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Wilcox v. Drought

71 A.D. 402 Court N.Y. App. Div. English

Delivered by Laughlin, J.:

Contents

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p. 402
Harriet H. Wilcox, Plaintiff, v. Julia Drought and Others, Defendants, Impleaded with Berry B. Simons and Jacob Moersfelder, Appellants, and Josephine O’Neil, Respondent.

Headnote

Priority of lien as between two mortgages executed at the same. time — the one received in payment of a debt, being first delivered, but the last recorded,, given priority over the other taken as collateral only — who is not a “subsequent purchaser in good' faith” — presumption of acceptance by the mortgagee of a mortgage recorded-without his knowledge by the mortgagor.
Julia Drought, being indebted to Timothy Flood and to the firm of Simons & Moersfelder, agreed to give them mortgages for the amount of their claims upon a certain house, which was already subject to three mortgages. She-agreed with each of the parties that his mortgage should be a prior lien after
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the three existing mortgages. The mortgages were drawn by Mrs. Drought’s attorney on May 11, 1900. Mrs. Drought took the Flood bond and mortgage and left the Simons & Moersfelder mortgage with her attorney with instructions not to deliver it until directed to do so. At seven or eight o’clock on the morning of May twelfth she delivered the Flood mortgage in absolute payment of Flood’s claim, and the same morning notified her attorney that the Flood bond and mortgage had been delivered and that he might deliver the Simons & Moersfelder bond and mortgage.
The attorney had previously written a letter to Simons & Moersfelder, stating that he had prepared the mortgage to them and had had it recorded at once so that it might become a “ prior lien to another mortgage which is to be given,” and that he would forward the mortgage to them as soon as it was returned ■ from the register’s office. He thereupon, without changing the letter, sent it together with the bond to them by mail and sent the mortgage to the register’s office, where it was recorded at temforty-eight a. m., May 12, 1900. The Flood mortgage was recorded one minute later.
May 21, 1900, Mrs. Drought’s attorney received the Simons & Moersfelder mortgage from the register’s office and sent it to the mortgagees, who received it the next day and retained it without objection. It appeared that Simons & Moersfelder had promissory notes for the amount of their claim and that when the mortgage was given nothing was said about surrendering the notes or extending the time of credit.
Held, that Simons & Moersfelder were not “subsequent purchasers in good faith and for a valuable consideration,” within the meaning of section 241 of the Real Property Law (Laws of 1896, chap. 547), the mortgage having been given simply as security for the existing notes which were retained by them, and that the Flood mortgage having been first delivered, although subsequently recorded, was a prior lien, especially as that was the manifest intention of the mortgagor
Semble, that the rme that where the grantor or mortgagor executes and records a deed or mortgage, without the knowledge of the grantee or mortgagee, a subsequent acceptance by the grantee or mortgagee will give effect to the instrument from the time of its delivery to the recording officer, does not apply where the rights of third parties have intervened (per Latjghlin and O’Brien, JJ.).
Appeal by the defendants, Berry B. Simons and another, from so much of an order of the Supreme Court, made at the Hew York Special Term and entered in the office of the clerk of the county of Hew York on the 26th day of Hovember, 1901, as overrules said defendants’ exceptions to the report of a referee and confirms said report in all things as to the claim of Josephine O’Heil and directs the chamberlain of the city of Hew York to pay to the said Josephine. O’Heil or her attorney a sum of money in his hands to
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the credit of a foreclosure action, in a proceeding instituted to obtain surplus monéys. ' ■
■ On the 11th of May, 1900, the defendant, Julia Drought, was the owner of premises situated at the southwesterly corner of One Hundred and Seventy-sixth street and Monroe avenue, and also of premises situated at the northwest corner of One Hundred and Twenty-seventh street and Fifth avenue, which may be referred to as the Monroe avenue and Fifth avenue houses respectively. Her husband, William Drought, was her agent. She was indebted to Timothy Flood, a plasterer, in the sum of $1,223 for materials furnished and services rendered, to secure which he was entitled to file a mechanic’s lien against the Fifth avenue- house. For two weeks or more prior to the last-mentioned day he had, been urging pay, ment of his claim and threatening to file a lien if it were -not paid or secured. At this time defendant Drought was also indebted to appellants in the sum of $3,175 for iron work on the Fifth avenue house for which promissory notes had been given, some of which had matured and been protested for non-payment, and they had been pressing payment. Mrs. Drought called on them, pursuant to a letter which they wrote to her husband some two or three weeks prior to the eleventh of May, and upon their demanding payment she told them that their claim was large and that she could not pay it. - After several interviews she finally proposed to give them a mortgage upon the Monroe avenue house, upon which there were three outstanding mortgages, the first for $12,000, the second for $1,500 and a third which remained as security for about $700. She informed them of these incumbrances and that Flood was annoying her husband, who was ill, by pressing his claim and threatening to file a mechanic’s lien on the Fifth avenue house; that her husband had promised Flood a mortgage on the Monroe avenue house, but that his claim was small (about $1,200), and that she could take care of that and could pay the other smaller claims out of money that was coming in. Finally it was agreed that they, should take as security a mortgage on the Monroe avenue house, which should be a lien next after the three mortgages already men tioned. It was expressly understood that it should be prior to the contemplated mortgage to secure Flood’s claim. Mo thing was said apparently about the surrender of the notes or an extension of
