Judson v. . Dada , 79 N.Y. 373 ( 1880 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The equity of the defendants McMahon and Green to have the land of the defendant Dada first sold for the payment of the plaintiffs' mortgage, did not arise out of any contract or dealing between them and Dada, but was derived wholly through their grantor Miss Avery. By reason of the assumption of the payment of the plaintiffs' mortgage by Dada and Morrill in the conveyance to them by Miss Avery, of a part of the mortgaged premises, she became equitably entitled (in the absence of any defense against the covenant as between her and them,) to have the land conveyed by her to them first sold, in case of a foreclosure of the mortgage, in exoneration of the residue of the mortgaged premises retained by her. Her subsequent grantees of this residue succeeded to whatever equitable rights she had under this covenant in respect to the land conveyed by her, but nothing more. They could not derive through her any other or greater equity than she herself possessed at the time of her conveyance to them. They never had any equity except such as then attached to the land conveyed, and passed as incident to the conveyance. They took her covenant that the land she conveyed to them was free from incumbrances. The plaintiffs' mortgage was at the time a recorded lien upon all the property. At the same time the covenant between Miss Avery and Dada and Morrill, which was also on record, apparently, as between Miss Avery and Dada and Morrill, constituted the land conveyed to them the primary fund for the payment of the mortgage. It may be supposed, though the fact does not appear in this case, that McMahon and Green relied upon this covenant as well as upon the covenants of Miss Avery with them, for their protection. But long before Miss Avery's conveyance to them, and while she was still owner of the land afterwards conveyed to them, she had in substance released Dada and Morrill from their assumption of the mortgage, to the extent of $273.32, and as between her and them her land was primarily chargeable in equity with that portion of the plaintiffs' mortgage, and their's was chargeable only with the residue. I am unable to comprehend upon what principle her subsequent grantees could become entitled to any greater equity than she had. If in consequence of her dealings with Dada and Morrill the primary fund for the payment of the mortgage had been diminished and the land afterwards conveyed by her to McMahon and Green had consequently become deprived of its protection as to a portion of the recorded mortgage, their remedy was against Miss Avery upon her covenant, — and not against the defendant Dada to revive a liability from which he and his land had been discharged by their grantor before her conveyance to them.

Stress is laid upon the fact that the covenant of Dada and Morrill was contained in a deed upon record, but I cannot see that this gives the respondents any greater rights than they would have if the covenant had been contained in a separate instrument of which they had notice. It was equally subject to any defense which might exist as against Miss Avery, at the time she conveyed.

It is also urged that Miss Avery's agreement to credit, as a payment on the mortgage, the amount of the rebate for deficiency in the quantity of land, was not on record, and therefore was not binding upon her subsequent grantees for value without notice. This agreement was not within the recording act. It might as well be contended that an unrecorded release of part of a mortgage debt or of part of mortgaged premises by mortgagee to mortgagor was not binding upon a subsequent assignee of the mortgage without notice. The transaction was not a conveyance of real estate and did not come in any aspect within the recording act, and putting it on record would not have been notice to McMahon and Green. The case presents a mere conflict of equities between the defendant Dada, who claims that his land was partially discharged from his assumption of the $4,500 mortgage, and the respondents, who claim that they bought relying upon that assumption, or are entitled to the benefit of it. The equities of the appellant being the first in point of time should prevail. It is impossible I think to hold that one who purchases part of mortgaged lands, and agrees with his grantor to, assume the whole mortgage in exoneration of the residue of the lands, cannot discharge his land from the consequences of that assumption, by agreement with his grantor, made while still the owner of the residue of the land subject to the mortgage, and that a subsequent grantee of such residue of the land can claim the benefit of the assumption, notwithstanding such discharge.

The case would be quite different if the discharge had been given after the grantor had sold the residue of the land to a party who had relied upon the assumption. It might then be beyond the control of the grantor, the rights of third parties having attached.

The question whether the personal liability incurred by the first grantee to the holder of the mortgage, by assuming the payment of it, could be discharged by agreement between the grantor and grantee, is not involved in this case. It depends upon different considerations. But even that liability depends upon the nature of the dealing in which the assumption is made, and is subject to any condition or defeasance attached thereto. (Garnsey v. Rogers, 47 N.Y., 233.) And if the consideration for the assumption fails, or there is a good defense to it as between the parties, it is difficult to say that it can nevertheless be enforced by the mortgagee. A cotemporaneous agreement on a separate paper will qualify or control it even as to the mortgagee. (Flagg v. Munger, 9 N.Y., 583.)

It is further claimed on the part of the appellant that the deed itself in which the assumption is contained, disclosed enough to put the respondents on inquiry and charge them with constructive notice of the release by Miss Avery of the appellant's covenant to the extent of the value of the land which was deficient. It appeared on the face of the deed that the consideration of the assumption was the conveyance by Miss Avery to Dada and Morrill of a piece of land, part of the mortgaged premises, supposed to contain eighty acres and that it was agreed between the parties that if the quantity was less or more than eighty acres the excess or deficit should be paid for at the rate of thirty dollars per acre. Whoever purchased the land relying upon the assumption was thus notified of the consideration thereof, and that if the land conveyed to Dada and Morrill fell short, and Miss Avery failed to pay Dada and Morrill for the deficiency, they would be equitably entitled to be relieved from their undertaking to pay the $4,500 mortgage to the extent of the agreed valuation of such deficiency, and Miss Avery's remaining land would be subject to that amount, and the question is presented whether under these circumstances the subsequent purchasers from Miss Avery, with notice of this infirmity in the assumption, or that it was subject to the contingency referred to, were not bound to inquire whether any deficiency had been discovered and ascertained, and if so, whether it had been paid for, as agreed. Such an inquiry would have disclosed the fact that a deficiency had been ascertained and settled for by relieving Dada and Morrill from their assumption to that extent, and the point arises whether upon the principle recognized in Williams v. Brown (15 N.Y., 354), the respondents are chargeable with constructive notice of these facts. We do not consider it necessary to determine this point, as it is sufficient for the decision of the case that the grantees of Miss Avery succeeded only to such equities as she actually had at the time of her conveyance to them, without regard to the question of notice, and that they can claim no greater equities than she could have claimed, had she still continued to be owner.

That part of the judgment or decree which is specified in the notice of appeal to the General Term should be reversed. The judgment of foreclosure and sale should stand, and judgment be rendered in favor of the appellant on the question of the order in which the mortgaged premises shall be sold.

The plaintiffs costs on this appeal should be paid out of the proceeds of sale, and the appellant Dada should recover his costs of the appeals to the General Term and to this court. The form of the judgment should be settled on notice.

All concur, except ANDREWS, J., taking no part; DANFORTH, J., concurring in result.

Judgment accordingly.