New York Life Insurance & Trust Co. v. Staats

Harris, J. The real question upon which the rights of the parties to this litigation must depend is, whether Dr. Staats, at the time of the execution of the mortgage to the commissioners, became a borrower of the money he had received upon the Corning mortgage, or is to be regarded as a defaulter to that amount. It was a violation of duty to receive the money at all. The 12th section of the loan act (Sess. Laws of 1837, p. 124) declares that “ no borrower shall be permitted to pay any part of the principal moneys loaned on any day other than the first Tuesday of October in any year.” Having received the money, the 28th section of the act made it the duty of [574] the commissioners, at the end of their annual meeting, to loan it out, in the same manner, and upon the like security, as the original loans were made. In making such loan, they were required to be satisfied that the borrower had a title in fee to the lands proposed to be mortgaged, and that the same were free and clear of all incumbrances, and also that such lands, exclusive of the buildings thereon, were worth double the amount of the proposed loan. For this purpose,. the commissioners' were required either to view the lands or to make due inquiry respecting the value thereof. They were also required to examine the title, and to administer an oath to the applicant for the loan, the form of which is prescribed in the 25th section of the act. In addition to these examinations, the commissioners were authorized, by the 10th section, if they should deem it necessary, “ to require the borrower to satisfy them by proper evidence, that he possessed an estate in fee in such lands, free and clear of all incumbrances.” All these provisions contemplate the presence and action of both commissioners. . The act requires that the duties shall be performed by the commissioners “ respectively.” The term is inapt, but it cannot be doubted that by it the legislature intended that the duties referred to should be performed by the commissioners together, acting as a board. Applications for loans are to be made to them, and not to one of them individually. They are together to decide whether they will accept a mortgage. They are together to judge of the sufficiency of title. They are both to.view the lands, or otherwise to be satisfied of their value. Both are to determine whether the evidence that the lands are free from incumbrance is satisfactory, or whether further evidence shall be required. In short, except when otherwise provided in the act, as in the 23d section, the duties of the commissioners cannot be discharged by one alone. Both must be present, concurring in the act. This principle has been established by the court of. appeals, in Powell v. Tuttle, (3 Comst. 396.) I am inclined to think, too, that a commissioner cannot himself legally become a borrower from the commissioners-. The [575] nature of his duties, upon application being made for a loan, is incompatible with his being himself a borrower. He is required, in the exercise of his official judgment, to determine whether the loan shall be made, and for that purpose is called upon to decide whether the property to be mortgaged is of sufficient value to answer the requirements of the act, and also whether the evidence of title is satisfactory. It is for him to examine the applicant upon oath in respect to incumbrances, and then to determine whether further evidence on the subject shall be required. How can these and similar duties with which the commissioner is charged, be performed when he himself proposes to become the borrower? ’ I am satisfied that it never was intended by the legislature, that the commissioners should themselves become borrowers of the fund committed to their charge. It is contrary to the spirit, and inconsistent with the provisions, of the act. It is a cardinal maxim of the law, that no man can be a judge in his own cause. It is declared by statute that no judge can sit, as such, in any cause in which he is interested. The case of a commissioner, when he himself proposes to become a borrower, is clearly within the policy of the law which will not allow a man to give judgment in his own cause. (See Oakley v. Aspinwall, 4 Comst. 514.) He must decide upon the sufficiency of the security, involving the value of his own property, the validity of his own title, and the question of liens and incumbrances. The impolicy of allowing a commissioner to decide such questions, when he himself is to be the borrower, needs no stronger illustration than this case presents. Assuming that the title of Dr. Staats was valid, and that the property mortgaged was worth double the amount of the mortgage, exclusive of buildings, yet the records of mortgages showed that, at the time the alleged loan was made, the property was incumbered to an amount greatly exceeding its conceded value. It is not to be believed that had the loan been applied for by any other person, such security would have been received. But if it be conceded that the commissioners may make a loan to one of themselves, still I think the transaction in ques [576] tion did not amount to such a loan, No application was made to the commissioners. They never determined that the loan should be made, The most that can be said is, that Van Du-sen, the other commissioner, was informed of what had been done by Dr. Staats, or what he was about to do, and that he expressed no dissent. And even in respect to this, there seems to be some uncertainty. Dr. Staats, when examined, was far from being sure that he had ever even spoken to his colleague on the subject of the loan. The fact that no entry of the transaction was made in the minutes, as well as the circumstances connected with the execution of the mortgage itself, are calculated to give strength to the doubt whether Van Du-sen even knew of the transaction at all. I am constrained, therefore, to regard the mortgage, not as a loan authorized by law, but as an attempt to secure the state for money which the mortgagor had received in his official capacity as a commissioner, and which he illegally retained in his own hands. He never became a borrower of the money within the spirit and meaning of the act, and, notwithstanding the mortgage, I can regard him in no other light than as a defaulter. There can be no doubt, I suppose, but that Dr. Staats, having in his hands the money of the state, might have executed a mortgage to the commissioners which would have become a valid lien even as against subsequent bona fide incumbrancers. But to do this, the mortgage must have been acknowledged and recorded according to the provisions of the recording act. Then, when the plaintiffs, being about to make their loan, came to search for incumbrances, the record of the mortgage would have been found in its proper place. Then there would have been no opportunity for concealing the knowledge of its existence, by placing the record among mortgages which had been executed eight years before. No such’ state of facts as that which has resulted in this litigation could have existed. As between the mortgagor and the mortgagees, the mortgage is undoubtedly a valid lien, The mortgagor himself is estopped from denying the validity of the transaction. But, as against the plaintiffs, who are subsequent incumbrancers^ [577] and not chargeable with notice of the lien, the mortgage is void, for the reason that it has neither been executed in such a manner as to make it a valid mortgage under the provisions of the loan act, nor recorded as an ordinary mortgage. [Albany Special Term, October 31, 1854. There must be the usual judgment of foreclosure and sale. There will be no necessity for a reference to ascertain the amounts due upon the several incumbrances. These amounts were sufficiently established upon the trial. The proceeds of the sale are to be applied, first, to the payment of the plaintiffs’ costs, and then the amount due the plaintiffs .upon their bond and mortgage ; secondly, to the payment of the costs of the Albany City Bank and the amount due upon their mortgage; and lastly, the surplus, if any, is to be applied to the payment of the mortgage to the loan commissioners. There must be a similar judgment in the other suit between the same parties. As the mortgage to the Albany City Bank embraces the premises in both suits, the loan commissioners are to be at liberty to elect which premises shall be sold first, and to have the City Bank mortgage paid in such a manner as to secure the greatest surplus applicable to their mortgages. Bams, Justice.] 1ST. B. This judgment was affirmed by the general term, on appeal.