Unknown County MI Archives Court.....Thompson, Vs Mack 1837
************************************************
Copyright.  All rights reserved.
http://www.usgwarchives.net/copyright.htm
http://www.usgwarchives.net/mi/mifiles.htm
************************************************

File contributed for use in USGenWeb Archives by:
Deb Haines http://www.genrecords.net/emailregistry/vols/00003.html#0000719 August 9, 2008, 6:51 am

Source: Cases In Chancery
Written: 1837

CASES IN CHANCERY.

Thompson v. Mack and others.

Recording laws: Priority as between grantees. Where a party claims priority 
under or by virtue of the statute regulating the registry of deeds and 
mortgages, he must show a compliance with its provisions in order to entitle 
him to such priority.

Mortgage by deed absolute in form, record of. Under the code of 1833, where a 
deed absolute in form was shown by contemporaneous writing to be only a 
mortgage, it should have been recorded as a mortgage; and if recorded as a 
deed, the record would not give it priority over a prior unrecorded mortgage. 
(a.)

Once a mortgage always a mortgage. Where a deed absolute in form was given to 
secure a debt, and the grantee at the time gave back an agreement to reconvey 
when the debt should be paid, but this agreement was not; recorded, and the 
deed was recorded as a deed and not—as the statute required—as a mortgage; and 
the grantor, to obtain further credit, afterwards gave up the agreement to 
reconvey, and the grantee sold the land: Held, that the deed having originally 
been a mortgage did not cease to be such on the surrender of the agreement, 
and that the deed not having been properly recorded, the subsequent grantees 
could not claim priority over a mortgage duly recorded which the first grantor 
had given after conveying as above stated. (b.)

This was a bill to foreclose a mortgage, and stated that the complainant, 
August 11, 1830, purchased a quantity of drugs and medicines to the amount of 
$197.23 of the firm of Lawrence, Keese & Co., of the city of New York. That 
afterwards, and before the goods were received, it was agreed between the 
complainant and Mack that the latter should take the drugs and medicines and 
pay for them; and that Mack, on the 14th April, 1831, gave a mortgage to the 
complainant on lot number fifty-seven, in the village of Pontiac, to indemnify 
him against the payment of the debt due to Lawrence, Keese & Co., which 
mortgage was afterwards recorded, July 24, 1833; that Mack had neglected to 
pay Lawrence, Keese & Co., who had sued the complainant for the price of the 
drugs and medicines, and recovered a judgment against him of $265.47 damages, 
and $8 costs, which the complainant had paid; that April 9, 1833, Mack 
conveyed, by an absolute deed, the lot mortgaged (together with another lot in 
Pontiac) to the defendant Chamberlain, whose deed was recorded July 20, 1833, 
four days previous to defendant's mortgage. The bill charged that the deed 
from Mack to Chamberlain, although absolute on its face, was intended by the 
parties to operate as a mortgage only, and was given to secure a debt due from 
Mack to Chamberlain; that Chamberlain had bound himself by bond, or other 
writing, to re-convey the premises on the payment of the debt, and that such 
bond or writing for a re-conveyance was not recorded by Chamberlain with his 
deed; it further states that June 29, 1834, Chamberlain conveyed the lot to 
the defendant Keeney, who, June 3, 1834, conveyed it to the defendants Draper 
and Richardson; and Chamberlain, Keeney, Richardson and Draper, were severally 
charged with notice of complainant's mortgage at the time of their respective 
purchases.

The defendants put in several answers. Mack, in his answer, admits the 
purchase of the drugs, etc., but not till after they had been received by 
Thompson, and put into Mack's store for sale; states that Thompson put a clerk 
in the store to sell the goods; that the clerk sold a considerable portion of 
them, and used part of the money, the proceeds of the sales, for his private 
purposes; that Mack aided in selling the goods, etc.; that April 14, 1831, 
Mack purchased of Thompson the drugs unsold, and the debts due for those which 
had been sold, and agreed to indemnify Thompson against the debts due by him 
to Lawrence, Keese & Co., and to pay the $32 for transportation, and that Mack 
and wife, on the same day, executed the mortgage mentioned in the bill, as 
indemnity to Thompson; that the mortgage was not recorded until the time 
stated in the bill; that, December 10, 1832, he paid to Thompson $56.98, to be 
applied on the mortgage, and took receipt to that effect; that Thompson is 
also indebted to him in the sum of $91 for services, and also owes him for 
rent, and on other accounts, as he believes, to the amount of the debt; denies 
any knowledge of the judgment against Thompson; admits the deed to 
Chamberlain, of April 9, 1833, and its record, and that he took from 
Chamberlain a paper, not under seal, in which Chamberlain agreed to re-convey 
the lots, if he should in a short time (could not state how long) pay to 
Chamberlain the amount due him, which was about $150; that he, Mack, being in 
embarrassed circumstances, shortly afterwards applied to Chamberlain for 
further credit, and to obtain such credit he gave up the agreement to re-
convey, and surrendered all right, title, claim and equity of redemption in 
the premises; that he did not tell Chamberlain of Thompson's mortgage, and 
does not believe that Chamberlain knew of that mortgage; that the reason that 
two lots were deeded to Chamberlain was that there was an incumbrance of dower 
on one of them; that Keeney bought the lots fifty-seven and fifty-two of 
Chamberlain; that he never informed Keeney, and does not believe he knew of 
Thompson's mortgage at the time he purchased the lots; that the sale to Keeney 
was not for the benefit of Mack or his family.

