Hutchinson v. Bramhall

The opinion of the court was delivered by Van Syckel, J. On the 21st day of February, 1882, James A. Bradley executed to William W. McChesney and John B. Hutchinson a lease for a lot of land in Asbury Park, for the term of twenty years. There was a covenant in the lease that the lessees should, within four months from the date thereof, erect on the leased — 380 — premises a building thirty feet by sixty feet, and three stories high. The building was erected within the limited time. At the time the lease was made, the said McChesney and Hutchinson were partners in business, and continued thereafter to carry on in said building their partnership business, under the firm name of McChesney & Hutchinson. On the 7th of May, 1883, Bramhall, Deane & Co. recovered a judgment in the Monmouth circuit court against the said William W. McChesney, and by virtue of an execution issued upon said judgment the undivided half interest of said McChesney in the said leasehold and building was sold by the sheriff of Monmouth county to said Bramhall, Deane & Co., December 7th, 1883. June 16th, 1882, the lessees executed a mortgage on the said building to Alison E. Hutchinson, which was recorded as a chattel mortgage. December 23d, 1882, the lessees executed a mortgage on the said building and the land leased, to Lewis P. Thompson, which was also recorded as a chattel mortgage. January 2d, 1884, C. H. C. Beakes recovered a judgment against McChesney & Hutchinson for a partnership debt. Buchanan & Co. furnished the lumber for the erection of said building, and filed a lien claim therefor against said McChesney & Hutchinson, and on the 8th day of October, 1883, they recovered a general and special judgment thereon, and by virtue thereof the said building and the estate of said McChesney & Hutchinson in said land were sold and conveyed by the sheriff of Monmouth county to Alison E. Hutchinson, on the 28th day of April, 1884. On the 19th of January, 1884, and before the last-mentioned conveyance, the said Bramhall, Deane & Co. filed their bill in the court of chancery for a partition of the said tract of leased land. The sale under the lien judgment produced $1,258.67 in excess of the sum due on the lien claim. The lien judgment being paramount to the title of the complainants in the equity suit, the said complainants filed a supplemental bill, July 17th, 1884, praying that the said surplus might — 381 — be paid into the court of chancery, and distributed under the direction of that court. The court of chancery properly held that, in the application of the said fund, the creditors of the partnership were entitled to priority in payment over the complainants, who were creditors of McChesney, one member of the firm. The contest in the court of chancery was held to be between C. H. C. Beakes, the judgment creditor of the firm, and the chattel mortgage creditors of the firm, and a decree was rendered in that court giving the judgment creditor the preference. From that decree, Alison E. Hutchinson, who holds the prior mortgage, has appealed. The lien claim of Buchanan & Co. was filed against the lessees only; Bradley, the lessor and owner of the fee, was not a party to it. Under the fourth section of the lien law, the building having been erected by the written consent of the owner of the fee, his estate in the land might have been sold to satisfy the lien claim. But the lien claim having been filed against the estate of the lessees only, the sale under the special judgment passed only their interest in the land and building to Alison E. Hutchinson. The surplus money in court to be distributed, represents only the estate of the lessees. The lien of the judgments and mortgages, which encumbered the estate of the lessees, is transferred to this surplus fund. It is immaterial whether the building can be removed by the lessees or those who own their estate, so far as these encumbrances are concerned. That is a question which will arise between A. E. Hutchinson, as purchaser under the lien judgment sale, and Bradley, the lessor, when the lease expires, and not between A. E. Hutchinson, as mortgagee, and Bradley, nor between judgment and mortgage creditors. This, however, seems to be clear : that the building which the lessees engaged to erect, and which they did erect, in compliance with their covenant in the lease, must be left upon .the premises during the term of the lease, for it would be highly unreasonable — 382 — to construe the lease in such a way as to permit the lessees to erect the building one day and remove it the next. That could not have been the intention of the parties. The mortgage of Alison E. Hutchinson is on the said building (known as McChesney & Hutchinson’s Ice Cream Manufactory), situate at Asbury Park, Hew Jersey, on the northwest corner of Main street and Summerfield avenue. The mortgage of Lewis P. Thompson is on the said ice cream manufactory, with the leasehold interest of the said McChesney & Hutchinson, for the ground on which it is located. In legal effect these mortgages do not differ; they both cover the interest of McChesney & Hutchinson in the said building and land. The surplus in court stands in the place of such leasehold interest as the lessees had. The extent of that interest is a question to be settled between Bradley and the purchaser under the lien claim, and it cannot affect the distribution of the fund. The simple question here is whether a mortgage on a leasehold interest must be recorded as a real estate mortgage. A leasehold is a chattel real, and goes to the executor or administrator. 1 Greenl. Cruise tit. VIII. ch. 2 § 19. All leases and terms of lands, tenements and hereditaments of a chattel quality, are chattels real, and will go to the executor or administrator; but he has no interest in the freehold terms or leases. The general rule for distinguishing these two kinds is that all interests for a shorter period than a life, or more properly speaking, all interests for a definite space of time, measured by years, months or days, are deemed chattel interests; in other words, testamentary and of the nature, for the purposes of succession, of other chattels or personal property. 