"author": "Burr, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

James J. Sullivan, Respondent, v. Corn Exchange Bank, Appellant, Impleaded with Thomas Monahan and Others, Defendants. James J. Sullivan, Respondent, v. W. & J. Sloane, Appellant, Impleaded with Thomas Monahan and Others, Defendants.
    Second Department,
    December 30, 1912.
    Mortgage to secure payment of antecedent debt — failure to execute bond — lien — priority of unrecorded mortgage over subsequent judgment— equitable mortgage — enforcement of mortgage, when no date of payment is specified — “ subsequent purchaser in good faith.”
    Where a mortgagor executed a mortgage upon real estate to secure the payment of an antecedent debt, but failed to execute and deliver the . bond, and subsequent to the execution of the mortgage but before it was recorded two creditors of the mortgagor secured judgments against him upon claims which were not in existence at the time the mortgage was given, the mortgage is a valid and enforeible lien prior to the lien of the judgments.
    Such an instrument might be sustained as an equitable mortgage.
    Where a mortgage contains an express covenant to pay a debt the fact that no date is specified when it shall become payable does not render it unenforcible.
    The right to enforce it either accrues immediately or it may be enforced • after the lapse of a reasonable time and upon demand.
    A judgment creditor is not a ‘ ‘ subsequent purchaser in good faith ” within the meaning of section 291 of the Real Property Law, and an unrecorded mortgage has a preference over a subsequent judgment unless there is a superior equity in favor of the holder'of the latter,
    Separate appeals by the defendants, Corn Exchange Bank and W. & J. Sloane, each from so much of an order of-the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 11th day of October, 1912, as grants judgment to the plaintiff on the pleadings against such appellant.
    
      Selden Bacon, for the appellants.
    
      Gilbert W. Minor [Clark A. Wick with him on the brief], for the respondent.
   Burr, J.:

(f'EromTaffi'order granting plaintiff’s motion for judgment on the pleadings this appeal comes.

The complaint alleges that on October 31, 1910, defendant Monahan was justly indebted to plaintiff in the sum of $4,000, and as security for the payment of such indebtedness promised to execute his bond for that amount, bearing date on that day, secured by a mortgage on real property in Kings county. On the date named he did execute and deliver such a mortgage, but failed to execute and deliver the bond. The mortgage contained a recital that Monahan was indebted to plaintiff in the sum named, “ secured to be paid by his certain bond or obligation, bearing even date herewith, conditioned for the payment of the said sum of ” $4,000. The grant of the land described in the mortgage was stated to be “for the better securing the payment of the said sum of money mentioned in the condition of the said bond or obligation, with interest thereon, and also for and in consideration of one dollar.” The mortgage contained an express covenant to “ pay the indebtedness as hereinbefore provided.” The mortgage was duly recorded January 27, 1911. ] Prior to the commencement of this action, which was on or about August 12, 1912, payment was. demanded of the amount of such indebtedness, to wit, $4,000, with interest from October 31, 1910. [/Upon default of payment this action was brought for a foreclosure of said mortgage. / As incidental relief plaintiff demanded that ‘1 said mortgage be reformed by omitting therefrom the recital in (sic) the giving of said bond.” /"Defendants Corn Exchange Bank and W. & J. Sloane, each a domestic corporation, separately answered, denying none of the allegations .of the complaint, but setting up, the Com Exchange Bank that on the 10th day of January, 1911, it recovered a judgment against said Monahan in an action in the Supreme. Court for $8,157.36, which judgment was docketed in the office of the clerk of Kings county on January 11, 1911, and W. & J. Sloane that it also . recovered a judgment against said Monahan on January 10, 1911, in an action in the Supreme Court for $17,733.74, which judgment was also docketed in said clerk’s office January 11, 1911. ( No attack is made upon the bona fieles of said mortgage, nor do defendants contend that it was given in fraud of creditors. ■ Plaintiff’s motion for judgment on the pleadings was granted, and the question here is solely, one of priority of lien.

pThe mortgage in question became and was from the date of its delivery a perfectly valid lien and incumbrance upon the premises therein described, as between the parties thereto. Even if it was given to secure payment of an antecedent debt, the same rule applies as between the parties and against all others who had at the time no equitable interest in the property, or who did not acquire rights as subsequent purchasers or incumbrancers for value. (1 Jones Mort. [3d ed.] § 458; Young v. Guy, 23 Hun, 1; affd., 87 N. Y. 457; Obermeyer & Liebmann v. Jung, 51 App. Div. 247.) j The fact that no bond was actually given at the date ofthe execution and delivery of the mortgage does not impair it, since there ■ was other sufficient consideration therefor.- (1 Jones Mort. [3d ed.] § 353; Goodhue v. Berrien, 2 Sandf. Ch. 630; Baldwin v. Raplee, 4 Ben. 433.) pits validity does not depend upon the form of the indebtedness, whether by note, bond or otherwise, but upon the existence of the debt which.it was given to secure. (Goodhue v. Berrien, supra,; Burger v. Hughes, 5 Hun, 180; affd., 63 N. Y. 629.) This case is distinguishable from Bergen v. Urbahn (83 N. Y. 49, 51), where a bond was in fact given, which was not produced upon the trial, nor was any explanation offered for the failure to produce the same. The mortgage itself contains an express covenant to pay the -debt, and the fact that no date is specified when it shall become payable does not render it unenforcible. Either the right to enforce it accrues immediately (Purdy v. Philips, 11 N. Y. 406; Eaton v. Truesdail, 40 Mich. 1; Rhoads v. Reed, 89 Penn. St. 436), or it may be enforced after the lapse of a reasonable time and upon demand. The complaint alleges demand, and if the rule of reasonable time does apply, it is for defendant to show that a lapse of nearly two years after delivery, without payment of either interest on the debt or taxes or assessments upon the property, is not such reasonable .time.

