Court Opinion

ID: 5255309
Source: CourtListenerOpinion
Date Created: 2022-01-06 18:26:00.189693+00
Date Added: 2024-06-11T08:28:00.189572
License: Public Domain

Putnam, J. (dissenting):
This situation arises from a mortgage loan to Mrs. Gennaro (wife of a retailer of plaintiff’s beer in casks and kegs), made by the plaintiff brewing company on January 15, 1912. She had no record title. That still remained in the Dennisons. Mrs. Gennaro had no possession of the property. But at this time there was an unrecorded deed to her from her husband, contained in his desk, dated July 14, 1911, purporting to be in consideration of one dollar, which recited an incumbrance by mortgage to secure $1,000, which the party of the second part assumed and agreed to pay.
In closing these transactions Mr. Bushnell of Peekskill, now deceased, acted as attorney for the Gennaros, also for the plaintiff. The plaintiff had written to Bushnell about *790this loan, and Bushnell answered that he would take care of it. Bushnell took the wife’s acknowledgment and then sent the bond and mortgage to the brewing company, which itself sent the mortgage for record and paid the recording charges.
The court has found: “ That plaintiff made no inquiry as to the nature and extent of the title or interest in the said premises of the said defendant, Eugenia Gennaro.”
Of course, this was the only way such a mortgage as plaintiff’s could be taken as a first lien, since inspection of the deed to Mrs. Gennaro would disclose the prior $1,000 mortgage to the Dennisons.
It is settled in New York that a junior incumbrancer who first gets on record is not protected by the Recording Act if the mortgagee had constructive notice of a prior unrecorded instrument. (Tuttle v. Jackson, 6 Wend. 213; Jackson v. Burgott, 10 Johns. 457.)
The Recording Acts protect only one who is a purchaser in good faith. Such a purchaser or mortgagee, chargeable with notice of the rights of a prior purchaser or incumbrancer, is not acting in good faith. The degree of notice required is, in the language of the authorities, such as would lead any honest man, using ordinary caution, to make further inquiries. (Moore v. Le Maire, 169 App. Div. 154, 157.)
As was said by Duer, J.: “ The principle of the doctrine of constructive notice is, that when a person is about to perform an act by which he has reason to believe that the rights of a third party, may be affected, an inquiry into the facts is a moral duty, and diligence an act of justice. Hence, he proceeds at his peril when he omits to inquire, and is then chargeable with a knowledge of all the facts that by a proper inquiry he might have ascertained. This neglect is followed by all the consequences of bad faith, and he loses the protection to which his ignorance, had it not proceeded from neglect, would have entitled him. The cases are innumerable in which this doctrine has been applied in courts of equity to purchasers and mortgagees of real estate, and there are many in which it has operated to divest the title of those whose actual good faith was unsuspected. The rule, that it is only purchasers for value and without notice, who, in certain cases, may oppose their title to that of the true owner, we have always believed *791and must still believe, is the same in courts of law as of equity, and in both, we cannot doubt that the term notice must receive the same interpretation. It must either be limited to strict knowledge, which is derived from positive information, or must be extended to that which the law imputes to him, who, having reason to believe or suspect, refuses or neglects to inquire.” (Pringle v. Phillips, 7 N. Y. Super. Ct. 157,171.)
I think the finding of no inquiry as to the nature and extent of this mortgagor’s title is decisive. Obviously the brewing company took this mortgage either relying on the credit of a favored customer, the mortgagor’s husband, or else it willfully shut its eyes, and did not call for the title deed. In either view it was not a bona fide purchaser, and, therefore, not under the protection of the Recording Acts. (39 Cyc. 1715; 2 Devlin Deeds [3d ed.], § 629a.) If it be asked what any honest man, using ordinary caution, would ask for in taking a mortgage from a holder of an unrecorded deed, or what in these circumstances would be a proper inquiry, I think no real question should arise. In such case, before consummating the transaction, the deed constituting the basis of the title would be ordinarily called for and inspected.
Hence I would affirm.
Kelly, J., concurred.