Reynolds v. Webster — 55 N.Y. St. Rep. 6

Majority

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Frank B. Reynolds et al., Resp’ts, v. John A. Webster et al., App’lts.

(Supreme Court, General Term, Fourth Department,

Filed September 23, 1893.)

Headnote

1. Mortgage—Record—Priority.

The lien of a mortgage to secure future advances, duly recorded, is superior to that of a prior, unrecorded purchase money mortgage, of which the second mortgagee had no notice.

2. Same.

Such lien extends to the full amount of the mortgage, although the prior mortgage is recorded before all the advances have been made; such record not being constructive notice to the holder of the mortgage first recorded.

Appeal from judgment in favor of plaintiffs.

Action to foreclose a mortgage given by one Covell to secure future advances. Defendant Webster, in his answer, set up a, prior purchase money mortgage given to him by Covell, which was not recorded until after the record of plaintiff’s mortgage.

M. M. Waters, for app’lts; F. H. Everhart, for resp’ts.

The defendant Webster, by his conveyance to Covell, transferred all his title and estate in the premises, and, upon receiving back the mortgage for a part of the purchase price, he acquired only a lien thereon to that amount. Bryan v. Butts, 27 Barb., 503 ; Trustees of Union College v. Wheeler, 61 N. Y., 88 . He then stood in the position of an ordinary mortgagee for value, having transferred both, title and possession to Covell. The case cited from 59 N. Y., 541 (Dusenbury v. Hulbert), does not hold any different rule. Such case merely decides that intermediate the receipt of the title by Covell and the delivery back of the mortgage, it being all one transaction, Covell could not have given any lien that would be superior to such purchase money mortgage. While Webster held his mortgage, and before he had it recorded, the plaintiffs received the mortgage which they are now seeking to foreclose, and they promptly put it on record in advance of Webster. Their mortgage was collateral to a bond in the penalty of $3,000, conditioned to pay at maturity any and all balances of account, money, notes, etc., and indebtedness of any kind at any time hereafter owing by the firm of Covell & Dielcin

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son, or either of them, to the plaintiffs, and was intended as security for future sales of cigars, from time to time, to be sold to such firm by the plaintiffs. Such a mortgage is a valid security, and is a conveyance within the recording acts. Ackerman v. Hunsicker, 85 N. Y., 43 . Both Webster and the plaintiffs, therefore, stood in their relations to Coveil as mortgagees of the same premises, the security of each being liable to be' affected by the provisions of the recording act. That act makes a prior, unrecorded mortgage void as against a subsequent mortgagee in good faith, and for value, whose mortgage is first duly recorded. Webster’s mortgage, therefore, although prior to plaintiffs’, became void as to it, provided plaintiffs are to be deemed purchasers in good faith and for value.

On behalf of Webster, it is claimed that plaintiffs were" not purchasers for value, because at the time they took and recorded their mortgage they had advanced nothing upon it; also, that at most they were purchasers for value to the extent only of the amount advanced at the time Webster’s mortgage was recorded, viz., ninety dollars, and that hence, under the recording act, plaintiffs’, mortgage is made superior to Webster’s to the extent of ninety dollars only. The case of Ackerman v. Hunsicker, above cited, decides both of such propositions against the defendants. It is there said that such a mortgage is a potential lien for its full amount, of which subsequent purchasers, or encumbrancers have notice through the record, and the rule is distinctly laid down that “ a party who takes a mortgage to secure further optional advances, upon recording his mortgage, is protected against intervening liens, for advances made upon the faith and within the limits of the security, until he has notice of such intervening lien, and that the recording of the subsequent lien is not constructive notice to him.” See, also, Farr v. Nichols, 132 N. Y., 327 ; 44 St. Rep., 555 . These cases seem to be conclusive against the positions taken by the defendants upon this appeal. The judgment, therefore, should be affirmed, with costs.

Hardin, P. J., and Merwin, J., concur.