Viele v. . Judson , 82 N.Y. 32 ( 1880 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.]

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The effect of the recording acts upon the rights of Viele as assignee of the mortgage given by Decker to Vaughn and by the latter discharged fraudulently, and without authority, presents the primary question in this case. The record of such an assignment is not constructive notice to the subsequent purchasers and incumbrancers of the land deriving a title in good faith from the mortgagor, but is constructive notice to all persons claiming a right under the mortgagee by assignment or otherwise. (Campbell v. Vedder, 3 Keyes, 174; Gillig v.Maas, 28 N.Y. 191; Purdy v. Huntington, 42 id. 334;Greene v. Warnick, 64 id. 220.) The prior mortgage of Decker having been recorded, the sole question remaining is as to the unwarranted discharge of the same by Vaughn, the mortgagee. It is conceded that if Viele's assignment had been unrecorded, the discharge, however invalid as between the original parties, would have been good as against subsequent purchasers for value and without notice of the fraud. (Warner v. Winslow, 1 Sandf. Ch. 430; Ely v. Scofield, 35 Barb. 353; Van Keuren v. Corkins, 66 N.Y. 77.) But in this case the assignment was in fact recorded, and was constructive notice of the rights of Viele as against any act of the mortgagee affecting the mortgage assigned. It furnished protection against any subsequent assignment of the same mortgage, or any unauthorized discharge. Being on record it was notice that Vaughn's rights were gone and that he could neither assign nor discharge the instrument. (Belden v. Meeker, 47 N.Y. 308;Vanderkemp v. Shelton, 11 Paige, 29.) It is said that the record of the assignment was only notice to those acquiring rights in the mortgage itself. (Greene v. Warnick, 64 N.Y. 220; Crane v. Turner, 67 id. 437.) That is too narrow a view of the authorities. The same reason that prevents a subsequent assignment prevents also a subsequent discharge. Equally in each case the assignment shows title out of Vaughn and, therefore, incapacity to act. It is claimed, however, that the assignment to Viele was so imperfect that the clerk could not note it on the record of the mortgage and, therefore, it was not constructive notice. The assignment contained the name of the assignor, and of the maker of the mortgage, the date of the same and a covenant of the amount due. Unless, which is not pretended, there was some other mortgage of Decker bearing the same date, there was no uncertainty or ambiguity. It was entirely possible for the clerk to find this mortgage on his records, and be sure it was the one referred to. No rule compels a statement of the place of record, or a description of the lands to make it the duty of the clerk to record. He did do so in fact. That he did not note the assignment in the margin of the record is of no consequence. He might have done so if he had pleased. We have been referred to no statute making it the duty of the clerk to thus note the record of an assignment in the margin of the mortgage. It is purely a matter of convenience. Whether done or not in no manner affects the rights of Viele. For his protection the law only required his assignment to be recorded. It did not impose the additional condition of a note on the record. The only authority for the insufficiency of the record in question brought to our notice is that of Moore v. Sloan (50 Barb. 442). We do not think that case was rightly decided.

