Opinion
File No. 54948
This is an action of foreclosure wherein the controversy is with respect to the relative priorities of certain junior encumbrancers, lying first, between the holders of mortgages, defendants Buchta and Barnard, and second between said Buchta and a mechanic's lienor. The evidence shows, with respect to the controversy between the defendants Buchta and Barnard, that on September 19, 1936 the defendant Malkin owned the equity in the real estate under foreclosure, which was at that time subject to three mortgages. On that date Malkin executed and delivered to the defendant Buchta a fourth mortgage which, however, was not recorded until August 4, 1937. In the interim, on May 10, 1937, Malkin conveyed his interest to the defendant Sutherland, free and clear of all encumbrances except zoning regulations and "mortgages as appear of record." There is no indication in the evidence that Sutherland had actual or constructive notice of the Buchta mortgage. On July 27, 1937, while Buchta's mortgage was still unrecorded, Sutherland executed and delivered a mortgage on the premises in the sum of $1,000 to Barnard, which was not recorded until August 9, 1937, the Buchta mortgage having in the meantime, on August 4, 1937, been recorded. In view of the circumstance that Sutherland was without knowledge, actual or constructive, of Buchta's mortgage, and because Buchta failed to record her mortgage within a reasonable time following its delivery to her (Gen. Stat. [1930] § 5010), Sutherland acquired a title to the property free from the lien of the Buchta mortgage. The defendant Buchta is not aided by section 5010 of the General Statutes, Revision of 1930, on which she relies, which provides, in part, that "no conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies," notwithstanding her mortgage was recorded prior to the mortgage held by the defendant Barnard. While in the absence of countervailing equities the Buchta mortgage would have had priority over the Barnard mortgage if the mortgagor under the Buchta mortgage still had title of record when the Buchta mortgage was filed in the town clerk's office, and the mortgagor under the Barnard mortgage had been Malkin, the defendant Barnard was justified in relying on the title to the land as the record disclosed it, in Sutherland. The defendant Barnard, moreover, was chargeable with notice only of recorded conveyances made by the defendant Sutherland during the time that title stood of record in Sutherland's name. Accordingly, Barnard's right to redeem and the order in which she is entitled to redeem is not affected by the recording of the Buchta mortgage prior to her own, and her mortgage has priority over the defendant Buchta's mortgage. Further, on September 22, 1937 Malkin delivered to the defendant Buchta an assignment drawn on the defendant Sutherland in favor of Buchta, requiring Sutherland to pay to Buchta a certain sum out of a balance of the purchase price of the property owing by Sutherland to Malkin, which Malkin caused to be delivered to Sutherland, and incidentally to this Sutherland learned of the existence of the Buchta mortgage. Thereafter, on October 15, 1937, Sutherland conveyed his equity in the mortgaged premises to the defendant, The Stamford Housing Corporation, of which Sutherland was president, and on November 15, 1937 The Stamford Housing Corporation delivered a mortgage in the sum of $500 to the defendant Barnard. Defendant Buchta's mortgage does not have priority over this mortgage. Assuming that the defendant The Stamford Housing Corporation had actual knowledge of the existence of the Buchta mortgage at the time it gave the $500 mortgage to the defendant Barnard, there is no evidence that the defendant Barnard had actual or constructive notice of the existence of the Buchta mortgage, and it is the settled rule that where a second purchaser for value and without notice purchases from a first purchaser who is charged with notice, the second purchaser becomes a bona fide purchaser entitled to protection. The defendant Bernard cannot be charged with constructive notice from the fact that the Buchta mortgage was recorded at the time she accepted the mortgage in the sum of $500 from The Stamford Housing Corporation. That mortgage was from Malkin to Buchta, and when it was recorded the record title was in the name of the defendant Sutherland. A record is a constructive notice only to subsequent purchasers deriving title from the same grantor. The Buchta mortgage is inferior to a mechanic's lien arising out of the furnishing of materials for the construction of a building on the mortgage premises, where while the mortgage was given before the initial delivery of materials, it was not recorded until after such initial delivery of materials (Gen. Stat. [1930] § 5105).
MEMORANDUM FILED MARCH 31, 1938.
Ned E. Ostmark, of Fairfield, for the Plaintiff.
Taylor Lovejoy, of South Norwalk; Hereward A. Wake, of Westport; Earl H. Jagoe, of Westport; Keogh Candee, of South Norwalk, for the Defendants.
Ward Malkin, pro se.
E. L. Sutherland, pro se.
Memorandum of decision in action of foreclosure wherein the controversy is concerned with relative priorities of defendant junior encumbrancers.
In this action of foreclosure, the controversy is concerned with the relative priorities of certain defendant junior encumbrancers — first as between two holders of mortgages, Mildred Buchta and Julia E. Barnard and, second, as between Mildred Buchta and a mechanic's lienor, The Hatch Bailey Company.
As between Mildred Buchta and Julia E. Barnard, the following situation is delineated by the evidence: On September 19, 1936 the defendant Malkin owned the equity in the real estate under foreclosure which was at that time subject to three mortgages. On that date he executed and delivered to the defendant Mildred Buchta a fourth mortgage in the sum of $700 which, however, was not recorded at that time, nor until August 4, 1937. In the interim, on May 10, 1937, the defendant Malkin conveyed his interest in the equity to the defendant C. Lindsay Sutherland, free and clear of all encumbrances except zoning regulations and "mortgages as appear of record." There is no evidence to indicate that Sutherland either had actual knowledge or notice of any circumstance which, if pursued by inquiry, would have apprised him of the fact that the defendant Buchta at the time was the holder of the unrecorded mortgage delivered to her on September 17, 1936.