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credit. The bond and mortgage were to be drawn by her attorneys and sent to their attorneys for examination. Mrs. Drought agreed to pay the expense attending the execution of the papers and the recording of the mortgage. The terms of the bond and mortgage do not appear to have been discussed. The mortgage was not prepared at once and they wrote to her; she called on them and they insisted that there must be no further delay.
On the 11th day of May, 1900, Mrs. Drought signed and acknowledged two bonds and mortgages drawn by her attorney; all dated on that day, payable November 11, 1900, and bearing six per cent interest, and the mortgages covering the Monroe avenue property. One of these bonds and mortgages was for $3,175 and ran to appellants; and the other to Josephine O’Neil for $1,223, the amount of Flood’s claim. Mrs. Drought’s attorney erroneously understood that appellants’ mortgage was to have priority over the other. On that afternoon he accompanied his client to meet Flood, pursuant to an appointment; but not finding him it was arranged between her and her attorney that the bond and mortgage to appellants which she left with him should not be delivered until he should receive a telephone message from her directing its delivery.
At from seven to eight o’clock on the morning of May twelfth, Mrs. Drought delivered the mortgage to Josephine O’Neil in absolute payment of Flood’s claim, for work and materials famished in the construction of the Fifth avenue house, and received a release thereof. It does not appear why this mortgage was taken in the name of the respondent Josephine O’Neil instead of Mr. Flood, but it is not claimed that she has any other or different rights'than he would have had had it been taken in his own name; and she testified that she expected him to do whatever was necessary to protect her rights under the same.
It appears that at the time of the delivery of the O’Neil bond and mortgage Mrs. Drought expressly represented that the premises in question were covered only by the three mortgages first mentioned ; also that said mortgage was to be a lien immediately following them. It further appears from the testimony of Flood and of Kelly, O’Neil’s attorney, which is not controverted, that Mrs. Drought told them, on a suggestion being made with reference to the necessity of the recording the mortgages at once, that they
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might have- it recorded 'at their leisure, and need not record it until the next day; and also said, “ I am not so mean a person as to go down and put another mortgage on- record before it.”
Anticipating that, the mortgage to appellants-was to be recorded first, Mrs. Drought’s attorney had written and signed a letter to be sent to them in which he stated that pursuant to the instructions of Mrs. Drought he had prepared .the mortgage to them, and had had it reCoided at once, so" that it might become a “ prior lien to another mortgage which is to be given,” and that he would forward the mortgage to them as soon as it was returned from the register’s office. Sometime in the forenoon of May twelfth, according to his testimony, he received a telephone message from Mr. Drought saying that the O’Neil bond and mortgage had been delivered, and that he might deliver the Simon and Moersfelder bond and mortgage. He thereupon, without changing the letter, inclosed it and the bond to them by mail and sent' the mortgage to the register’s office for record. The letter and bond were received by the mortgagees that day.
Mrs. Drought testified that she did not want the mortgage to appellants delivered until after she had obtained a settlement with Flood, because she feared trouble with him. Subsequent to her agreement with appellants she found it necessary to settle with Flood upon the terms stated. It does not appear that either party knéw in advance of her promise to give the other priority, or the fact of the delivery or recording of the other’s mortgage.
The mortgage to appellants was recorded, according to the record^ at ten forty-eigh't a. m. May 12, 1900, and the mortgage to respondent one minute later. It does not appear that appellants had any notice of the respondent’s mortgage until the early autumn of that year, but Flood discovered on the following day' that the mortgage to appellants was recorded ahead of that to respondent. He thereupon filed a mechanic’s lien for the indebtedness represented by the mortgage to the respondent, and subsequently brought an action to foreclose it, in which the defendant Drought pleaded payment by the mortgage to respondent. After filing the mechanic’s lien, Flood procured from the respondent a discharge of the mortgage and tendered it, with the bond and mortgage, to Mrs. Drought’s attorney, apparently for' the purpose of rescinding, on account of
p. 407
the fact that the mortgage to appellants had been recorded first, but it appears that he took no step to rescind until after filing the mechanic’s lien, and the facts are not sufficiently shown to indicate an irrevocable election on his part in that regard, and inasmuch as the -appellants make no point in this connection, it is unnecessary to consider the question of rescission or election.
On the 21st day of May, 1900, the attorney for Mrs. Drought received the mortgage from the register’s office and mailed it to appellants, who received it the next day and retained it without objectiom.
Mark Ash, for the appellants.
Mark G. Holstein, for the respondent.

