205 N.Y. 105 | NY | 1912
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *107
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *108 On the facts set forth in the foregoing statement two propositions have been advanced by the appellant, one of them being argued at some length.
The first one is that the statement made by Foss as to the amount due on the mortgage at about the time appellant was purchasing the premises was conclusive both as to him and as to his assignee by a prior but unrecorded assignment. This proposition may be dismissed without consideration on the merits. The effectiveness of such a statement on any view is dependent on the element of estoppel whereby a party would be prevented from enforcing the mortgage at a greater amount than was stated to be due thereon, as against a grantee who had purchased on the faith of the statement. As already pointed out it appears that the deed to appellant was executed before the statement was given and, therefore, there can be no estoppel. Other evidence in the case makes me think that quite probably the finding as to the date of execution of the deed is erroneous and that as a matter of fact the statement was given before the deed was executed. The appellant, however, does not seem to find any fault with the findings in this respect and they have been unanimously affirmed.
We then come to the second proposition that appellant's *110 payment to the mortgagee is good as against a prior unrecorded assignment to respondent and his assignor, the German Bank.
Two answers are made by respondent to this contention. The first one is that the bond and mortgage were really executed as security for a negotiable note and that they followed the note when it was transferred by Foss to the bank and later by the bank to the plaintiff and that certainly a payment on a negotiable note to a former holder thereof is not good as against one to whom it has been transferred, whatever may be the rule as to a non-negotiable instrument.
It may be regarded as the rule that where a negotiable instrument is secured by a mortgage the latter will not be discharged by payment to the record holder if as a matter of fact the note and mortgage had already been transferred to a bonafide holder for value before maturity even though no assignment has been recorded. (Thomas on Mortgages [2d ed.], sect. 308;Biggerstaff v. Marston,
In this case the mortgage and bond did not disclose and the appellant did not know that they were security for a note. In addition the findings do not show whether the note or other instruments were transferred to the respondent before or after the payment was made, and they do make it pretty certain that the transfer was made after the maturity of the note. Under these circumstances I doubt the application of the rule.
But, even so, I think that the payment made by appellant to Foss after he had parted with the note and bond and mortgage was unavailing as against the assignee although the latter's assignment had not been put on record.
The provisions of the Recording Act are not controlling in disposing of this question. That act concededly provides for the recording of assignments of mortgages, but *111
it also expressly provides that such recording shall not be of itself notice of such assignment to a mortgagor, his heirs or personal representatives, so as to invalidate a payment made by either of them to the mortgagee. (Real Property Law, §
In the latter case it appeared that one Carnes was the purchaser of the equity of redemption in premises subject to a mortgage. He had made payments to one Taylor after the latter had assigned the bond and mortgage to one Webster by an assignment which was recorded before the payments. Under these circumstances, Judge MILLER said: "Under the Recording Act, therefore, Carnes was chargeable with notice that the mortgage, which he intended to pay, had been assigned by Taylor to another party, * * * who subsequently assigned her rights therein to the plaintiff. The record of an assignment of a mortgage is constructive notice to all persons of the rights of the assignee, save as excepted by the statute. * * * The record of the assignment here, as in the case cited, was an ample protection to the plaintiff's claim and notice to Carnes that Taylor had disposed of his interest in the mortgage."
This case seems to have been cited with approval in Larned v.Donovan (84 Hun, 533, 536; S.C.,
But if we should be tempted to hold as a logical converse *112 of this rule, that in the absence of such record of an assignment or other direct notice, the purchaser might safely pay to the assignor, we should find ourselves confronted with a preponderance of authority preventing such view under the facts existing in this case. The payment relied on by the appellant was regarded and treated by him and by the record holder of the bond and mortgage as a final payment fully discharging the mortgage. When he made the payment he did not take any satisfaction of the bond and mortgage, did not ask for their production or even as to their whereabouts, but made his payment blindly and simply with the statement that at a later day his attorney would call for the purpose of obtaining a satisfaction. Such conduct did not rise to ordinary prudence, and rendered his intended payment unavailing as against the assignee.
Where a party makes what is treated as a final payment in satisfaction of a bond and mortgage without taking a satisfaction and without requiring production of the instruments, or receiving some sufficient excuse for their non-production, the payment is at his peril and not good as against an assignee for value under an unrecorded assignment. The reason for this rule lies outside of the Recording Act, and is found in the fact that on such final and full payment, at least if no formal satisfaction is taken, it is so far the ordinary rule to produce and deliver up the instrument which is being paid and satisfied that the failure to do this in the absence of sufficient explanation and excuse is a circumstance calculated to put the payer on inquiry and lead him to ascertain the true ownership.
In Brown v. Blydenburgh (
Under the circumstances a decree of foreclosure and sale was made, and on appeal this decree was affirmed, the court saying: "There are circumstances in the case which ought to have put Blydenburgh upon inquiry as to Atwell's right to discharge the mortgage debt. The bond and mortgage were not in his possession at the time the certificate of discharge was given. * * * There is neither allegation nor proof that Blydenburgh made any inquiry of Atwell for the bond and mortgage, or that any misrepresentation was made by Atwell on that point. In the common and usual course of business, Atwell, if he had been the owner of the bond and mortgage, would have delivered them to Blydenburgh when the satisfaction was acknowledged; and it is against all probability that Blydenburgh would have paid the debt either in money or by a conveyance of the land without inquiry for his bond. That inquiry would have resulted either in a discovery of the fact that the securities had been previously assigned by Atwell, or in a misrepresentation made by him of the true state of the case. Such a misrepresentation might have excused Blydenburgh. It would have been evidence of his good faith in taking the discharge. His answer not being on oath, is not evidence in his favor, and the circumstances referred to raise a presumption against him which he was bound to remove by proof. This he has not done." (p. 145.)
