Opinion
November Term, 1899.
Henry M. Field, for the appellant.
Elisha W. Gardner, in person, for the respondent.
Plaintiff testified that when he delivered the deed of October, 1890, to his wife, Sarah, and his son, Cassius M., he received no other consideration than the stipulations found in the deed in respect to his annuity and support. The language of the deed in respect to the annuity to be paid to him and the support rendered is as follows: "And the parties of the second part agree to pay to the party of the first part an annuity of two hundred dollars ($200) a year, payable Sept. 1 April 1, in each year, 1st annuity to be paid Sept. 1, 91, to the extent of $100 $100 thereafter on April 1 and Sept. 1 in each year. Also natural support, except clothing, at the home of the parties of the second part. The said annuity is not assignable, and if assigned, then the annuity is to be void. In case of sale of the herein named premises, the party of the first part agrees to release said annuity from a lean on the property by being paid a sum to be ascertained on the principle of life annuities."
Sic.
The conveyance, however, was made subject to a mortgage of $7,000, and at the time it was executed there was remaining on the premises another mortgage of $15,000, which mortgages had been executed by the plaintiff. The recited consideration for the deed was $20,000. There was some evidence that the property was worth $20,000; and there was also some evidence given that the property did not exceed in value one-half that sum. The prayer of the plaintiff's complaint to enforce his equity or interest in or lien upon the lands described in the complaint was appropriate. ( Perry v. Board of Missions, etc., of Albany, 102 N.Y. 99.)
The principal question to be determined upon this appeal relates to the mortgage taken by the respondent for $648.65.
The respondent testifies that at the time he took the mortgage he had no actual knowledge of the stipulation, reservation or lien found in the deed from William to his wife and son of the annuity or the covenant to support William. However, when the respondent took his mortgage the deed had been on record about four years and contained the stipulation as to the annuity and support. The respondent knew that a conveyance had been made by William to Sarah and Cassius Bentley, and that they claimed title through the medium of the deed of William to them. The respondent made some examination in the clerk's office in respect to the mortgages upon the premises prior to or at the time he received his mortgage. He did not examine the deed nor the record thereof according to his testimony. There is a little evidence to the effect that he was informed of the $200 annuity. That evidence is contradicted by the respondent, and, apparently, was not credited by the Special Term. In determining the question it may be assumed that he had no actual knowledge or actual notice of the stipulation found in the plaintiff's deed to his wife, Sarah, and his son, Cassius.
In Cambridge Valley Bank v. Delano ( 48 N.Y. 336) it is said: "The principle of equity is well established that a purchaser of land is chargeable with notice, by implication, of every fact affecting the title which would be discovered by an examination of the deeds or other muniment of title of his vendor, and of every fact as to which the purchaser, with reasonable prudence or diligence, ought to become acquainted. If there is sufficient contained in any deed or record which a prudent purchaser ought to examine to induce an inquiry in the mind of an intelligent person, he is chargeable with knowledge or notice of the facts so contained."
In Knapp v. Hall (53 N.Y. St. Repr. 398), HAIGHT, J., said: "A purchaser of lands is chargeable with notice of facts affecting the title which could be discovered by an examination of the deeds or other muniments of title; and where there is an outstanding mortgage or lien unrecorded, and he has had notice of its existence, it becomes his duty to inquire and ascertain the extent of the rights of the person holding the same."
In Schwinger v. Hickok ( 53 N.Y. 285) it was said: "It is doubtless true that a person claiming a right or title under a conveyance or an instrument, in execution of a power, is in general chargeable with notice of any infirmity in his title disclosed by the instrument under which he claims, or of which, by reasonable diligence, he would have become acquainted."
In Acer v. Westcott ( 46 N.Y. 384) it was held: "A recital in a deed forming a link in the chain of title of any facts which should put a subsequent grantee or mortgagee upon inquiry and cause him to examine other matters by which a defect in the title would be disclosed is constructive notice of such defect. But the basis of this rule is negligence, and it is only applicable to cases where the purchaser or incumbrancer is chargeable with gross negligence in not making the examination." (See McPherson v. Rollins, 107 N.Y. 322.)
The language found in the deed amounts to a condition subsequent. ( Birdsall v. Grant, 37 App. Div. 349; Wheeler v. Dunning, 33 Hun, 205.)
It would have been competent for the plaintiff to waive the conditions subsequent, and such waiver might have been evidenced by an execution of a mortgage by him without the limitations and conditions in the deed. ( Wheeler v. Dunning, supra.)
