Court Opinion

ID: 3607849
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:52:50.873363+00
Date Added: 2024-06-11T14:07:29.675947
License: Public Domain

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The claimants are the holders and owners of mortgages, subsequent in order of time to that under which the mortgaged premises were sold, and the surplus fund realized. The mortgage under which Schmidt claims was *Page 208 
executed and duly recorded in November, 1851; and that of the claimant Jones, in February, 1852. If this were all, the mortgage of Schmidt being prior in date, and prior in record, to that given to Jones, the right of Schmidt to the fund would be clear. It is contended, however, by Jones, that the original priority or preference of lien of the mortgage held by Schmidt, as assignee, was, by agreement with the mortgagee, postponed to his mortgage, and that consequently he is entitled to stand in the place of the owner or assignee of the first mortgage in respect to the surplus moneys. This is met by the allegation that at the time the agreement was made with the original mortgagee, he was not the owner of the mortgage, or having any interest therein, he having assigned the same to a bona fide purchaser; and that neither the agreement for preference was entered into, nor the mortgage of Jones given, under circumstances that either legally or equitably conclude such assignee or purchaser from insisting on the right of priority.
The mortgage just given and recorded was to one Julius Walber, who, simultaneously with its execution, assigned it to Mrs. Bertha Maass, for a valuable consideration. Walber really never had any interest in the mortgage. Mrs. Maass was possessed of $5000 of separate personal estate, which her husband desired to use in his business. He was the owner in fee of real estate in Williamsburgh, and to obtain the money, and secure her, he gave his bond and mortgage to Walber, the latter assigning the bond and mortgage to Mrs. Maass, on receiving the $5000 and paying it over to the husband. This was undoubtedly the true nature of the transaction, and shows that Walber, though nominally the creditor and mortgagee, had no real interest, and that Mrs. Maass was a purchaser in good faith and for value. There is not the slightest ground to impute fraud or bad faith to Mrs. Maass, either in the inception of her mortgage or its assignment. In November, 1851, therefore she was the assignee of the Walber bond and mortgage for value and in good *Page 209 
faith. Her assignment was not placed upon record until some two years afterwards; nor was it necessary in order to protect herself against a subsequent mortgage or conveyance from Maass, for the recording statutes only apply to successive purchasers
from the same sellers, (Raynor v. Wilson, 6 Hill, 469,) and the record of the assignment of the mortgage would only be constructive notice of such assignment, as against subsequent assignees of the mortgagee. (N.Y. Life Ins. Co. v. Smith, 2 Barb. Ch. R. 82.) The omission to record it would be no fraud upon a junior mortgagee, nor estop her from setting up her claim to defeat his mortgage.
Some four months after the Walber mortgage had been given, recorded and assigned to Mrs. Maass, Maass, who was dealing with Jones in malt and hops, and who was indebted to him, and desired further credit, entered into an arrangement by which he was to give Jones a mortgage as security for present indebtedness and further advances. But Jones knew of the existence of the prior mortgage, and that it was a subsisting lien; and, moreover, that any subsequent mortgage he might take would be of little value as a security, without priority of lien. Accordingly he enters into an agreement in writing with Walber, in which for a nominal money consideration, and for the purpose of enabling Maass, as the writing expresses it, to take up more money and to increase his credit upon the security of the mortgaged premises, Walber agrees that the mortgage of November, 1851, (then owned and possessed by Mrs. Maass,) should come after any mortgage that Maass and wife thereafter might execute to Jones, for any amount less than three thousand dollars, and that such mortgage thereafter to be made in favor of Jones, should always have preference before the mortgage of November, 1851, and should always be paid before said $5000 mortgage. This agreement was followed by the execution to Jones of a mortgage by Maass and wife to secure the bond of Maass to Jones for the payment of $1500 and interest, on or before *Page 210 
