Hovey v. Hill

By the Court —

Mullin, P. J.

Upon the evidence in this case the referee was justified in finding that the mortgage which is the subject in controversy in this suit was not trans- . ferred to Mrs. Loveridge until after the filing of the notice of lis pendens in the creditor’s suit brought by this plaintiff against Ball and al., to set aside the conveyances covered by the mortgage in question to Lewis O. Hill, as fraudulent and void as against the creditors of Milo W. Hill.

The questions to be decided are: Was the Us pendens constructive notice to Mrs. Loveridge of the facts alleged in the complaint as to the fraudulent character of the dealings between the defendants in the suit in reference to the property covered by the mortgage, or was it constructive notice that the title of the mortgagor was fraudulent and void as against the plaintiff, a creditor of Milo W. Hill ? If not, then did Mrs. L. have actual notice of the fraudulent conduct of the defendants in that action, or such notice as should have put her on inquiry as to the bona fides of the dealings of the defendants in relation to the land covered by the mortgage, or of the title of the mortgagor to the said premises.

. In England and in this State prior to 1823, the mere commencement of a real action in the court of law or filing a bill in equity affecting the title to land were notice to all the world; and every person acquiring title to the land to which the action at law or suit in equity related, subsequent to the commencement thereof, took it charged with notice of the suit and of the matters charged in the bill of complaint in. regard to the said land. (Murry v. Ballou, 1 J. C. R., 566, 577; Adams’ Equity, 324, note 2; Griffith v. Griffith, 1 Hoffs. Ch. R., 153; Parks v. Jackson, 11 Wend., 442; Houghton v. Slade, 22 Barb., 161.)

In 1823 the legislature of this State (Laws of that year, chap. 182, § 11), required in order to charge persons not parties to a suit in equity, with notice of its pendency, that the complainant should file with the clerk of the court a notice of the pendency of the suit, containing the title of the cause, the general objects of the action, and a description of the lands to be affected thereby.

This provision of the act of 1823, was incorporated into the Revised Statutes (vol. 2,103, 2d ed., § 48); it was adopted by the codifiers and forms section 132 of the Code of Procedure, modified in some respects, but it is not necessary now to consider these modifications.

The object of the creditor’s suit in which the lis pendens was filed was to set aside the conveyances to Lewis 0. Hill, from the daughters of Milo W. Hill, and from Lewis C. to Abbott, and from Abbott to Rowley, as having been made by the procurement of Milo W. for his benefit without consideration, and with the intent of cheating and defrauding his creditors.

The fact that such an action for such a purpose, and that the complaint contained these charges of fraud were made known by the plaintiff on the 8th June, 1865, being the day on which the Us pendens was filed. That suit was prosecuted to judgment declaring the conveyances fraudulent and void as against the plaintiff. The plaintiff did all that was required to perfect the Us pendens.

Mrs. L. must not only be held to have been charged with notice of the matters above mentioned, but she is bound by the judgment in that action. Section 132 of the Code above cited expressly provides that from the time of filing the notice the pendency of the action is constructive notice to a purchaser or incumbrancer of the property affected thereby, and every person whose conveyance or incumbrance is subsequently executed or subsequently recorded, shall be deemed a subsequent purchaser or incumbrancer, and shall be bound by all proceedings taken after the filing of such notice, to the same extent as if he were made a party to the action. Mrs. L., as owner by assignment of the mortgage in question, is an incumbrancer and therefore within the terms of the statute. She took the mortgage, subject to all equities existing against it in favor of the mortgagor against the mortgagee, but not to the latent equities of the mortgagor’s creditors. (Westfall v. Jones, 23 B., 9 ; 7 Paige, 316; 2 J. Ch., 512; 2 J. C. R., 442.) The equities of the mortgagor if any could have been ascertained by inquiry. But we cannot say that the assignee could have ascertained who were creditors, nor that he could have obtained the information if he had. (2 J. C. R., 442.) But the assignment did not infuse into the mortgage any additional validity. If it was void in the hands of the assignor for fraud or want of consideration, it was equally invalid in the hands of the assignee.

Upon the facts found by the referee (and of their correctness, I entertain no doubt) the mortgage was not a valid security for any purpose in the hands of Abbott, or of Lewis O. or Milo W. Hill. Lewis took the title io and held the land in fraud of Milo’s creditors. He never had a particle of equitable interest in it. Ho interest was intended to pass to Abbott. He was the mere conduit to transmit the nominal legal title to such other person as shoidd purchase of Hill.

The mortgage given by Rowley belonged to Milo, who was the real owner of the land, and therefore entitled to its proceeds. Abbott in assigning to Mrs. L. the mortgage transferred just such interest as Milo W. had in it against his creditors; that was just nothing whatever. Had Mrs. L. been a bona fide purchaser for value without notice, she would have held the mortgage, discharged of all equities of the creditors, but it is obvious she did not pay value, and it is found that she had notice of the invalidity of the mortgage and of the rights of the creditors of Milo W. when she purchased. (Seymore v. Wilson, 19 N. Y., 417; 3 Barb. Ch., 451; Carter v. Griswold, 3 Edw., 364.)

I have not stopped to consider the question whether amortgage gives to the holder such an interest in the land covered by it as to charge such holder with notice, by lis pendens, as it seems to me too plain for argument.

I am in favor of affirming the judgment with costs. Judgment affirmed.