Chamberlain, in his answer, admits that Mack was indebted to him, and gave him 
a deed of lots numbers 57 and 52, April 9, 1833; denies that he had any notice 
of Mack's mortgage to Thompson. Further states that when Mack gave up the 
written agreement he released and surrendered all right to redeem; that he 
paid Mack the full value of the premises, encumbered as they were by a claim 
of dower. That Keeney paid the full value for the lots; that at the time of 
making the deed to Keeney, he, Keeney, had no notice of Thompson's mortgage, 
to his knowledge. Keeney, in his answer, denies any knowledge of Thompson's 
mortgage at the time he purchased from Chamberlain, and until he had sold to 
Draper and Richardson; admits the deed from Mack to Chamberlain, of April 9, 
1833, and deed from Chamberlain and wife to him, June 26, 1834. Denies all 
knowledge of any agreement other than the deed from Mack to Chamberlain, until 
after he sold to Draper and Richardson; that he cannot state the exact amount 
paid by him for the lots; that he gave full value, and purchased them for 
himself, etc. Admits the sale by him to Draper and Richardson, June 3, 1835, 
and their mortgage, etc., to him.

Draper and Richardson, in their answer, admit that they had notice of 
Thompson's mortgage, either before or after their purchase, but do not 
remember which.

R. Manning, for complainant.

The deed from Mack to Chamberlain, although absolute on its face, is 
nevertheless a mortgage. It was given to secure a debt to Chamberlain, who was 
to re-convey the premises when Mack paid him.

As a mortgage, the defeasance, or agreement to re-convey, should have been 
recorded with the deed, in the record of mortgages, as the statute requires. 
(Rev. Laws of 1833, pages 283 and 284, § 3.) By the registry of it as a deed, 
instead of a mortgage, it did not, as a mortgage, gain priority over the 
complainant's mortgage. (Dey v. Dunham, 2 Johns. Ch., 182; Grimstone v. 
Garter, 3 Paige, 421; James v. Morey, 2 Cowen, 246.) The registry of it, as a 
deed, availed nothing. The registry of a legal instrument does not change the 
nature or effect of the instrument. It does not change a mortgage into a deed, 
or a deed into a mortgage. Its only effect is to give priority to legal 
instruments which have been properly recorded. Whether, therefore, the 
defeasance was delivered up to Chamberlain before or after the complainant's 
mortgage was recorded, if after the deed had been recorded, cannot alter the 
case, for it could not make a good record out of what was before a bad record, 
or no record at all. From the testimony of Chamberlain it appears the 
surrender of the defeasance was not intended to turn the mortgage into an 
absolute deed. He considered the deed afterwards, as he had done before, as 
security for the debt Mack owed him. The complainant's mortgage was recorded 
long before Keeney purchased of Chamberlain, and as Chamberlain's deed is not 
good, either as a deed or mortgage, against the complainant's mortgage, 
Keeney's deed certainly cannot be. If there was any doubt that Chamberlain's 
deed continued to be a mortgage after the defeasance was surrendered, and it 
should be insisted the defeasance was given up to Chamberlain before the deed 
was recorded, the testimony is too vague and uncertain upon that point to take 
away the common law rights of the complainant. The defendants, when seeking to 
gain an advantage through the registry law, should clearly show themselves 
entitled to it by a compliance with the law.

B. F. H. Witherell, for the defendant.

Chamberlain was a purchaser without notice. (See 2 Ves., 453; 3 Ves., 221; 4 
Ves., 383; 9 Ves., 24.)

Chamberlain took up the writing of defeasance before his deed from Mack was 
recorded; when that instrument was taken up, if not before, his deed from Mack 
became absolute.

By the writing or article to Mack from Chamberlain, Mack was to have but sixty 
days to redeem; the deed was then absolute.

Keeney was a purchaser for a bona fide consideration, without 
notice, and if Chamberlain had notice Keeney will be protected. (Demarest v. 
Wyncoop, 3 Johns. Ch., 129; Jackson v. Given, 8 Johns., 141; Laws 1838, p. 
283, sec. 2, p. 279, sec., 2.)

Draper and Richardson are protected as well as Keeney, under the principle 
that a purchaser with notice to himself from one who purchased without notice 
may protect himself under the first purchaser. (Bumpus v. Platner, 1 Johns. 
Ch., 213.)

