Berry v. Mutual Insurance

| New York Court of Chancery | Sep 30, 1817

The Chancellor.

[ * 608 ]

The equitable rights of the parties, in this case, must have reference to the time when the knowledge of their respective mortgages was communicated to each other, in the winter of 1814, and prior to the registry of the elder mortgage. The subsequent registry by the plaintiffs was of no avail. The rights of the parties had become fixed, by means of the notice, previously, mutually and concurrently given, and which notice, as *to them, answered all the purpose and object of a registry. Priority of registry never prevails over a previous notice of an unregistered mortgage. (10 Johns. Rep. 461, 2.) In considering this case, then, I shall place entirely out of view the fact of the registry. The real point in the case is, which of the unregistered mortgages had the preference in equity, when the information of their existence was given and received.

If there be several equitable interests affecting the same» estate, they will, if the equities are otherwise equal, attach upon it, according to the periods at which they commenced; for it is a maxim of equity, as well as of law, that qui prior est tempore potior est jure. This rule has been repeatedly declared; (Clarke v. Abbott, 2 Eq. Cas. Abr. 606. pl. 41. Bristol v. Hungersford, 2 Vern. 525. Symmes v. Symonds, 1 Bro. P. C. 66. Brace v. Marlborough, 2 P. Wms. 492. 495.) and we are to see if there be any thing in this case to prevent the application of it.

The ■ mere oMeavinglhe title deeds with

There is no fraud charged or proved upon the plaintiffs, and if they are to be postponed, notwithstanding they have the elder mortgage, it must be on the ground of culpable negligence, either in leaving the lease with the mortgagor, when they took the mortgage of his term, or in not causing their mortgage to be seasonably registered. I feel strongly disposed to give to these circumstances all the weight to which they can be entitled.

[ *609 ]

[ * 610 ]

1. It is understood to have been the old rule in the English chancery, that if a person took a mortgage, and voluntarily left the title deeds with'the mortgagor, he was to be postponed to a subsequent mortgagee, without notice, and who was in possession of the title deeds. The reason of the rule was, that, by leaving the title deeds, he enabled the mortgagor to impose upon others who have no registry to resort to, except in the counties of Yorkshire and Middlesex, and who, therefore, can only look for their security to the title deeds, and the possession of the mortgagor. *The rule was so understood and declared, by Mr. Justice Burnet, in Ryall v. Rowles, (1 Atk. 168. 172. 1 Vesey, 360.) and by Mr. Justice Butter, in Goodtitle v. Morgan, (1 Term Rep. 762.) and there are decisions which have given great weight to the circumstance of the title deeds being in possession of the junior mortgagee. Thus, in Head v. Edgarton, (3 P. Wms. 279.) the lord chancellor said, it was hard enough upon a subsequent- mortgagee, that he had lent his money upon lands subject to a prior mortgage, without notice of it, and, therefore, he could not add to his hardship, by taking away from him the title deeds, and giving them to the elder mortgagee, unless the first mortgagee paid him his money ; especially as the first mortgagee, by leaving the title deeds with the mortgagor, had been, in some measure, accessary in drawing in the defendant to lend him money. This case, however, so far from establishing what was supposed to be the old rule of equity, evidently contradicts it, and admits the better title in the first mortgagee. So, in the case of Stanhope v. Verney, before Lord Northington, (Butler’s note to Co. Litt. 290. 296. § 13.) the second mortgagee, without notice, had possession of the title deeds, but the chancellor did not give him the preference on that single circumstance, but because he also had got possession of an outstanding term. There does not seem, therefore, to be the requisite evidence of'the existence of any such rule in equity, as has been stated by some of the judges ; and if there was, a different rule has been since established. It is now the settled English doctrine, that the mere circumstance of leaving the title deeds with the mortgagor, is not, of itself, sufficient to postpone the first mortgagee, and to give the preference to a second mortgagee, who takes the title deeds with his mortgage, and without notice of the prior encumbrance. There must be fraud, or gross negligence, which amounts to it, to defeat the prior mortgage. There must be something like *a voluntary, distinct, and unjustifiable concurrence, on the part of the first mortgagee, to the mortgagor’s retaining the title deeds, before he shall be postponed. Lord Thurlow, in Tourle v. Rand, (2 Bro. 650.) said, he did not conceive of any other rule by which the first mortgagee was to be postponed, but fraud or gross negligence, and that the mere fact of not taking the title deeds was not sufficient; and that if there were any cases to the contrary, he wished they had been named, So the rule was also understood by Chief Baron Eyre, in Thumb v. Fluitt, (2 Anst. 432.) and has since been repeatedly recognized. (Lord Eldon, in 6 Vesey, 183. 190. Sir William Grant, in 12 Vesey, 130. 1 Fonb. 153. 155. note.) It is admitted, by these same high authorities, to be just, that the mortgagee, who leaves the title deeds with the mortgagor, so as to enable him to commit a fraud, by holding himself out as absolute owner, should be postponed; but the established doctrine is, that nothing but fraud, express or implied, will postpone him.

a mortgagor, fufg”’eñt postpone the fQrst ""fecond mortgagee,who jjtfe a without notice encumbrance” There must be fraud> or sross qufvaient ' to fraud> l° P“j‘ mortgagee to a s®c°e“d w™h00„j foSce. ‘ °U „The rrg'slry ¡s a substitute p°r lht¡iedept°ls,g deeds, , A subsequent bona fide purchaser is ex-