1 Wms. on Exrs. 562; 2 Bl. Com. 386. A lease for nine hundred and ninety-nine years is a chattel, which the administrator may dispose of in the same manner as he may of the other personal property of his intestate. He needs no order from the court, as in the case of selling real estate to pay debts. Ex parte Gay, 5 Mass. 419. In Decker v. Clarke, 11 C. E. Gr. 163, mortgages of chattels — 383 — real were held not to be within the provisions of the act concerning chattel mortgages. Nix. Nig. 613. The like view was taken by the New York court of appeals in Booth v. Kehoe, 71 N. Y. 341. The Hutchinson and Thompson mortgages having been filed as chattel mortgages, it is unnecessary to discuss that question. These mortgages, being prior in time to the Beakes judgment, must prevail over it, unless it was essential, as is contended, to record them as real estate mortgages. Decker v. Clarke, 11 C. E. Gr. 163, and Spielmann v. Kliest, 9 Stew. Eq. 199, adopt the view of Chancellor Kent, in Johnson v. Stagg, 2 Johns. 510, that the mortgage of a leasehold for years is within the provision of the registry act requiring mortgages of lands to be recorded. It is conceded by the learned jurist who decided these cases that the ancient rule of law was that the words “ lands, tenements and hereditaments ” comprehend only freehold estates, and not leases for years, and that a lease for years confers no estate in the lands demised by it. We cannot disregard the established technical meaning at common law of words which have been woven into our system of conveyancing, and have become part of it, without introducing confusion and uncertainty in respect to land titles. The fourteenth section of our act concerning conveyances (Rev. p. 155) provides that every deed or conveyance of or for any lands, tenements or hereditaments to any purchaser of the same shall be recorded. To bring a writing within the descriptive terms of the statute, to entitle it to be registered, it must be a deed or conveyance of lands, tenements or hereditaments to a purchaser of the same. The language of the statute implies that it must be such an estate in lands as can be conveyed only by writing sealed and delivered. At common law, estates in fee, for life or for years might have been created by deed and livery of seizin, or by livery of seizin only; and leases for years might have been made by parol merely, without livery of seizin. Contracts were also divided — 384 — into specialties, and agreements by parol — if written and not under seal, they were parol agreements; a lease for years, in writing, not under seal, was a parol lease. Thus, says Chief-Justice Hornblower, in Mayberry v. Johnson, 3 Gr. 116, stood the law of conveyancing and of contracts when the 29 Car. II. c. 3 was passed. He declared the effect of that statute to be that estates of freehold could be created and conveyed only by deed, while leases for any term of years might be by writing not under seal. In the language of the statute, they could be made by parol, put in writing, and were still, upon common law principles, parol contracts. Such leases are, in legal contemplation, neither deeds nor conveyances, and have never been so denominated. They are not within the fourteenth section. The framer of that statute understood that “ deeds or conveyances ” excluded writings not under seal, as appears by the provision that the deed or conveyance shall be recorded within fifteen days of the time of signing, sealing and delivering the same. A lease for years under seal is undoubtedly a deed, but is it, within the meaning of the fourteenth section, a deed or conveyance of lands, tenements or hereditaments ? If so, we have this peculiar condition of the law: that a lease under seal for a term of years must be recorded under penalty of losing its priority, while an equally effective lease for a term of years, in writing, not under seal, cannot be recorded. Thereby the sanction of the statute can be evaded by simply omitting to put a seal upon the lease. It cannot be conceived that the framer of the fourteenth section intended to leave the law in that situation. The act of 1872 imposes no penalty; it was intended to give the lessee the advantage to be derived from registry, if his lease was sealed and duly acknowledged, but to leave him as at common law, if he did not record his lease, or if he accepted a lease not under seal. It was framed for the benefit of the lessee, and not with a view to protect creditors. It will also be observed that the act of 1872 provides that all leases under seal, except leases for less than two years, may be — 385 — recorded, while, if leases for years are within the terms of the fourteenth section, leases for less than two years are not excepted from its operation. It must be inferred that the draftsman of the statute understood the term “ deed or conveyance of lands, tenements and hereditaments ” to mean what it signified under the old rule of the common law, viz., a deed or conveyance of a freehold estate, such estate as must be conveyed by deed, and not a lease for years, which may be passed by writing not under seal. That such has been the general understanding of the legal profession is evinced by the fact that up to the time of the passage of the act of 1872, the principal recording offices in this state will be searched in vain to find the existence of an established practice of recording leases for years as conveyances of lands. It/was not deemed necessary to record a lease for years, in order to preserve the rights of the lessee, or to protect a purchaser of the freehold, because the lessee, or his agent or asignee was usually in possession, and that possession put the subsequent