
    Jane A. Townsend, as Sole Executrix, etc., of Randolph W. Townsend, Deceased, Respondent, v. Provident Realty Company of New York and Others, Defendants, Impleaded with Hamilton Bank of New York, Appellant.
    First Department,
    December 30, 1905.
    Mortgage — merger of lien when mortgagee takes title — presumption as to merger stated — second mortgage takes precedence on merger of ' prior mortgage — evidence.— declarations of owner at time of merger admissible against his assignee.
    The lien of a mortgage, as a matter of law, becomes merged in the realty when 'the mortgage and the title to the mortgaged premises vest in the same person, •unless it clearly appear that the merger is not intended.
    Hence, when the owner of a prior mortgage, on property on which there is a second mortgage, obtains title to the premises and it is shown that the title was so taken for the purpose of making the second mortgage the first, the lien of the prior mortgage is merged and the rights of a subsequent assignee of said • prior ..mortgage are postponed to the lien of the- second mortgage.
    The record pf the conveyances whereby such, merger is effected is notice to the' ..assignee of said merged'mortgagee. .
    
      It seems, that, though such merger takes place,.a subsequent assignment of the "' merged mortgage"gives the assignee a-lien, which, however, is subsequent to ■ the lien of a prior second mortgage not merged. )
    
      It seems, that a written statement made by" a corporation at a time when it held . said first mortgage and the legal title to the premises, which statement describes th'e premises as incumbered only by the second mortgage, is a declaration of an intention to merge the lien in the superior title which is admissible against the subsequent assignee of such merged mortgage,
    Houghton, J., dissented. ‘ ■
    Appeal by the defendant,, the Hamilton Bank of Hew York, from a judgment , of the Supreme Court in favor of the, plaintiff, entered in the office of the clerk of the county of Hew Y ork on the 7th day of July, 1905, upon the decision of the court, rendered after a trial at the Hew York Special Term. •
    
      Herman Aaron,- for the appellant.
    
      Harold Swain, for the respondent.
   Ingraham, J.:

This action was brought to foréclose a mortgage on certain real property in the city of Hew York, dated May 14,1900, and recorded in the office of the register of the city and county of New York on May 16, 1900. This mortgage was assigned to the plaintiffs testator on Sovember 13,1900, and recorded in the office of the register of the city and county of Sew York on Sovember 15,1900. When« this mortgage was executed and delivered there was an existing mortgage on the premises to secure the sum of $1,100, dated December 24, 1896, and recorded in the office of the register of the city, and county of Sew York on the 28th day of December, 1896. This latter mortgage was assigned to the Provident Realty Company by an assignment dated June 26, 1900, and recorded in the office .of the register of the city and county of Sew York on July 19, 1900. The Provident Realty Company thus being the owner of the first mortgage on the premises, acquired title to the mortgaged premises by deed dated November 25, 1901, which deed was duly recorded in the office of the register of the city and county of Sew York on Sovember 27, 1901. Subsequently on February 15, 1902, the Provident Realty Company assigned this mortgage. for $1,100 to one Levy by assignment dated February 15, 1902, and recorded in the office of the register of the city and county of Sew York on March 11, 1903, and thereafter Levy assigned this mortgage to the Hamilton Bank of Sew York. The trial court found that the Provident Realty Company, being seized of the mortgaged prop- • erty, took and accepted a conveyance thereof with the intention of merging the said mortgage in the fee of the mortgaged property in pursuance of an agreement made between the Provident Realty Company and the plaintiff’s testator that the said $1,100 mortgage, then a prior lien upon the premises, should be so merged. Thereafter the Provident Realty Company treated the $1,100 mortgage as merged in the fee ; and in August, 1902, before the execution and delivery of this $1,100 mortgage to Levy, the Provident Realty Company made and delivered to the Citizens’ National Bank its statement in whigh it set forth that the above-described mortgaged premises were incumbered only by the mortgage held by the plaintiff’s testator; and as a conclusion of law the court found that the said $1,100 mortgage became merged, in the fee of the premises described in the complaint, and that the interest, if any, of the Hamilton Bank of Sew York in the said premises, was subject and subordinate to the mortgage held by the plaintiff and decreed a foreclosure of that mortgage. Upon the judgment entered upon that-decision the Hamilton. Bank appeals.- .The only question is, whether the finding of the court that the $1,100 mortgage became . merged in the fee of the mortgaged premises was sustained by the ■ evidence.

