Frost v. Beekman

The Chancellor.

This case has led to the discussion of several important questions.

1. The first in order is, whether the deed from Beekman to Corl was duly delivered, and at what time, so as to pass the estate.

The deed must he taken to have been duly delivered from the time it was handed to Corl by Westerlo, with whom it had been deposited as an escrow. The exact time of this delivery does not appear, but it may be safely fixed as early as the 1st of October, 1805, for it must have been after, and shortly after, the registry of the mortgage on the 9th of September preceding. The letter from Beekman to Westerlo, containing the conditions, upon the fulfilment of which the deed was to- be delivered, did not expressly, or by any necessary intendment, require that the mortgage should have been previously executed by CorPs wife. It mentioned only, that Corl was to have *6 the mortgage (after executing it and the bond) put on record.” The agent of the defendant accepted of the. mortgage as sufficient, without such acknowledgment, and the defendant aficrwards received the mortgage from Westerlo without objection, though the want of acknowledgment by CorPs wife must have appeared from the mortgage itself. The wife died in the summer of 1806, and the defendant cannot be permitted, under the circumstances of the case, to question the validity of the delivery on the ground that the wife was not a party to the mortgage. Nor can he be heard, to say, that the mortgage was not “ put on record,” so as to defeat the delivery of the deed. The clerk’s certificate of the registry was all that the letter to Westerlo could have intended. It was not expected that the agent would go into the county of Onon daga to inspect the registry himself. The certificate upon the mortgage was accepted by Westerlo,xand from him by *297 by the defendant, as sufficient evidence of the registry. The defendant has thus affirmed the delivery of the deed, by accepting the mortgage, with the evidence accompanying it of a performance of the conditions on which the delivery of the deed was made to depend. He ought to be concluded from denying the delivery, especially as against third persons who have acquired interests under it; and this conclusion is the more just and necessary, when we consider that the defendant has never ceased, even since the discovery of the mistake in the registry, to treat the mortgage as valid.

Every deed takes effect from the delivery; and the reasonable inference from the transaction, is to consider the deed as operating only from the time of the performance of the condition, and the actual delivery to the grantee. This is the general rule, as stated by Perkins, (sect. 138.,) and it is only to be controverted when justice requires a resort to fiction. In Butler and Baker's case, (3 Co. 35. b. 36. a.,) it wasresolved, andthe lawhad, indeed, been sounderstood long before, (Bro. tit. non est factum, pl. 5.,) that a deed delivered as an escrow, and afterwards to the grantee, shall relate back to the first delivery, when that relation is necessary to give effect to thedeéd, as if the grantor, being a feme sole, should marry, or if the grantor, whether a feme sole or not, should die between the first and second delivery; but, that in other cases, as where it would avoid a lease, it shall not have that relation, but shall operate according to the truth of the case from the second delivery. The fiction of carrying the deed back by relation, is resorted to from necessity, to prevent injury7, and to uphold the deed; or, as it is expressed in the case from Coke, “ in such case for necessity, and ut res magis val tat quampereat, to this intent, by fiction of law, it shall be a deed ab initio, and yet in truth, it was not his deed until the second delivery.*'’ In that case it was likewise resolved that, as to collateral acts, there should b** ao such relation at all.

The registry ”sf anot¡ce6ato subsequent purchasers.

In the present case, there is no necessity of resorting to this fiction of relation, as between the parties to the bill. It would operate unjustly upon the defendant, for it would be defeating his mortgage altogether, so far as respected the first deed from Corl to Frost, which was recorded in July, 1805. If the question was between Corl and the persons to whom he sold, the deed ought to relate back, so as to give effect to his intermediate grants, and prevent him from defeating, them. This is the amount of the doctrine in Jackson v. Bull, ( 1 Johns. Cas. 81 .) But here is a struggle between innocent persons, to avoid a loss, and we ought not to resort to fiction to help one as against the other. The transaction must be left to rest upon its simple and naked truth.

I conclude, then, that the deed to Corl took effect from its delivery to him, about the 1st of October, 1805.

