Trustees of Union College v. Wheeler

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The following facts are shown by the findings of the referee: James Mellen, prior to the 1st of October, 1828, was the owner in fee of all the lots and real estate described in the mortgage, except the lots situated in the village of Oswego, and he, by a deed of that date, conveyed all of the premises so owned by him to Chauncey B. Aspinwall, who had negotiated for the purchase thereof, but the purchase was, in fact, made for the joint benefit of himself and Philo Stevens and Benjamin Nott; each of them paid an equal amount of the purchase-price thereof, and they were each equally interested in the property. Aspinwall, by deed bearing date January 26, 1830, conveyed an undivided two-thirds part of said land to the said Philo Stevens. This deed was recorded in the proper county, March 1, 1830. The consideration expressed therein was $2,000.

During the time the title of this property was in Aspinwall, portions of it were sold, and the portions so sold were held by the different purchasers under contracts executed on the part of the owners and vendors by Aspinwall alone. Sales were also made of other portions of the land after the conveyance by Aspinwall to Stevens, as above stated, and before the giving of the mortgage in question. Upon such sales, contracts were given to the purchasers respectively, executed by Aspinwall and Stevens, except in one instance, in which Aspinwall executed it alone on the part of the sellers. Some payments had been made on the contracts when the mortgage was given, and others were, also, subsequently made thereon.

Benjamin Nott, by a quit-claim deed, dated July 18, 1833, in consideration of one dollar, as expressed in the deed, conveyed to the said Stevens all the lands and premises described in the deed from Mellen to Aspinwall, and also certain village lots in Oswego, of the value of $6,000, covered by the mortgage in question, and particularly described in the complaint. The village lots, at the time of the conveyance, belonged one-third to Stevens, and two-thirds to Nott. Stevens, upon receiving the said deed, executed the said mortgage to Nott, without making any exception therefrom of the lots under contracts, as before stated. The mortgage was assigned by Nott to the plaintiff on the 1st of July, 1834, by an assignment of that date, for the consideration of $2,790.87, paid at the time, but not recorded until the 20th of December, 1852. The plaintiff, at the time of taking the assignment, had no actual knowledge or notice of the existence of these contracts, or that any part of the lands covered by the mortgage was occupied. Some of the property described in the mortgage had, before its execution, been sold, and actually conveyed to different purchasers; and no claim thereon, by virtue of the mortgage, was made at the trial. Subsequent to the assignment of the mortgage to the plaintiff, but before it was recorded, Nott, without the knowledge of the plaintiff, "so far as appeared" to the referee, released certain portions of the mortgaged premises from the lien of the mortgage by releases given to Stevens, bearing date March 26, 1836; and he conveyed those portions, about the same time, to other parties. The property so released was of more than sufficient value to satisfy the amount due on the mortgage at the time of the release thereof, and also at the time of the trial. The validity of those releases, it may be here remarked, is acknowledged by the plaintiff in its complaint. It is therein stated that the parcels of land included therein had "been released from the lien of the said mortgage, and as to them the plaintiff makes no claim." Several of the parties holding the contracts to which I have referred, and others claiming under them, were in actual possession of the premises agreed to be sold, as above stated, at the time of the conveyance by Nott, and the execution of the mortgage to him by Stevens, and others of them, although not in actual occupation, had exercised acts of ownership thereon.

The referee also found that the evidence did not show that Nott had notice of any particular contract given by Aspinwall and Stevens for the lands therein referred to, or specific notice of any particular sale to any particular person, or, perhaps, of any sale in particular; or that he had "actual notice of the actual occupation of any of the lots or particular pieces."

He also found the following facts:

First. That Aspinwall did the principal part of the business of selling and contracting the land sold, as hereinbefore stated, and collected most of the payments made toward the land by the purchasers; and kept the account of money received and paid out on account of the lands; that Stevens occasionally collected money, but the evidence did not show that Nott ever collected or received any direct from the purchasers.

Second. That Nott was informed, from time to time, of sales of said lands being made, and contracts of sale being given therefor; and knew of sales being made, and contracts given from time to time; and knew that Aspinwall and Stevens were making sales thereof, and giving contracts therefor during the time said sales were being made.

