Daly v. New York & Greenwood Lake Railway Co.

Pitney, V. C. The first question is as to whether the complainant has standing in equity as the owner of this bond and mortgage. There can be no doubt that the interest in and control of them by the original executors of the mortgagee were divested and ended by the decree of the surrogate of New York superseding them. And it is equally clear that Mr. Sheehy, the new trustee, was entitled to the possession and control and vested with the equitable interest in them in trust for the beneficiaries under the will, by the decree of the New York supreme court. And it seems to be well settled at this day in New Jersey — in fact, familiar and common learning — that a mere delivery of a bond and mortgage, with intention to pass the title, upon a proper consideration, will vest the equitable interest in the person to whom it is so delivered. This is the substance of the ruling by Mr. Justice Drake, speaking for the supreme court, in the case of Hutchings v. Lowe, 1 Gr. 246; and in the same direction is what wms said by Master Wilson in Morris Canal Co. v. Fisher, 1 Stock. 667 (at p. 686). The same doctrine was declared by Chancellor Runyon in Kamena v. Huelbig, 8 C. E. Gr. 78 (at p. 80), where he says: “ This assignment was in writing, but had it been by the mere handing over of the bond and mortgage, it would have been sufficient.” And Master Weart, in Galway v. Fullerton, 2 C. E. Gr. 389 (at p. 394), states the same doctrine, citing authorities from New York and elsewhere. Chan [600] cellor Runyon reiterates it in Harris v. Cook, 1 Stew. Eq. 345, and again in Denton v. Cole, 3 Stew. Eq. 244, citing with approval Galway v. Fullerton, supra. It has always been held that a mortgage will, in equity, follow the debt which it was given to secure, wherever that debt is well assigned or transferred, without any formal assignment of the mortgage. Green v. Hart, 1 Johns. 580, on appeal from the chancellor. I think the equitable title of the complainant in the bond and mortgage here in question is fully established. The next question is as to whether or not the present railway company’s claim of title under mortgages prior in date to that of the complainant, gives it the better standing in this court. It is to be observed that at the time the two mortgages under which the railway company claims, to wit, in 1870 and 1871, were executed and recorded, the title in this land had not been vested in the railway company, and it must claim under the description of land “ thereafter to he acquired.” There can be no doubt that, under that clause, a title in equity, of greater or less value, was made to the purchasing trustees, and by them to the present defendant corporation, of this after-acquired property. The question is whether the railway company took it free and clear of the encumbrance of complainant’s mortgage. That the mortgagor, the original Montclair Railway Company, took the property with full notice .of complainant’s mortgage, there can be no doubt. As between complainant and the first railway company, the complainant’s right- is indisputable. Notwithstanding that the first railway company had notice of the complainant’s mortgage, it was competent for it, under our recording acts, to give a title to the premises free and clear of complainant’s mortgage. As to that portion of it, nine hundred and four thousandths of an acre, which was actually conveyed by Spaulding to the railway company by deed recorded prior to the recording of complainant’s mortgage, no conveyance was made by that railway company subsequent to the making of complainant’s mortgage. Such conveyance was made by mortgages prior to the date of the complainant’s mortgage. [601] Now, the language of the recording act then and still in force, which applies to the present case, is as follows: “ Every deed of mortgage &e. which shall have been made and executed after the first day of January, 1821, or shall hereafter be made and executed, shall be void and of no effect against a subsequent judgment creditor, or bona fide purchaser or mortgagee for a valuable consideration, not having notice thereof, unless such mortgage shall be acknowledged and proved according to law &c. and recorded or lodged for that purpose with the clerk of the -county” &c. It thus appears that the recording act operates entirely in favor of subsequent mortgagees and bona fide purchasers. The case abundantly shows that the mortgages under which the defendants claim were given before the railroad was built, and presumably before all of the money was advanced upon the bonds secured by those mortgages. The case does not show how much, if any, money was so advanced prior to the conveyance by Spaulding to the railway company, but it may be presumed that some of the bonds were negotiated prior to that time. Counsel for complainant contended, with much ingenuity and strength, that his mortgage must be a