Ackerman v. Hunsicker

It does hot appear that Ackerman was under any obligation to indorse for Levy or his firm; it was optional with him to do so; and the question is whether, as to indorsements voluntarily made by him after the judgments were docketed, the lien of his mortgage is not to be postponed to that of the judgments. Had he taken a new mortgage to secure him for those subsequent indorsements at the time when he made them, no one will question but that such new mortgage would have been subject to the hen of the judgments. The docket would have been constructive notice to him. But it is said in behalf of the respondent, that as his mortgage was recorded prior to the docketing of the judgments, they were not constructive notice to him. For the appellant it is insisted that as to indorsements made subsequent to the docketing of the judgments, the plaintiff is a subsequent incumbrancer, and is chargeable with notice.

An examination of the authorities shows that the question cannot be regarded as settled in this State. There are numerous cases holding that a mortgage, judgment or other security, may be taken and held for future advances or responsibilities. Chancellor Kent so held Brinkerhoff v. Marvin (5 Johns. Ch., 320), and in the same case he intimated that advances made or responsibilities incurréd after a subsequent judgment, will not be covered by such security (p. 327). He reiterated the same opinion in James v. Johnson (6 Johns. Ch., 417, 429). In lansing v. Woodworth (1 Sandf. *56Ch., 43), and Barry v. Merchants' Exch. Co. (Id., 280), Assistant Vice Chancellor Sandeord expressed himself to the same effect, citing Brinkerhoff v. Marvin; and in Craig v. Tappin, (2 Sandf. Ch., 85), and Goodhue v. Berrien (Id., 630), he decided the point in accordance with the opinion above referred to. In the later case of Truscott v. King (6 Barb., 346), the Supreme Court at General Term in the third district, held that the receiving of a subsequent mortgage was not constructive notice to a creditor who had taken a prior judgment as security for future advances, and that such judgment creditor was to be protected in his advances made after the recording of the mortgage and before he had actual notice of such mortgage. It did not appear-, in that case, that the judgment creditor bound himself to make future advances. But the case is of doubtful authority upon the question now under consideration. It was reversed by the Court of Appeals (6 N. Y., 147), upon another point, indeed, but upon one equally fatal to the case as an authority upon this question. The reversal was upon the ground that the judgment had been paid and satisfied. That being the case, the question of the priority of lien was not involved, and all that was said about it was unnecessary to a decision of the ease, and was mere dAot/wm. Besides, of the two cases cited by Parker, J., who delivered the opinion in the Supreme Court, to wit, Gordon v. Graham (7 Viner’s Abr., 52; 2 Eq. Cas. Abridged, 598), and Shirras v. Caig (7 Cranch, 34), the first — an English case — has no application to our system of registry; and furthermore, it has been overruled by the House of Lords (Hopkinson v. Rolt, 7 Jur., N. S., 1,209; 5 Law Times, N. S., 90); and as to the second case, Bhirras v. Gaig, the report of it does not show that the subsequent conveyance had been recorded, and that being the case, actual notice was requisite to affect the holder of the prior security, even as to subsequent voluntary advances.

The case of Thomas v. Kelsey (30 Barb., 268), cited by the respondent’s counsel, is not in point. All that that case holds, having even a remote bearing upon the one in hand, is that the lien of a mortgage given to secure further advances, is superior to the lien of a subsequent judgment, as to advances made prior to the docketing of the judgment, although the mortgage was not re*57corded, provided the omission to record it was not the result of a fraudulent design; and in Robinson v. Williams (22 N. Y., 380) the advances were made prior to the docketing of the defendant’s judgment.

The case of Hall v. Crouse (13 Hun, 557), cited by the respondents’ counsel, is also not in point, it appearing that the holder of the prior mortgage in that case had aetmal notice of the subsequent judgment, before he rendered the services, as to which he claimed his mortgage was a prior lien.

These are all the cases in this State cited by counsel on either side, and I know of no other bearing upon the question.

In several of the other States, the point has been adjudged in accordance with the views of the appellants’ counsel. It has been so held in Pennsylvania, Ohio, Illinois and Michigan. Some of the leading cases are Ter Hoven v. Kerns (2 Penn. St., 96); Bank of Montgomery County's Appeal (36 Penn. [12 Casey], 170 ; Spader v. Lawler (17 Ohio, 371); Collins v. Carlisle (13 Ill., 254), and Ladue v. Detroit & Milwaukee R. R. Co. (13 Mich., 380). In Ter Hoven v. Kerns (supra) the question was fully discussed. It was there held that a judgment given to secure further advances, which were optional, was not a lien as- against a subsequent judgment rendered before such advances were made. The judgment was treated by the court as standing upon the same footing as mortgages. The reasoning adopted was, in substance, that a mortgage to secure future advances, which are optional, does not take effect between the parties as a mortgage or incumbrance until some advance has been made; that if not made until after another mortgage or incumbrance has been recorded, it is, in fact, as to such after advances, a subsequent and not a prior incumbrance ; and that the record of the subsequently recorded mortgage is notice, as to such after advances, as much as if the mortgage first recorded had not been executed until after such advances were made. These views are affirmed by the other cases above cited, and are very forcibly supported by the exhaustive opinion of Christiancy, J., in the case of Lad/ue.

In Yermont, a different rule has been laid down. The case of Daniels v. McColvin (16 Vt., 300) held that express notice of a sub*58sequent incumbrance is required in order to stop further advances upon a mortgage, to secure future advances, and in addition to this, a formal protest against the first mortgagee continuing to increase the indebtedness under his mortgage. That rule, it is believed, prevails nowhere else. Judge Redeield, afterwards Chief Justice, dissented.

The rule laid down in Ter Hoven v. Kerns, and the other concurring cases above cited, seems to us reasonable. It proceeds upon the ground that as, by our law, a mortgage passes no estate in ^ the land, and is simply a lien, it follows that a mortgage given to cover future advances, which the mortgagee has the option to make or not, as he chooses, is a mero shadow or nullity until some advance is made upon it, and then it is enforceable only to the extent of the advance, and that, as to each subsequent advance, it is to be regarded as a fresh mortgage, subject to the lien of incumbrances duly recorded before the advance is made. True, this rale makes it necessary for the holder of such mortgage to search the record for intermediate incumbrances on making éach fresh advance, but that is an inconvenience to which every person is subject, who takes a mortgage and relies upon it as a security. The rule does not apply, of course, to the case of a mortgagee who is bound to make the future advances. Thus limited, it does not appear to be in conflict with the weight of authority in this State, and I think it should be applied to this case. I am of the opinion, therefore, that' the record of the judgments set up by the defendant was constructive notice to the plaintiff, and that they are severally to be preferred to the lien of his mortgage, as to all indorsements made by him after the respective judgments were docketed.

The judgment should be reversed, and a new trial ordered before another referee, costs to abide event.

Ordered accordingly.