Purser v. Anderson , 4 Edw. Ch. 17 ( 1839 )

The Vice-Chancellor:

The evidence is contradictory as to the consideration of the bond and mortgage between John Anderson and his brother Robert, which the latter assigned to Rapelye, who now claims to receive payment of it out of the surplus money in this court. But I consider the preponderance is decidedly in favor of the supposition that the bond and mortgage were given to secure Robert and their uncle David against the note which they had made, for John’s accommodation, to be discounted at the Seventh Ward Bank; and that, when John paid that note, as it appears he did, the specific purpose for which the bond and mortgage had been given was satisfied.

After this, however, it was still competent for the parties, John and Robert, to keep the bond and mortgage alive for any other purpose founded on a good or valuable consideration, provided the rights of creditors or third persons did not intervene. It is attempted to be shown that another indebtedness of John to Robert did exist, which served as a consideration, but the evidence falls short of proving the fact in a satisfactory way, either as to the actual indebtedness or the amount for which Robert should hold it as security; and it could not be held as against John’s creditors for the benefit of his family. Upon the whole, therefore, the conclusion must be, that on payment of the note at the bank, the bond and mortgage were satisfied and became a dead letter in the hands of Robert.

Such being the condition of the bond and mortgage, could it be assigned so as to be of any effect or avail in the hands of the assignee 1

With the assent and concurrence of the mortgagor, it could be assigned, and in the hands of an assignee for value it would be available as against the mortgagor and mortgagee. In the present case, the mortgagee has covenanted, in the assignment, that the money mentioned in the mortgage was due upon it; and John Anderson, the mortgagor, appears to have been ready, at all times, to admit the mortgage to be a subsisting security and to concur in the assignment —and Mr. Rapelye having actually paid value for it, I see no difficulty in considering the bond and mortgage as a valid and subsisting security in his hands as against these parties.

But the question is, whether it is so as against third persons who claim adversely to him 1 Before Rapelye paid his money and took the assignment, John Anderson gave a mortgage to Conover; and, then, assigned his equity of redemption for the benefit of his creditors. When Conover took his mortgage, he understood the preceding mortgage to Robert Anderson was satisfied and no longer an incumbrance, and it was not competent for John and Robert, afterwards, to revive a defunct mortgage to the prejudice of Conover’s security. So, after executing the assignment for the benefit of his creditors, it was not competent for John Anderson to defeat the benefit of it to them, by consenting to the setting up of this former incumbrance. The Conover mortgage and the assignment for creditors were both on record anterior to Rapelye’s purchase and the payment oí his money. He is, therefore, chargeable with notice oí them; and if he had inquired of Conover or the assignees, he might have ascertained whether they claimed in opposition to or in subordination of the mortgage he was about to purchase. If they had admitted that they claimed subject to it as a subsisting incumbrance, he would have been safe in becoming the assignee. But if they had objected, as they do now, he could not have made the purchase, except at the risk of being defeated by them. There was enough to put Rapelye on this inquiry; and it is tantamount to notice to him that they would dispute the validity of the mortgage. He is not, therefore, to be regarded as a bona fide purchaser without notice.

The equity set up by the holder of the Conover mortgage and by the assignees, to a preference, is not a latent equity which Rapelye could not know or guard himself against; and he is not entitled to the benefit of the rule on that subject as laid down by the judges in James v. Morey, 2 Cowen’s R. 246.

I am of opinion that the master has reported correctly on the subject of the claims to the surplus ; and the exceptions to the report must be overruled, with costs of the exceptions and hearing to be paid by George Rapelye. Each party may be left to bear his own costs of the reference.