Feltenstein v. Ernst

Scott, J.

This is an action to recover the deposit paid by plaintiff’s assignor upon a contract for the purchase from defendants of certain real property in the city of Hew York. The contract was dated Hay 15, 1905, and provided that the property should he conveyed, Subject to a first mortgage in the sum of Twenty-six thousand five hundred dollars ($26,500), bearing interest at the rate of five (5#) per cent per annum. Due Dec. 1st 1907.” This mortgage, as appears from the evidence, was an existing mortgage at the time the contract was made, having been executed on August 19, 1904, and recorded in the register’s office on the same day. By its terms it was to become due on December 1, 1907, and bore interest at the rate of five per cent per annum. It contained the usual interest, tax, assessment, insurance and receivership clauses, and, in addition thereto, a clause, commonly known as the Brundage clause, providing for the contingency of the imposition by the legislature of a specific tax on mortgages. This clause provided in substance that if, before the debt was paid, any law should he enacted reducing the taxable value of land by deducting therefrom any lien thereon, or changing the laws in relation to taxes on debts secured by mortgages or the manner of collecting such taxes, the mortgagors should pay to the mortgagee a sum equal to the tax or burden imposed by such law upon the holder of such bond and mortgage in addition to the interest provided to be paid by said bond and mortgage, unless the amount of such tax added to the said interest should exceed legal interest, or, unless payment of such tax by the mortgagors or owner of the land should he prohibited by law. If the tax added to the interest should exceed legal interest, or if payment of the tax by the mortgagors or owner of the land is prohibited by law, the bond and mortgage is to become due and payable thirty days after the enactment of the law. The *264additional amounts to be paid are to be regarded as interest. If any law be enacted under which, by the terms of this covenant, the mortgagors may become liable to pay an additional sum, they may, at their option, pay off the bond and mortgage upon giving three months’ notice. It is not to be denied that there is a possibility under this clause that, without any act or default on the part of the mortgagors, or the owner of the land, the interest on the mortgage may be increased beyond five per cent, or the due date may be advanced. The plaintiff contends, and the court below held, that this possibility avoided the contract and entitled the plaintiff to recover back the deposit paid by her assignor. The significant facts are that the mortgage was an existing instrument at the time the contract was made and that, in so far as the contract undertook to describe it, the description was accurate; for the mortgage did bear five per cent interest and was to fall due on December 1, 1907. The general rule respecting the purchase of land subject to incumbrances is that, if the purchaser has notice of the existence of the incumbrance and its general nature, he is chargeable with knowledge of the contents, terms and conditions thereof, and cannot avoid his purchase, no deceit or fraud having been exercised, because he did not acquaint himself with the particular terms of the incumbrance, and finds them to be different from what he supposed. Riggs v. Pursell, 66 N. Y. 193; Kingsland v. Fuller, 157 id. 510; Blanck v. Sadlier, 153 id. 551. The latter case is in some respects similar to the present. The action was, also, by a purchaser to recover back a deposit paid upon a contract for the sale of real property. The sale was agreed to be made “ Subject to a mortgage of $16,000 to be at five per cent having three years to run,” and no other or further statement or representation was made as to the time or conditions of the mortgage. It developed, upon examination, that the mortgage contained a clause requiring it to be paid in gold coin. In deciding against the plaintiff, the Court of Appeals used language that is peculiarly applicable to the present case, saying: In this case the land was the subject of sale and not the mortgage. The purchaser was notified of the ex* *265istence of the mortgage and its amount. He made no inquiry as to whether it contained any special terms. He purchased subject to the encumbrance entering into no personal obligation for its payment. * * *. Special clauses in mortgages are not infrequent * * *. It would not, we conceive, be a valid ground of objection on the part of a purchaser of land subject to a specific mortgage, wherein the contract did not set out such special clauses, that they were not disclosed at the time the contract was made, if there was no deceit or misrepresentation.” So it was said in Higgs v. Pursell, supra: “ This was a sale of premises held under a lease and the lease was referred to in the notice of sale, and hence the purchasers are chargeable with knowledge of the contents thereof. They are supposed to have examined the lease and made their bid in view of its provisions.” The point in these cases, as in the present, is that the purchaser agreed to take subject to a specific incumbrance of which he had notice. Presumptively, he had also knowledge of its terms. If he had not, he should have ascertained the terms, either by examination of the record, or by inquiry of the seller. All that the seller is required to do is to correctly describe the incumbrance, so far as he attempts to describe it at all. If he does this and tenders a deed subject to a mortgage answering the description in the contract, he has fulfilled his obligation. The contract of sale made no reference to any covenants in the mortgage, not even specifying that it contained, as it did, “ the usual covenants; ” so that no basis is provided for the application in plaintiff’s behalf of the maxim “ Expressio unius est exclusio alterius.” Undoubtedly, the purchaser. was entitled to rely upon the description of the mortgage in so far as the seller undertook to incorporate it in the contract; and, if the amount had been found to be larger, or the interest higher, or the due day earlier, a very different question would have been presented. But the description was not inaccurate. The reference to the mortgage in the contract was, manifestly, to that instrument as it then existed; and the amount, rate of interest and due date were correctly set forth. Schiff v. Tamor, 104 App. Div. 42, much relied upon by the plaintiff, *266is not in point. There, too, the purchaser had agreed to take title subject to an existing mortgage; and the seller had stipulated, on his part, that the principal sum thereof was “ to be extended, prior to the closing of title hereunder, for not less than three years, at the same rate of interest, by an extension in writing executed by the holder and duly acknowledged.” The seller tendered, in fulfillment of this agreement, an extension which included the so-called Brundage clause, heretofore cited, which was not incorporated into the existing mortgage. The court held, very naturally, that the purchaser had agreed to buy subject to the mortgage as it existed when the contract was made; that the seller’s agreement was for an unconditional extension óf that mortgage just as it then existed and that that obligation was not satisfied by tendering an extension tacking on to the mortgage any other or different conditions than those which it contained at the time of making the contract. In my opinion the plaintiff’s objections to the fulfillment of. the contract are untenable and the judgment should be reversed, with costs to appellants to abide the event.

Dowlixg, J., concurs.