That settlements were made between Aspinwall, Stevens and Nott during the time they were equally interested in said lands, and Nott received his one-third part of the money paid on account of the sale of said lands, the same being paid to him in different sums and at different times by said Aspinwall; and said Nott knew that such moneys were derived from the sale of these lands, though it did not appear that he knew from whom in particular, or on what specific lot, the same were received or paid.

Third. That there was due, or to become due, on the respective contracts outstanding, from different parties, at the date of the mortgage in question, sums amounting in the aggregate to about $735; at the time of the recording thereof a little over $600, and at the time of the assignment thereof, about $135.

Upon those facts the referee found as conclusions of law:

1st. That the releases of the two village lots in Oswego were effectual to discharge them from the lien of the mortgage.

2d. That Nott's knowledge of the fact that sales were being made and contracts given, and the receipt of money by him from time to time, knowing that it was derived from the sale of those lands, was sufficient at least to put him on inquiry; that the actual possession of parties, in some instances, bound him to constructive notice thereof, and that the plaintiff had no greater or better equity than Nott himself; that, although the notice was or might be held to be in a different transaction than that of securing the mortgage, yet the mortgage was, nevertheless, affected thereby, and that the defendants claiming through or under the contracts given prior to the mortgage, who appeared and defended, were entitled to have the property so released first credited and applied thereon before recourse could be had to their land; and as the property so released was, both at the time the release was given and at the time of the trial, of more value than the amount due on the mortgage and the costs of the action, the plaintiff was not entitled to a judgment for a sale of their lots, but that the residue thereof, except the part released, might be sold. He thereupon ordered judgment, which was subsequently entered, dismissing the complaint as to the defendants and declaring that the mortgage as to the lands owned by them was not a lien, charge or incumbrance thereon, or any part or parcel thereof, but directing a sale of the residue of the mortgaged premises.

The General Term, on an appeal by the plaintiff from so much of the judgment as was adverse to it, affirmed that portion thereof which related to the lands of such of the purchasers from Aspinwall and Stevens as had before the mortgage was given entered into the possession of the lands purchased by them severally, improved the same and erected dwellings thereon, but reversed it and ordered a new trial as to those who had merely cut timber and sold it or had only cleared some part of it, but who had not entered into actual occupancy by residing on the lands purchased by them or receiving rents or profits thereof, except by the sale of timber, or made any other improvement than cutting and selling timber or clearing some portion of it.

