Cambridge Valley Bank v. . Delano , 48 N.Y. 326 ( 1872 )

The referee found that the appellants had no actual notice that the mortgage held by the Cambridge Valley Bank was in any way a lien upon the lands in Niagara county; but he held, as a matter of law, that the appellants had constructive notice thereof, by reason of the proceedings in partition, and the proceedings to sell the real estate of Sarah A. Mather, an infant, and hence, that they were not entitled to the protection of purchasers in good faith, for value.

The learned judge who wrote the opinion of the General Term held that the proceedings referred to did not give the constructive notice, but that the deed from Lucina Gale and Susan A. Mather did, and the judgment was thus affirmed for a reason different from that assigned by the referee.

Constructive notice, as defined by Judge Story, is in its nature no more than evidence of notice, the presumption of which is so violent that the court will not even allow of its being controverted. (Story's Eq. Jur., § 399.) In 2 Wn. on Real Prop., 596, the author says: "In regard to the extent to which a purchaser is bound by constructive notice, and what a purchaser by a subsequent deed is presumed to know, the rule is, that the law imputes to the purchaser a knowledge of all the facts relating to the same land, appearing at the time of his purchase upon the muniments of title, which it was necessary for him to inspect, in order for him to ascertain the sufficiency of such title; and if an ordinarily diligent search would bring to an inquirer a knowledge of a prior incumbrance or alteration, he is presumed to know of them."

It will not do to carry this doctrine of constructive notice so far as substantially to annul the recording acts, and I think the following definition of constructive notice is sufficiently guarded to furnish a safe rule in most, if not all cases. Where a purchaser has knowledge of any fact sufficient to put a prudent man upon an inquiry, which, if prosecuted with ordinary diligence, would lead to actual notice of some right or title in conflict with that he is about to purchase, it is his duty to make the inquiry, and if he does not make it, he is guilty of bad faith, or negligence, to such an extent that the law will presume that he made it, and will charge him with the actual notice he would have received if he had made it. (Williamson v. Brown,15 N.Y., 354; Baker v. Bliss, 39 N.Y., 70.)

There is nothing in the proceedings in partition to lead the most cautious person to suspect that the mortgage in question was in any way charged upon the lands in Niagara county. It is not even mentioned. The only mortgages mentioned are the loan office mortgage and the mortgage for $1,690, given to the Lockport Bank and Trust Company, both recorded in the clerk's office of Niagara county, and both at that time unsatisfied upon the record. These two mortgages, to make equality of partition, were charged in different proportions upon the lands allotted to Susan A. and Sarah A. Mather, and there is nothing in the proceedings to excite a suspicion even that there was any mistake as to the mortgages.

In the proceeding to sell the estate of the infant, Sarah A. Mather, there is no mention whatever of the mortgage recorded in Orleans county. The petition to the Supreme Court simply alleges that the premises are subject to and charged with the payment of about $2,000, upon two mortgages both due, and that the holder of one of them requires payment. An order appointing a special guardian and a reference was made, and the referee made his report, in which he stated that the premises were subject to two mortgages — one of them to the Lockport Bank and Trust Company, upon which there was due about $1,600, and that the purchaser should be required to pay off said mortgages and give a mortgage for the balance of the purchase-money. The special guardian reported that he had entered into agreement for the sale of the premises to Delano, for $8,000, to be paid and secured as follows: $2,167.52, with interest from May 11, 1855, down upon the two mortgages, and the balance to be secured by his bond and mortgage, with interest from May 11, 1855.