It appears from -the evidence that this Provident Realty Company was a corporation organized by David Levy, he being the sole stockholder, except that one share of stock was issued to bach of the . directors of the corporation to enable them to qualify as such directors. Levy was -the president of the corporation and apparently used it for his own purposes. Levy being the owner of the real ' property subject to the $1,100 mortgage, executed a mortgage upon ' the. premises to the plaintiff’s testator’s assignor, and subsequently ’. conveyed the premises to the Provident Realty Company who then ■was .the owner,of the’ $1,100 -mortgage. The,evidence is, that it was explained to Levy that this conveyance was necessary to make the plaintiff’s mortgage the first mortgage upon the premises, and ■ that it was executed and delivered in consequence of the statement ■ made to him, that unless it was made and the mortgage merged in the fe.e, information would be given to the plaintiff’s testator that the mortgage which he held and which is now sought to be fore- • closed was’ a second mortgage. The siibsequent- assignment of the $1,100 mortgage to the assignor 'of the Hamilton Bank was without the knowledge and consent of the plaintiff and appears to have been delivered by David Levy as president of the . company to his brother . Emanuel M. Levy as security for moneys that Emanuel M, Levy had advanced to David Levy.. An examination of the record at the-time that this transfer was made would have disclosed the fact that the Provident Realty Company was the owner of the fee of the. mortgaged-premises, and also the $1,100 mortgagé, and that at that ' time the property was subject to- the lien of the mortgage, now under foreclosure. Notice ■ of these facts must be éharged to Emanuel M. Levy when he received the assignment of the mortgage from the Provident Realty Company, and to the Hamilton ■ Bank when it received the- assignment.' of the mortgage from . Emanuel M. Levy. Undoubtedly, as between the Hamilton Bank 'and the Provident Realty Company the transfer of this mortgage In Emánuel M. Levy made it a valid lien upon the property, but if the mortgage had actually been merged in the fee of the mortgaged premises it would leave the $1,100 mortgage a subsequent lien to the plaintiff's mortgage. There can -be no question but that upon the face of the record this $1,100 mortgage became merged in the ’realty when the mortgage and the title to the mortgaged premises vested in the same person. If, however, it had clearly appeared that it was not the intention to merge the mortgage in the realty such merger will not be 'effectuated, and it has been held that the intention that the mortgage should not be merged could be inferred where it clearly appears that it would be to the interest of the owner of the mortgage and the mortgaged premises that such merger should not take place. But still upon the face of the instrument the merger becomes operative as a matter of law unless it should appear that such was not the intention. This principle was enunciated by Lord Loughborough in Compton v. Oxenden (2 Ves. Jr. 264) where it -was said: “ It is a clear principle, both at law and in equity, that where there is a confusion of lights, where debtor and creditor become the same person, there * * * is an immediate merger,” but that equity will preserve the rights distinct according to the intent, express or implied. Wherever it is “more beneficial for the person entitled to the charge to let the estate stand with the incumbrance upon it than to take it discharged of the ■ incumbrance,” that circumstance will have a controlling influence in deciding on the implied intent.

This inference, however, does' not apply where there is express evidence to show that it was the intent of the owner of both the mortgage and mortgaged property that the mortgage should become. merged and extinguished where the title to the mortgage and the mortgaged premises vested in the same person. The case of Millspaugh v. McBride (7 Paige, 510) is a mere statemerit of this principle. The facts upon which that case was decided were that the prior mortgage was assigned to the owners of the realty for the purpose of protecting their title against the junior mortgage and was not, as against the junior mortgage, merged in the equity of redemption. “ It was, in equity, impossible for the prior mortgage or the equitable interest of the defendants therein, to unite with their legal title to the equity of redemption, by reason ,of the intermediate equity which the complainant had by virtue of big mortgage.” A different position is presented in this case, for here .the Provident Eealty Company -was the owner of the prior mortgage, and the real property was conveyed -to. it so that the mortgage held by it should be merged in the realty, and thus secure to the plaintiff’s mortgage the position of first mortgage. The assignment ' by the Provident Eealty Company to Emanuel M. Levy was actuj ally executed and delivered on March 11, 1903, and the assignment of this mortgage to the Hamilton Bank was on March 16, 1903, The; declaration of the Provident Eealty Company to the Central Mational Bank, which was admitted in evidence, was delivered to that bank between the 20th and the 25th of March; 1902, at the time that the -legal title to the $1,100 mortgage and- the mortgaged . premises was vested in the Provident Eealty Company, and was, therefore, a declaration as to the incumbrance upon this property made by the owner of the realty and the. mortgage at the time-when both were vested in the corporation making the declaration and it was clearly competent as characterizing the possession of the mortgage and the fee of the mortgaged property, and the intention of the corporation. This evidence is; not subject to the objection discussed and sustained in Merkle v. Beidleman (165 N. Y. 23). The declaration admitted in evidence in that case Was not' a declaration of an assignor of personal property, affecting the title to the property, but. was the declaration of the owner, of real property while in possession of it, characterizing its title, and is- evidence of’ its intention as to whether this mortgage had merged in.the realty. But assuming tliat this evidence was improperly admitted, the evidence' is ample to sustain the finding of the trial judge that the mortgaged premises wére. conveyed to the mortgagee fo'r the express / purpose of merging the $1,100 mortgage in the fee, and without this declaration the finding was sustained by ample evidence, in fact, by uncontradicted. evidence. '

The judgment appealed from should, therefore, be affirmed, with costs. .

O’Brien, P.. J., McLaughlin and Clarke, JJ., concurred; ■ Houghton, J-, dissented. - ‘

Judgment affirmed, with costs.  