Case ID: ny-st-rep_63/html/0481-01.html
Source: Caselaw Access Project
Author: {"author": "Parker, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Rutgers Female College of New York, App’lt, v. Cornelius H. Tallman, Resp’t.
    
      (Supreme Court, Generral Term, First Depm'tment,
    
    
      Filed, November 16, 1894.)
    
    Vendor and purchaser—Notice.
    When a situation is presented which the law declares should put a person of ordinary prudence on inquiry, he is chargeable with constructive notice of everything to which that inquiry would have reasonably led, but nothing more.
    Appeal from a judgment in favor of defendant.
    
      Albert Sticlcney and Wm. L. Snyder, for app’lt; James M. Smith, for resp’t.
   Parker, J.

For a little over two years prior to June 1, 1872, 'James P. Pierce, of the state of California, had the record title to certain premises known as Nos. 487, 489 and 491 Fifth avenue,-—premises for which a number of years had been occupied by this plaintiff for college purposes. On that date Pierce conveyed the property to this defendant, for a consideration of $120,000. At the time of the conveyance, defendant was a trustee of the plaintiff, to which position he was elected June 20, 1871. Immediately after the defendant had acquired title to the premises, he leased them to the plaintiff from year to year until 1879, when plaintiff was. dispossessed; but by verbal agreement, subsequently entered into, plaintiff occupied the premises as defendant’s tenant until some time in April, 1882. The last meeting of the board of trustees was held at said premises on the 18th of April, 1882. About, two months prior to the last-mentioned date,- defendant conveyed the property to August Pottier for the sum of $180,000, and in'July following, the plaintiff, at the request of Pottier’s attorneys, and for a nominal consideration, also executed and delivered to said Pottier a quitclaim deed of the premises. Hot until 1890—nearly eight years after the conveyance of the property to Pottier—was any claim presented to or demand made of the defendant, in respect to such property, or the proceeds of it, when this.suit was commenced, in which the plaintiff prayed that defendant account to it for all the moneys received by him from Pottier, after deducting any money that may have been advanced to him for the benefit of the plaintiff. The trial at special term resulted in a judgment for defendant, and on this appeal plaintiff contends that the trial court misapprehended the nature of its contention, arid treated the case as an ordinary action of fraud brought against a party standing in an ordinary position, thus ignoring what plaintiff characterizes as the fraudulent feature of the entire case, to-wit, that the plaintiff was a trustee.

As we understand plaintiff’s position, it is that, prior to the conveyance from Pierce to the defendant, tiré plaintiff was entitled in equity to redeem the property on paying to Pierce the amount actually due to him, and that Tallrnan, having been elected a trustee prior to his taking the deed from Pierce, is chargeable with knowledge of all the facts which by reasonable diligence he could have acquired from an investigation and examination of the college records, and, further, that such facts were actually brought to his attention as should have put him on inquiry. For many years prior to May 31, 1870, the title to the property was in the plaintiff. It was incumbered by four mortgages, upon which the principal sums due amounted to $53,000 on June 29, 1868,: at which time the plaintiff executed and delivered to James P. Pierce another bond and mortgage for the sum- of $52,000, payable, with interest, on the 1st of July, 1871. This latter mortgage the plaintiff contends was without consideration, and that the-execution of it was procured by Henry M. Pierce, the then president of the college, and a brother of James P. Pierce, the mortgagee, in pursuance of a fraudulent scheme having for its purpose the acquisition qf the title to the property for very much less than its actual value. The court refused to find as a fact that the mortgage was without consideration, or as a conclusion of law, that the mortgage was, as between Pierce and the plaintiff, fraudulent and voidable. If these findings were well founded, it necessarily follows that the judgment of the special term was right. But if it be assumed, for the purposes of further discussion, that; as between plaintiff and Pierce, the mortgagee, the mortgage was avoidable, we are unable to discover a basis upon which a recovery in favor of the plaintiff could have been predicted. The court refused to find, as requested by the plaintiff, that the “defendant was expressly notified that there was an irregularity or illegality in the execution and delivery of said mortgage of $52,000.” Its refusal is justified by the record.

The question of actual notice is therefore out of the case, and whether defendant had constructive notice remains only for consideration. Defendant was elected a trustee June 20, 1871, and thereafter was informed that Homer Morgan & Co., real estate brokers, were offering the property for sale in behalf of Pierce. Ascertaining the price at which the property could be purchased, he caused his attorney to search the title. We have not the result of that search before "us, but the fact is that the records contained nothing indicating that the $52,000 mortgage was voidable, or that the plaintiff had any equity whatever in the property. They disclosed that on the 23d day of October, 1869, a judgment of foreclosure and sale of the fourth mortgage was regularly entered at a special term of the supreme court. Thereafter a sale was duly had thereunder, resulting in the purchase of the property by James P. Pierce for the sum of $117,000. Out of the purchase money the referee paid the amounts due for principal and interest on the four mortgages which were prior to the $52,000 mortgage, and deposited the sum remaining in his hands, viz., $57,270.48, with the chamberlain of the city of Flew York, as by the decree he was directed. In surplus proceedings subsequently had, and in which plaintiff appeared by attorney, an order was made that said surplus moneys be paid to James P. Pierce, in satisfaction of the principal and interest due on said $52,000 mortgage. FTo appeal was taken from that order, and payment was subsequently made by the chamberlain in pursuance of it As the plaintff was a party to the suit, and appeared in the surplus proceedings, there was certainly nothing in the record* to suggest that the plaintiff had any equity in the property. It is urged that the fact that plaintiff was in possession of the property was sufficient to put defendant on inquiry touching plaintiff’s rights therein. Seymour v. McKinstry, 106 N. Y. 230; 8 St. Rep. 580, and 11 id. 760. True, but when a situation is presented which the law declares should put a person of ordinary prudence on inquiry he is chargeable with constructive notice of every thing to which that inquiry would reasonably have led, but nothing more. Hanover Nat. Bank v. American Dock & Trust Co., 75 Hun, 55; 56 St. Rep. 862. Such inquiry would have disclosed that, at the time when he was elected a trustee, plaintiff’s possession was that of a tenant of James P. Pierce. A little later, and on July 14, 1871, at a meeting of the board of trustees of the plaintiff, it was recommended that plaintiff secure the college premises owned by Pierce for another year; and subsequently the premises were rented by plaintiff from Pierce from August 1, 1871, to June 1, 1872, at a rental of $800 per month. These facts appeared upon the minute book of the plaintiff, and were sufficient to satisfy the inquiry which the law put upon him by reason of plaintiff’s possession. Defendant’s position is quite different than it would have been had the suit to foreclose the mortgage been commenced, and the subsequent proceedings had, while he was a member of the board of trustees. . He did not become a member until after the title to the property, through judicial proceedings, had become vested in one who was a stranger to him, and who had never been officially connected with the plaintiff,—one whose title the plaintiff recognized by renting the property from him at a stipulated rent; the lease being in pursuance of resolutions passed by the board of trustees. In the presence of such facts, and in the absence of other information tending to arouse suspicion, he was not bound to investigate in relation to the consideration of the several mortgages, which-were the subject either of foreclosure or of disposition in the surplus proceedings.

Judgment should be affirmed, with costs.

All concur.