In view of this circumstance, and because defendant Buchta failed to comply with the requirements of section 5010 of the General Statutes, Revision of 1930, in neglecting to record her mortgage within a reasonable time following its delivery to her, Sutherland acquired a title to the property free from the lien of the Buchta mortgage. Second National Bank of New Haven vs. Dyer, 121 Conn. 263; Cressey vs. Phelps, 2 Root 420.
On July 27, 1937 and while the defendant Mildred Buchta's mortgage was still unrecorded, defendant Sutherland executed and delivered a mortgage on the premises to defendant Julia E. Barnard, in the sum of $1,000, which, however, was not immediately recorded nor until August 9, 1937 and in the meantime, on August 4, 1937, defendant Mildred Buchta filed for record the mortgage which had been given to her by defendant Malkin on September 19, 1936.
Defendant Buchta on this state of facts, contends that since her mortgage was recorded prior to defendant Barnard's, it is an encumbrance senior to it, by virtue of section 5010 of the General Statutes, Revision of 1930, which provides in part: "No conveyance shall be effectual to hold any land against any other person but the grantor and his heirs, unless recorded on the records of the town in which the land lies . . ." In the absence of countervailing equities, that would be so if the grantor of the Buchta mortgage still had title of record when the latter was filed in the town clerk's office and the grantor of the Barnard mortgage had been Malkin instead of the latter's successor in title, Sutherland. But defendant Barnard was justified in relying upon the title to the land as the record disclosed it and this informed her that the title in the name of Sutherland, who was her grantor, was free of a mortgage given either by the latter or any of his predecessors in title to defendant Buchta. "The basis of the protection so afforded is an equitable estoppel which arises out of the fact that the person who has failed to record the instrument under which he claims has thereby misled creditors into the belief that title is in the person who appears upon the record to own the property. . . . The person claiming the property may have a good title to it, but as against anyone who is entitled to rely upon the record he is barred from asserting that title." Second National Bank of New Haven vs. Dyer, 121 Conn. 263, 271. The defendant Barnard, moreover was chargeable with notice only of recorded conveyances made by the defendant Sutherland during the time that the title stood of record in the latter's name. Hawley vs. McCabe, 117 Conn. 558, 563, 564; Wheeler vs. Young, 76 Conn. 44, 51. It follows that the defendant Barnard's right to redeem and the order in which she is entitled to do so is not affected by the recording of the Buchta mortgage prior to her own and her mortgage has priority over defendant Buchta's.
It next appears that on or about September 22, 1937 Malkin delivered to defendant Buchta an assignment drawn on defendant Sutherland in favor of defendant Buchta requiring Sutherland to pay to her the sum of $166 out of a balance of the purchase price of the property owing by Sutherland to Malkin, which the latter caused to be delivered to defendant Sutherland on that date and incidentally to this, defendant Sutherland then learned of the existence of the Buchta mortgage. Thereafter, on October 15, 1937 Sutherland conveyed his equity in the mortgaged premises to the defendant, The Stamford Housing Corporation, by deed recorded on that date, and on November 15, 1937 The Stamford Housing Corporation executed and delivered a mortgage to defendant Julia E. Barnard in the sum of $500. Defendant Buchta claims priority over this, contending that, unlike the situation with respect to the mortgage delivered to defendant Barnard, on July 27, 1937(1) the Buchta mortgage already appeared of record at the time that the $500 mortgage was executed to defendant Barnard, and (2) the defendant Sutherland had actual knowledge of the fact that Malkin had given the mortgage to defendant Buchta and as he was president of the defendant, The Stamford Housing Corporation, the latter was, also, charged with such knowledge. Without so deciding, it may be granted that The Stamford Housing Corporation had actual knowledge of the existence of the Buchta mortgage at the time it gave the $500 mortgage to defendant Barnard. The seemingly well established rule, however, is ". . . that if a second purchaser for value and without notice purchases from a first purchaser who is charged with notice, he thereby becomes a bona fide purchaser, and is entitled to protection." 2 Pomeroy, Equity Jurisprudence (4th ed.) § 754. There is no evidence that either Sutherland, personally, or as president of The Stamford Housing Corporation, communicated any information to defendant Barnard to the effect that defendant, Buchta, claimed an interest in the premises as a mortgagee or that defendant, Barnard, herself acquired such knowledge from any other source or intelligence such as, if pursued by inquiry, would have led to the ascertainment of that fact.
Neither can defendant Barnard be charged with constructive notice derived from the fact that the Buchta mortgage was recorded at the time that she accepted the $500 mortgage from The Stamford Housing Corporation. That mortgage was, as noted supra, from Ward G. Malkin to Mildred Buchta, but when it was filed, the record title was in the name of defendant Sutherland. "It is a settled doctrine . . . that a record is only a constructive notice to subsequent purchasers deriving title from the same grantor." 2 Pomeroy, Equity Jurisprudence (4th ed.) § 658. The recording of the mortgage from Malkin to Buchta while the record title was in the name of Sutherland, was, consequently, no constructive notice to defendant Barnard in accepting the mortgage from The Stamford Housing Corporation. Baker vs. Griffin, 50 Miss. 158; Hawley vs. McCabe, supra; Kulmacz vs. Milas, 108 Conn. 538, 541, 542. The mortgage in question is, hence, entitled to priority over the Buchta mortgage.