subsisting lien, for the simple reason that the prior mortgages were not within the terms of the recording act, and that there were no conveyances by the railway company, grantee of Spaulding, after the conveyance to it, and so there was not, and could not be, any person occupying the position, as against him, of a bona fide purchaser for value without notice. But, without relying upon that point alone, I think that, according to the first principles of justice as administered in a court of equity, the complainant’s mortgage must be accorded priority over the Hewitt mortgages. The general rule seems to be that the holder of a mortgage, who claims by its terms that it is a lien upon after-acquired property, takes such property subject to all liens upon it between the parties. This was distinctly decided by the supreme court of the [602] United States in the case of United States v. New Orleans Railroad Co., 12 Wall. 362, where Mr. Justice Bradley, speaking for the court, uses this language: “ This, we apprehend, is an erroneous view of the doctrine by which after-acquired property is made to serve the uses of a mortgage. That doctrine is intended to subserve the purposes of justice, and not injustice. Such an application of it as is sought by the appellants would often result in gross injustice. A mortgage intended to cover after-acquired property can only attach itself to such property in the condition in which it comes into the mortgagor’s hands. If that property is already subject to mortgages or other liens, the general mortgage does not displace them, though they may be junior to it in point of time. It only attaches to such interest as the mortgagor acquired, and if he purchase property and give a mortgage for the purchase-money, the deed which he receives and the mortgage which he gives are regarded as one transaction, and no general lien impending over him, whether in the shape of a general mortgage, or judgment, or recognizance, can displace such mortgage for purchase-money. And in such cases a failure to register the mortgage for purchase-money makes no difference. It does not come within the reason of the registry laws. These laws are intended for the protection of subsequent, not prior, purchasers and creditors.” The doctrine of this case was adopted and applied by the court of errors and appeals in Williamson v. New Jersey Southern Railroad Co., 2 Stew. Eq. 311 (at p. 317), where the case last cited was cited with approval. Both of these cases I deem to be in point. In the case in 12 Wall. 362, the railroad company had made a mortgage which covered all the company’s property of every kind with a stipulation to include all future-acquired property, and had purchased a lot of rolling stock subsequent to the date of the mortgage, and given back a consideration mortgage for it to the vendor which had not been recorded, and the fact of its existence was unknown to the bondholders under the first mortgage. In deciding it Mr. Justice Bradley calls attention to the distinction between [603] that case and Galveston Railroad Co. v. Cowdrey, 11 Wall. 459, much relied upon by defendant’s counsel in this cause. In Williamson v. New Jersey Southern Railroad Co., lands came to a railway company which were subject to a mechanics’ lien which had not yet been filed or recorded, so that the title of the mortgagees intervened between the time when the occurrences out of which the mechanics’ lien arose took place and the time that the lien itself was filed and perfected, and it was held that the mechanics’ lien prevailed over the mortgage. The legal title to these premises has never been dealt with and never passed to the present railway company. It is familiar learning, found in all the cases, that a mortgage upon after-acquired property cannot rise higher than a contract to convey the title to that property when acquired, and a suit for its enforcement is, in effect, a suit for the specific performance of a contract. Holroyd v. Marshall, 10 H. L. Cas. 191; Pennock v. Coe, 23. How. 117; Smithurst v. Edmunds, 1 McCart. 408, which is the leading case in New Jersey on that subject, and has been followed in numerous cases since, including Williamson v. New Jersey Southern Railroad Co., supra. The title, then, of the railway company in this case is purely an equitable one. The title of the complainant herein is a legal title. It was an actual reconveyance of the property to Mr. Howell. That legal title was not disturbed by the prior record of the conveyance by Spaulding to the Montclair Railway Company, because its officers had notice of it, and that company was really itself the mortgagor, being in equity a purchaser from Howell and his co-grantors. Garves v. Coutant, 4 Stew. Eq. 763. Howell, then, not only held the legal title, but his equity was prior, in point of time, to' that of the railway company, and, on plain principles, must prevail. I will adyise a decree accordingly.