Opinion
Argued February 6, 1893
Decided February 28, 1893
Jacob F. Miller for appellants.
Levi F. Longley for respondent Anderson. C.P. Collier for plaintiff, respondent.
The two mortgages given to the brothers, Harvey and Richard Miller, respectively, by their grantee, and the priority of which, one over the other, is the subject of dispute, would have been concurrent liens upon the land in the natural order and developement of the transaction, and having reference only to the equality of a common ownership of the consideration. But neither mortgage, on its face, gave any notice of the concurrent existence and lien of the other, and its purchaser would not and could not be deceived merely by its terms. If he bought without examination of the record, and omitting all inquiry, his situation would differ in no respect from that of one who finds his security subject to a prior incumbrance, the existence of which he might have ascertained by the exercise of proper diligence. When Wise took an assignment of Richard's mortgage, therefore, the mere transfer, in and of itself, gave him no information whether there was or was not another existing incumbrance of equal or prior lien, and his duty was that of inquiry and examination of the record as in any other case of the purchase of a mortgage security, which may or may not be a subordinate lien upon the land. We are not at liberty to assume that Wise made any such inquiry. The counsel who acted for him testified that he did, and was told in the presence of the two brothers, and with their assent, that they had conveyed the land in which they were equal owners, and taken back a separate purchase money mortgage to each, which were equal and concurrent liens. There was a denial on the part of the brothers, and a sharp controversy over the question of fact, which was submitted to the jury as a special issue. They found in favor of the defendants, and their verdict confirmed by the finding of the court, compels us to assume, somewhat against our impressions of the truth, that no such inquiry and no such representations were made, and leaves us confined to the bare inference that Wise had knowledge of the existence of the two mortgages from some extrinsic source. The mortgage which he took recited that the conveyance of the land to the mortgagor was by the two brothers and their mother, and while not necessarily giving information of more than one mortgage, is supplemented by the finding that Wise took his assignment in good faith, believing the two mortgages to be equal and concurrent liens. How he came to know that there were two such mortgages the evidence does not specifically disclose, but does indicate the fact found, and we are at liberty to assume that he did know it, and that the arrangement between the brothers by which Harvey's mortgage was agreed to be and became the first and prior lien was concealed from and unsuspected by him when he accepted the transfer.
That arrangement was by parol, proved to the satisfaction of the court and expressly found. It is now argued that such agreement was void for want of a consideration to support it. We cannot concur in that view of the transaction for two reasons. The agreement was at the time of the sale, and an element or condition of its final consummation. It may fairly be assumed to have been one of the conditions upon which Harvey joined with Richard in making the sale and delivering the deed, and without which he might have refused to complete the sale by declining to accept a concurrent mortgage. Beyond that, the agreement was executed in fact by a prior delivery to Harvey of his mortgage, followed by a prior record, with the express consent of Richard, and for the avowed purpose of fully executing the agreement.
Harvey's mortgage was recorded on April first, and thereafter assigned to the defendant, Anderson. Richard's was recorded the next day and assigned to Wise, from whom, through intermediate owners, it has come to the plaintiff, who seeks to foreclose it. Both sides substantially concede that the record has not so changed the rights of the respective assignees as to prevent each from standing in the place of his original assignor. ( Greene v. Warnick, 64 N.Y. 220; Decker v. Boice, 83 id. 215; Westbrook v. Gleason, 79 id. 30.) The question thus comes to the single point whether Harvey and his assignee are equitably estopped from asserting the agreed priority of lien as against Wise and his assignees, and that is the principal ground of the appellant's argument.
In considering that question we must upon the findings assume as facts that Richard's mortgage to the eye of Wise, with the knowledge that he had, disclosed no defect and permitted a belief that it was concurrent and not subordinate; that the parol agreement which postponed its lien would or might be unknown to a purchaser; that so it became an instrument or means available for a possible deception; that Harvey, conscious of these facts, knew in addition that Richard was intending to turn the mortgage over to Wise in payment for land about to be purchased. So much Harvey knew, and that is all that he knew, and upon that knowledge it is insisted that Harvey, by his silence, is estopped from asserting any priority of lien as against Wise, who was thereby deceived. Undoubtedly mere silence may sometimes found an estoppel, but it must be when there is a duty and opportunity to speak, when silence either is or operates as a fraud to the consciousness of the party who does not speak, and when he knows or ought to know that some one is relying upon his silence and will be injured by that silence. ( Viele v. Judson, 82 N Y 40.) In other words the omission to speak must be, relatively to the party harmed, an actual or constructive fraud. (Herman on Estoppel, § 954.) The facts here approach but do not reach that standard. I do not think that they imposed upon Harvey the duty of seeking out Wise and disclosing to him the arrangement made. There was nothing to suggest to strict honesty of purpose the need of any such action. While he knew that Richard was intending to assign his mortgage to Wise, he did not know and was not bound to suspect that Richard would assign it as a concurrent mortgage, and conceal the existing truth and practice a deceit upon his assignee. Harvey had given his mortgage immediate priority of record. That fact shows that he meant and intended no concealment or artifice. He supposed it to be notice of the truth to all the world, and with some reason at least, since the priority of record raised a presumption of priority of delivery. ( Freeman v. Schroeder, 43 Barb. 618.) Nor was there anything in the priority which he obtained which so affected the value of Richard's mortgage as to arouse in Harvey's mind either a belief or suspicion that Wise would not accept Richard's security if the truth was told. Something over six thousand dollars had been paid by the mortgagor in cash, over and above the two mortgages. Apparently the land was a full and ample security for both, and no peril attached to the holder of a second mortgage. Under such circumstances it is impossible to say that Harvey, by silence, committed an actual fraud. There is no such finding and no request for one, except that contained in the request to find facts involving it, which were negatived by the verdict of the jury and the conclusion of the court. Nor can we say that Harvey's silence was a constructive fraud. He had no reason to know and was not bound to anticipate that his brother would conceal the agreed priority. He had a right to assume that the truth would be told and the actual facts be made known. He did not know that Wise would take the mortgage with any reliance upon his silence, and it is very certain that Wise did not, but relied upon and was deceived by the silence of Richard alone. If Wise had given Harvey an opportunity to speak under conditions which made it his duty to do so, a very different situation would be disclosed, but here we are asked to hold that knowledge by Harvey that Richard's mortgage was about to be assigned imposed upon him the duty of seeking out the new assignee and warning him, and that his non-performance of that duty would be justly relied upon by such assignee. That, I think, is going quite too far. The party asserting such an estoppel should at least put his adversary consciously in the wrong, and the facts found in this case are entirely consistent with honesty of action and of purpose on the part of Harvey.
There is a further claim made in behalf of the appellant that Wise before the assignment to him became the equitable assignee of Richard's mortgage as it was to be given by the mortgagor and so no change in its terms or lien was possible without the assent of Wise. There are no facts on which that contention can stand. Richard made a contract with Wise in January, 1870, for the purchase of the latter's farm. The conditions of that contract are not disclosed. It is not shown that at that date Richard Harvey had arranged to sell their farm or take any mortgages and there is an utter absence of proof that Wise had agreed to accept such a mortgage, or that Richard had promised to furnish it. All that we know is that on the succeeding first of April, Richard "expected" to use his mortgage in the payment of Wise. Out of that bare expectation and in the absence of further facts it is impossible to construct a theory of equitable assignment.
The further objections to the judgment as against the personal representatives and a legatee of the estate, of the guarantor of plaintiff's mortgage are sufficiently answered by the opinion of the General Term.
The judgment should be affirmed with costs.
All concur.
Judgment affirmed.