/ Another and a more interesting question, is respecting the ' extent and effect of the registry of the defendant’s mortgage, as notice to purchasers. It was a mortgage for 3,000 dollars, and, by mistake, the registry was only for 300 dollars. This mistake is the whole cause of the controversy.

The mortgage act of the sess. 24. ch. 156,, declared, among other things, that the registry of a mortgage should contain, not, indeed, the mortgage at large, but the essential ' : ° parts of the mortgage, and among other specified parts, “ the mortgage money, and the time, or times, when payable.” To this register all persons whomsoever, at proper seasons, are at liberty to have recourse; and the act declared that mortgages were to have preference, as to each other, according to the times of registry, and that “ no mortgage should defeat or prejudice the title of any bona fide purchaser, unless the same should have been duly registered, us aforesaid.” This registry is notice of the mortgage to all subsequent purchasers and mortgagees; and so the act was construed, and the law declared, by the court of errors. in the case of Johnson v. Slagg, (2 Johns. Rep. 510.) *299 The English authorities on this point do not, therefore, govern the case. The language of those authorities, undoubtedly,is, that the registry is not notice, though that doc■trine is much questioned, and the point seems still to floating and unsettled. (Bedford v. Backhouse, 3 Eq.Cas. Abr. 615. pl. 12. Wrightson v. Hudson, lb. 609. pl. 7. Morecock v. Dickins, Amb. 678. Latouche v. Dunsany, 1 Schoale & Lefroy, 157. Sugden, (3d. Lond. ed.) 524—7. Com. Dig. tit. 32. Deed, ch. 21. s. 11.) The only question with us is, when, and to what extent, is the registry notice ? Is it notice of a mortgage unduly registered ? or is it notice beyond the contents of the registry ?

The registry-notice'onfy íhe^uro sperifiyi in the reslSt’5'‘

The'true construction of the act appears to be, that the registry is notice of the contents of it, and no more, and that the purchaser is not to be charged with notice of the contents of the mortgage, any further than they may be contained in the registry. The purchaser is not bound to attend to the correctness of the registry. It is the business of the mortgagee, and if a mistake occurs to his prejudice, the consequences of it lie between him and the clerk, and not between him and-the bona fide purchaser. The act, in providing that all persons might have recourse to the registry, intended that as the correct and sufficient source of information; and it would be a doctrine productive of immense mischief to oblige the purchaser to look, at his peril, to the contents of every mortgage, and to be bound by them, when different from the contents as declared in the registry. The registry might prove only a snare to the purchaser, and no person could be safe in his purchase, without hunting out and inspect- • ing the original mortgage, a task of great toil and difficulty. I am satisfied that this was not the intention, as it certainly is not the sound policy, of the statute; nor is it repugnant to the doctrine contained in the books, that notice to a purchaser, of the existence of a lease, is notice of its contents. (Taylor v. Stibbert, 2 Ves. jun. 437. Hiern v. Mill, 13 Ves. jun. 118. 120. Hall v. Smith, 14 Ves. jun. 426.) In that case, the *300 party is put upon inquiry, and he must make it, or abide the consequences. The decision, in Jackson v. Neely, (10 Johns. Rep. 374.,) was made upon the same principle ; and was held that the recital in a deed of a letter of attorney, by which it was made, was notice to the purchaser of the existence of such a power. But here the statute did not toean to put the party upon further inquiry. The registry was intended to contain, within itself, all the knowledge of the mortgage requisite for the purchaser’s safety.

. An unauthora mortgage, or without'^any previous proof or acknowiedgment, seems, be no-sequent6 chaser. Equity gives ngainst'a purvaiuabief°consideration, without ttO"siee,

The question does not necessarily arise, in this case, how far the unauthorized registry of a mortgage, as one made, for iustance, without any previous legal proof, or acknowledgmQnt would charge a purchaser with notice of the mortgage, ... ° ° The better opinion, in the books, seems to be, that it would not be notice, and that equity will not interfere in favour of encumbrancer, when he has not seen that his mortgage was duly .registered. (Sugden’s Law of Vend. 527. 1 Schoale & Lefroy, 157. Hiester v. Fortner, 2 Binney, 40.) But here every thing was done that could have been previously required of the mortgagee. The mortgage was duly presented for registry, and he was not bound to inspect and correct the record. This was the exclusive business and duty of the clerk, and there is no reason why the registry should not operate as notice, to the amount of the sum mentioned therein; and, indeed, so far the obligation of the registry is admitted by the bill.