the 30th of September, 1852. The mortgage was recorded on the 21st of February, 1852, and the written agreement of Walber two days afterwards, in the book of conveyances, in Kings county clerk's office. Although Mrs. Maass united in the execution of this mortgage, it is found by the referee (and the evidence fully sustains the finding) that she had no knowledge or notice of, nor was she in any way privy to the agreement between Walber and Jones; nor did she know or understand that Jones' mortgage as intended to have a preference over that held by her. In short, that at the time of joining in the execution of the Jones mortgage, she was entirely ignorant of any arrangement or agreement to give it a preference over his own, or of the fact that it was intended to have a preference; nor was she a party or privy in any way to the arrangement between Jones, Walber and Maass. No statement was made or act done by her which misled or deceived Jones as to the ownership of the Walber bond and mortgage; and he took the agreement from Walber without requiring the production, at the time, of the papers. If Jones was deceived at all, as to such ownership, it was by Walber and Maass, the former holding himself out as owner, when he knew that he had no title or interest either in the debt or in the security. The mere fact of Mrs. Maass uniting with her husband in the mortgage to Jones, under these circumstances, is not a ground in equity for postponing or rendering subordinate her mortgage to his. The spirit and intent of the act, and of the instrument which she executed, was to cut off her inchoate right of dower. This was the effect of the deed, and all that was within the contemplation of the parties. The debt was the husband's, and the premises mortgaged were his; he was the mortgagor in fact, and she united in the deed, not to transfer any present right, but to cut off or convey an inchoate interest, as the wife of the mortgagor in the premises mortgaged. Of course, a mortgagor of premises, who himself holds a mortgage thereon at the time he mortgages his interest in the premises to another, can not *Page 211 
set up such prior mortgage, or any interest he has acquired under the same, against his own mortgagee, or any person claiming under him. But Maass was the mortgagor, in this case, and it was his premises that were mortgaged to Jones.
At the time therefore the Jones' mortgage was given and recorded, Mrs. Maass, the assignor of the claimant Schmidt, was the bona fide owner of the mortgage given to Walber in 1851, and which was the prior lien on the premises, and she was not chargeable with any fraud or bad faith, either in its inception or assignment, or in the course of the subsequent dealings between Walber, Jones and her husband, which equitably should entitle Jones, or his mortgage, to precedence.
But it was said, at the special term, that Jones was justified in treating with Walber, because, by the record, he was the apparent owner of the mortgage; and that Walber's agreement operated as a release to Jones of the mortgaged premises to the extent of his mortgage. This position, however, seems to have been abandoned in the argument at bar. The fact that Walber was the recorded owner of the mortgage, gave no binding force to any agreement that Jones might enter into with him in respect to it, or its priority, unless with the knowledge and privity of the real owner. Mrs. Maass was the real owner of the mortgage, and had it in her possession. Her omission to record the assignment was no fraud. It deprived her of no right, except as against a subsequent assignment first duly recorded; and it conferred no right upon Walber to treat with Jones in relation to the mortgage, nor upon Jones to treat with him, unless he should comply strictly with the recording act; and then he would be justified by the law, and not by his faith in Walber. Nor did the agreement operate as a release of the mortgaged premises. The whole premises were still held by the Walber mortgage, and continued subject to it. No specific portion was thereby taken out, granted, bargained, sold or released to Jones. All that can be said of the writing is, *Page 212 
that it was a personal contract or covenant, good between the parties, if Walber had the right to make it.