purchaser on inquiry. Van Keuren v. Central Railroad, 9 Vr. 165. If the fourteenth section comprehends leases for years, then it may, with much force, be argued that by a reasonable interpretation of the act of 1872, that section is repealed, so far as relates to leases. In any other view, what beneficial effect can be given to the later statute? Of what value is the supplement of 1872, or what purpose can the option therein given to record leases or not, serve, if the penalty provided in the fourteenth section for not recording still pertains? That the act of 1872 leaves it to the option of the lessee whether he will register his lease, must be conceded, for registry is a creature of statute law, and no forfeiture can arise in respect to it except that which the statute itself prescribes. Where it is not prescribed, it does not exist. Will it be presumed that the legislature would enact a law that the lessee might, at his option, record his lease, if it was intended that for his failure to do so he should be subject to the penalty denounced in the earlier act ? The lessee would have been precisely in that position without the law of 1872. If a — 386 — statute requires an act to be done, and imposes a penalty for the omission to do it, and a subsequent statute provides that the same act may be done or not, at the option of the party before required to do it, does not the implication arise that the penalty is removed? It is not necessary, however, to decide this question now. The learned jurists who revised the act"respecting conveyances, retaining in it the fourteenth section as it before existed, and incorporating in it the provisions of the act of 187-2, manifestly conceived that the legal phraseology used in the act had been adopted with the signification given to it in the old common-law. This is indicated by the fact that the twenty-fifth section of the Revision provides that the clerk shall record, in well-bound books, “all deeds and conveyances of lands, tenements and hereditaments ” and also “ all other instruments which are by the act therein directed to be recorded.” The “other instruments,” within the contemplation of the revisors, must have' been leases for years, and assignments of such leases. This is shown by reference to the ninth section of the act respecting conveyances in Nixon's Digest, edition of 1868, which does not contain the words “ all other instruments.” Those words were presumably added because the revisors did not understand that deeds or conveyances of lands, tenements and hereditaments, included leases for years. In my judgment that is the true interpretation of the language of the fourteenth section. It does not authorize or require leases for years to be put on record. The language of the mortgage act is substantially the same as that' in relation to deeds, providing for the registry of all mortgages ' and defeasible deeds in the nature of mortgages of lands, tenements and hereditaments. If not necessary to record the lease itself, it cannot be necessary to record a defeasible conveyance of the lease. There would be nothing upon the record to enable parties interested to trace the title, and therefore the registry of such mortgage would not be notice. Losey v. Simpson, 3 Stock. 246. — 387 — My conclusion, therefore, is that the priority of the mortgages in question is not lost by the omission to record them as real estate mortgages. There is also another ground upon which the Hutchinson mortgage is entitled to be preferred. The evidence shows that Beakes held a judgment against the partners, which was recovered prior to the execution of that mortgage. McChesney, one of the partners, told Beakes that the firm wished to borrow money from Hutchinson, and secure it by mortgage on the building, if Beakes would release the building from the lien of that judgment, so that the mortgage would not be subject to it. To that Beakes assented, and on the 15th of June, 1882, executed such release, and the mortgage was thereupon executed to Hutchinson before the rendition of the judgment now held by Beakes. By this evidence, Beakes is chargeable with knowledge of the Hutchinson mortgage before he recovered his judgment, and he cannot postpone the mortgage for want of registration. The case of Morris v. White, 9 Stew. Eq. 324, is not in conflict with this conclusion. There this court laid down the rule that the fact that a judgment creditor knew that a mortgage was intended and being prepared, did not deprive him of the right which a creditor has to secure a just debt by greater vigilance ;and promptness.” A creditor is under no obligation, legal or equitable, to permit another to gain a position superior to his own. But in that case, although the White mortgage was not recorded until two days after the entry of the Morris judgment, the judgment creditor was charged with notice of it, and postponed to it upon far less evidence than is submitted on behalf of the mortgagee in this case. That decree rests upon the finding that the mortgage was actually executed before the judgment was entered. Here the judgment creditor not only knew that the mortgage was to be given, but he released an earlier judgment to enable the mortgage to occupy the first place, and the mortgage was executed and delivered long before the recovery of the judgment — 388 — which Beakes now sets up to displace it. Beakes is chargeable with notice, not only that Hutchinson intended to take a mortgage, but that he actually had taken it before his judgment was obtained, and any necessity which might otherwise have existed to register the mortgage was thereby dispensed with. In my opinion, the decree below should be reversed, and the entire fund in court appropriated to the payment of the Alison E. Hutchinson mortgage. The fund being insufficient to satisfy that mortgage, neither the complainant nor Beakes should be allowed, costs in this court or in the court below. Decree unanimously reversed.