Second Nat. Bank of New Haven v. Dyer

• Decision Date: 07 April 1936
• Citation: 184 A. 386,121 Conn. 263
• Court: Connecticut Supreme Court
• Parties: SECOND NAT. BANK OF NEW HAVEN v. DYER et al.

184 A. 386

121 Conn. 263

SECOND NAT. BANK OF NEW HAVEN v. DYER et al.

Supreme Court of Errors of Connecticut.

April 7, 1936

Appeal from Superior Court, Fairfield County; John A. Cornell and Frank P. McEvoy, Judges.

Action to foreclose a mortgage by the Second National Bank of New Haven against James A. Dyer and the Prudential Insurance Company of America, wherein the Prudential Insurance Company of America filed a cross-complaint. A demurrer to the cross-complaint was sustained, and the Prudential Insurance Company of America failed to plead further. Judgment was entered against the Prudential Insurance Company of America adjudging that the cross-complaint was insufficient, and the Prudential Insurance Company of America appeals.

Error and case remanded.

Argued before MALTBIE, C.J., and HINMAN, BANKS AVERY, and BROWN, JJ.

J Dwight Dana and Frank E. Callahan, both of New Haven, for appellant Prudential Ins. Co. of America.

Leonard M. Daggett, and I. Gordon Colby, Jr., both of New Haven, for appellee.

MALTBIE, Chief Justice.

The plaintiff brought this action to foreclose a mortgage made by the defendant James A. Dyer to the Thomas F. Clark Company and assigned by that company to it. The Prudential Life Insurance Company was made a defendant as claiming an interest in the mortgaged premises by reason of an assignment of the same mortgage to it by the Clark Company, which was alleged to be subsequent to the assignment to the plaintiff. The insurance company, to which we shall hereafter refer as the defendant, filed an answer and cross-complaint. The cross-complaint gave a rather detailed history of the transaction, and to it were annexed copies of the various instruments involved in the controversy. Its allegations, so far as material to the issue decisive of the case, state the following situation: the Clark Company, which was engaged in the business of loaning money on mortgages, had a contract with the defendant giving to it the exclusive right to submit to the defendant applications for loans on improved real estate in certain towns; one being that in which the real estate included in the mortgage here in question was located. It was the practice of the defendant not to take mortgages to secure loans for construction purposes until the improvements had been completed. To provide funds for the construction of the improvements, the Clark Company would obtain a loan from some bank, assigning to it as security a mortgage made to it to secure the advances to the mortgagor. Upon the completion of the improvement, the defendant would purchase the mortgage upon the Clark Company furnishing it with the mortgage note and deed and a certificate of title. The defendant approved an application submitted by the Clark Company for the loan to Dyer. Dyer then executed the note and mortgage in question to the Clark Company. The company made a written assignment of the mortgage to the plaintiff as collateral security for a loan. This assignment was never recorded. Subsequently, the Clark Company executed and delivered to the First National Bank & Trust Company of New Haven an assignment of the same mortgage as collateral security for a loan, furnished the bank a certificate of title showing that the company held the mortgage as of record, and also indorsed and delivered to it an instrument which purported to be, but was not in fact, the note secured by the mortgage. Later, the mortgage and the false note were reassigned to the Clark Company, by a written instrument duly recorded. Meanwhile, the Clark Company had furnished to the defendant a certificate of title showing that the land records disclosed the Dyer mortgage to be owned by it, and its assignment to the First National Bank. Thereafter, the Clark Company delivered to the attorneys who were representing the defendant the false mortgage note, the original assignment to the First National Bank, its reassignment to the Clark Company, and an assignment of the mortgage by the company to the defendant; and the attorneys caused the last two instruments to be recorded. The defendant had no knowledge of the assignment of the mortgage to the plaintiff, and accepted as genuine the note delivered to its attorney, in reliance upon the title to the mortgage as disclosed by the record referred to in the certificate of title. The defendant sought in its cross-complaint a judgment that it was the owner and holder of the mortgage and debt secured thereby, and that the plaintiff indorse without recourse and deliver to it the note actually secured by the mortgage. The plaintiff filed a demurrer to the cross-complaint which the trial court sustained, and, the defendant refusing to plead over, judgment was entered upon the cross-complaint for the plaintiff.

The defendant claims that, because of the failure of the plaintiff to record the assignment of the mortgage to it, the latter cannot assert any right to the mortgage or the indebtedness secured by it as against the defendant. Section 5010 of the General Statutes provides: " No conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies." We have never expressly decided whether an assignment of a mortgage falls within the purview of this statute. Mortgages have always been regarded as conveyances of land within the meaning of the recording statute. An assignment of a mortgage passes to the assignee all the title the mortgagee had in the land. Gen.St. § 5029; Cohn v. Bridgeport Plumbing Supply Co., Inc., 96 Conn. 696, 702, 115 A. 328, 24 A.L.R. 808; State v. Parker, 112 Conn. 39, 51, 151 A. 325. The assignment is in effect a conveyance of the land included in the mortgage. In Quinebaug Bank v. French, 17 Conn. 129, we held that where a mortgage had been placed upon certain property and duly recorded, and subsequently, by various conveyances, the record title to the land had vested in the defendant, the rights of an attaching creditor were to be determined upon the basis of that title, in disregard of an unrecorded assignment of the mortgage. In Gregory v. Savage, 32 Conn. 250, notes secured by a mortgage were negotiated and the mortgage securing them was assigned; thereafter, one of the notes was further negotiated to the plaintiff; the assignee of the mortgage quit-claimed to the mortgagor; we held that the plaintiff could not foreclose the land as against a purchaser from the mortgagor who had thereby acquired the record title to the land free of the mortgage; and while there was in that case no assignment of the mortgage to the plaintiff, the reasoning of the court is obviously based upon the proposition that the plaintiff, to protect his interest, must not only have had such an assignment, but it must have been duly recorded. In Mechanics' Bank v. Johnson, 104 Conn. 696, 700, 134 A. 231, we held that payments made to a mortgagee after he had assigned the mortgage and the assignment had been recorded were not binding upon the assignee in the absence of proof of agency, estoppel, and the like.

That an assignment of a mortgage falls within the purview of the recording statute follows from the nature of such an instrument and is plainly indicated in the cases we have cited. Indeed, to hold otherwise would make a serious inroad upon the policy of this state that purchasers of interests in real estate are entitled to rely upon the land records as disclosing the true title; it would make it possible for a mortgagee to mislead purchasers of land by vesting in the mortgagor, through a release of the mortgage, an apparently clear title, when in fact the mortgage might still be subsisting by reason of an outstanding unrecorded instrument and the recording statute would give no protection to an assignee of the mortgage as against a prior unrecorded assignment. The very case before us illustrates the injustice that may result in such a situation, for all the plaintiff needed to do fully to protect its interests was to record the assignment made to it, whereas, that not having been done, the defendant paid full value for the assignment made to it after taking such precautions through a search of the record as it might reasonably rely upon to assure the transfer to it of a good title. Our conclusion that an assignment of a mortgage falls within the purview of the recording statute is confirmed by the statute concerning the garnishment of debts secured by mortgages or liens (section 5780), for it is there provided that if the provisions of the statute are followed, the creditor may file for record a judgment lien upon the mortgage or lien, and his rights thereunder will not be affected by...