Paul v. Paul

It must be conceded, I think, that there is-nothing in the evidence which tends to impeach the good faith of John Paul, in taking the mortgage in suit.

So far as the evidence discloses, he received it without notice of any existing lien, and parted with value when he surrendered the notes of the mortgagor. Brown v. Leavitt, 31 N. Y., 113 ; Pratt v. Coman, 37 id., 440; Phœnix Ins. Co. v. Church, 81 id., 218.

He, therefore, occupied the position of a bona fide mortgagee for value, whose mortgage, upon the recording thereof, took precedence over the prior unrecorded mortgage given to the bank and now held by the defendant, Gardner.

It will not be claimed that if this action to foreclose such, mortgage had been brought by the mortgagee or his personal representatives, the defense which is here sought to be interposed would be available to the defendant, and the only question therefore which is seriously urged upon fhe.attention ol the court, is whether or not the equity of the-

It is true that this precise issue is not tendered by the answer, and yet it would hardly be sale, in these days of liberal construction, to assume that it may not be litigated, especially as the case has been tried and submitted upon the theory that such an issue is, in some manner, raised by the pleadings. ■

It is proper therefore that the question should receive careful consideration, for it is an exceedingly interesting one, and one which must be decided upon principle without the aid of precedent, for no authority precisely in point has been .cited, and diligent examination of the books has not been rewarded by the discovery of any.

The general proposition that one who takes a mortgage by assignment from a bona fide mortgage for value, receives it discharged of all equities, even though he had notice of a prior mortgage, and is not a holder for value, is one which has long obtained, and is not here disputed. Webster v. Van Steenbergh, 46 Barb., 211 ; Wood v. Chapin, 13 N. Y., 509 ; Page v. Waring, 76 id., 463; The Lacustrine Fert. Co. v. The Lake Guano and Fert. Co., 82 id., 476. But it is insisted that there is an' exception to this rule which operates against the mortgagor who, if he .were to become the owner of the mortgage, would take it subject to all existing equities, and it is contended that the plaintiff, being a party to the mortgage, stands in no better position than her husband.

For the purposes of this discussion it may, perhaps, be assumed that the above contention is well founded so far as the mortgagor, Joseph M. Paul, is concerned, although it would not be difficult, I think, to show wherein he occupies a different relation from that of a grantor of premises, for in the latter case he could not execute a deed of property theretofore conveyed to another party, without knowing that he was perpetrating a fraud. - Here, however, there is no evidence of any desire or intention on his part to give the mortgage in suit priority over the bank mortgage, nor indeed, of any knowledge that the bank mortgage had not been recorded.

There is nothing about the transaction to distinguish it from any other of a similar nature, where it had become necessary to execute a second mortgage, and had this mortgage been transferred to him by a bona fide holder for value after he had become divested of his legal title to the premises, a strong argument might be advanced in support of his equitable right to hold it as against the prior mortgage.

But the soundness of the defendant’s contention respect

In endeavoring to furnish a satisfactory solution of this inquiry it will be proper to indulge in the presumption that the legal title to the premises embraced within the mortgage was in the husband, Joseph M. Paul (Turner v. Brown, 6 Hun, 331 ), and this presumption is strengthened rather than weakened by the evidence.

This being so, the plaintiff, as his wife, had no estate in the mortgaged premises, but only the claim or incumbrance of an inchoate right of dower. Lawrence v. Miller, 2 N. Y., 245 ; Aikman v. Harsell, 98 id., 186.

Consequently the only effect of her joining in the mortgage was to divest herself of this inchoate interest (Power v. Lester, 23 N. Y., 527 ), and had this been accomplished by her executing a separate instrument in the nature of a release, it will hardly be contended that she could not succeed, to John Paul’s title to this mortgage by assignment, even with knowledge of the existence of a prior mortgage.

By way of illustration let us apply another test. Suppose that John Paul had taken his mortgage with notice of the prior mortgage, and had thereafter joined in a quit-claim deed of the premises to a third party, who received the coxiveyance in good faith, and for value; thex*eafter the gi'antee caused his deed to be recorded, and then conveyed the premises to Johxx Paul. Would the fact that the latter had discharged his lierx by joixxing ixi the coxxveyance take him out from the operatioxx of the role which it is conceded is applicable to all who derive title from a bona fide pm> chaser, excepting the “ brigixxal party,” axxd if not, by what process of reasoning can the plaintiff be made an exception to that rule?

Again, the undisputed evidence shows that the plaintiff was not present during the negotiations, which resulted in the execution of this mortgage by her husband, for it appears she received it from him by mail, and, after executing it, x’etuxmed it to him through the same medium. * * * For aught that appears, she may have supposed that the prior mortgage had been satisfied, axxd it is not px’etended that she had arxy knowledge that it was unrecorded. Where then is there any element of fraud even of that intangible quality known as ‘ ‘ constructive fraud?” In this respect the case differs very materially from that of Schutt v. Large ( 6 Barb., 373 ) cited by counsel, for in that case the wife was a party to an active fraud after the decease of her husband. See opinion Welles, J., p. 380.

Viewixxg the question from any reasonable standpoint, I am uxxable to see why the plaintiff, within well-settled