It is now, however, claimed, that if not an assignment of the mortgage itself, it was in effect an assignment to Jones, a subsequent purchaser in good faith, and for a valuable consideration, of an interest in it, and the instrument having been first duly recorded, the effect, under the recording acts, is, as against such subsequent assignee or purchaser to invalidate the assignment to Mrs. Maass. I shall not agitate the question whether the recording acts apply to the assignment of a mortgage. In Vanderkemp v. Shelton, (11 Paige, 28,) the Chancellor was of the opinion that, since the revised statutes, the provisions of those acts extend to such a case; although, at least, a plausible argument may be made against such a construction. It is enough that I am of the opinion that the revised statutes, relative to the proof and recording of conveyances of real estate, c., have no application to an instrument like that executed between Walber and Jones; that it was a paper not entitled to record, or if entitled, was not recorded according to law, and hence its record was not notice even to subsequent purchasers, or conferred priority over Mrs. Maass' assignment afterwards duly recorded. Now, what was the writing? In terms and effect it was a mere personal contract between two holders of mortgages, for the postponement of one mortgage to the other. No interest in the mortgage itself, no title or right to the prior bond and mortgage, was transferred to Jones. The agreement did not by its terms (nor did the parties intend that it should) transfer to Jones the bond secured by the mortgage, nor any interest in it. An assignment of a mortgage without the debt is, under the recording acts, unmeaning. It cannot be pretended that any interest was, or was intended to be, conveyed in the mortgaged premises, or in the security as such. It is in substance a stipulation, as to the law of the case, not as regards any thing entering into or affecting the debt or the security — for both the debt and the lien of the mortgage were to remain, *Page 213 
but in relation to priority simply. By the law, the mortgage earliest in date, and of record, was the first lien, and entitled to be first enforced, but the party supposed to be the mortgagee stipulates, in the particular case, to relinquish his legal right to precedence. That the owner of the mortgage may contract to do this is plain; and if the contract be in good faith, and founded on a valuable consideration, a court of equity would adjust the rights of the parties accordingly. Such an agreement, however, is not entitled to be recorded; nor would the record thereof be constructive notice to any body, or invalidate any previous transfer of the postponed security. It is only an instrument in writing by which an estate or interest in real estate is created, aliened, mortgaged or assigned, or by which the title to real estate may be affected in law or equity, that the provisions of our recording statutes have any application. (1 R.S. 762, § 38.) If the conveyance does not affect any interest in the real estate, or the title thereto in law or equity, no benefit is to be derived from the record. An assignment of a mortgage may, by construction, be brought within the purview or intention of the recording acts; but an instrument that neither in terms or by legal construction creates, aliens, mortgages or assigns real estate, or by which the title thereto is affected legally or equitably, is not, within any adjudged case, the proper subject of record. What interest in real estate, or in the mortgaged premises, did Walber's agreement create, alien, mortgage or assign? None whatever. It had no relation to the debt, or the security, or the equity of redemption. It was certainly no grant or release of the equity of redemption, for that was in Maass; nor by any just construction an assignment of the mortgage or any interest in it.
If the Walber agreement, therefore, was not the subject of record, Jones acquired no rights by recording it. But if it were treated as an instrument within the recording act, nothing would be gained if it were not recorded according to law. It would neither make void Mrs. Maass' assignment, *Page 214 
nor confer priority over such assignment which was subsequently duly recorded. The statute directs that different sets of books shall be provided for the recording of deeds and mortgages; in one of which sets all conveyances absolute in their terms, and not intended as mortgages, or as securities in the nature of mortgages, shall be recorded; and in the other set such mortgages and securities shall be recorded. (1 R.S. 756, § 2.) The paper writing between Walber and Jones, which seems not to have been under seal, was recorded, subsequent to the Jones' mortgage, in the book of deeds. This was not a compliance with the terms or intention of the statute. The paper, if any thing by which a title or interest in real estate was affected, was not an absolute conveyance. An assignment of a mortgage is but a conveyance or transfer of a conditional estate or interest, and of a security for the payment of money; and certainly it can not be claimed that this paper should have a more enlarged operation and effect than if the mortgage itself had been assigned. It was in no sense a conveyance of real estate absolute in its terms. It was the writing of the supposed mortgagee; and if it had a relation to any thing it was to an interest in the security, and not in the real estate covered by it. It should have been recorded in the book of mortgages, if any where, to have made the record effectual as against subsequent bona fide assignees or purchasers from the mortgagee. Recording the paper in the book of deeds in the Kings county clerk's office was not duly recording it, within the meaning of the recording acts, so as to be constructive notice to a subsequent mortgagee in good faith, or to affect a conveyance subsequently but duly recorded. In N YLife Ins. Co. v. White, (17 N.Y.R. 469,) it was held that a loan office mortgage recorded out of the order due to its date was not recorded according to law, and that such entry did not afford the notice contemplated by the legislature. In Sawyer v.Adams, (8 Verm. Rep. 172,) a mortgage deed was recorded fraudulently by the town clerk, on the back leaf of a former volume of records in *Page 215 
which no mortgages had been recorded for upwards of twelve years previously. It was held that the mortgage was not duly recorded, and that a subsequent attaching creditor had a priority over the mortgagee; although the statute of that state did not in terms direct the order in which conveyances should be recorded, but simply made it the duty of the clerk "truly to record all deeds and conveyances," c. Our statute provides for two sets of books of record; one for conveyances absolute in their terms, and not intended as mortgages or as securities in the nature of mortgages; and the other for such mortgages or securities. To record a mortgage, or a conveyance intended as a mortgage, or a security in the nature of a mortgage, in the book of conveyances absolute in their terms, would not be a lawful record. Such conveyance would not be, in the words of the statute, "duly recorded," so as to be constructive notice to a subsequent assignee or purchaser in good faith and for a valuable consideration from the mortgagee.
