Parkist v. Alexander — 1 Johns. Ch. 394

Majority

p. 394

Parkist against Alexander and others.

April 14th.

Headnote

An agent or trustee, undertaking a special business, cannot, on the subject of that trust, act for his own benefit to the injury of his principal.

If an agent undertakes to judge whether,he may not innocently depart front the instructions of his principal, he does it at his peril.

The registry of a mortgage is, of itself^ notice, in law, to all subsequent pur- ' chasers.

And, it seems, that the registry of a mere equitable mortgage or encumbrance, is notice to the subsequent purchaser of the legal estate, so as to entitle such mortgage to a preference.

THE bill stated that, in 1804, William Tucker made a verbal agreement with William Alexander, now deceased? in his lifetime, for a lease to Tucker, in fee, for lot 4., in the village of Little Falls, subject to the annual rent of three pounds. That Alexander then acted as a sub-agent, to majtp. verbal agreements, under Barent Bleecker, who was the attorney in fact of Ellis, the owner of the property, and authorised to make and execute leases in his name. That, a. few months after that agreement, the plaintiff purchased Tupkefs right, for three dollars, and took possession of the premises, of which Alexander had notice. That, in 1805, the plaintiff built a house, and made valuable improvements on the lot, and in 1806, built a barn thereon, and continued to occupy the premises, having expended above 600 dollars in improvements, until the 6th May, 1808, when he sold the premises, &c., to Alexander M'Knighi, for 550 dollars, and gave him a quit-claim deed ; and to secure the payment of the purchase money, took his bond, and a mortgage on the lot, which mortgage was duly registered the 27 th of December, 1807. That, at the time of sale, it was explained to M'-Knight, that' the plaintiff held the lot under a parol agreement only for a lease; but that a lease should be procured from Barent Bleecker to confirm his title.

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That in 1810, the plaintiff requested William Alexander to obtain a lease of Bleecker, pursuant to the parol agreement, and Alexander, accordingly, procured a lease from Bleecker to the plaintiff, in fee; but soon after Alexander discovered that the lease was incorrect in its description of the bounds of the premises, and advised the plaintiff to have the lease returned and corrected. That the plaintiff accordingly authorized Alexander to surrender the lease, and procure a new one to Ml Knight, with the intent thereby to give effect to the mortgage which Mr Knight had made to the plaintiff, and Alexander engaged so to do, well knowing all the facts relative to the lease.

That, at various times, in 1810 and 1811, the plaintiff inquired of Alexander, whether he had obtained the lease to MKnight, and he answered that he had neglected to do so. That, in April, 1811, a default having been made in the payment of Ml Knight'1 s bond, the plaintiff caused the mortgaged premises to be advertised for sale, under the power for that purpose contained in the mortgage. That, on the 10th of September, 1811, about a month before the day of sale, the plaintiff called on Alexander, and offered to take the incorrect lease himself, and get it exchanged for another, as he wished to obtain the hew lease to MKmghl before the day of sale. That Alexander then confessed that he had got the new lease in his own name ; and that he had done it for the purpose of securing a debt due to himself from Ml Knight. That the premises were sold on the 10th of Obtober, 1811, for 125 dollars, to Thomas Smith, the agent of the plaintiff, who executed a release to the plaintiff, on the 14tb of January, 1812.

The hill charged that Alexander, in 1811, in violation of his engagement and trust, falsely represented to Bleecker, that the plaintiff requested to surrender the old lease, and that a new lease should be given to him, Alexander, which was done accordingly. That Ml Knight is now, and has been for five years past, poor, so that the bond is of little or

p. 396

no value, and the only security the plaintiff relies on is the mortgage. That there was a collusion between M'Knight and Alexander to defeat the plaintiff’s mortgage. That j¡iexan¿er intestate, in February, 1813, leaving a widow, who was administratrix, and several children, his heirs at law, who are defendants. The plaintiff prayed that the lease might be assigned to him, or that the defendants should pay off the mortgage and the costs.

The plea and answer of the widow and children of Alexander stated, that MlKnight showed Alexander the deed from the plaintiff, and, in consideration of 700 dollars, (paid partly in cash, and part in satisfaction of an old debt due from M'Knight to Alexander,) sold and conveyed the premises to Alexander, by a release,' dated the-5th of January, 1810. That the purchase was made by Alexander in confidence that M'Knight had a right to sell, and that, before the payment of the money, Alexander had no notice of the mortgage, or of any right of the plaintiff to the lot. That the second lease of the lot, dated January 1st, 1810, was obtained by Alexander with the consent of MlKnight, and without any notice Of the mortgage or claim of the plaintiff. That Alexander purchased the lot after he had been directed to procure the lease; and that he was first informed of the mortgage after" "the purchase and payment to M'Knight, and after the plaintiff had advertised the sale under the mortgage.

