Johnson v. Strong — 48 N.Y. St. Rep. 193

Majority

p. 193

Edward W. Johnson, Resp’t, v. Elizabeth B. Strong et al., App’lts.

(Supreme Court, General Term, Fifth Department,

Filed October 21, 1892.)

Headnote

1. Mortgage — Priority of lien over land contract—Constructive. NOTICE BY POSSESSION.

L. entered into a contract for the sale of lands with P., who went into possession. L. assigned his interest in such contract to B., and thereafter gave to S. a mortgage on the same premises. Before taking the mortgage 8. made inquiries of L. as to the possession of P.; learned of the contract hut not of its assignment, and was informed that it had been abandoned by P. Held, that the possession of P. was notice of the contract but not of its assignment, and that the lien of the mortgage of S. had precedence of the interest of the assignee of the contract.

2. Judgment—Lien of—Priority.

In such case, B. assigned his interest in the contract to Y., W. having in. the meantime recovered and docketed a judgment against L., Held, that the judgment, although recovered prior to the assignment to Y., was subject to B.’s interest, and as all that interest passed to Y., was subject to-that of Y.

Appeal by the-defendants, Mrs. Strong and the Westons, from a judgment entered in Cattaraugus county, on the report of a referee.

J. H. Waring, for app’lts ; C. S. Cary, for resp’t.

The action was by an assignee of the vendors in an executory contract for the sale of lands, to foreclose the equity of redemption of the purchaser, for non-payment of the-purchase price. The vendors were the defendants Lewis, the

p. 194

purchaser was the defendant Pierce, and the contract was entered into in October, 1889, at which time Pierce went into possession, and so continued until October, 1890. In June, 1890, the Lewises assigned all their interest in the contract to the Exchange National Bank of Olean. In August, 1890, the Lewises gave to the ■defendant, Mrs. Strong, a mortgage on the same premises to se-cure the payment of money at that time loaned to them by her. Before taking the mortgage, Mrs. Strong, by her agent, making •inquiries of her mortgagors, in respect to the possession of Pierce, learned of the existence of the contract, but not of its assignment to the bank, and was informed by the Lewises that it had been abandoned by Pierce; and she took her mortgage in the belief that the mortgagors’ title was clear of incumbrance. The contract was in fact abandoned by Pierce in October, before any rights of the plaintiff had intervened; and no inquiry of Pierce would have elicited information of the assignment of the contract, because he was himself ignorant of the fact The Lewises resumed possession of the property in October, and have ever since held it by their tenants. Two months later the bank assigned its interest in the contract to the plaintiff, the defendant Weston having in the meantime recovered and docketed a judgment in the proper county against the Lewises.

The facts above stated are taken from the findings of the referee, and upon them he bases a conclusion of law to the effect that the lien of the plaintiff under his assignment of the contract of sale is superior to that of Mrs. Strong under her mortgage, as well as to that of the Westons under their judgment.

The former branch of this conclusion was clearly error. It is based, as appears from the opinion of the referee, upon the proposition, not found ás a conclusion of law, that the possession of the purchaser in the contract, at the time the mortgage was given, was notice to Mrs. Strong of the existence of the contract not only, but also of its assignment to the bank and of its rights' thereunder. We regard the proposition as entirely untenable. The possession of Pierce was notice of the contract under which he held and of all his rights thereunder. It was not notice of the assignment of the contract nor of the rights of any party who was not in possession. The rule is that the possession in a third party is notice to the grantee of all -the rights of the party in possession ¡so far as diligent inquiry suggested by such possession would dis■close them. There was nothing in the possession by the purchaser in the contract to suggest that the contract bad been assigned by "the vendors, moreover the information actually derived by inquiry from the vendors virtually negatived the idea of an assignment by them, and information of the assignment could not have been obtained by any inquiry of Pierce.

None of the authorities cited by counsel for either party on this appeal carry the doctrine of constructive notice by possession beyond that stated above. Tuttle v. Jackson, 6 Wend., 213 ; Page v. Waring, 76 N. Y., 463 ; Moyer v. Hinman, 13 id., 184; Ellis w. Horrman, 90 id., 466.

We have no doubt that the lien of the mortgage of Mrs. Strong

p. 195

has precedence to the interest of the assignee of the contract of sale.

On the other hand, the judgment of the Westons, although recovered before the assignment to the plaintiff, was subject to the interest of the plaintiff’s assignor and all that interest passed to the plaintiff by the second assignment.

Upon the evidence as it now stands the judgment might perhaps be modified so as to give effect to the equities of all parties, but as there may be additional evidence on another trial, the judgment should be reversed, and a new trial granted.

Judgment reversed and a new trial granted, with costs to abide. the final award of costs.

Macomber and Lewis, JJ., concur.