Court Opinion

ID: 6122417
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:06:34.799047+00
Date Added: 2024-06-11T08:23:48.738655
License: Public Domain

Gilbert, J.:
The general principle, that an agreement in writing to give a mortgage, or a mortgage defectively executed, or an imperfect attempt to create a mortgage, or to appropriate specific property to the discharge of a particular debt, will create a mortgage in equity which will have preference over subsequent judgment creditors, seems to be firmly established in England and in this country. It is founded on the maxim that a court of equity looks upon things agreed to be done as actually performed. (See note to Russell v. Russell, 1 L. C. E , 666 ; Taylor v. Wheeler, 2 Vern., 564; Burn v. Burn, 3 Ves., 582.) In Morse v. Faulkner (1 Anst., 14), it was held to be clear that where there is an agreement to convey or a defective conveyance by a person then actually having title, that would be such an equity as would bind the lands in the hands of the heir. This principle was applied by Chancellor Kent in Wadsworth v. Wendell (5 J. Ch., 230). A judgment creditor stands in no better position in such a case than an heir. He is in no sense a bona fide purchaser, but stands in the shoes of his debtor in respect to such a transaction, and can claim only the rights of the latter against one whose right accrued by virtue of an agreement made before the recovery of the judgment. (White v. Carpenter, 2 Paige, 217; Arnold v. Patrick, 6 id., 310; Siemon v. Schurck, 29 N. Y., 598.)
It is urged that this case is not- within the principle stated, for the reason that the plaintiff parted with no present consideration at the time and on the faith of the agreement to give the mortgage. The referee has, in substance, found the fact to be otherwise, and we agree with him that such is the proper conclusion to be drawn from the evidence. The previous indebtedness of Milbank was extinguished, and that was not only a sufficient but a valuable consideration. In most cases, it is true, equitable mortgages which have been upheld, have been created to secure an advance of money or of credit made at the time, or of advances to be made in future and actually made, and not as security for an-antecedent indebtedness. In the case of Burn v. Burn (supra), however, an agreement to give a mortgage for an antecedent indebtedness was held to- create a specific lien, and was preferred to the assignees of the equitable mortgagor and his general cred*628itors. This doctrine was evidently approved by the chancellor in The Matter of Howe (1 Paige, 125). (See, also, Chase v. Peck, 21 N. Y., 581; Lanning v. Tompkins, 45 Barb., 309.) These cases, we think, are decisive of this question, and we agree in the principle on which they rest. A debtor has the right to appropriate his property to the payment of one debt in preference to another ; and where he has made an agreement to secure a particular creditor by mortgage, on the faith of which the creditor lias acted to his prejudice, unless the agreement be sustained, but before a formal mortgage has been executed another creditor has recovered a judgment, we do not perceive any equitable reason for preferring the legal lien of the latter to the prior equitable claim of the former. The agreement to give the mortgage being fair and bona fide, the right of the party claiming the benefit of it is equal to that of a judgment creditor, and, being prior in time, should have precedence over the latter.
That Milbank agreed to give a mortgage we think is clear. His offer, and the acceptance of it by the plaintiff, constituted a valid agreement upon mutual considerations.
Independently of the foregoing views, we think the referee correctly decided that there was a valid delivery of the bond and mortgage first executed by Milbank as early as April 3, 1873. That was several days before the judgment creditors acquired their liens, and was an attempt made in good faith by Milbank to perform his previous agreement to make a mortgage. The plaintiff received the bond and mortgage, and its acceptance thereof will be presumed from the beneficial nature of the security, in the absence of proof that it rejected them. (Spencer v. Carr, 45 N. Y., 406.)
The efforts made by the bank to get the additional security which the name of Milbank’s brother afforded, and the subsequent taking of another bond and mortgage for that purpose, and having the latter mortgage recorded, without relinquishing the securities first given, in our opinion, did not alter the equitable rights of the parties.
The judgment must be affirmed with costs.
Present — Gilbert and Dykman, JJ. Barnard, P. J., not sitting.
Jüdsrment affirmed with costs.