I think, therefore, that the assignee and holder of the mortgage of November, 1851, is entitled to the surplus moneys. Such mortgage being prior in date and in record to that given to the appellant Jones, still retains its original priority in the hands of Schmidt. Mrs. Maass' rights, and those of her assignee, were not affected by the attempted record of the agreement between Walber and Jones; nor is there any thing in the circumstances of the case, as between Mrs. Maass, the assignee and holder of the senior mortgage, and Jones, the junior mortgagee, to equitably entitle the mortgage of the latter to priority.
This view disposes of the case, and obviates the necessity of inquiring whether, if the Walber agreement is to be regarded as giving priority to the Jones mortgage, that priority was not extinguished and gone by the payment, in fact, to Jones of the amount of his mortgage after its maturity. This was the ground taken by the referee, and it seems not to be without force. Priority of lien of the Jones mortgage, if obtained *Page 216 
at all, was by virtue of the Walber agreement. Walber stipulates, with the view of enabling Maass to take up more money and to increase his credit upon the security of the mortgaged premises, that any mortgage Maass may execute to Jones, for an amount less than $3000, shall take precedence of his own. By virtue of this agreement, a mortgage to secure a present indebtedness of Maass would be entitled to no priority. It was only a mortgage to secure future advances that Walber stipulated should come before his mortgage; and Maass and Jones were to fix the amount of future credit, not to exceed three thousand dollars. A bond and mortgage were executed for $1500, payable on the 30th of September, 1862, thus fixing the amount and time of credit. Jones continued his dealing with Maass, furnishing him malt and hops, and Maass making large payments on account, up to the death of the latter in November, 1853. Of the advances made by Jones from the date of the mortgage to Maass' death only about the sum of $465 were unpaid, and after the 30th of September, 1852, (the time the mortgage matured,) Jones received from Maass on account some $6300, a sum more than sufficient to satisfy the mortgage and Maass' old debt. Walber, by his agreement, had surrendered his right of priority only "for the purpose of enabling Maass to take up more money and to increase his credit." His lien continued, and attached itself as against Jones' mortgage, the moment the object of the agreement was accomplished. When Jones had made advances to the amount of $1500, and Maass had credit to that amount, and these advances were paid by Maass, the object of the agreement was fully accomplished. Walber, even as a junior mortgagee or incumbrancer, had the right before or after the maturity of the Jones mortgage to have paid to Jones the amount of the advances, ($1500,) and to have had the mortgage satisfied or assigned to him, or to be subrogated to the rights of Jones under it. It can hardly be claimed that Jones had any right, as against Walber or his assigns, to *Page 217 
continue and enlarge a credit with Maass indefinitely. If he would do so, he has no right to ask that the lien of the Walber mortgage should be postponed until it should suit his convenience or interest to close his account with Maass.
The order of the Supreme Court should be affirmed.
MARVIN, J. did not sit, in the case.
All the other Judges concurring, except that ROSEKRANS, J. thought that Walber's stipulation affected real estate and might be recorded,
Order affirmed.