Court Opinion

ID: 3620187
Source: CourtListenerOpinion
Date Created: 2016-07-06 00:02:11.292751+00
Date Added: 2024-06-11T14:05:33.149545
License: Public Domain

On this appeal no questions are material except such as arise between the plaintiff and the defendant Gleason upon the following facts:
On the 1st day of December, 1868, one Dennis McKoon had a clear title of record to 275 acres of land situated in Delaware county. There was however outstanding his bond for $1,500 secured by a mortgage upon these premises, not of record, given by him to one Schoonmaker. McKoon by deed recorded December 1, 1868 conveyed fifty-five acres part of the 275 to one Samuel Jones who took the deed in good faith, without notice of the mortgage above referred to, and under the belief that he was acquiring an unincumbered title to the land. At the same time he gave McKoon a mortgage for $700, of which $500 were for the purchase money of the fifty-five acres, and $200 for a pair of oxen. It was recorded on the 1st of December, 1868. On the 2d *Page 38 
of December, 1868, Gleason having first searched the records purchased of McKoon this mortgage for a valuable consideration, in good faith and without notice of the mortgage given by McKoon and believing the Jones mortgage to be a first lien upon the premises embraced in it. On the 27th of October, 1868, the McKoon mortgage was assigned to Westbrook; the mortgage was not recorded until the 8th of January, 1879. On the 29th of July, 1870, Gleason foreclosed the Jones mortgage — the assignment of the McKoon mortgage had not been recorded — Westbrook was not made a party; whether Schoonmaker was or not does not appear. Upon the sale under his foreclosure Gleason became the purchaser of the premises and received a deed therefor October 10, 1870, under which he and his grantees have since occupied the premises.
This action is brought for the foreclosure of the McKoon mortgage. Upon the trial the court found the facts above stated and held that the rights of Gleason acquired under the Jones mortgage were entitled to priority over those of the plaintiff under the McKoon mortgage, and the correctness of that decision is the question before us. The appellant's counsel contends that it is not, and his argument would be of great weight as to one branch of this case if there was either any defect or legal taint in the Jones mortgage, or any equity outside of the limit of the recording act, in favor of the McKoon mortgage as against the other. The authorities cited by him apply to cases within one or the other of these classes. They are as follows Schafer v.Reilly (50 N.Y., 61) was a controversy between a mechanic's lienor and a mortgagee. The mortgage was given without consideration, to be sold by the mortgagee for the benefit of the mortgagor — and was recorded — after the record the mechanic's lien attached — and after that the mortgage was sold — the mechanic's lien was given the preference, ALLEN, J., saying, "there is no question here under the recording act" — and adds, * * * "doubtless a bona fide grantee without notice of a prior unregistered deed may hold although *Page 39 
his grantor may have taken title with full knowledge of such deed," and that this remark applies to mortgagees and assignees of mortgages is apparent not only from the context, but the cases cited by the learned judge, among others Jackson v. VanValkenburgh hereafter referred to.
In Greene v. Warnick (64 N.Y., 220), the question was as to the priority between two mortgages. Each had been executed to secure portions of purchase-money to be paid for the premises described in them — "upon an agreement between the mortgagees that the mortgages should be equal liens, that neither was to have priority over the other and that both were to be recorded at the same time," — one was recorded first — but the court said "although first recorded it was not a subsequent conveyance and therefore these two mortgages executed at the same time are not within the statute," and they "must share equally in the surplus money" which was in dispute. The equity which prevailed was the result of an agreement between the mortgagees, and the court held that the assignees were bound by the agreement. The equity did not rest upon the simple fact of notice. De Lancey v. Stearns
(66 N.Y., 157), is to the effect that where a mortgage is taken without value paid, the taker is not a bona fide purchaser within the meaning of the recording act and that an assignee of such a mortgage stands in no better position than the mortgagee his assignor, as regards a prior unrecorded mortgage, — but that case recognizes the distinction on which the respondent here prevailed, the court saying "although on the question of notice the bona fide assignee of the mortgage for value may stand in a better position than the mortgagee, she cannot on the question of the consideration of the mortgage either as between herself and the mortgagor, or third parties," citing in support of the first part of the proposition, Jackson v. Van Valkenburgh (8 Cowen, 260), and Fort v. Burch (5 Denio, 187), and as to the last part, the case of Schafer v. Reilly (supra); and so far as it goes supports the respondent here — because in the case before us the question relates only to the effect of *Page 40 