The respondent claims that appellants are not “ subsequent purchasers in good faith and for a valuable consideration ” within the meaning of section 241 of the Real Property Law (Laws of 1896, chap. 547), and that her mortgage having been first delivered, although subsequently recorded, is the prior lien. The referee and Special Term have so held, and this is the important question presented by the appeal.

I-t is urged on the part of the respondent that there was no delivery of appellants’ mortgage as against the intervening rights of third, parties until it was received from the register’s office and mailed to them. It is well settled that the delivery of a deed or mortgage to a recording officer with intent that it shall become operative, although without the knowledge of the party to be benefited, constitutes a good delivery as between the parties, and an acceptance will be presumed unless the grantees or mortgagee repudiates the transaction when it comes to his knowledge. (Lady Superior, etc., v. McNamara, 3 Barb. Ch. 375 ; Ford v. McCarthy, 77 Hun, 612 ; 29 N. Y. Supp. 786 ; Munoz v. Wilson, 111 N. Y. 295 ; National Bank v. Bonnell, 46 App. Div. 302 ; Edlich v. Gminder, 65 id. 496.)

The rule is otherwise, however, where the grantor or mortgagor who causes the instrument to be recorded does not intend that it shall become operative. (Parmelee v. Simpson, 5 Wall. 81 ; Foster v. Beardsley Scythe Co., 47 Barb. 505 .)

p. 408
The referee has specifically found, and the evidence supports the finding, that the respondent’s mortgage was made, delivered and accepted for a valuable consideration and upon the agreement and understanding, that it was to be a lien on the premises subject only to the three prior mortgages, and without notice or knowledge on the part of the mortgagee of the existence of the mortgage subsequently delivered' to the appellants.

While it appears that Mrs: Drought hesitated for a. time in deciding whether to give priority to appellants or respondent in securing their respective claims, it is evident that she finally determined to give the respondent priority. This is manifest from her withholding delivery of the appellant’s mortgage until after she had delivered the mortgage to the respondent." She probably deceived the appellants in this regard, but it is likely that her intention would have been consummated in such a manner as to avoid any controversy, were it not for the fact that her attorney, instead of delivering the mortgage to appellants, as he was authorized and directed, sent it to the recording office instead. When the appellants subsequently accepted the mortgage, the mortgage to respondent was upon record, and, it being the intention of the mortgagor that the latter should have priority, I think the appellants are chargeable with having accepted their mortgage subject to the rights of the respondent.

The mortgage to respondent having been first made and'delivered for a good consideration between the parties, it takes priority over the mortgage to appellants, unless the latter is given priority by the Recording Acts. (Cary v. White, 52 N. Y. 138 .) If the appellants are subsequent purchasers in good faith and for a valuable consideration, the question arises when they became such. Until the appellants accepted the mortgage they were at liberty to reject it. At the time it was delivered to the" recording officer the appellants could have receded from their parol negotiations and have filed a mechanic’s lien or otherwise enforced their claim. There could, therefore, be no actual" binding delivery to them until they had knowledge of the facts so that they might ratify the • act of the mortgagor in executing and having the mortgage recorded or dis-affirm the transaction. In the case at bar that time was subsequent to the recording of the respondent’s mortgage.

I think the rule that where the grantor or mortgagor executes

p. 409
and records a deed or mortgage without the knowledge of the grantee or mortgagee a subsequent acceptance by the grantee or mortgagee will give effect to the instrument from the time of its delivery to the recording officer should not apply in a case where the rights of third parties have, as here, intervened. (1 Jones Moft. [5th ed.] § 85 ; Thomas Mort. [2d ed.] § 474; Munoz v. Wilson, supra; Foster v. Beardsley Scythe Co., supra ; Parmelee v. Simpson, supra.) Furthermore, it is not shown that the appellants were purchasers for a valuable consideration within the meaning of the Recording Act. The mortgage was given as security for an antecedent debt. The appellants retained the notes which represented .the indebtedness, and, so far as appears, no new notes were given and they did not part with any property or right or waive any remedy.

These views lead to the conclusion that the mortgage to respondent takes preference over the mortgage to appellants and that the order appealed from should be affirmed, with costs.'

O’Brien, J., concurred; Yan Brunt, P. J., concurred upon the ground that the appellants are not purchasers for value; Patterson, J., concurred in result.

Order affirmed, with costs.

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