Assets Realization Co. v. Clark

• Decision Date: 26 March 1912
• Citation: 205 N.Y. 105,98 N.E. 457
• Parties: ASSETS REALIZATION CO. v. CLARK et al.
• Court: New York Court of Appeals Court of Appeals

205 N.Y. 105

98 N.E. 457

ASSETS REALIZATION CO.

v.CLARK et al.

Court of Appeals of New York.

March 26, 1912.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by the Assets Realization Company against Fred Clark and others. From a judgment of the Appellate Division (137 App. Div. 881,123 N. Y. Supp. 1105) affirming a judgment for plaintiff, defendant named appeals. Affirmed.

September 2, 1902, Henry A. Clark and Cornelia, his wife, gave their note for $600 to one Foss, payable three months after date . On the same day they executed and delivered to him a bond conditioned for the payment of $600 three months after date, and a mortgage to secure the payment of said bond. While said bond and mortgage were really given to secure the payment of said note, this was not in any way stated in the instruments themselves. Some payments were made on said note and renewals given from time to time until August 3, 1903, when the final note was given for the sum of $375 payable one month after date. On said last-mentioned date Foss made and delivered to the German Bank of Buffalo his own note for $375 payable three months after date, and assigned to the bank as collateral security for the payment thereof the note, bond, and mortgage executed by the Clarks to him as aforesaid. The Foss note was renewed from time to time until November 28, 1904, when a final note was given for the sum of $370 payable 10 days after date. December 22, 1904, a judgment was entered dissolving the German Bank and appointing one Wheeler receiver of its assets, and some time thereafter, the date not appearing in the findings, the latter sold and transferred to the plaintiff in this action the note dated November 28, 1904, for $370 made by Foss and also the Clark note, bond, and mortgage held as security therefor. No assignment to the bank of the Clark instruments was recorded until February 9, 1906, and the assignment from the bank to plaintiff was not recorded until one day later. April 18, 1905, the mortgagor named in the above-mentioned mortgage, Cornelia A. Clark, sold and conveyed the premises described therein to the appellant; the deed being recorded two days thereafter.

It is the claim, and if we look at the evidence it substantiates the claim, that it was the arrangement between the grantor and the grantee in said conveyance that the former should pay the indebtedness secured by the Foss mortgage down to $200, and that the grantee should pay the balance as part of the purchase price. The mortgagors prior to the conveyance did pay $163 to apply on their indebtedness secured by the mortgage, and did secure from Foss the following statement, which was delivered to the appellant, viz.: ‘Buffalo, N. Y., April 22, 1905. To C. A. Clark: This is to state that you are owing me on account of mortgage for $600.00 given September 3rd, 1902, the sum of $200 (Two Hundred Dollars). When that sum is paid I will release the same, the debt being paid. Charles E. Foss.’ It will be noted that this statement is dated four days after the execution and delivery of the deed to appellant as found by the trial judge. Subsequently appellant paid to Foss $202 as full payment and satisfaction of the bond and mortgage. When making this payment he did not know that the bond and mortgage had been assigned, or that they were in fact executed as security for a note, and he did not through his agent call for the production of the bond and mortgage or inquire as to their ownership or whereabouts or demand any satisfaction thereof. His son, who made the payment, testifies that he paid $202 to the mortgagee, and ‘explained to him that Magavern would come out and take his acknowledgment to the discharge in a few days. There was no notary or commissioner there to take the acknowledgment at the time. I told him that Magavern would be up to take his acknowledgment to the transfer, and he said ‘All right, any time.” He further testifies: ‘I did not ask Mr. Foss to show me the mortgage or to show me any papers. I didn't ask him anything about where the papers were.’ It was found by the trial court that there was due on the bond and mortgage a sum considerably in excess of the $200 and interest from the date of the statement made by Foss as aforesaid.Frank C. Ferguson, for appellant.

Warren Tubbs, for respondent.

HISCOCK, J. (after stating the facts as above).

On the facts set forth in the foregoing statement two propositions have been advanced by the appellant; one of them being argued at some length.