I conclude, therefore, that the registry was notice to purchasers, to the amount, and only to the amount, of the sum specified in the registry.

We are next led to consider how far relief can be granted to the defendant consistently with these principles.

Whatever claims the defendant' may have to favour, arising ^rom ^e misfortune attending his case, yet it is an establishec^ ru^e’ ™ equity»to give no assistance against a purchaser for a valuable consideration, without notice. (Wallwyn v. Le e, 9 Ves. 24.) He has equal claims upon the equity of *301 the court. But, whenever actual notice of the true sum in the mortgage can be brought home to the purchaser, he is from that time, so far as the former purchase is left incomplete, either as to the deed on the one hand, or as to payments on the other, bound by the prior equitable lien, and all subsequent payments, by him, are made in his own wrong, so far as the rights of the mortgagee are concerned. As soon as notice is received, it arrests all further proceedings towards the completion of the purchase and payment, and, if persisted in, they are held to be done in fraud of the equitable encumbrance. (Wigg v. Wigg, 1 Atk. 384. Story v. Lord Windsor, 2 Atk. 630.) Thus, in Tourville v. Naish, (3 P. Wms. 306.,) it was held, that where a man purchases an estate, and pays part, and gives a bond for the residue, notice of unequitable encumbrance, before payment, though after the giving of the bond, was sufficient to stop payment, and to entitle the obligor to relief, in equity, against the bond. Again, in Hardingham v. Nicholls, (3 Atk. 304.,) it was ruled to the same effect, that, if the purchaser for a valuable consideration had not paid the money when notice of the lien was received, though it was secured tobe paid, the plea of such a purchase was not good against the plaintiff’s title. There can be no doubt as to the rule of equity in this case, and the only difficulty is, to determine from what time the plaintiffs are to be charged with notice of the mistake in the registry of the mortgage.

e^mbrance11 stops j*n^furings towards of”™hePltpurof Pthe money, Frost and M. Goddard are to be treated as bona fide purchasers, without notice. It is so averred in the bill, and there is no proof to contradict it. The last deeds from Corl to them, though bearing date in September, 1805, were acknowledged in September, 1806, andaré proved by the witnesses on the part of the plaintiffs, (Healy and Taylor,) to have been executed in September, 1806. At that time, as Frost avers, they had no notice, in fact, of the registry, though they were chargeable with notice, in law; and when the notice, in fact, not only of the registry, but of the *302 mistake in the registry, came to their knowledge, is left to he inferred from circumstances. They have not thought ProPer disclose the precise time, and the obscurity in this fact is left by the plaintiffs, authorizes the presumption that they may have known it sooner than they are willing to declare. The bill does not state at what time the discovery was made of the registry, but only that, “ on such discovery,” Frost applied to the defendant, to pay him the 300 dollars, and was then first informed of the mistake. One of the witnesses ( Whitney) would lead us to conclude that the first actual knowledge which the parties had of the registry was in September, 1807; and it was in September, and November, 1807, as appears by the acknowledgments upon the deeds, that Frost and Marlin Goddard sold to the other plaintiffs. I think that actual notice of the true mortgage ought to be fixed on Frost and Martin Goddard, as early, at least, as September, 1807. The purchasers from them, who are the other plaintiffs in the bill, make no averment of being bona fide purchasers, without notice of the true mortgage. They are perfectly silent on the fact of notice, and the bill is rather equivocal on this point, even as to Frost. He only says, that he and Martin Goddard alienated “ without any" knowledge or suspicion of any encumbrance, except the mortgage registered as aforesaid.” In all cases in which a party sets up his title to relief in equity, as a bona fide purchaser, he must deny notice, though it be not charged. (3 P. Wms. 244. n. Bodman v. Van Den Bendy, 1 Vern. 179.) It is a general rule in pleading, that whatever is essential to the right of the party, and is necessarily within bis knowledge, must be positively and precisely alleged ; and the plaintiffs coming in the. character of bona fide purchasers, were bound to state, affirmatively, the equity of their case; if they will not aver the fact, that they were purchasers without notice, • we are not bound to presume it. . The fact rests in their own knowledge. In Gerard v. Saunders, (2 Ves. jun. 454.,) *303 the defendant pleaded a purchase for a valuable consideration, without notice 5 and Lord Loughborough held, that he was bound to deny, fully, and in the most precise terms, every circumstance from whence notice could be inferred.

