Campbell v. Vedder , 1 Abb. Ct. App. 295 ( 1866 )

By the Court.

Peckham, J.

The amount of surplus money, after paying Campbell’s claim, was one thousand ffve hundred and seventy-four dollars. The claim of either party, if well founded, is sufficient to absorb the whole. The mortgage held by the executors is the older lien, and must prevail, unless its priority has, in some manner, been lost. Van Vranken insists it has, upon various grounds: First. That Van Vranken is a bona fide purchaser, without notice of their mortgage, and, as their assignment was not recorded, it is dormant and void as to him. Second. That the conveyance to Isaac Vedder, the mortgagee of the equity of redemption, operated as a satisfaction or payment of the mortgage assigned to the executors.

As to the first ground> the referee found that Van Vranken had constructive notice of the assignment to the executors by the reference thereto in the deed to his mortgagor’s grantor, and also in the deed to the grantor himself In both deeds, all the mortgages (except the one held by Van Vranken, not then executed) were referred to, and the grantee in the last, agreed'to pay them, as part of the purchase money. The court below affirmed the position of the referee. This doctrine is, perhaps, sound enough, Champlin v. Laytin, 6 Paige, 189; affirmed 18 Wend. 407, 421; Childs v. Clark, 3 Barb. Ch. 52. If Van Vranken had constructive notice of this assignment, he could not be a “ bona fide purchaser ” of the mortgage assigned.

But there is no occasion here to invoke the aid of any disputed principle. This mortgage held by the executors had been duly recorded, as the referee found; and that, of itself, although the point was not presented by counsel, was notice to all subsequent incumbrancers and purchasers. The statute, as to recording assignments of mortgages, has no application to Van Vranken’s mortgage or to this case.

So far as regards him, — the mere holder of a subsequent mortgage, — the record of the prior mortgage was clear and sufficient notice thereof.1- The failure to record an assignment of the prior mortgage could not 'blot out the record of the mortgage itself. If Van Vranken was the purchaser, in good faith, of the prior mortgage, and an assignment thereof, previously made, had not been recorded, he would hold the, mortgage. But, if he only became a purchaser of the premises by absolute deed, or otherwise, the record of a prior mortgage is sufficient notice thereof to him, no matter how often assigned, or whether the assignment be recorded or not. The only alteration made by the recording act of 1830 is, that an assignment must now be recorded as against a subsequent 5ona fide purchaser of the' mortgage assigned. A “ subsequent purchaser, in good faith,” in the recording act, as to this case, means a purchaser of the mortgage assigned, not a purchaser of the premises. 1 B. 8. 756, § 1. A subsequent purchaser of the premises is bound by a prior recorded mortgage, no matter who holds it. This is too plain to be elaborated.

As to the second ground, the conveyance of the premises to the mortgagee did not operate as a payment of the mortgages ■he had held thereon, as he was not then the holder of the mortgages ; nor was there any merger — of course there could be none, as the different estates never vested in the same person. Besides, merger in equity is a question of intention, and there can be no pretense of any intention that they should merge when they are referred to as subsisting liens in the deed itself to the mortgagee — the deed stating that they are then in the hands of third persons (one in the hands of said executors), and that the conveyance was expressly made subject thereto. Sheldon v. Edwards, 35 N. Y. 279.

The judgment entered upon the report of the referee was modified by the order of the supreme court. The plaintiff Campbell, held two bonds and mortgages [the second and third above mentioned], as assignee, as. security for his debt. The one which had previously been assigned to the executor’s testator was the elder of the two. The plaintiff had been allowed to take his pay from the surplus money, without any order of court or agreement of parties as to the application of the money — whether, in paying plaintiff’s debt, it should apply upon the elder or the younger' mortgage, or upon both. The court held that, in the absence of such order or agreement, or actual application, the law applied it to the elder mortgage. The amount due upon the elder mortgage was thus reduced to seven hundred and ninety-five dollars and eighty-two cents, and, to that amount only, the court ordered payment of the executor’s claim. The court declined to dispose of the balance of the surplus money, on the ground that Isaac Yedder, though a party to this suit, was not a party to the reference, as he should have been, and that such balance should, therefore, remain until the further order of the court.

Isaac Vedder, the mortgagee in both mortgages, made no claim to the surplus moneys, and, under the facts of this case, he had none whatever. He had assigned the elder mortgage [the second mortgage above mentioned], to the executors’ testator to secure a sum greater, at the time of the trial, than the amount due on the mortgage, and larger than the balance of the surplus money. After making this assignment, he fraudulently assigned the same bond and mortgage to another. The latter assignment was conceded to be valid, because the first assignment was not recorded. Equity will not allow him to take advantage of his own fraud, by insisting that the payment to Campbell shall be applied to the elder mortgage, and thus defraud the executors, when, in justice, it ought to be applied upon the other mortgage, held by Campbell. Thus, neither Campbell nor the first assignee, the testator, would bo defrauded. Justice would thus be done to all. There is nothing in Seymour v. Van Slyck, 8 Wend. 403; affirmed 15 Id. 19, relied upon by the court below, at war with such an application.

On the contrary, the doctrine of the application of payments, as fully examined by the chancellor in that case, in the court of errors, directly sanctions the application of this money by Campbell to the satisfaction of the younger mortgage, then held by him. Where neither party, debtor or creditor, has applied the payment, “the court, upon whom the exercise of the power devolves in that case, should make the application upon equitable principles.” Chancellor Wabwobth, delivering the opinion of the court, 15 Wend. 29. In that case the court was not guided by the rule that the payment must be applied to the oldest demand, in the absence of any application or direction. The application was made precisely where the court determined that justice and equity required. So it should be applied in the case at bar. The court below was of opinion that justice required its application according to the decision of the referee; and in that we think the court was right.

Again: equity,as a general rule, requires the creditor having two securities to pesort first to the one to which another creditor has no claim. Besley v. Lawrence, 11 Paige, 581; Ingalls v. Morgan, 10 N. Y. 178.

Isaac Vedder, the mortgagee who assigned the first mortgage [the second mortgage above mentioned], to the executors’ testator, and, thereafter, again to another, together with another mortgage, had no interest in the first mortgage until both claims, which it was assigned to secure, were paid, and the mortgage would not revert to him until then. If the assignment to the testator were void as to Campbell, because not recorded, it was perfectly good as to Isaac Vedder, the assignor. Van Vranken is simply a subsequent mortgagee, and the prior incumbrance must be first paid.

We see no defect in the pleadings that would not allow the judgment ordered by the referee. The facts and claims of both parties were properly stated. If there were any deficiency in the prayer for relief, the court should have amended it. Emery v. Pease, 20 N. Y. 62; Marquat v. Marquat, 12 Id. 336. We think the judgment entered upon the report of the referee was right, in all respects, and should be affirmed, with costs.

All the judges concurred.

Judgment appealed from affirmed, with a modification that the judgment on the report of the referee he affirmed with costs, and costs of this appeal to be paid by the appellant, Van Vranken.