notice. Trustees of Union College v. Wheeler (61 N.Y., 88), presented no question under the recording act, nor did it turn upon the question of priority between successive mortgages on the same real estate. It related to equities between the mortgagee and certain purchasers by contract of portions of the mortgaged premises, and the question was whether as to them the assignee of the mortgage stood in any better position than his assignor, the mortgagor. Crane v. Turner (67 N.Y., 437), affirming S.C. (7 Hun, 357), where the facts are somewhat more fully reported, and in both courts the decision is put upon the priority given to the plaintiff's mortgage by the recording act. The Supreme Court say "the plaintiff's mortgage was duly recorded as against the defendant Turner claiming under the same title" and upon appeal this court said, "nor is there any ground for the position of the defendant's counsel, that under the recording act the plaintiff's mortgage was not notice to the defendant although recorded, because the record shows a perfect claim of title sustaining the plaintiff's mortgage," and the opinion closes with these words, "as the recording act does not aid the defendant and no ground is shown upon which he is entitled to priority it necessarily follows that there was no error." The remaining case cited by the appellant, Davis v. Bechstein (69 N.Y., 440), is foreign to any question before us. It involved no claim of priority between successive mortgages, but determined that a bond and mortgage executed without consideration and invalid between the parties, could not by the unauthorized act of the mortgagee be rendered valid in the hands of his assignee against the mortgagor. There is no doubt that the purchaser of a chose in action must abide the case of the person from whom he buys. And it is upon that rule that the cases relied upon by the appellant and above referred to stand. The respondent's case does not infringe it, nor interfere with Bush v. Lathrop (22 N.Y., 535), which stands upon the same doctrine and was also referred to in several of the above cases. It applies to cases where there is some inherent *Page 41 
weakness in the security, as want of consideration, or usury, or where there is an agreement outside the mortgage affecting its priority or some other circumstance from which an equity arises against the enforcement of the whole or some part of the security, or where an assignment is in terms absolute but was in fact conditional, or for the whole amount appearing due when in fact it was for less. This distinction is insisted upon by Judge DENIO in Bush v. Lathrop. The thing in controversy in that case was a bond and mortgage, claimed by the defendant by assignment through Noble's assignee; Bush was Noble's administrator, and after stating the general doctrine which upholds the equities of third persons as well as those of parties to the instrument, the learned judge says: "It is necessary to add that I do not consider that the assignee stands in place of the assignor in every respect in all cases. The suggestion made in the earliest of the cases in this State, that the assignee if a bona fide purchaser without notice was not prejudiced by the notice of his assignor was well founded and has since been repeatedly recognized." (Citing among others Jackson v. VanValkenburg — and adding): "It was not notice which prejudiced the title of the parties under whom the defendant claimed, but the fact that Noble, the last absolute owner of the bond and mortgage never parted with his title, except on condition that it should be returned to him on payment of a comparatively small sum of money. The defendant claimed under that conditional assignment, and though he may not have been aware of the condition he is nevertheless bound by it." So in Greene v.Warnick (supra), there was an agreement at the time of the execution and delivery of the two mortgages that neither should have priority over the other; and the assignee was held subject to that agreement and bound by it. So if the agreement had been that one of the two mortgages should have priority over the other, no doubt the assignee would have been bound by it, for such an agreement is valid and would be enforced notwithstanding the *Page 42 
other was first recorded. (Jones v. Phelps, 2 Barb. Ch., 440;Freeman v. Schroeder, 43 Barb., 618.) For the reason stated in Bush v. Lathrop, and before referred to, the appellant's case does not permit the application of the principle upon which these cases stand. The Jones mortgage was free from defect, it was founded upon a good and valuable consideration as between the parties; valid in the hands of the mortgagee but not enforceable by him to the prejudice of rights acquired through the earlier mortgage executed by him upon the same premises. This disability, however, was personal to himself. He was precluded from asserting any right which would impair the undertaking he had given, or the value of the mortgage he had executed as security for its performance. It is as if a third party had notice of the earlier mortgage and the consequence is the same and not greater. He was under no obligation not to put his mortgage on record, and having done so, the statute which permitted it, and the assignment of the mortgage are both to be considered in determining the defendant's rights. The plaintiff relies upon notice of his mortgage only. But as to this the defendant stands upon the statute; and thus his position is different from that of the assignor, to the latter the statute has no application — for he had actual notice — the assignee had not. He ascertained that the Jones mortgage was recorded, and the omission of the plaintiff to record his mortgage created an assurance as if by statute that it did not exist. The defendant had not constructive notice, and the priority to which the plaintiff's mortgage would have been otherwise entitled is lost. (Peabody v. Roberts, 47 Barb., 94; Tuttle v. Jackson, 6 Wend., 213.) Such is the plain import of the statute (R.S., vol. 1, chap. 111, pt. II, p. 756), which declares that every unrecorded "conveyance shall be void as against any subsequent purchaser in good faith for a valuable consideration of the same real estate or any portion thereof whose conveyance shall be first duly recorded." (§ 1.) A "conveyance" includes a "mortgage." (§ 38, p. 762.) An "assignee *Page 43 
