Court Opinion

ID: 7120535
Source: CourtListenerOpinion
Date Created: 2022-07-24 12:37:56.297393+00
Date Added: 2024-06-11T16:14:05.417677
License: Public Domain

De Grapp, J.
(specially concurring). I concur in the conclusion announced. There can be no question as to the validity of a mortgage to secure future advances or liabilities. It is a recognized- form of security; and although a mortgage of this *68character has frequently been regarded with jealousy, and carefully scrutinized by courts of last resort, its validity is quite universally accepted. In the instant case, the legality of the" mortgage is not questioned upon the ground that there was in fact no valid consideration. It is well established that the real consideration in a mortgage or deed may be shown by parol, although different from that expressed in the instrument itself. The Tobin mortgage Avas recorded. It antedated plaintiff’s mortgage. We are not dealing with a condition in a mortgage. It recited a definite consideration, greater in fact than the amount of money then advanced, but under an agreement not expressed in the mortgage, that the consideration named should cover future advances or loans made by the mortgagee. The mortgage gave notice of an incumbrance,- — nothing more. This case does not involve the frequently stated rule that the condition of a mortgage must give reasonable notice of the in-cumbrance, and upon application to the record by a third party, he may acquire all the information which his interest demands. It is well settled that a party investigating the record of a mortgage must have the power of knowing from this source the subject-matter of the mortgage, and the incumbrance on the property must- be so defined as to prevent the substitution of everything which a fraudulent grantor may devise to shield himself from the demands of his creditors. There is no fraud pleaded or proved in the case at bar. The plaintiff could know nothing from an examination of the record as to future advances, but it did have knowledge of the agreement between the parties to that mortgage, and was bound to seek definite information from the parties who were in a position to give it. If they failed or refused, they would be estopped. Briefly stated, plaintiff, as an inquiring creditor, could not know from the record the precise incumbrance then in existence, but it had notice of certain definite -facts Avhich point to and guide it in the necessary investigation of the subject. We must not confuse a case of this character with conditions in mortgage deeds that neither communicate any certain information nor point out any path in pursuit of which information may be obtained. We are not dealing with the policy of our recording system, nor Avith the proposition aa’Ii ether the condition of the mortgage is described *69with such reasonable certainty that in respect to it a subsequent mortgagee is legally affected with notice. In the principle of constructive notice of the record, a subsequent mortgagee must be supposed to have read the mortgage with its condition, which must give reasonable notice. With this criterion we are not concerned. The Tobin mortgage did possess an uncertainty in the description of the obligation. The sum of the indebtedness was specified in the Tobin mortgage,- but it was stated as a present and existing indebtedness, which was not the fact. Plaintiff, however, was informed, prior to the execution of the second mortgage, and from the mouth of his mortgagor, that an agreement existed between the latter and Tobin that the amount stated did not represent his actual loan, but was intended to cover future advances, and that as to the amount that had been advanced, the mortgagor was not certain. What more could a recorded condition do? It was clearly the intent of the parties to the Tobin mortgage, and so communicated to plaintiff, that the lands described should stand as security for all advances made by Tobin to the mortgagor. If there was in fact no legal mortgage in this respect, there was undeniably an equitable one, which a court of equity would enforce against the original parties to it, and against all others not in the condition of bona-fide purchasers or subsequent incumbrancers without notice. It is not necessary to the validity of a mortgage that it should truly state the debt it is intended to secure, but it stands as a security for the real equitable claims of the mortgagee, whether they existed at the date of the mortgage or arose afterwards, upon the faith of the mortgage, before notice of an equity subsequently claimed. In Shirras v. Caig, 7 Cranch (U. S.) 34, Chief Justice Marshall, in delivering the opinion of the court, said:
“It is true that the real transaction does not appear on the face of the mortgage. The deed purports to secure a debt of 30,000 pounds. * * * It was really intended to secure different sums, due at the time to particular mortgagees, advances after-wards to be made, and liabilities to be incurred to an uncertain amount. It is not denied that a deed which misrepresents the transaction it recites and the consideration on which it is executed is liable to suspicion. It must sustain a rigorous examination. It is, certainly, always advisable fairly and plainly to *70state the truth. But if, upon investigation, the real transaction shall appear to be fair, though somewhat variant from that which is described, it would seem to be unjust and unprecedented to deprive the person claiming under the deed, of his real, equitable rights, unless it be in favor of a person who has been, in fact, injured and deceived by the misrepresentation. ’ ’
It is said in Williamson v. Brown, 15 N. Y. 354:
“The true doctrine on this subject is that, where a purchaser has knowledge of any fact sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or- to have been guilty of a degree of negligence equally fatal to his claim to be considered as a bona-fide purchaser.”
There is nothing unusual in the facts before us. It is frequent for a person tvho expects to become more heavily indebted to mortgage his property as security for debts to be contracted, as well as for those already due. In the instant case, there is no pretense, and could be none, that the Tobin mortgage was not valid between the parties to it. A subsequent incumbrancer with notice of an outstanding equity cannot acquire a superior right. "We will concede that the true amount of the debt should be stated, and under the instant facts, a recital that the mortgage was intended to cover future advances; but the Tobin mortgage was valid between the parties, and the plaintiff had actual notice of the original intendment. The defendants are entitled to priority over plaintiff’s mortgage, in accordance with well settled rules of law and a uniform current of decision.