Court Opinion

ID: 6567793
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:21:28.243577+00
Date Added: 2024-06-11T15:56:48.196228
License: Public Domain

EmeRSON, Justice,
dissented and delivered tbe following dissenting opinion:
I am unable to agree with a majority of the court in this case, and file tbe following reasons for dissenting therefrom:
On tbe 5th day of July, 1873, tbe defendant, Smith, made a note of $17,107, tbe amount of bis indebtedness to tbe respondents, payable to tbe order of Jobn W. Kerr sixty days after date. Kerr indorsed tbe note for Smith’s accommodation; Smith then promising to execute afterwards a mortgage for Kerr’s indemnity. The note and mortgage on which this action was brought, were made by Smith at Kerr’s request, on tbe 27th of September-following, for tbe purpose of sucb indemnity.
Although tbe note, to which the mortgage sought to be foreclosed by this action is collateral, contains an absolute promise to pay $13,000 sixty days after date, yet it could .not, between tbe immediate parties, kave been enforced, except on *48the happening of a loss against which it was intended as a security. The law is now well settled, that however absolute a deed or other instrument, it may be shown by parol to have been intended as a security. Atwater v. Emerson, 7 Mich. 12; Strong v. Stewart, 4 John. Ch. 167; Ryan v. Walker, 1 Wis. 527; 6 John. Ch. 417; 46 N. Y. 609; 2 Whart. on Ev., § 1081, 1032.
Between Smith and Kerr the sum stated in the note is like a penalty with a parol condition or defeasance, to pay any loss Kerr might sustain by reason of the indorsement.
The second finding of the court below is “ That the consideration for the note and mortgage sued on by the plaintiff, was the indorsement by John W. Kerr of a certain note, made by the defendant Charles E. Smith, on the 5th day of July, A. D. 1873, for the sum of $17,107.10, which note was made payable to said Kerr in sixty days from date, and was to bear interest at the rate of one and one-half per cent, per month, and that said Kerr indorsed said $17,107.10 note on the 5th day of July, A. D. 1873, upon the request of said Smith, and upon Ms promise to execute and deliver to him the note and mortgage sued on by the plaintiffj as part of one and the same agreement.”
There is no evidence in the record that any note was promised, nor that any mortgage was to be made except for Kerr’s indemnity. The note and mortgage which were made did not, therefore, literally conform to the agreement, and the last clause of the finding appears to .be entirely unsupported by proof. Had Smith merely given a mortgage conditioned to save Kerr harmless, and this finding had referred solely to such a mortgage, it would have been correct; but this finding does not notice the conditional nature and effect of the instruments in their inception; they are treated as being legally absolute according to their face, as though they were valid and binding when made for the payment of $13,000 in sixty days. When they were made in September . there was a sufficient executed consideration to support a mortgage for Kerr’s con*49tingent loss, and it does not appear that Smith or Kerr intended the securities to have any other operation.
Hence, the finding above quoted does not accurately state the transaction as disclosed by the evidence.
The answer of the appellant, Neslin, truly sets forth the consideration and purpose for which these instruments were made, and that the respondents had notice thereof. The1 respondents are found to be entitled to have judgment according to their literal reading; that is, for principal and interest from date, as for an actual debt. Kerr would not be entitled to such a judgment, nor would the respondent, except on the footing of a bona fide holder. On that subject there is no finding, and obviously for the reason that the court below treated the note and mortgage as absolute in their inception; in the hands of Kerr, as well as in the hands of the respondents; hence, it is apparent that the respondents obtained judgment without being required to show the bona fides of their purchase.
The errors of law and fact in the second finding led to this result, and this alone would necessitate a reversal; for there is a recovery where no cause of action existed between the original parties, and in the absence of any fact found which would give the respondent a right of action when none existed in favor of Kerr. But other points remain to be considered.
The mortgagor makes no defense; but Neslin, who is made a defendant on the general allegation that he has, or claims to have, some interest in or claim on the mortgaged premises, answers the complaint, and sets up an earlier mortgage, given November 27, 1872, by the same. mortgagor, for $7,000, shown by the evidence to be purchase money of the mortgaged premises. It bears interest from March 1,1873, at the rate of one and one-half per cent, per month until paid, and secures also $300, attorneys’ fees, amounting, at the time this decision is made, (August 5, 1878,) in all to $14,037.50. This mortgage is held by the court below to be subsequent and subordinate to the mortgage held by the respondent. It will be *50noticed that it is prior in date; and this fact gives the bolder a right to prior satisfaction, unless bis lien is intrinsically defective, or unless be bas done some act, or is guilty of some neglect wbicb by law or equity, has the effect to postpone him. Rankins v. Scott, 12 Wheat. 177.
The only ground on which it is claimed that Neslin lost priority, is his omission to record his mortgage until after the mortgage held by the respondents had been made and recorded. To determine that this omission has this postponing effect, we must hold that he was under a legal or equitable obligation to record his mortgage, and that the respondents are in a situation to claim preference on account of the neglect.