This report was confirmed and a conveyance ordered in pursuance of its terms. Afterward a deed was given by the special guardian to Delano, in which payment of the consideration was acknowledged in the usual form; but the deed contained no reference to any mortgage. The mortgage to secure the balance of $5,832.48, with interest from May 11, 1855, was given and recorded. By examining these proceedings, these are all the facts any person would learn in reference to any mortgage. He would have reason to suppose that Delano took possession of the estate on the 11th of May, 1855, and that he purchased it, as of that date, as he was to pay the amount due upon the two mortgages at that date, with interest, and he was to pay the balance of the purchase-money, with interest from that date. He would find at that date but two mortgages, the loan office mortgage and the $1,690 mortgage, both satisfied of record before the deed was given, the latter June 8, and the former November 11, 1855, and hence neither of them mentioned in the deed. Having found that the only two mortgages upon the record were satisfied, he would have no occasion or reason to look further. The agreement reported by the special guardian and the order of the court required that the two mortgages referred to in the proceedings should be paid down, and any one examining the records and finding all the mortgages appearing there satisfied, would have the right to suppose, and rest with entire confidence upon the belief, that the agreement and the order of the court had been complied with, and that the mortgages had been paid and satisfied. There was nothing to awaken a suspicion in the mind of a prudent, or even of a very vigilant person, that there remained any mortgage that was in any way a charge upon these premises, or that there was any mistake as to the mortgages mentioned in the proceedings.

It only remains to be considered whether notice of the lien of the mortgage in question is to be imputed to the appellants from anything contained in the deed from Lucina Gale and Susan A. Mather to Delano. This deed was dated June 11, 1855, and was subject to the payment by Delano of the loan office mortgage, and the mortgage for $1,690, recorded in book of mortgages No. 16, on page 481, in the clerk's office of Niagara county. The deed makes no mention of or allusion to the mortgage for $2,160; but the learned judge who wrote the opinion at General Term held that, inasmuch as the deed bound Delano to pay a mortgage to the Lockport Bank and Trust Company, and the mortgage described had been satisfied of record before the date of the deed, there was sufficient to put a purchaser who examined the records and learned these facts upon inquiry; and that by inquiring of the Bank and Trust Company, or of Delano or his grantors, he would have learned of the existence of the mortgage in question, and the facts constituting it a lien upon the lands in Niagara county. I cannot concur in these views.

In all the records in Niagara county, there is no mention or hint even of the existence of the mortgage in question. In the partition proceedings commenced in 1852, the only mortgages mentioned and provided for were the two mortgages mentioned in the deed to Delano. The same is true of the proceedings for the sale of the infant's real estate. These mortgages are mentioned not once only, but several times, in proceedings conducted by parties supposed to be familiar with the title to the land, and under circumstances which forbid any presumption of mistake. A purchaser from Delano looking at the records would find these facts, and also that these same mortgages are assumed to be paid by Delano in his deed as part of the purchase-money. But the deed does not state how much is thus assumed, nor how much was at the date of the deed due upon the mortgage. He would also find that in the mortgage given by Delano for the balance of the purchase-price, he agreed to pay interest from May 11th, thus showing that probably he had the benefit of the purchase or had the possession from that date. He would also find that on the 8th day of June, three days before the deed was given, the mortgage for $1,690 was satisfied of record, and he would infer either that Delano satisfied the mortgage, after making the contract to purchase, or that the vendors had satisfied it and that it was inserted in the deed by mistake, it not appearing how much, if anything, was in fact deducted from the purchase-price on account of that mortgage. But he would not infer, even if he were a very cautious and vigilant person, that there was a mistake as to the mortgage, because it was the only mortgage of the kind that ever appeared upon the records; it was the precise mortgage mentioned and described in all the proceedings from the commencement, and there certainly was nothing whatever to suggest to a reasonably prudent and careful man that there was any other mortgage not recorded which was a charge upon the lands, and which the parties referred to. It would be too much, under such circumstances, to impute bad faith or negligence to a purchaser for not making an inquiry which was probably never suggested to his mind. If the doctrine of constructive notice is to be carried so far, purchasers will frequently be placed in peril who are entitled to the protection of the recording acts.

I therefore hold that there was nothing in this deed from which the law could impute to the appellants notice of the mortgage in question.

All concur.

Judgment in accordance with opinion of LEONARD, C.