of a mortgage" is a "purchaser." (§ 37, p. 762.) Both the plaintiff and the defendant are within this statute "purchasers." They hold by "conveyances." The defendant's mortgage was first recorded — his payment of consideration, good faith and want of notice are established. He is directly within the protection of the statute. Upon authority the conclusion is the same. InJackson v. Van Valkenburgh (8 Cow., 260), above referred to, decided in 1828, it appeared that McKoon was the owner of certain premises and gave a mortgage thereon to the defendant in 1821. It was not recorded until October 29, 1825. In 1823 McKoon gave a mortgage to Fuller  Pettree; they were expressly informed of the preceding mortgage. Their mortgage was recorded January 28, 1823. On the 23rd of July, 1825, it was assigned for value to the plaintiffs who had no notice of the first mortgage. In an action of ejectment against the first mortgagee. the assignees recovered, the court holding that they were not affected by notice to their assignors. I am not aware that this case has been questioned; it has on the other hand been frequently recognized and followed: (Fort v. Burch, 5 Denio, 187; Corning v.Murray, 3 Barb., 652; Webster v. Van Steenbergh,
46 id., 215; Bush v. Lathrop, 22 N.Y., 549.) Williamson v. Brown
(15 id., 365) is cited in De Lancey v. Stearns (66 id., 161), but shown to be inapplicable to the facts then before the court because the mortgage under which the claim was made, was not given for value nor the party claiming under it a bona fide
holder within the statute. The respondent is, however, not only the assignee of the mortgage, but a purchaser of the mortgaged premises. As such his rights are the same as if he had not been the owner of the mortgage or a party to its foreclosure. (Wood
v. Chapin, 13 N.Y., 519.) He bought on the foreclosure of the Jones mortgage. His title is founded upon it (People v.Beebe, 1 Barb., 388; Butler v. Viele, 44 id., 166; Packer
v. R. and S.R.R. Co., 17 N.Y., 292; White v. Evans, 47 Barb., 185), and by relation may be deemed to have been acquired at the time of the *Page 44 
delivery of the mortgage by Jones, which must have been as early as the date of record, December 1, 1868, and his rights are to be determined by the records in the clerk's office, as they existed on the 2d of December, 1868.
With knowledge of what facts, affecting Jones' title and the mortgage, is he chargeable? Jones was in possession of the premises under a deed from McKoon who, as then appeared from the records, had a clear and unincumbered title — no mortgage against the property, except the one executed by Jones. By the sale on the foreclosure the mortgage lien has become a title. There is no principle of law or equity which subjects it to the plaintiff's mortgage. It is in accordance with equity that as between himself and the defendant the plaintiff should suffer the consequences of his own negligence in omitting to record his mortgage, and that he should not now be permitted to the defendant's prejudice to assert a priority for his mortgage which, by the express provision of law, is, because unrecorded, void as against one standing in the position of the defendant. (1 R.S., chap. 111, tit. 5, pt. 2, § 1, p. 756.) It is true that the assignment to the defendant was not recorded until after the plaintiff had placed his mortgage on record, but that is immaterial. The registry of the Jones mortgage serves the defendant. This was the doctrine in Hooker v. Pierce (2 Hill, 650) where speaking of certain conflicting claims to land arising on different conveyances the court say, "the registry of the grantor's deed enures in the nature of things to the benefit of all those who claim under him. They become entitled to use all his habiliments of title as their own. They might acquire a better title than he but cannot be considered as having taken less. He being without constructive notice, they are not affected. It is enough that they personally act in good faith as the jury found them to have done. This finding frees them from all imputation of notice." The rule and the reason of it apply here. Referring to the title acquired by the purchaser on foreclosure DENIO J, says, "where legal title is concerned a mortgage, which for many other purposes, is a mere chose *Page 45 
in action is a conveyance of the land, the interest remaining in the mortgagor is an equity, the foreclosure cuts off and extinguishes that equity and leaves the title conveyed by the mortgage absolute. (Packer v. R. and S.R.R. Co., supra) and to the same effect is the statute relating to conveyances on foreclosure. (2 R.S., 192, § 158; p. 72, Pt. 111, chap. 2, art. 6.) Gleason by the assignment of the Jones mortgage became a purchaser sub modo, Frisbee v. Thayer (25 Wend., 399);James v. Johnson (6 John. Ch. 417). He acquired the interest in the real estate which the mortgagee took by the mortgage and he is to that extent a purchaser not only of the mortgage but of the interest which is conveyed by it (Belden v. Meeker, 2 Lans., 470), and as he became such in good faith and for a valuable consideration he takes his title under that mortgage unaffected by the mortgage, then unrecorded which the plaintiff now seeks to enforce. I am thus led to the conclusion that the defendant is protected by the recording act from the consequences of notice to the mortgagee and no other defect in his title is suggested.
CHURCH, Ch. J., MILLER and EARL JJ., concur with RAPALLO, J.; DANFORTH, J., concurs with RAPALLO, J., as to effect of Jones' deed, but dissents as to recording act.
Judgment reversed.