Opinion
Decided January 3d 1941.
1. Complainant mortgagee delivered his mortgage to the register for the purpose of having it recorded as a deed. It was in fact so recorded. Subsequently judgments, later assigned to respondent, were recovered against the mortgagors and duly entered in the Circuit Court. Held, the lien of the mortgage is subsequent to that of the judgments.
2. The recording of an instrument in its proper book is fundamental to the entire idea and scheme of constructive notice through the records.
3. R.S. 46:17-2, 46:17-3.1 and 46:17-4 relating to the recording of mortgages, are controlling under the circumstances of this case. A.M. Krantz Co. v. Kort, 109 N.J. Eq. 150, distinguished.
Appeal of Thomas Hadfield.
On appeal from an order of the Court of Chancery advised by Vice-Chancellor Stein, who filed the following opinion:
"An appeal having been taken from the order made in this cause, this memorandum is now filed.
"This matter was disposed of by me on September 4th, 1940, when, by letter sent to counsel for the parties, I made known my conclusion that the mortgage had been improperly recorded and did not constitute notice to the Mentzes, holders of the judgments and that those judgments are ahead of the mortgage. On September 5th, 1940, I advised an order in accordance with my conclusion, by which order the petition of Thomas Hadfield was dismissed and the special master in partition was directed to pay to the respondent Joseph M. Mentz the sum of $421.95, the amount in controversy.
"The controversy arises in a suit for the partition of real estate and involves the question of priority between a certain mortgage held by the petitioner, Thomas Hadfield, and two judgments recovered by Mary Mentz and by her assigned to the respondent Joseph A. Mentz. By the decree for sale entered upon the consent of all the parties in interest, it was decreed that the one-tenth interest and estate of the defendants Charles Hadfield and Agnes Hadfield, his wife, are subject to the lien of a mortgage dated October 31st, 1933, held by the complainant Thomas Hadfield, in the sum of $300, upon which mortgage there was due on the date of the reporting master's report the sum of $415.95, and further that said one-tenth interest and estate are subject to the lien of a certain judgment recovered on July 29th, 1936, by the defendant Mary Mentz against the said Charles Hadfield and Agnes Hadfield in the Essex County Circuit Court in the total sum of $12,295.71, together with interest, and to the lien of another judgment recovered on July 16th, 1935, by Mary Mentz against said Charles Hadfield and Agnes Hadfield, in the Essex County Circuit Court for $60.73, both of which judgments were assigned to Joseph A. Mentz. Said decree of sale recited that as to the liens of said mortgage and the two judgments no determination as to priority was being made, and this because the judgment creditor claimed priority for said judgments over said mortgage by reason of the fact that the mortgage was recorded as a deed, such claim of priority being disputed by the mortgagee Thomas Hadfield. In order to facilitate an early sale of the real estate the matter of the disputed priority was by the consent of the disputants reserved and the selling master was directed to bring into court the moneys arising from the sale of the share or interest of the judgment debtors Charles Hadfield and Agnes Hadfield. After sale and confirmation the proceeds were distributed amongst the parties entitled thereto, the master retaining, as ordered by me, out of the one-tenth share of Charles Hadfield and Agnes Hadfield (the judgment debtors) the sum of $421.95 to abide the determination of priority between the mortgagee and the judgment creditor. Thereafter the mortgagee brought the matter on before me by petition and notice. The judgment creditor presented and filed his affidavit from which it appeared that the first of his judgments was entered on July 16th, 1935, and the second on July 29th, 1936, that both judgments were entered in the Essex County Circuit Court and became on their respective dates of entry liens against the real estate sold in partition. By that affidavit it also appeared that prior to the entry of the two judgments the judgment debtors had executed and delivered to the petitioner a mortgage for $300, dated October 31st, 1933, and encumbering the mortgagors' undivided one-tenth interest in the real estate in question and that such mortgage was on June 27th, 1934, lodged with the register of Essex county for the purpose of being recorded as a deed and was, in fact, recorded as a deed the same day. By that affidavit the judgment creditor disclaimed all notice of the petitioner's mortgage. At the time of argument it appeared from a certified copy of the mortgage in evidence that the same had been recorded in the Essex county register's office as a deed in Book P 87 of Deeds for Essex county at pages 267-268. However, it is insisted that it mattered not in what book the mortgage was recorded if, in fact, it appeared in any of the record books in the register's office. The mortgage in question is in the common form and contains the usual defeasance clause and the ordinary attributes of a mortgage. It was not disputed that the instrument had been lodged with the register to be recorded as a deed. I had before me therefore two uncontroverted facts (1) that the mortgage has been delivered to the register for the purpose of being recorded as a deed and (2) that it in fact was so recorded.