This case was cited without criticism on this point in Bacon
v. Van Schoonhoven (
It is true that in the Brown case the payment was by the mortgagor of his own obligation and, therefore, the propriety of his taking it up was more pronounced than in a case like the present where payment was attempted of the obligation of another. I think, however, that this is a matter merely of degree and that the principle is applicable in the latter case.
In Gillig v. Maass (
In Kellogg v. Smith (
In Purdy v. Huntington (
Practically the same situation was presented in the case ofCurtis v. Moore (
In Syracuse Savings Bank v. Merrick (
It was held under these circumstances that the second assignee, not receiving the bond, failed to show due diligence and that a finding to the contrary should be reversed. Chief Judge CULLEN, writing in behalf of the court, said: "The failure of Warner to produce the bond at the time of the assignment was sufficient to put the respondent on inquiry and if unexplained to operate as notice of the defect in Warner's title" (p. 391), citing amongst other cases Brown v. Blydenburgh (supra), and then writing as already indicated that the excuse given by Warner for not producing the bond was not sufficient.
As stated, the plain principle underlying and affirmed by all of these decisions is that when a party makes a payment, or completes a transaction intended like a merger to operate as a payment, in full discharge of a bond and mortgage, or takes a transfer thereof, the evidence of the debt naturally and ordinarily is produced and delivered, and, therefore, the failure to do this in the absence of sufficient explanation constitutes notice which makes the payment or transaction unavailing as against a prior assignment although unrecorded.
The cases of Van Keuren v. Corkins (
The case of Bacon v. Van Schoonhoven simply established that one who takes a conveyance or mortgage of real estate relying on a formal satisfaction of a prior mortgage made by a third party has no occasion to call for the production of the mortgage which has been satisfied or of the bond, and, therefore, may rely on a satisfaction which is produced to him executed by the record holder of the prior mortgage. This case in addition involved the application of the Recording Act.
We do not desire to be regarded as holding that the rule applied in this case to a final payment would necessarily be applicable to a partial payment of principal or a payment of interest and that the payer in such latter cases would always be under obligation to call for the production of the bond. While that question is not here for decision, it is apparent that quite different reasoning might be applied to the case of full and final payment and to that of one which was only partial and did not entitle the payer to surrender of the instruments. (Foster
v. Beals,
Neither do we intend to determine that appellant would not have been protected as against the unrecorded assignment if when he made his payment he had taken a satisfaction piece of the bond and mortgage, although without production of the latter, and had placed the same on record before the assignment was recorded. While that question strictly is not here and, therefore, cannot be decided, there are strong reasons for saying that in such case appellant would have been protected by the Recording Act.
Section 241 (now 291) of the Real Property Law, after providing for the recording of a "conveyance of real property," enacts; "Every such conveyance not so recorded is void as against any subsequent purchaser in good faith and for a valuable consideration, [from the same vendor, his heirs or devisees] of the same real property or any portion thereof, whose conveyance is first duly recorded." There is some question whether the words in brackets are in force. While chapter 547, Laws of 1896 (Real Property Law), enacted the section in full as above printed and repealed that portion of the Revised Statutes containing the section then substantially being reproduced, except that the bracketed words were added, at the same session of the legislature was passed chapter 572, which amended the section of the Revised Statutes which had been repealed by the Real Property Law, and thereby, I suppose, re-enacted it without the words in question.
Section 240 (now 290) of the Real Property Law has defined the term "conveyance" as including "every written instrument, by which any estate or interest in real property is created, transferred, mortgaged or assigned, or by which the title to any real property may be affected," etc.
Under this definition it has been held that an instrument in satisfaction of a mortgage is a conveyance within the protection of the Recording Act. (Bacon v. Van Schoonhoven,
In said section 240 the term "purchaser" is defined as including "every person to whom any estate or interest is conveyed for a valuable consideration," etc.
While this language is not quite as broad as that defining a "conveyance," in that it does not expressly include as a purchaser one to whom is executed an instrument "by which the title to real estate may be affected," it seems to me that the two definitions must be construed together, and that since a "conveyance" has been held to include a discharge of a mortgage, logically it should be held that one to whom a discharge is executed is a purchaser within the statute.
Furthermore, since a mortgage, even though somewhat incongruously in the light of its real nature as a mere security, is a conveyance for the purposes of the Recording Act of an estate or interest in the land mortgaged, it is no great stretch to regard a discharge of the mortgage as releasing and thereby conveying the mortgagee's interest and thus bringing it within the exact language defining a purchaser. (Decker v. Boice,
If a discharge is a "conveyance" and the person to whom it is executed a "purchaser," there would be no difficulty in concluding that payment of the amount due on the mortgage would make the purchaser one for value and thus entitle him to the benefit of the Recording Acts.
The judgment should be affirmed, with costs.
CULLEN, Ch. J., GRAY, VANN, WILLARD BARTLETT and COLLIN, JJ., concur; HAIGHT, J., not voting.
Judgment affirmed. *121