McPherson v. Rollins — 12 N.Y. St. Rep. 488

Majority

p. 488

Florence McPherson, Resp’t, v. Patrick Rollins et al., App’lts.^[1]

(Court of Appeals,

Filed November 29, 1887.)

Headnote

Trustee—Trust—To secure payments at stated times—Anticipation.

Where a mortgage was made for the benefit of infants securing payment at stated times, a trustee under such mortgage has no authority to-receive payment in anticipation of the times expressed in the mortgage; and when the trustee executes a discharge before the trusts expressed could have been performed it will be of no effect as against the infants, and such mortgage being on record, purchasers of the land for valuable consideration, after the mortgage had been discharged by the trustee, are charged with notice of the terms of the trust set out in it.

p. 489

The action was for the foreclosure of a mortgage made by one G-ray, the material portions of which are hereinafter set out. Andres Deming, Ida McPherson, an infant, and. Michael and Patrick Rollins, with others, were made defendants. The Rollins’ answered, claiming title as purchasers in good faith and for a valuable consideration. Ida McPherson submitted her rights to the court, asking that her interest be adjudged. The issues_ were tried" before a. referee, who found that' Deming, with the purpose of providing for his two daughters and their children, made a division of his real estate and conveyed the part now in. question to his daughter, Fanny G-ray; that as part of the same transaction she executed to him a mortgage upon that part, reciting that the grant was “ intended as a security for the payment of the sum of $250 annually to said Deming, for and during his natural life, on or before the fifteenth day of May in each year thereof, reckoning from the date of this mortgage, and for the further payment of the further sum of fifty dollars annually to said Deming, or to the general guardian of Florence McPherson (the plaintiff), on or before the fifteenth day of May in each year hereafter for the benefit of said Florence, until the^[1] said Florence shall arrive at the age of fifteen years, and thereafter the further sum annually to said Deming, or guardian, of the $100 payable on or before the fifteenth day of May in each year until the said Florence shall arrive at the age of twenty-one years for the benefit of said Florence, and for the further payment of the further sum of fifty dollars annually to the said Deming, or to the general guardian of Ida McPherson, on or before the 15th day of May in each year hereafter for the benefit of said Ida until the said Ida shall arrive at the age of fifteen years, and thereafter the further sum annually to said Deming or guardian of $100 payable on or before the 15th day of May in each year until the said Ida shall arrive at the age of twenty-one years for the benefit of said Ida£ said Florence and Ida being the granddaughters of said Deming, the said. Florence being fourteen years of age April 1, 1873, and the-said Ida eleven years of age October 10, 1872; that the deed and mortgage were recorded in the proper clerk’s office on the 21st day of July, 1873, and thereafter and until the 16th of February, 1875, were in the custody of Mrs. Gray; that-in February, 1874, Deming at the request of Mrs. G-ray and. without payment or other consideration, executed and acknowledged a certificate of satisfaction of the mortgage and it was recorded on the 9th of February, 1874, and a memorandum noted in the margin of the record of the mortgage as “ Discharged on record of discharges of mort

p. 490

gages, page 470; ” that thereafter the premises were only conveyed by or under the authority of Mrs. Gray to the defendants for a full and valuable money consideration paid hy them.

The referee found “as a question of fact and law, that by the proceedings of the 14th of July, above mentioned, and the delivery and execution of the deed and mortgage of tho t ■date an irrevocable trust for the benefit of the plaintiff and her sister Ida was created and declared in the condition of the mortgage in suit; that Deming, the trustee, had no power to annul or change the condition of the trust; that the discharge of the 6th February, 1874, above referred to, was therefore as to said trust and the interests of the beneficiaries unauthorized and void;” and as a fact “that the Rollins’, ■defendants, prior to and at the time of their purchase as above stated, had no actual notice of the existence of the mortgage of Mrs. Gray to Charles Deming as a subsisting lien or incumbrance upon the premises therein described. But did find as a question of law and fact that , they then had constructive notice or notice sufficient to put them on inquiry as to that fact which they were bound to regard; that no part of the annuity to the plaintiff or Ida had been paid,” and gave judgment of foreclosure according to the prayer of the complaint. Upon appeal the judgment was affirmed by the general term of the supreme court for the fifth department and the defendants appeal.