[ * 611 ]

2. The hardship and abuse complained of in the English cases, arise from the want of a general registry act, under whicli a second mortgagee can always secure himself. I be lieve there are no registry acts in England, except in certain counties, as Yorkshire and Middlesex; and the provision in such cases, (see stat. 3 and 4 Ann, ch. 4.) is similar to that in our act concerning mortgages, and gives the subsequent purchaser, or mortgagee, the preference, if the memorial of his deed be first registered. It has been decided, in Johnson v. Stagg, (2 Johns. Rep. 510.) that our act concerning the registry of mortgages extends to leases for years, assigned by way of mortgage ; and that the leaving of the lease with the mortgagor, was no evidence of fraud, because the registry of the mortgage was a beneficial substitute for the deposit of the deed, and gave better and more effectual security to subsequent mortgagees. *The registry of the mortgage is notice; and if the first mortgagee neither takes the tule deeds, nor registers his mortgage, he only exposes himself, and not the subsequent purchaser, or mortgagee. The statute expressly secures the bona fide purchaser, and it equally enables the subsequent mortgagee to secure himself, by registering his mortgage.

We have seen that the leaving the title deeds with the . , o , ,i mortgagor is no prejudice to the hrst mortgage; and there is the less necessity for it with us than in England, because, with us, the creditor who subsequently, and without notice of any prior unregistered mortgage, deals with the mortgag01"> can always protect himself in the easiest and most effectual manner ; and, supposing he omits to do it, by a misplaced confidence in the mortgagor, has he any equitable claim to be preferred to a prior mortgagee, who, under the same misplaced confidence, has equally omitted to do it ? This is the turning point in the present case.

prcssiy protected by the stat-o‘eunregistered encumbrances j qüenta mongagee h™ayi/)ro' a °regUtry of his mortgage, The statute, not make a reS5ie irrhe omission of a eposes °the mortgagee to íosmhaMsdiie°n in 'case*'Sofle'a subsequent bochaser, or toPthe ofiFtcTaTubse quentregistered mortgage. is ■^0™ortffag'ae i'chaser Within the meaning of ad registerm=

[ * 612 ]

The first mortgage was valid without registry. The statute ^oes not render a registry indispensable. The omission of the registry only exposes the mortgagee to the hazard of a loss of his lien by a subsequent bona fide purchase, or to the hazard of a postponement of his lien to a subsequent resristerm mortgage. A second mortgage will not, per se, and w^^out registry, gain a preference. Theré is no such principle to be deduced from the statute, and there is no reason or necessity f°r it in the nature of the case. The reason why a bona fide purchaser is expressly excepted from the opera-^on an unregistered mortgage is, that he could not otherwise deal with safety, and would be exposed, even with the utmost vigilance, to the frauds of the mortgagor. The act does not provide for the registry of his deed, but only for tie registl7 °f mortgages, and gives them a preference according to the *priority of the registry. The second mortgagee protects himself by his registry, but the purchaser does not, and cannot; and, therefore, the statute declares that his deed shall absolutely prevail over the unregistered mortgage. The statute of 3 and 4 Ann, relative to the west riding of Yorkshire, provides for the registry of deeds and mortgages promiscuously, and, therefore, places them upon an equal footing.

Though, in one sense, every mortgage is a purchase, yet the mortgage act evidently speaks of purchasers, in the popular sense, as those who take an absolute estate in fee. There is no pretext for considering a mere mortgagee as a purchaser, within the meaning of the second section of the act concerning mortgages.

I have not been able to discover any principle of law or equity that will enable me to say, that the first mortgage is to be deprived of its advantage of priority of time. The omission to register the mortgage was not capable of producing any mischief to third persons, who would use ordinary diligence and precaution. The defendants, ought not to charge a negligence upon the plaintiffs of which they have been equally guilty. It was their own fault or folly that they were not protected. They trusted to the assurances of the mortgagor that his land was unencumbered; and the plaintiffs trusted equally in the mortgagor, that he would not, afterwards, sell or mortgage the land. It is d common rule, say the books, that where of two persons, equally innocent, or equally blamable, one must suffer, the loss shall be left with him on whom it has fallen; and here comes in the other rule, that the equities being otherwise equal, the priority of time must determine the right.

a second J^^ftokave his8 mortgage j^fte'reiieveü against a prior less from the possession^' or other tircum^^“ásbeen! or might be ^cliscd wh;™ could not be ^laerdedagain°st by the exercise ge£re!narydl11’' 8

[ * 613 ]

It is very clear that the first mortgagee was not bound to register his mortgage, because the law makes it valid, *as between the parties, without registry. The registry is only a matter of precaution, and the statute has provided against all the mischief of the omission. If the party will not avail himself of the means of safety provided by statute, he cannot expect that this Court will grant him further aid, and especially against a party whom he charges with no fraud. it relief is ever given in any case, on the ground or policy, or constructive fraud, against the sale or mortgage of property, it is because, from the non-delivery of possession, or from other circumstances, imposition had or might have been practised, which could not be detected or guarded against by the exercise of ordinary diligence. No such ground for relief exists in this case.

I am, accordingly, of opinion, that the plaintiffs are entitled to relief, according to the prayer of their bill, and that the defendants are either to account to them for the amount due on their bond and mortgage, or that the residue of the term be sold for the satisfaction of their debt. The costs of suit are to be paid out of the property mortgaged.

Decree accordingly.