[1] The first one is that the statement made by Foss as to the amount due on the mortgage at about the time appellant was purchasing the premises was conclusive both as to him and as to his assignee by a prior but unrecorded assignment. This proposition may be dismissed without consideration on the merits . The effectiveness of such a statement on any view is dependent on the element of estoppel whereby a party would be prevented from enforcing the mortgage at a greater amount than was stated to be due thereon, as against a grantee who had purchased on the faith of the statement. As already pointed out, it appears that the deed to appellant was executed before the statement was given, and therefore there can be no estoppel. Other evidence in the case makes me think that quite probably the finding as to the date of execution of the deed is erroneous, and that as a matter of fact the statement was given before the deed was executed. The appellant, however, does not seem to find any fault with the findings in this respect and they have been unanimously affirmed.

We then come to the second proposition that appellant'spayment to the mortgagee is good as against a prior unrecorded assignment to respondent and his assignor, the German Bank. Two answers are made by respondent to this contention. The first one is that the bond and mortgage were really executed as security for a negotiable note, and that they followed the note when it was transferred by Foss to the bank and later by the bank to the plaintiff, and that certainly a payment on a negotiable note to a former holder thereof is not good as against one to whom it has been transferred, whatever may be the rule as to a nonnegotiable instrument.

[2] It may be regarded as the rule that, where a negotiable instrument is secured by a mortgage, the latter will not be discharged by payment to the record holder if as a matter of fact the note and mortgage had already been transferred to a bona fide holder for value before maturity, even though no assignment has been recorded. Thomas on Mortgages (2d Ed.) § 308; Biggerstaff v. Marston, 161 Mass. 101, 36 N. E. 785;Jones v. Smith, 22 Mich. 360;Williams v. Keyes, 90 Mich. 290, 51 N. W . 520,30 Am. St. Rep. 438. In this case the mortgage and bond did not disclose and the appellant did not know that they were security for a note. In addition, the findings do not show whether the note or other instruments were transferred to the respondent before or after the payment was made, and they do make it pretty certain that the transfer was made after the maturity of the note. Under these circumstances I doubt the application of the rule. But, even so, I think that the payment made by appellant to Foss after he had parted with the note and bond and mortgage was unavailing as against the assignee, although the latter's assignment had not been put on record.

[3] The provisions of the recording act are not controlling in disposing of this question. That act concededly provides for the recording of assignments of mortgages, but it also expressly provides that such recording shall not be of itself notice of such assignment to a mortgagor, his heirs, or personal representatives, so as to invalidate a payment made by either of them to the mortgagee. Real Property Law, § 271. While expressions seeming to indicate a contrary view have sometimes been used in the opinions, I think we must regard it as settled that in the case of another than the mortgagor, as for instance the purchaser of the equity of redemption, a record of an assignment of a mortgage is constructive notice to one desiring to make a payment on the mortgage. Viele v. Judson, 82 N. Y. 32;Brewster v. Carnes, 103 N. Y. 556, 563,9 N. E. 323. In the latter case it appeared that one Carnes was the purchaser of the equity of redemption in premises subject to a mortgage. He had made payments to one Taylor after the latter had assigned the bond and mortgage to one Webster by an assignment which was recorded before the payments. Under these circumstances, Judge Miller said: ‘Under the recording act, therefore, Carnes was chargeable with notice that the mortgage, which he intended to pay, had been assigned by Taylor to another party, * * * who subsequently assigned her rights therein to the plaintiff. The record of an assignment of a mortgage is constructive notice to all persons of the rights of the assignee, save as excepted by the statute. * * * The record of the assignment here, as in the case cited, was an ample protection to the plaintiff's claim and notice to Carnes that Taylor had disposed of his interest in the mortgage.’ This case seems to have been cited with approval in Larned v. Donovan, 84 Hun, 533, 536, 32 N. Y . Supp. 731; s. c., 155 N. Y. 341, 342,49 N. E. 942;Armstrong v. Combs, 15 App. Div. 246, 250,44 N. Y. Supp. 171. See, also, Smyth v. Knickerbocker Life Ins. Co., 84 N. Y. 589, 593;Ely v. Scofield, 35 Barb. 330;Belden v. Meeker, 47 N. Y. 307, 312, 313 .

[4] But if we should be tempted to hold as a logical converseof this rule that, in the absence of such record of an assignment or other direct notice, the purchaser might safely pay to the assignor, we should find ourselves confronted with a preponderance of authority preventing such view under the facts existing in this case. The payment relied on by the appellant was regarded and treated by him and by the record holder of the bond and mortgage as...