Assuming that it was the duty of the respondent to examine the deed, the muniment of title, under which Cassius and Sarah assumed to hold the property in question, it must be supposed that had such examination been made he would have ascertained the equitable rights of the plaintiff remaining in the lands. He, being charged with the duty of examining, is charged with the knowledge or information which an examination would have developed. ( Williamson v. Brown, 15 N.Y. 354; Anderson v. Blood, 152 id. 293.) In the latter case it was said: "Where a purchaser of land has knowledge of any facts sufficient to put him upon inquiry as to the existence of some right, or some title, in conflict with that he is about to acquire, he is presumed, either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered a bona fide purchaser."
If the respondent had read the record of the deed in the clerk's office prior to taking the mortgage from his mortgagors, he would have discovered the equities of the plaintiff in the premises.
Under the facts and circumstances disclosed in the case, we think it must be held that the respondent is not an incumbrancer in good faith for valuable consideration without notice of the equities of the plaintiff in the lands. The plaintiff's equities, therefore, being found to exist, and being prior in point of time to the mortgage of the respondent, should prevail. ( Binghamton Savings Bank v. Binghamton Trust Company, 85 Hun, 75, and cases there cited; Maroney v. Boyle, 141 N.Y. 462.)
The case in hand differs from Hulett v. Whipple (58 Barb. 224). In that case there was a search upon the records of the clerk's office, and the premises were found to be free from any incumbrance; and, besides, that case was placed upon the ground that there had been a waiver of the equitable lien for unpaid purchase money by the peculiar state of facts and circumstances surrounding that particular case.
(2) It is claimed that the respondent's mortgage should prevail because the deed executed by the plaintiff to his wife and son was only recorded as a deed, and was not recorded in the mortgage book.
In 2 Revised Statutes (9th ed.), section 2, page 1831, it is provided, viz.: "Different sets of books shall be provided, by the clerks of the several counties, 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."
In section 3, page 1832, it is provided that "Every deed conveying real estate, which, by any other instrument in writing, shall appear to have been intended, only, as a security in the nature of a mortgage, though it be an absolute conveyance in terms, shall be considered as a mortgage; and the person for whose benefit such deed shall be made shall not derive any advantage from the recording thereof, unless every writing, operating as a defeasance of the same, or explanatory of its being designed to have the effect only of a mortgage, or conditional deed, be also recorded therewith, and at the same time."
In the case in hand there was not "any other instrument in writing" by which it was made to appear that the deed was only intended as a security in the nature of a mortgage.
We think the provisions of the statute to which reference has been made do not relieve the respondent from his negligence in omitting to examine the deed under which his mortgagors derived their title to the premises.
In Patman v Harland (L.R. [17 Ch. Div.] 353) it was said: "If, therefore, you have notice of a deed relating to the title and forming part of the chain of title, you have notice of the contents of that deed, and it is no excuse for not asking to look at it to say you were told that the deed contained nothing which it was necessary for you to look at. * * * Where you know of a deed it is no answer to be told that it does not prejudicially affect the title, as if it does affect the title you are bound by its contents."
Under the evidence found in the appeal book it is very apparent that the respondent, at the time he received the mortgage in question, was fully aware that it was through the medium of the plaintiff's deed that the plaintiff's wife and son had derived whatever title or interest they had in the premises; and the facts disclosed by the record indicate that the respondent had sufficient information to put him upon inquiry, and he must be presumed to have made the inquiry and ascertained the actual facts, or by reason of his negligence failed to ascertain the facts, and, therefore, he is not to be considered an incumbrancer in good faith without notice. He did not part with fresh money. He did not part with a fresh consideration. He held a judgment against the plaintiff which was recovered subsequent to the execution of the deed of the plaintiff, and was not in law or in equity an actual lien upon the premises at the time the respondent assigned such judgment to his mortgagors. It is nowhere alleged that the respondent was induced by the fraud of the mortgagors to accept the mortgage in lieu of the judgment which he held. Nor is there any evidence in the case tending to show that Cassius, by the execution of the mortgage to the respondent, intended to assign any interest in the mortgage for $15,000 which he then held upon the premises.
It may be that upon another trial the respondent may be able to furnish evidence sufficient to induce the court to find that he is equitably entitled to an assignment of an interest in the $15,000 mortgage sufficient to compensate him for the judgment which he assigned. However, upon that question we express no opinion.
The views already expressed, if approved, lead to the conclusion that the judgment, so far as it is appealed from, should be reversed, with costs to the appellant to abide the event.
All concurred, except ADAMS, J., not voting.
Judgment, so far as appealed from, reversed, and a new trial ordered, with costs to the appellant to abide the event.