Perrine v. First National Bank

The opinion of the court was delivered by Reed, J. We are of the opinion that the portion of the charge which permitted the jury to find for the plaintiff upon the ground that the first mortgage was executed in fraud of creditors, was erroneous. It is perceived that the plaintiff did not attack the Perrine mortgage from the standpoint of a general creditor. He had •established no lien as such creditor, and without this he was disentitled to question the bonafides of that instrument. His footing as a litigant is his mortgage. How it is self-evident that the parties had the right to contract for a lien upon any portion ' of the chattels in question, or upon any interest in those chattels. The mortgagee had no power to compel the execution of an instrument other than that which the mortgagor chose to make. His acceptance of this one, in its existing form, was entirely voluntary. In it, it was expressly stipulated that there was an already existing mortgage upon the property, upon which mortgage there was due $700. The position of the plaintiff is, that in spite of this stipulation he can sweep away this first mortgage upon the ground that its execution was a fraud upon creditors. It is perceived that the mortgagee of the equity of redemption left in the mortgagor after the execution of the first mortgage is asserting a right to do that which the mortgagor himself was powerless to do. The mortgagor himself could not set up this defence against the first mortgage. The question is, How can his assignee, who has taken his title with a stipulation that the first is an existing lien, do so? We think that [404] the second mortgagee is concluded by his stipulation from doing that which his mortgagor was unable to do. In Massachusetts a purchaser who takes title to mortgaged property, even with notice of an unrecorded mortgage, can claim precedence over the mortgage because of the failure of the mortgagee to record it. Bingham v. Jordan, 1 Allen 373; Travis v. Bishop, 13 Metc. 304. But in Howard v. Chase, 104 Mass. 249, it was held that a second mortgagee, under a mortgage containing a provision that the property is “ subject to a mortgage for about $10,000,” could not question the superiority of the lien of the first mortgage, although unrecorded. The court remarked that the second mortgagee took no greater rights than the mortgagor had, which was an equity of redemption, and therefore could not deny the validity of the first mortgage. In Tilbert v. Horton, 31 Minn. 518, a second mortgagee, in whose mortgage the existence of a prior mortgage was recited, was held to be shut off from attacking the prior mortgage for fraud upon creditors. Mr. Cobbey, in volume 2, p. 1039, of his work on Chattel Mortgages, states the rule to be that “the owner of a second mortgage in terms subject to the first mortgage cannot defend against it.” It is sufficient for the decision of this cause to hold that the rule so laid down is true to the extent that whenever the mortgagor could not have defended against the first mortgage, neither can the second mortgagee, who has recognized the existence of the first mortgage, do so. Judgment reversed.