There has been no appeal from the portion of the judgment of the General Term adjudging such reversal. The only question for our consideration, therefore, is whether it was erroneous, so far as it affirmed the judgment of the Special Term. We think not. Assuming that the mortgage was a valid lien on the whole of the mortgaged premises owned by the mortgagor at the time it was given, and that the rights of the several persons then holding contracts were subordinate thereto, they were entitled, on well settled principles of equity, to have the lands unsold, held by the mortgagor, applied to the payment of the mortgage, before a recourse was had to their lands. In violation of that principle Nott, the mortgagee, with notice of their rights, released two village lots in Oswego, of more than sufficient value to satisfy the mortgage, from its lien, and thereby, instead of subjecting the land primarily liable and relieving the remainder from the burden of the mortgage, he claimed to impose the whole of it thereon. That he could not do. The effect of the release was to discharge the land of those holding contracts of purchase at the time the mortgage was given. The actual occupancy of the parties as to whose lands the judgment of the Special Term was affirmed, by a residence in dwellings erected thereon and making improvements, was constructive notice to Nott of their rights, and he was chargeable with the consequence thereof, and could not do any thing in derogation of those rights or to their prejudice. If there were any doubt or question as to the application to this case of the principle above referred to, by reason of such constructive notice, arising from such occupancy as above stated, there is another and conclusive reason why the mortgage, after the execution of the releases, should not be enforced against the lands of the respondents. Nott was part owner, in equity, of the lands contracted to be sold by Aspinwall and Stevens, and was cognizant of the fact that sales were made by them; and he in fact received his share and proportion of the money paid on the contracts. He therefore stands in the relation of a contracting party, or at least is chargeable with notice of those contracts, and bound thereby. He consequently must be considered as having knowledge or notice of them when he conveyed his interest to Stevens and took back the mortgage in question; and Stevens, from the facts found by the referee, was equally chargeable with such knowledge and notice. Therefore, he took his deed and Nott took his mortgage subject to the right of the purchasers under their contracts, and Nott could not do any thing to defeat, impair or prejudice those rights while the mortgage was owned by him; and he, certainly, could not, either before or after the release, have enforced it against their lands. The plaintiff, as his assignee, acquired no other or greater rights. It took an assignment of the mortgage, and not a conveyance of or interest in the lands that were mortgaged What it acquired was a chose in action, and the interest or right of Nott therein, and the General Term, MULLIN, J., giving the opinion of the court, properly held that "if the mortgage ever became a lien on the lands under contract, it was a lien subordinate to the rights of the purchasers;" and the learned judge said that if Nott was foreclosing, he entertained no doubt but that the purchasers prior to the mortgage would have had a perfect defence to the action; but he considered that the plaintiff, being a bona fide purchaser thereof, was not chargeable with the notice that Nott had of the rights and equities of the purchasers — a proposition to which I do not assent, but which I do not deem it necessary to examine, having herein before shown that the mortgage was, in fact, taken subject to their rights, and the plaintiff took no greater or other title. (See Ingraham v. Disborough, 47 N.Y., 421.) He, however, held that the plaintiff was chargeable with constructive notice of the interest which the purchasers in actual occupancy of the lands purchased by them had therein, and on that ground he held that their lands were not subject to the lien of the mortgage. This was clearly right, but was not, in my opinion, necessary to sustain the portion of the judgment appealed from. As before stated, a portion of the mortgaged premises, more than sufficient in value, was released from the lien of the mortgage. That portion was at the time owned by the mortgagor, and liable to be first sold, and its release discharged the lands of the respondents from all liability. It is no answer to this to say that the releases were given by Nott after the assignment to the plaintiff, and without its knowledge or consent at the time. It, in its complaint, in express terms, as already stated, alleges and admits that the parcels described in the releases "have been released from the lien of the said mortgage, and as to them the plaintiff makes no claim," and does not therein allege or in any manner claim that those releases, or either of them, were executed and given without its knowledge, authority or consent. The allegation of such releases is followed by the statement "that at the time the said release was made as aforesaid, the plaintiff had no notice, actual or constructive, that the said Philo Stevens had conveyed or parted with his interest in any of the other parcels of real estate subject to the lien of the said mortgage." This allegation, construed in connection with that of the release by Nott of the premises released, raises a pretty strong implication that it was, in fact, made with its approbation and consent. The referee does not find that it was given without its knowledge. He qualifies his finding by saying that after the assignment, but before the recording thereof, "Nott, without the knowledge of the officers of the college, asfar as appears before me," released the premises, and he subsequently, after finding "that none of the parties holding contracts for these lands had any knowledge of the existence of the mortgage in question at the time payments were made on said contracts by any of the parties," and that the plaintiff, or its officers, at the time the mortgage was assigned, did not have knowledge of the said contracts, etc., added as follows: "And itdoes not appear that the officers of the college had any knowledge of the execution of the two releases of the village lots, above referred to, at the time the same were executed, or that the plaintiff, or any of its officers, authorized Nott to give said releases, or either of them." It is, however, immaterial, in my view of the question, whether they were or not given with the authority of the plaintiff — the act of Nott has been ratified and adopted by it. The referee and the General Term both have held the releases to be effectual to discharge the lots embraced therein from the lien of the mortgage.

The appellant's counsel, however, claims that the releases by Nott cannot prejudice plaintiff's lien. Assuming, but not conceding, that to be so, it does not aid the plaintiff, and affords no ground for the reversal of the judgment appealed from. If the release was invalid and ineffectual as against the plaintiff, then the premises intended to be released are still subject to the lien of the mortgage, and were primarily liable to be sold; and as the referee found that they were, at the time he made his decision, of greater value than the amount then due on the mortgage and the costs of this action, there was no error in declaring that its lien on the lands of the respondents was discharged.

The plaintiff's counsel further claims that if the land itself could not be sold it had a lien upon the purchase-money unpaid on the contracts, from the date of the record of the mortgage. Without expressing any opinion on that question, it is sufficient to say that the complaint was not based on such claim, and relief founded on such a lien, if it existed, could not be granted on the allegations or facts stated therein.

It follows, from the views above expressed, that the portion of the judgment appealed from by the plaintiff must be affirmed, with costs.