The Howard Insurance Company against Halsey and others, 1 Seld. Notes 82

The holder of a part of mortgaged premises, under an unconditional grant from the mortgagor, has an equitable right to' have the residue of the premises applied in the first instance to the payment of the mortgage debt. Subsequent grantees of the residue of the mortgaged premises take the place of the mortgagor, in this respect, and are bound by the same equity.

The mortgagee, however, is not bound at his peril to ascertain the existence of such equities arising subsequent to his mortgage; and if, without notice of any such equities, he releases from the lien of his mortgage that part of the mortgaged premises which, as between the mortgagor and his grantees, ought to be first charged with the payment of the mortgage debt, he does not thereby lose his lien upon the part not released. The recording of conveyances, subsequent to his mortgage, is not sufficient to charge him with notice of the equitable rights of the grantees.

Nor, as it seems, does possession by the grantees, in pursuance of such conveyances, charge him with such notice. Notice to an attorney, in order to charge the principal, must be received by him when engaged for the principal, in the same transaction to which the notice is sought to be applied. An attorney employed by a mortgagee to foreclose a mortgage, in making searches preparatory to such foreclosure, learned the existence of a conveyance of a part of the mortgaged premises by the mortgagor: those proceedings were abandoned without any actual foreclosure.

Held, that the information obtained by the attorney did not charge the mortgagee with notice of such conveyance, when subsequently applied to for a release of a part of the mortgaged premises. A person executing an instrument which refers to a deed is presumed to have notice of the contents of such deed and of the rights of the party holding under it, so far as they affect the rights of the party making the reference.

A release by the mortgagee of a part of the mortgaged premises, referred to a deed from the grantee of the mortgagor of another part of the mortgaged premises, and it was held, that such reference was sufficient to charge the mortgagee with notice of the contents of the deed referred to, and of the rights of the grantee under it.

Where such grantee had, as against the owner of the premises released, an equitable right to have the part released first applied in payment of the mortgage debt, and the value of the part released was sufficient for that purpose,—Held, that the release discharged the lands of the grantee having such prior equity, from the lien of the mortgage. (See 4 Sandf. 565; 8 N. Y. 271.)