Mr. Nash, for app’lts; Mr. Abbott, for resp’t.

That a valid trust was created by the terms of the mortgage and to the effect as found by the referee, and that it continued to exist, there can be no ■doubt. The transfer of property was executed and the relation of trustee and cestui que trust formed and at no time renounced by the cestui que trust. This question must be deemed closed in this court by its decision m Martin v. Funk, 75 N. Y., 134 .

The important inquiry before the referee was whether Rollins’, the defendants, had any notice, actual or constructive, of the plaintiff’s rights, or of the character in which Deming held the mortgage. His finding that they had no actual notice reduces our inquiry to the effect of the recording act. As intending purchasers they must be presumed to investigate the title and to examine every deed or instrument forming a part of it, especially if recorded; they must, therefore, be deemed to have known every fact so disclosed (Acer v. Westcott, 46 N. Y., 384 ), .and every other fact which an inquiry suggested by those records would have led up to. Thus they are plainly chargeable with notice of the mortgage and of all the facts

p. 491

of which the mortgage could inform them. They knew, therefore, that the legal interest was in Deming, and that to some extent he was the owner of a beneficial interest. As to that, that they might rely upon his acts.

How was it as to the plaintiff ? The mortgage declared that it was intended as security for the payment of $250 annually to “Deming or to the general guardian of Florence McPherson (the plaintiff), on or before the fifteenth day of May in each year hereafter for the benefit of said Florence, until the said Florence shall arrive at the age of ■fifteen years, and thereafter the further sum annually to said Deming or guardian of $100, payable on or before the fifteenth day of May in each year until the said Florence shall arrive at the age of twenty-one years for the benefit of said Florence,” and recited also that she was fourteen years of age on the 1st day of April, 1873, being the same year in which the mortgage was executed. There was notice, therefore, that the plaintiff had a beneficial interest under the mortgage which by its terms would continue nntil 1880, the time of her majority, and in like manner, although to a different period, as to the rights of Ida. It is true that at the same time the purchasers found of record a certificate signed by Deming and dated February 6, 1874, referring in terms to this mortgage, and declaring that it “is redeemed, paid off and discharged. But this was an act not in the execution of his trust nor warranted by it, and the referee properly held that as against the plaintiff it was of no effect. As to this also the purchaser must be presumed to have known the law.

The case of Field v. Schieffelin ( 7 Johns. Ch., 150 ), and other similar cases cited by the appellant, apply only where a trustee or guardian has a power of disposition of the estate and may exercise it in his discretion. This power Deming did not possess. The discharge was in contravention of the trust, and, therefore, in fraud of the beneficiaries for whom the trust was created. By its very terms the mortgage was to be a security not only for the payment of money, but to remain such security for the payment of money at specific times during the plaintiff’s minority. The defendants knew this and knew also that the time when the trustee was authorized to receive payment had not arrived.

His power was limited by the terms of the mortgage and his apparent authority was his real authority. He had no power to vary its terms nor receive payment in anticipation of the times fixed by the mortgage. His declaration or certificate that he had been paid, was, therefore, of no avail against the express provisions of the instrument by which his power was defined. In case of default on the

p. 492

part of the mortgagor in paying, the mortgagee might, as the appellant says, foreclose, for power to do so is expressly given by the mortgage, but whether the security for future payments would then be found in the decree or otherwise, would depend on circumstances not pertinent to the present inquiry.

A point is made that the plaintiff is not the owner of the mortgage and cannot maintain the action. Such question was not raised by the pleadings, nor does it appear to have been presented upon the trial, but the averments of the complaint show that the plaintiff is a real beneficiary. The form of the action is not objected to and the judgment goes no further than to give the relief to which as a beneficiary she is entitled.

It should, therefore, be affirmed.

All concur except Raparlo, J., absent.