Opinion
November Term, 1900.
A.D. Wait, for the appellant.
Lewis E. Griffith, for the respondent.
There was evidence tending to show that the mortgage of February 15, 1893, never became operative in the hands of Potter; that he paid nothing for it and that it had never been delivered prior to the occasion of its assignment to plaintiff. Still, upon its assignment to plaintiff under the circumstances here shown, he occupied the position of a purchaser in good faith for full value, and the mortgage became an effective security as against any one obtaining a subsequent lien. ( Schafer v. Reilly, 50 N.Y. 61; Viele v. Judson, 82 id. 32, 39.) The record of the mortgage was notice to subsequent purchasers of the premises, although the assignment to plaintiff was not recorded. ( Curtis v. Moore, 152 N.Y. 159.) When, therefore, the bank on the 23d of August, 1894, some six months after the assignment to plaintiff, took its mortgage, it took it with constructive knowledge of the existence of the prior mortgage, and the effect of such notice would not be destroyed, although the bank parted with value on the faith of the mortgage.
The main question in the case arises over the effect to be given to the cancellation. That was executed October 29, 1894, and brought to the knowledge of the bank on the same day. If, in reliance upon that, the bank had advanced money upon its mortgage ( Bacon v. Van Schoonhoven, 87 N.Y. 446), or had given a valid extension of the time of payment of its prior debt ( Cary v. White, 52 N.Y. 138), it would have been protected. It is not claimed that any money was advanced, and the question is whether there was an extension. The referee has found in substance that there was none.
It has been held that the fact simply that a creditor takes as collateral a new security payable at a future time does not operate to extend the time of payment of the principal debt, or suspend the right to sue upon the original security. ( Fallkill Nat. Bank v. Sleight, 1 App. Div. 189.) That proposition is not disputed by the appellant, but the claim is that the referee should have found the existence of an agreement, express or implied, for an extension. There was no writing to that effect. The instruction of the bank to the committee was that a substantial payment must be made within four months. What should constitute a substantial payment seems to have been left undetermined. That would be a material element on the question of extension. No payment was made within four months. The existence of the prior mortgage was discovered about September fifteenth; the satisfaction was not executed until October twenty-ninth. It is not made clear that there was any completed agreement for extension upon the execution and delivery of the mortgage, or that the conduct of the bank in regard to the matter was at all influenced by the cancellation, or that it gave or continued any extension by reason of that. The burden was upon the bank to show that it parted with value in reliance upon and by reason of the cancellation. The referee has in effect found that this was not shown, and his conclusion on that subject should not, I think, be disturbed.
The bank, in purchasing upon the sale under its mortgage in 1899, did not acquire any rights superior to the plaintiff. It then had notice of the plaintiff's claim to priority. The sale on the judgment operated to transfer the title the mortgagor had at the time of the execution of the mortgage. It did not affect prior liens.
The judgment should, I think, be affirmed.
All concurred.
Judgment affirmed, with costs.