Alexander M’Knight, who was also made a defendant, admitted the purchase of the lot, and the bond and mortgage as stated in the bill, and that the mortgage is unsatisfied.He stated that, without any intention to defraud the plaintiff, he sold the lot to Alexander about the 1st of January, 1810, for 700 dollars, part of which was paid in cash, and the residue was to satisfy a debt due Alexander, but he made no disclosure of the mortgage.

It was proved by several witnesses, that the plaintiff requested Alexander to take back the first lease, and procure a new one, in the name of M'Knight; and that Alexander

p. 397

promised to do so, and that the- reason assigned for having the new lease in the name of M'Knight was to save expense. It did not appear that Alexander knew of the mortgage, until the advertisement for the sale of the premises under it.

Kirkland, for the plaintiffs.

Gold, contra.

The plaintiff is entitled to relief. The intestate was intrusted by him with the agency of procuring a lease in fee of the premises, in the name of Alexander M'Knight, and he promised to perform the trust. Instead of doing this, he, afterwards, purchases the equitable title of M'Knight, and, with the consent of M'Knight, but without the knowledge or consent of the plaintiff, took the lease in his own name, in consequence of this, a mortgage from M-Knight to the plaintiff, and which was duly registered prior to the taking of the lease, and prior to the deed of M'Khight, is now attempted to be superseded, by setting up this subsequent legal title in the intestate. This, I think, cannot, and ought not to be permitted. An agent, or trustee, undertaking a special business for another, cannot, on the subject of that trust, act for his own benefit to the injury of his principal. This is a sound and fundamental rule of equitable policy. (Hardwicke v. Vernon, 4 Ves. 411., and see the case of Green and others v. Winter,^[2] . . May, 1814, and the authorities there cited.) The consent of M'Knight alone was not sufficient to authorize this departure from the instructions, for they were given by the plaintiffhimself, and accepted as coming from him ; and if the agent undertakes to judge that he may innocently depart from them, for the sake of -his own interest, and that the variation cannot be material, he does it at his peril. If it turns out that the departure will essentially affect the rights of the principal, the agent cannot, surely, establish any con

p. 398

flicting interest of his own upon such departure from his iustructions.

I shall consider this case, then, as if the lease had been ¡n name 0f M'Knight, and then the question is, whether the subsequent purchase by the intestate, without notice of the registry of the plaintiff’s mortgage, can defeat that mortgage ? This point was settled in the case of Johnson v. Stagg, ( 2 Johns. Rep. 510 .) The registry of a mortgage is, of itself, notice, inlaw, to all subsequent purchasers, as well as mortgagees; and they are bound, at their peril, to consult.the registry. A contrary doctrine would shake the foundation of all mortgage security, and lead to every species of fraud. It is, clearly, not the doctrine of the statute, which declares, that “ no mortgage, nor any deed, conveyance, or writing in the nature of a mortgage, shall defeat or prejudice the title or interest of any bona fide purchaser, &c., unless the same shall have been duly registered.” If this paragraph does not mean that a mortgage, duly registered, shall be preferred to a subsequent bona fide deed without notice, it is senseless and idle, and worse than idle—it is delusive, and a snare to the unwary. No decisions of the English courts, upon the English registry acts, in which there is any variation in the language of the provision, could induce me to change my opinion on the construction of our statute. 1 had occasion, lately, in the cause of Frost v. Beekman,^[2] to express this same opinion; and with me the point is absolutely at rest.

In this case, and for the purpose of this decision, I consider what. ought to be done as done, and, consequently, that M'Knight had a legal estate to support his mortgage to the plaintiff. But if the intestate had acted as he did, without any instructions from the plaintiff, and so as to reduce the interest of MKnight to a mere equitable estate at the time that he gave the mortgage to the plaintiff, and at the time that he gave the deed to the intestate, I think the better opinion is, that the registry of such equitable mortgage, or

* Ante, p. 288.

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encumbrance, is notice to the subsequent purchaser of the legal estate. The statute I have cited, speaks of any “ writing m the nature of a mortgage,” and these words may reach to any agreement creating an equitable encumbrance. The design of the statute was, that ¿very purchaser should look to the registry of mortgages, and see whether there was any mortgage, or any writing in the nature of a mortgage, previously executed by the grantor. Lord Hardwicke said, in Hine v. Dodd, (2 Atk. 275.) that the register act of 7 Anne, c. 20., was notice to all the world, but that the * * . courts had broken in upon the statute in cases of fraud. And some of the latest and best writers on the subject (Cruise's Digest, vol. 4. 348. Sug. L. of Vend. 3d Lond. edit. 524—8.) admit, that the true construction of the register acts is to render the registry, even of an equitable encumbrance, notice to all persons, and that the purchaser ought to search, or be bound by the notice. But the decisions, on the subject of tacking one lien to another, as in the cases of Bedford v. Bacchus, and of Wrightson v. Hudson, (3 Eq. Cas. Abr. 615. pl. 12. 609. pl. 7.,) are considered, in England, as having given a different construction to the registry acts. This doctrine of tacking has, however, been adjudged, and finally settled, with us, (Grant v. U. S. Bank, 1 Caines’ Cas. in Error, 112.,) not to apply between registered mortgages ; and the force of these decisions is no longer to be regarded. The case of Morecock v. Dickens, (Amb. 678.,) decided by Lord Camden, in 1768, is considered as the leading and decisive authority against the doctrine of constructive notice arising from the registry of a “ writing in the nature of a mortgage ;” and he seems to ground his opinion wholly upon the case of Bedford v. Bacchus, but he manifests, at the same time, a strong reluctance to be bound by such a doctrine. In that case it had been agreed, by deed between Morecock and Wilson, that a lease of lands to Wilson should stand as a security for 800Z., and this deed, containing the agreement, was duly registered