The Chancellor.—From the facts stated in the bill, answer and testimony, there 
can be no doubt that the conveyance from Mack to Chamberlain was a mortgage, 
and a mortgage only, in its inception; and it is evident that it so continued, 
and was so regarded until the transactions were closed by the payment of the 
amount due to Chamberlain, and the conveyance to Keeney.

It is admitted to have been so in the first instance. 

Chamberlain, in his testimony, says that the instrument of defeasance was 
given up, so that the estate conveyed should remain as security for further 
advances.

The account with Mack was not closed at that time.

Chamberlain says he should, at any time, have re-conveyed to Mack upon payment 
of the amount due, and an allowance for his trouble in securing his debt.

He did actually convey the premises to Keeney, the father-in-law of Mack, upon 
payment of the advances made by him, and the charges for his trouble.

The statute (Laws of 1833, page 284, section 3) provides that "every deed 
conveying real estate, which by any other instrument or writing, shall appear 
to have been intended as security, in the nature of a mortgage, though it be 
an absolute conveyance in terms, shall be considered as a mortgage and be 
deemed and adjudged to be liable to be registered as other mortgages are by 
virtue of this act; and the person or persons for whose benefit such deed 
shall be made, shall not have the advantage given by this act to mortgages, 
unless every instrument and writing operating as a defeasance of the same, or 
explanatory of its being designed to have the effect only of a mortgage or 
conditional deed, be also herewith registered in substance as in case of 
mortgages."

The deed of Chamberlain with the writing or agreement to Mack ought to have 
been registered as a mortgage. The recording of that deed, as a deed, though 
the record was prior to that of Thompson's mortgage, can give it no priority 
over that mortgage. (See Dey v. Dunham, 2 Johns. Ch., 182; Grimstone v. 
Carter, 8 Paige, 421.)

Four days after the record of the deed from Mack to Chamberlain, Thompson 
recorded his mortgage and thus gave notice of its existence.

Keeney claims, however, to have been a purchaser without notice.

But if in fact the transactions between Mack and Chamberlain constituted the 
instrument a mortgage and no more, the record of the mortgage of Thompson 
should be regarded as a sufficient notice to a subsequent purchaser.

The fact of a subsequent sale, especially while the mortgage of Thompson was 
standing upon the record, would not change the character of the transaction 
between Mack and Chamberlain. It would defeat the salutary provisions of the 
statute to permit it to be evaded by a sale to another when the party claiming 
(as in this case Thompson had done) had placed his mortgage upon record.

The mortgage to Thompson being of prior date, without reference to the 
registry laws would have priority; the defendants claim priority by virtue of 
the provisions of the statute. In order to entitle themselves to such 
priority, they must conform to its terms, which has not been done.

Mack sets out in his answer that the mortgage is nearly or quite paid. This 
will render it necessary that it be referred to a master to examine and report 
the amount due upon the mortgage, after allowing all proper credits and 
offsets, and to report to this court with convenient speed; and further 
directions are reserved until the coming in of the master's report.

----------------------
(a.) See the statute under which this decision was made in the chancellor's 
opinion. The provisions of the revised statutes of 1846, which are now the law 
on this subject, are considerably different, and the question may perhaps at 
some time arise whether this decision is applicable to them. The New York 
cases, cited in the opinion, were based upon peculiar provisions of statute.

(b.) The chancellor appears to hold that this would be the law notwithstanding 
the subsequent grantees bought in good faith, and without notice of the 
defeasible character of the first deed. Indeed, he says that "if in fact the 
transactions between Mack [the first grantor and mortgagor] and Chamberlain 
[the grantee in the first deed] constituted the instrument a mortgage and no 
more, the record of the mortgage of Thompson should be regarded as a 
sufficient notice to a subsequent purchaser." This would be to make the 
protection of the registry laws to a subsequent purchaser depend upon matters 
of fact not brought home to his knowledge; and this case would then be an 
exception to the general rule, that one who, in searching the records, finds a 
deed apparently conveying all the grantor's interest, is not bound to search 
for conveyances by the same grantor afterwards recorded, but of which he has 
no actual notice. The statutes of 1846 (Camp. Laws, § 2751) render a 
defeasance not recorded of no effect except as against the maker thereof, his 
heirs or devisees, and persons having actual notice thereof.

For illustrations of the maxim "once a mortgage always a mortgage," see 
Comstock v. Howard, Wal. Ch., 110; Thurston v. Prentiss, 1 Mich., 193; Batty 
v. Snook, 5 Mich., 231.

Additional Comments:
CASES DETERMINED IN THE COURT OF CHANCERY FOR THE STATE OF MICHIGAN
BY ELON FARNSWORTH, Chancellor 

File at: http://files.usgwarchives.net/mi/unknown/court/thompson32gwl.txt

This file has been created by a form at http://www.genrecords.org/mifiles/

File size: 15.9 Kb