¿.We think, therefore, that without reformation the mortgage was a valid and enforcible legal obligation on plaintiff’s land, and as against defendants, judgment creditors of Monahan, a lien prior to the hen of such judgments, even though the mortgage was not recorded until after the judgments were docketed. [ The cases relied upon by appellants (Ogden v. Ogden, 180 Ill. 543; Whiting Paper Co. v. Busse, 95 Ill. App. 288; Bramhall v. Flood, 41 Conn. 68; Porter v. Smith, 13 Vt. 492) are clearly distinguishable. In the Ogden case it appeared that no actual indebtedness existed at the time of the delivery of the mortgage, nor until the delivery of the note recited therein, which was some six years subsequent to the date of the execution of the mortgage, and in the meantime the right of subsequent incumbrancers had intervened. In the case of Whiting Paper Co. (supra) the original security had been surrendered, the bona jides of the debt was questioned, and the rights of subsequent incumbrancers had also intervened. In Porter v. Smith (supra), where plaintiff held two promissory notes of defendant and it was agreed that two new notes should be given, secured by a mortgage, and the mortgage was drawn correctly describing said notes, but, by mistake, the new notes were retained by the debtor and the old notes returned to the creditor, the mortgagee, all that was held was that the mortgagee could not proceed at law in ejectment as he might otherwise have done, but must proceed in equity to enforce his claim. In Bramhall v. Flood (supra) the decision rested upon the peculiar provisions of the ¡Recording Act of that State, which would seem to put judgment creditors upon a similar footing with purchasers and incumbrancers for value. (See Pettibone v. Griswold, 4 Conn. 158.) foür statute only provides that every conveyance (and for the purposes of the Recording Act a mortgage is within the definition of a conveyance) not recorded as therein required “is void as against any subsequent purchaser in good faith and for a valuable consideration, from the same vendor, his heirs or devisees, of the same real property or any portion thereof, whose conveyance is first duly recorded.” (Real Prop. Law [Consol. Laws, chap. 50; Laws of 1909, chap. 52], § 291.) [ A judgment creditor is not such a purchaser, and an unrecorded conveyance has a preference over a judgment unless there is a superior equity in favor of the holder of the latter^ (Thomas v. Kelsey, 30 Barb. 268; Flagler v. Malloy, 9 N. Y. Supp. 573; Obermeyer & Liebmann v. Jung, supra; Russell v. Wales., 119 App. Div. 536.) ,|FBut if it Could be successfully claimed that the instrument under consideration was so defective in form as to be invalid as a legal obligation, it might still be sustained as an equitable mortgage, j “An equitable mortgage may also be constituted by any writing from which the intention may be gathered; and an attempt to make a legal mortgage) which fails for want of some solemnity, is valid in equity.” (Miller Eq. Mort. 1; Payne v. Wilson, 74 N. Y 348; Perry v. Board of Missions, etc., of Albany, 102 id. 99; Hamilton Trust Co. v. Clemes, 163 id. 423; Hughes v. Edwards, 9 Wheat. 489; Flagg v. Mann, 2 Sumn. 486.) It is not necessary to bring an action to reform an equitable mortgage so as to make it a legal obligation in order to enforce it. (Sprague v. Cochran, 144 N. Y. 104.) J~An. equitable mortgage takes precedence over a lien, whether general or special, which only attaches, as does a judgment, to such right, title or interest as the debtor has in real property. (Matter of Howe, 1 Paige, 125; Keirsted v. Avery, 4 id.. 9; Dwight v. Newell, 3 N. Y. 185; Chase v. Peck, 21 id. 581; Robinson v. Williams, 22 id. 380; Payne v. Wilson, supra.)If this controversy had arisen between purchasers or incumbrancers of the property in question, the fact that the mortgage was given to secure an antecedent debt might have been a factor of consequence, since in such case, in the absence of an enforcible agreement to extend the' time for the payment of the debt, plaintiff might not be deemed a purchaser for value within the meaning of the Recording Ackj (Real Prop. Law, supra, § 291; O’Brien v. Fleckenstein, 180 N. Y. 350.) [/~But in the case of a judgment creditor who can claim no benefit under the provisions of the said act, if the mortgage was valid between the parties we can see no reason for any distinction in the absence of some superior or at least equal equity. The only anthority which we have been able to find directly to the contrary is the case of Wheeler v. Kirtland (24 N. J. Eq. 552). The statement in the opinion to that effect cites no authority in support of it, and it seems to us to be directly contrary to the authorities in this State to which reference has been made, pin this case no superior equity is shown on the part of the judgment creditors. It does not appear that the debts were even in existence at the time when the mortgage in suit was given, or that they extended credit to the mortgagor upon his supposed ownership of the premises in question, free from the lien of said mortgage. If plaintiff’s equitable lien had arisen subsequent to the docketing of the judgment or simultaneously therewith, a different question would have been presented (Dwight v. Newell, supra; Goodhue v. Berrien, supra), but upon the facts here disclosed the order appealed from was correctly made, and it should be affirmed^

Hdrschberg, Thomas, Carr and Woodward, JJ., concurred.

In each case order affirmed, with ten dollars costs and disbursements.