Judson, therefore, having acquired no right under the recording acts to invoke the protection of this unauthorized discharge, stands merely as the assignee of Hubbard, who took the mortgage, which he transferred to the defendant Judson. By this assignment the latter gained no other or greater rights as against the prior incumbrance than his assignor had at the date of the assignment. The doctrine is fully established that the assignee of a mortgage takes not only subject to the equities existing between the original parties, but also subject to the latent equities which exist in favor of third persons against the mortgagor. (Bush v.Lathrop, 22 N.Y. 535; Schafer v. Reilly, 50 id. 61;Trustees of Union College v. Wheeler, 61 id. 88; Greene v.Warnick, 64 id. 220.) In the case last cited Judge EARL states the rule with accuracy, and quotes approvingly the terse phrase of Lord THURLOW in Davies v. Austen (1 Ves. 247), that "a purchaser of a chose in action must abide by the case of the person from whom he buys." The case shows, and the referee finds that not only was the satisfaction by Vaughn after his assignment to Viele, and utterly without right, but that Ludlum, who had become the grantee of the land, and Hubbard, to whom he executed the mortgage afterward assigned to the defendant, had actual knowledge of the fraud when that mortgage was made. Neither the maker nor the holder of that mortgage were in any manner freed from the prior lien of the mortgage held by Viele, but the one executed and the other held the later mortgage, subject to such prior lien. When, therefore, Hubbard assigned his mortgage made by Ludlum to Judson, the latter took subject to the same lien. It is said, however, that the mortgage made by Ludlum to Hubbard was made without consideration, for the sole accommodation of the former, and never had inception, or possessed vitality until its purchase by the defendant. That is true, and yet does not change the position of Judson as an assignee. The fact does not transform the character of his holding from that of an assignee to that of an original mortgagee. It merely changes and postpones the date of the mortgage as an effective security. (Schafer v. Reilly,supra.) It follows, therefore, that the mortgage of plaintiff has priority over that held by Judson, unless there is force in the argument very ably pressed upon our consideration, that Viele is estopped from enforcing his mortgage as against Judson by reason of his knowledge of the state of the record and his omission to correct it. That is the ground taken by the General Term, and very forcibly asserted in the opinion accompanying their judgment. The doctrine is broadly stated that although the discharge was a fraud upon Viele; was perpetrated by other persons, without his previous knowledge or participation; the record cleared not by him or with his consent; he having done or omitted no act up to the moment of the discharge; was nevertheless estopped, because, having learned the state of the record, he did not, within a reasonable time, either enforce his mortgage by foreclosure, or bring an action to reinstate it upon the record. That is, a man may be estopped for not beginning a lawsuit. We cannot assent to this doctrine, unless the authorities are decisive in that direction. The case ofCostello v. Mead (55 How. 356) appears to sustain the position. The discharge of the mortgage was in fact a forgery by which the record had been cleared. A subsequent incumbrance had been recorded, and because the prior mortgagee neglected to reinstate the record, he was held to be estopped from enforcing his own security. The only authority upon which the decision was rested appears to have been Cornish v. Abington (4 Hurlst Norm. 550). In that case the rule is stated that if any person, by a course of conduct, or by actual expressions, so conducts himself that another may reasonably infer the existence of an agreement, or license, whether the party intends he shall do so or not, the person so conducting will not be permitted to gainsay the inference. The statement is well enough in its application to the facts of that case. Gover, a superintendent of defendant, had got paper of Cornish which the latter charged to defendant, although, as matter of fact, the purchase was really for Gover. Cornish sent to defendant an invoice of sales on which defendant appeared as purchaser. He received it without any objection communicated to Cornish, and, so far as the latter was concerned, kept silence. The delivery of paper continued, and finally, on a refusal of payment, the action was brought, and it was held that defendant was estopped from denying his liability. The case was rightly decided, but it rests upon the distinct fact that the situation originated a duty which the defendant owed to the plaintiff and of which he had actual knowledge. All the other cases cited on the argument have the same distinctive feature. (Horn v.Cole, 51 N.H. 287; Stevens v. Dennett, id. 324; Gregg v.Von Phul, 1 Wall. 280; Hill v. Epley, 31 Penn. 331;Chapman v. Chapman, 59 id. 214; Pickard v. Sears, 6 Ad. Ell. 469; Gregg v. Wells, 10 id. 90; Niven v. Belknap, 2 Johns. 573.) These cases, and those of similar character, have been recently reviewed in this court and do not need a detailed examination. In all of them the silence operated as a fraud and actually itself misled. In all there was both the specific opportunity and apparent duty to speak. And, in all, the party maintaining silence knew that some one was relying upon that silence, and either acting or about to act as he would not have done had the truth been told. These elements are essential to create a duty to speak. We do not find them in the case at bar. The records which showed the discharge showed also its invalidity. The facts were all there, and needed only reasonable care to insure their discovery. A proper search carried through the indices of the records would have disclosed the assignment to Viele and the invalidity of Vaughn's discharge. The danger lay in an inaccurate and incomplete search. Against that possibility the plaintiff was not bound to provide. Nobody relied on his silence or was misled by it. Judson was misled by the state of a part of the record, not by Viele's silence. He did not rely upon that, because he did not even know that Viele knew of the discharge. Indeed, for aught that appears, he did not know that there was such a man as Viele, much less that he was silent when he ought to have spoken, and so was justifying an inference. How can it be fairly said that Viele's silence operated as a fraud? It does not appear that he knew or suspected that a second mortgage was given, or even that there was such a man as Judson. The latter drew no inference from Viele's conduct, for he neither knew him nor his conduct. The inference he drew was wholly from the acts of other persons. Are we not in danger of going so far as to say that if a man patiently and silently bears a wrong, he shall be estopped from saying that it is a wrong? Suppose one's name is forged to a note, and he learns the fact that such a paper is afloat. Of course he understands that somebody may be deceived and injured by it. Must he bring an action against the forger, or prosecute him criminally within a reasonable time, at the peril of being estopped from proving the note a forgery when its collection is sought to be enforced? Enough has been said to indicate the ground of our opinion that no equitable estoppel existed in this case. We think the mortgage of plaintiff is a prior lien to that held by the defendant and that the judgments below were erroneous.

Judgment of the Special Term and of the General Term reversed, and new trial ordered with costs to abide the event.

All concur, except RAPALLO, J., not voting, and MILLER, J., absent at argument.

Judgment reversed.