One of the deeds td Frost, for 200 acres, was dated in 1803, and recorded in 1805, prior to the mortgage; and whatever payments were made upon that purchase before Frost was chargeable with notice of the true mortgage, though made prior to the time of the delivery of the defendant’s deed to Corl, ought equally, with subsequent payments, to be protected against any further sum than that contained in the registry of the mortgage. Frost cannot be in a worse situation by paying money before CorPs title was perfected, than if he had paid it immediately after. As a bona fide purchaser without notice, and so long as that character is preserved, he is not bound beyond the sum in the registered mortgage; and though no prior transaction between Corl and him could gain a preference over the mortgage as registered, because Corl had no title until the delivery of the deed to him, in consequence of that registry, yet, when the delivery took place, the prior deed to Frost, and the prior record of it, operated, instantly,' so as to protect FrosPs title from that time, and to render him a bona fide purchaser, except as to the registered mortgage. It follows, of course, that all prior payments made by him, became equally effectual, subject to the same limitation. A contrary rule would work odious injustice.

The subject of the payments requires this further explanation : and payments to the endorsee or assignee of Corl, before notice, are the same as payments to him; and if any part of the debt created by the purchasers, or either of them, had been duly transferred, so as to vest the interest in the assignee | and if either Frost or Goddard, before notice, had changed the debt in the hands of the assignee, by giving new notes or obligations to the bona fide holder, he ought to he allowed for this as payment, because he has extin *304 guished so much of the old debt, and become absolutely bound to the new creditor.

I shall, accordingly, direct a reference to a master, to state an account upon these principles, and to report what may have remained due from Frost and Goddard, on the 1st of October, 1807; and whatever that balance maybe, it is justly subject to the defendant’s mortgage, and must be appropriated in part satisfaction of it before the land can be relieved.

“ Ordered, adjudged, and decreed, that it be referred to one of the masters of this court, residing in the county of Onondaga, to ascertain and report what sum, or sums of moneypwere actually paid to Henry Corl, or to his endorsee, or assignee, duly authorized.to receive the same, by Josiak Frost, and Martin Goddard, respectively, before the first day of October, 1807, on any purchases mentioned in the pleadings in this cause, and made by them, or either of them, from him, prior to that date, of lands in lot No. 33., in the township of Marcellus; and that the master distinguish between such payments as were made for principal, and such payments as were made for interest. That he also ascertain, and report specially, whether any, and what part of the debts arising on such purchases, were transferred by Henry Corl, for a valuable consideration, and were discharged in the hands of the bona fide holder, prior to that period, by Josiah Frost and Martin Goddard, or either of them, by new notes or obligations : or, if not discharged, of which they had received notice from the assignee before that period. And the master is further directed to state an account of the moneys due on the respective purchases, for principal and interest, after deducting the payments which may have been made, and the parts of the debts discharged or assigned, with notice as aforesaid. And the master is further ordered and directed, to ascertain and report the amount of the principal and interest due on the mortgage *305 given by Henry Corl to the defendant, according to the true sum mentioned in the mortgage, and, also, according to the sum mentioned in the registry thereof; and in taking the accounts aforesaid, the depositions and exhibits in the cause may be used by the parties ; and they are to be at liberty to produce further proof, which the master is also to report ; and all further questions are inthemean timereserved.’'