"The matter is controlled by the 1937 Revised Statutes 46:17-2, 46:17-3.1 and 46:17-4. The first of those sections provides that mortgages or defeasible deeds in the nature of mortgages shall be registered in abstract form in a book provided for that purpose. The third of those sections provides for the recording of such instruments in full `in the book provided for the registry of mortgages.' The second section provides that every mortgage or conveyance in the nature of a mortgage for lands `shall be void and of no effect against a subsequent judgment creditor * * * unless such mortgage shall be * * * recorded, either by registry as hereinbefore provided or by recording in full, or lodged for that purpose with the county recording officer of the county in which such lands are situated, at or before the time of entering such judgment * * * provided nevertheless, that such mortgage as between the parties and their heirs shall be valid and operative.' This statute is substantially the same as section 22 of the former Mortgage act, R.S. 1877 p. 706 and Comp. Stat. p. 3414 § 22.
"In Kline v. McGuckin, 24 N.J. Eq. 411, this court considered an instrument which was an absolute conveyance on its face and was recorded as such but which was subject to an oral agreement for defeasance. In holding that the act to register mortgages did not apply, this court said (at p. 414) that if the defeasance had been in writing it is undeniable that the instrument, recorded as a deed, would be postponed to the liens of later date, amongst which later liens was a judgment.
"The matter of the misrecording of a mortgage was presented directly to Chancellor Runyon in the case of Patsons v. Lent, 34 N.J. Eq. 67. That was a suit for the foreclosure of a real estate mortgage and it appeared that the mortgage there sued on was not recorded in the records of mortgages but in the records of assignments of mortgages. In dismissing the bill the court said: `That the record of the mortgage in suit was not constructive notice to the company, there can be no doubt. The mortgage was, as before stated, recorded in the records of assignments of mortgages, and nowhere else. It was the complainant's business to see to it that it was properly recorded. Recording it in the records of assignments of mortgages was a nullity so far as notice was concerned.'
"The recording of an instrument in its proper book is fundamental to the entire idea and scheme of constructive notice through the records. One wishing to inform himself as to what mortgage liens encumber a parcel of real estate need do no more than examine the books containing the registered or recorded mortgages. He should not be and is not required to examine the records of deeds or other instruments. It is contended by petitioner's counsel that constructive notice arises no matter what be the book in which the mortgage is copied provided it be any book kept by the register. If this position were tenable, then a real estate mortgage would be effectively recorded if copied into the book of chattel mortgages or conditional bills of sale or releases or discharges of mortgages. Similarly, would a deed be constructive notice of ownership if recorded in any of these or other record books. That has not been the understanding since the earliest of our recording acts.
"Petitioner's counsel refers to R.S. 46:21-1 in which it is provided that any instrument enumerated in R.S. 46:16-1 which is duly recorded or lodged for record constitutes notice to all subsequent judgment creditors, purchasers and mortgagees. Counsel also refers to the case of A.M. Krantz Co. v. Kort, 109 N.J. Eq. 150, where that statutory section is considered in comparison with section 22 of the former Mortgage act. It will be noted that under the Conveyance act the enumerated instruments furnish constructive notice only if they have been `duly recorded.' No instrument is `duly recorded' unless copied into the appropriate record book. That was not the case here and the cited section of the Conveyance act has no application. Nor is the Krantz Case in point, for there the instrument brought into question was on its face an absolute deed and was recorded as such. There the instrument was `duly recorded' and the Conveyance act was held to apply. The court there did not have before it the circumstance here present, that of an instrument in fact and in form a mortgage but misrecorded as a deed.
"I regard the misrecording of this mortgage as a nullity, so far as it concerns the subsequent judgment creditor. The reserved fund of $421.95 is the property of the judgment creditor."
Messrs. Ruback Albach, for the appellant.
Mr. Walter Goldberg, for the complainants.
The order appealed from will be affirmed, for the reasons stated in the opinion delivered by Vice-Chancellor Stein in the Court of Chancery.
For affirmance — THE CHIEF-JUSTICE, CASE, BODINE, DONGES, HEHER, PERSKIE, PORTER, DEAR, WELLS, WOLFSKEIL, RAFFERTY, HAGUE, JJ. 12.
For reversal — None.