It is conceded that in 18T2-3 there was no statute in this Territory which expressly required the recording of mortgages; and none which defined the consequences of an omission to record, nor what advantages any other mortgagee would derive by superior diligence in recording such securities.
A recorder’s office had long been established under Territorial statutes, and the recording of certain instruments, other than mortgages, was expressly provided for, and, to some extent, regulated. The testimony also shows that there were record books kept for the recording of mortgages; that mortgages were in fact recorded; but no uniform or even general custom to record them. Under these circumstances it cannot be held that there is a statutory requirement to record as a part of the ceremony of creating a valid incumbrance; nor is any such claim made. It is well settled, that recording acts apply only to such instruments as the law by general or special terms requires to be recorded; and statutes which are only permissive in their language, and which do not declare the record to be notice, are not mandatory, and the record will have no other effect than that prescribed. Boyd v. Schlessinger, 59 N. Y. 301; Cook v. McChristian, 4 Cal. 23; Farmers' & Mechanics' Bank v. Bronson, 14 Mich. 361.
The respondents’ claim on this point is, that there being a *51recorder’s office, and a usage to record mortgages, the appellant was wanting in diligence. But unless the statute made the record notice, the party recording it would derive no advantage from its being recorded, and no subsequent purchaser or incumbrancer would be affected by it. It may, however, be contended that if a mortgage is recorded, a party dealing with the property afterwards would be warned by actual inspection of the record; and therefore Neslin, by omitting to record his mortgage, withheld information which it was his duty in this way to communicate, and should now be estopped from asserting a prior lien, which he failed to declare, to the prejudice of a subsequent mortgagee having no knowledge of it. The requisite facts do not appear in such a case to create an equitable estoppel. There being no duty to record the mortgage, there was no silence when there was a duty to give information. In this case, however, it does not appear that either Kerr or the respondents suffered any prejudice at all as the consequence of Neslin’s failure to record his mortgage; neither appear to have consulted or acted upon the record. Kerr did the act against which the mortgage was given as an indemnity, on Smith’s promise to give a mortgage, and on his assurance that the property was unincumbered. The diligence, therefore, which the respondents insist upon would have been unavailing, and, consequently, the want of it not detrimental.
Unrecorded instruments are good, even under recording laws, between the parties, and they are good as against all others who are not expressly exempted from their effect.
No party can be exempted in this Territory, under the laws existing prior to 1874, except upon equitable grounds; but in equity one party cannot obtain relief against another for not doing an act which he was under no obligation to perform, nor unless it appears that not doing it was injurious.
“ If a statute prescribed that an unrecorded mortgage should be void as against a subsequent purchaser or mortgagee for value, without notice, the court would have no option but *52to pronounce accordingly when such a case is presented. But in the absence of such a statute a court is not warranted in holding an unrecorded mortgage void when it does not appear that the record was consulted, nor that any subsequent dealing with the property was at all influenced by the state of the record.
Recording acts are intended to protect only bona fide purchasers and incumbrancers who have paid value. Neither Kerr nor the respondents are entitled to any preference in that character.
“ The term bona fide purchaser is borrowed from equity jurisprudence, and must be interpreted accordingly, and it is well setted that a grantee or incumbrancer, who does not advance anything at the time, takes the interest conveyed subject to any prior equity attaching to the subject. Wood v. Robinson, 22 N. Y. 564. A good consideration in a general sense is not sufficient. Weaver v. Borden, 49 N. Y. 291. Neither a past consideration as a precedent debt, when there is no change in the debt, surrender of securities or the like. Weaver v. Borden, 46 N. Y. 286; Cary v. White, 52 N. Y. 138. Nor an executory consideration, to be paid on performance in the future. Wormly v. Wormly, 8 Wheat. 421; Dixon v. Hill, 5 Mich. 404; Worms v. Whittaker, 6 Mich. 133; Blanchard v. Tyler, 12 Mich. 339; Stone v. Welling, 14 Mich. 514.
Value must be paid at the time, on the faith of the purchase or the security.
When the mortgage to Kerr was made he paid nothing; he had already endorsed for Smith, relying on his verbal promise for security. See Dusenbery v. Holbert, 59 N. Y. 541.
The testimony fails to satisfy us that when the note and mortgage were delivered to the respondents, there was any granting of time or other contemporaneous considerations; they were delivered simply as collateral security for a debt which the respondents deemed already well secured.
There is no more reason to suppose that the delay for the *53first sixty days, any more than for the ensuing five months, was by agreement, based on the receipt of this mortgage.
In my opinion the decree should be modified so far as it determines that the respondents’ mortgage is entitled to priority. It should be so modified as to require the application of the proceeds of the sale: First, To pay the costs of the appellant in this court and in the court below, with the costs of sale. Second, The amount due to appellant Neslin on his said mortgage; and, Third, the respondents’ mortgage and their costs.
Thereafter, counsel for appellant moved the court for findings, preparatory to an appeal to the Supreme Court of the United States. After argument the motion was allowed, and the Supreme Court decided to file findings.