White v. Moore

1 Paige Ch. 552

Opinion

The Chancellor :—The right of the bank to the surplus produced on the sale of the mortgaged premises, depends upon the question whether the absolute deed given to Spencer, but which was in fact nothing but a mortgage, ought to have been registered or recorded as a mortgage. There is no pretence that Mrs. Healy knew any thing of it at the time of her purchase, although it was recorded as a deed some days previous.

[1]

The second section of the act concerning mortgages (1 Rev. Laws, 373) provides, that no mortgage, nor any deed, conveyance or writing in the nature of a mortgage, shall defeat or prejudice the title or interest of any bona fide purchaser of any lands, tenements or hereditaments, unless the same shall have been duly registered, in the manner prescribed in that act. And the next section provides, that if there is a separate written defeasance, that shall also be recorded, in order to protect the instrument as a mortgage. The ^object of this statute undoubtedly was to require every deed or instrument which was in fact only a mortgage, to be recorded. If the construction of this statute was now for the first time to be settled, there might be a possible doubt whether the second section was so worded as to reach instruments which did not on their face purport to be mortgages, or conveyances in the nature of mortgages. But after the decisions of this court, sanctioned as they have been by the court of dernier resort, the construction of the statute is no longer to be questioned. In Day v. Dunham, (2 John. Ch. R. 188,) Chancellor Kent held, that a deed absolute on its face, but intended only as a security by way of mortgage, must be recorded as a mortgage, to protect the property against a hona, fide purchaser; and that a constructive notice, arising from its being recorded as a deed was not sufficient. It is true in that case there was a written defeasance; but it was not executed until six months after the recording of the absolute deed, and long after the conveyance to the adverse party. It therefore could not have altered his rights if the defeasance had continued in paroi. H the deed and defeasance had been recorded together as a mortgage the moment the defeasance was executed, it would not have protected the property against the intermediate conveyance. The decree in that cause was afterwards reversed in the Court of Errors, on the ground that the intermediate purchaser had actual notice, but the decision upon the point now under consideration was deemed correct. (15 John. R. 555.) The same question came before this court in James v. Johnson & Morey, (6 John. Ch. R. 417,) where there was no written defeasance, and was decided in the same way. When that case after-wards came before the Court of Errors, (2 Cowen’s R. 247,) the present chief justice examined that question and concurred in the construction of the statute given by Chancellor Kent. And the correctness of that construction was not questioned by any member of the court.

There can be no hardship or injustice in such a construetian; but on the contrary, it will more effectually carry into effect the intention of the legislature, and prevent fraudulent conveyances, and secret trusts. If a conveyance is intended *only as a mortgage, there can be no good reason why the terms on which it is to be defeasible should not appear on its face. If, through inadvertence, it is taken as an absolute deed, the holder may comply with the terms of the statute, by making a written defeasance, specifying the conditions on which it was intended to be given, and recording both together in the book of mortgages. If he does this before the rights of any third party have intervened, he will be protected. And if he neglects it, he will only be in the same situation of every other mortgagee who neglects to have his security recorded.

Having arrived at the conclusion that by the conveyance to Mrs. Healy, she took the property discharged of the mortgage to Spencer, it cannot be necessary to examine the other question raised in this cause. If her conveyance was good against the original mortgagee, it was also good against the bona fide assignees of the unregistered mortgage, who took it merely as security for an antecedent debt.

The whole of the surplus moneys must be paid over to Healy and his wife.

2 R. S. (4th ed.) 162, sec. 3.