Ketcham v. Wood

The referee did not find that the plaintiff’s mortgage was given to secure future advances, nor does the mortgage on its face purport to have been given for that purpose; nor is there any evidence of an agreement on the part of the plaintiff to make further advances after the mortgage was delivered. When the mortgage to the plaintiff was delivered, he advanced to the mortgagor' $75 only. Before any further advances were made by him,, Wood’s mortgage had been duly delivered and recorded. Tim question is whether the plaintiff’s mortgage is entitled to priority over Wood’s mortgage, as to the advances which were made after Wood’s mortgage was recorded. No doubt a mortgage, given as, security for future advances to a specified amount, is valid, and the record of such a mortgage is notice of a lien to the extent of the advances specified. But if there is no agreement respecting further advances, and none are referred to in the mortgage, the record of the latter cannot, in the nature of things,, be a notice that it was given as a security for further advances.. It is notice of any advance actually made, because, although the record itself conveys no notice that any sum less than that stated therein was advanced, yet it is undoubtedly sufficient to put any one upon inquiry, and is notice of any fact which would, in the usual course of business, be ascertained upon such inquiry. (Williamson v. Brown, 15 N. Y., 361; Craig v. Tappin, 2 Sandf. Ch., 78.) Wood, therefore, is chargeable with notice only, of the fact that $75 had been advanced by the plaintiff, before he (Wood) took his mortgage. It was not notice that the plaintiff had made the subsequent advances, for. they had not been made; nor of any agreement to make them, for no such agreement existed; nor that the mortgage was given as security therefor, for no such purpose was legally manifested in any form.

It is clear then, that at the time Wood’s mortgage was delivered, the plaintiff’s lien actually amounted to only the sum of $75, and we *68are of opinion that if Wood had actually notified the plaintiff that he had obtained a mortgage on the same premises, the lien of the plaintiff’s mortgage for advances made after such notice would have been subordinate to that of Wood’s mortgage. I am not aware that this point has been directly adjudicated in this State, but the foregoing conclusion seems to me to be founded in justice and equity. When Wood’s mortgage was recorded, $75 only would have been necessary to be paid to redeem or extinguish the plaintiff’s mortgage. Subject to a lien for that sura only, the mortgaged premises belonged to the mortgagor to sell, mortgage, or otherwise dispose of at his pleasure. It would seem to follow as a corollary, that as respects the advances which were made by the plaintiff, after the delivery of Wood’s mortgage, the plaintiff should be treated as a subsequent incumbrancer. Was he such subsequent incumbrancer without notice of Wood’s mortgage? He had no actual notice, but the legal effect of the statute relating to the recording of conveyances, mortgages, &c., is to make the record thereof notice to incumbrancers, whose liens have accrued after the record was made. Although the plaintiff’s mortgage was first recorded, and such record was notice to Wood, yet it was notice only of facts which actually existed, and Wood might lawfully take another mortgage, upon the mortgagor’s equity of redemption. That included the whole estate in the mortgaged premises, except the lien which then existed in favor of the plaintiff. That being so, the plaintiff, could not increase the amount of his lien, without becoming, as respects such increase, an incumbrancer subsequent to Wood.

We are of opinion, therefore, that the record of Wood’s mortgage was a sufficient notice thereof to the plaintiff. I do' not deem it necessary to review the authorities on this subject. They are conflicting, and it will suffice to refer to Washb. R. P., ch. 16, §§ 4, 42, et seq.; 1 Jones Mort., §§ 365-378; Thomas Mort., 61, 62; and 4 Kent’s Comm., 175, where citations of and comments upon them will be found.

The judgment should be reversed, and a new trial granted, wilh costs to abide the event.

Part of judgment appealed from reversed, and new trial granted at Special Term; costs to abide event.