p. 400

under the stat. of 7 Anne. Wilson, afterwards, mortgaged the lands to Duk.ns for 800/., and delivered him the lease ; but Dickens, at that time, had no notice of MorecocDs deed. j^¿¡S0)¡ became bankrupt, and Morecock hied his bill to be paid the money in preference of the mortgage to Dickens. The question was, whether Dickens, who had got the legal interest, was to be affected with constructive notice arising from the registry of Morecock1 s deed ? and Lord Camden said, that he considered himself bound by the decision of Bedford v. Bacchus ; that a thousand neglects to search had been occasioned by that decision, and, therefore, he could not take upon him to alter it; that if this was a new question he should have had his doubts, and that it was a serious question whether a court of equity should not say that, in all cases of registry, a subsequent purchaser ought to search, or be bound by the registry.

Mr. Sugden says, that this decision seems hardly reconcileable with the genera! principles of equity, and that it was founded on a mistaken application of the case of Bedford v. Bacchus. But when we consider that the principle of that prior decision is done away with us, and that except this of Lord Camden, and those relating to tack» ing encumbrances, we have no decisions on the point, and nothing but some extra-judicial dicta, (1 Schoale & Le f roy, 90. 157—160, 161.,) I think we are at liberty to give our registry act such a construction as will best accord with the obvious dictates of its policy. If the plaintiff’s claim was, then, to be considered as resting upon a mere equitable mortgage, 1 should still be of opinion that the registry of that mortgage gave it a preference to the subsequent legal title of the intestate.

I shall, accordingly, give to the defendant, Catharine M„ Alexander, as administratrix and guardian, &c. the election, either, within 30 days, to. assign over to the plaintiff the lease taken in the name of the intestate, or to discharge the mortgage debt, with the costs of the foreclosure ; and, in defaultof

p. 401

making such election, that the lease be assigned by her, as administratrix and guardian aforesaid; and that, in either case, she pay the costs of this suit. 7 1 •>

The following decree was entered:

“ That Catharine M. Alexander, one of the above defendants, as administratrix of the goods, chattels, and credits of William Alexander, deceased, and guardian to the other defendants, excepting Alexander MiKnight, within thirty days after being served with a copy of this decree, make her election, either to assign over to the plaintiff, and to his heirs, by an instrument valid in law, all the right, title and interest of the said William Alexander, at the time of his death, of, in, or to the lease mentioned in the pleadings in the above cause, hearing date on or about the first day of January, in the year of our Lord one thousand eight hundred and ten, and taken by the said William Alexander, deceased, in his own name, and given for town lot No. 4., in First-street, in the village of Little-Falls, and accompany the said assignment with actual delivery of the lease, or to pay to the plaintiff the principal and interest due on the bond and mortgage mentioned in the said pleadings, and executed by Alexander MlKnight, one of the defendants, to the plaintiff, and bearing date the sixth day of May, in the year of our Lord one thousand eight hundred and eight, together with necessary costs and expenses of the plaintiff, accrued iff advertising and selling the lot under a power contained in the said mortgage; and, in case the said Catharine M. Alexander shall, within that time, elect to discharge the mortgage debt and costs as aforesaid, and shall signify her election in writing, subscribed by her, or her solicitor, or counsel, and served on the plaintiff, his solicitor or counsel, or filed in the register’s office, it is further ordered, that it then be referred to one of the masters of this court, residing in Albany, Oneida, or Herkimer counties, to ascertain and report, with all convenient speed, the amount of such principal and

p. 402

interest and expenses as aforesaid; and that upon confirmahon of such report, the same be paid: and if no such election be made within the time aforesaid, it is further ordered, and decreed, that the said Catharine M. Alexander, immediately after the expiration of the said thirty days, assign and deliver the lease as aforesaid. And it is further ordered, adjudged, and decreed, that, in either case, the said Catharine M. Alexander pay to the plaintiff his costs of this suit, to be taxed.”

Footnotes

* Ante, p. 26—44.