Case Name: SYRACUSE SAV. BANK v. MERRICK et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1904-07-06
Citations: 89 N.Y.S. 238
Docket Number: 
Parties: SYRACUSE SAV. BANK v. MERRICK et al.
Judges: 
Reporter: West's New York Supplement
Volume: 89
Pages: 238–247

Head Matter:
(96 App. Div. 581.)
SYRACUSE SAV. BANK v. MERRICK et al.
(Supreme Court, Appellate Division, Fourth Department.
July 6, 1904.)
1. Mortgage—Assignment—Bona Fide Purchaser—Reliance on Record as to Title of Assignor.
The subsequent purchaser in good faith oí a bond and mortgage delivered at the time of the assignment piay rely on the record as to the title of the assignor, though the bond was not produced.
2. Same—Good Faith of Assignor—Evidence—Sufficiency to Justify Finding.
Testimony showed that the owner of a bond and mortgage, having made an unrecorded assignment of the same, executed a second assignment thereof to a bank, which, on discovering that the bond was not delivered, called the assignor’s attention thereto, and he answered that it was at his office, and that he would furnish it. He also made a statement to the bank at the time of the assignment that he was the then owner of the bond and mortgage, and had been for some time past, and other statements as to their validity, freedom from usury, etc.; reciting that the representations contained were for the purpose of having the bank discount his note and accept the assignment. Held to warrant a finding of good faith on the part of the bank in relying on the record as to the title of its assignor.
McLennan, P. J., dissenting.
Appeal from Trial Term.
Action by the Syracuse Savings Bank against Charles H. Merrick and others. From a judgment for plaintiff, defendants Charles H. Merrick and another, as executors of James Tolman, deceased, appeal.
Affirmed.
Argued before McLENNAN, P. J., and SPRING, WILLIAMS, HISCOCK, and STOVER, JJ.
Tracy, Chapman & Tracy, for appellants.
Lewis & Crowley, for respondent Salt Springs Nat. Bank.
Hiscock, Doheny, Williams & Cowie, for respondent Syracuse Sav. Bank.
Thompson, Woods & Smith, for respondent James E. Hubbell, guardian, etc.

Opinion:
STOVER, J.
This appeal involves the construction of the acts with reference to the recording of conveyances of real estate, in order to determine the priority of liens; the action being one for the foreclosure of a mortgage.
On August 2, 1895, George B. Warner was the owner of the bond and mortgage in question, and on that day assigned the same to one Tolman as collateral security for a note made by himself and another. The assignment to Tolman was not recorded, and on the 16th day of May, 1900, Warner executed a second assignment of the same bond and mortgage to the defendant Salt Springs National Bank to secure the sum of $7,000. The mortgage was delivered to the bank at the time of the assignment, but the bond was not delivered. The transaction by which the transfer was made involved the transfer of a number of other securities—some 26 in number—and upon their delivery to the defendant bank the attorney discovered that the bond in question and one or two others were not in the package delivered. The attention of Warner was called to the fact, and Warner answered that they were at his office, and he would furnish them. Warner also made a statement to the bank at the time of the assignment that he was the then owner of the bond and mortgage, and had been for some time past, and other statements as to their validity, freedom from usury, etc.; the statement reciting that the representations contained were made for the purpose of having the bank discount the note and accept the assignment. The trial court found that the bank was a purchaser in good faith of the mortgage, and adjudged that the assignment to the Salt Springs National Bank was entitled to priority over the assignment of the bond and mortgage to Tolman, and that the interest of said bank in any surplus arising from the sale was prior arid paramount to that of Tolman.
It is urged on behalf of the appellant that the recording acts do not apply, inasmuch as the nonproduction of the bond was notice to the bank of the rights of Tolman, and that the inquiries made "by the bank were not sufficient to relieve it from the presumption of notice. .The case of Kellogg v. Smith, 26 N. Y. 18, is relied upon as an authority for the proposition that a party receiving an assignment is bound to have the bond produced, or take the assignment at his own risk. The case of Kellogg v. Smith, supra, cannot be taken as authority for the broad proposition. In that case the mortgage contained a covenant that it should not be assigned without the consent of or notice to the mortgagor. It was assigned without such consent or notice, and subsequently the mortgagee again assigned to a person who learned by inquiry that the mortgagor had not received notice of the previous transfer. The second assignment was recorded; the first was not; and it was held that the first assignee obtained title to the securities. Neither the, bond nor mortgage were delivered to the second assignee. In the discussion of Bacon v. Van Schoonhoven, 87 N. Y., at page 451, the cases of Brown v. Blydenburgh, 7 N. Y. 141, 57 Am. Dec. 507, and Kellogg v. Smith, supra, are discussed, and the court there state that the holding in these cases is that the fact that the mortgagee does not produce the bond is a circumstance which should put the mortgagor upon inquiry. It is said in Campbell v. Vedder, 42 N. Y. 174, that a "subsequent purchaser, in good faith," in the recording act, as to the case then under discussion—being a case arising upon failure of an assignee to record his assignment of a mortgage—-"means a purchaser of the mortgage assigned, not a purchaser of the premises." And so we come to the proposition that a subsequent purchaser in good faith may rely upon the record as to the title of his assignor. Following the contention of the appellant further, that the facts in this case do not show a purchaser in good faith, we are inclined to adopt the finding of the trial court in that particular. Good faith becomes a question of fact where usual care is exercised in transactions. In this case the facts are undisputed, substantially, that the respondent bank made inquiry as to the bond, obtained a full statement with reference to its ownership, and relied upon the apparent record title to the mortgage. It would be idle to say that the statute protects assignees in good faith of mortgages, if, in addition to- the record title and good faith, it is still required that the bond should be actually produced upon a transfer, for then the protection depends upon the production of the bond, and not upon either the record or good faith; and the record of title to a mortgage would not be such protection as the statute clearly intended to extend to purchasers. We cannot say that the trial court has drawn a wrong inference as to good faith from the testimony in this action, and, it not clearly appearing that this finding is erroneous, we do not feel called upon to challenge it.
There can be no question as to the proposition for which the appellant strongly contends, that the bond is the evidence of the debt, and that the mortgage is security, as an incident thereto. Upon legal principle, and in the absence of statutory regulation, the assignment of the mortgage without the bond would convey nothing to a purchaser. But the title may be transferred by assignment, and equities may have to be dealt with in a variety of forms. If necessary to adjust equities that may arise, the security may be separated from the debt, and such disposition made of each as shall subserve the equities of the case. The power of the Legislature by the recording act to separate the mortgage interest in the land, and transfer it to a subsequent assignee, as a distinct thing from the mortgage debt, as evidenced by the bond or other instrument in the hands of the first assignee, to be enforced as he may be able to enforce it without the mortgage security, is unquestionable. The Legislature has undertaken to regulate transfers of interests in real estate, and has provided that a mortgage, although it may have no validity without an accompanying debt, shall be recorded, in order to protect its owner against intervening equities, and that the assignment of this mortgage, if its owner desires to be protected, shall be put of record, so that people exercising ordinary care and acting in good faith may be able to deal upon the strength of the record, as the owner of the security sees fit to leave it or make it; and this protection goes not only to the equities that may intervene with reference to the estate or title to the land itself, but attaches to the assignment or transfer, which may be, and is in some instances, a mere chattel interest. We think the judgment of the trial court was warranted, and the judgment should be affirmed.
Judgment affirmed, with costs. All concur, except McLENNAN, P. J., who" dissents.