Case Name: Solomon Jacobs, Appellant, v. Charles Edelson and Others, Respondents
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1903-05
Citations: 83 A.D. 363
Docket Number: 
Parties: Solomon Jacobs, Appellant, v. Charles Edelson and Others, Respondents.
Judges: 
Reporter: Appellate Division Reports
Volume: 83
Pages: 363–369

Head Matter:
Solomon Jacobs, Appellant, v. Charles Edelson and Others, Respondents.
Foreclosure of a purchase-money mortgage — defense that the mortgagee induced the mortgagor to purchase by false representations — it is not available where after knowledge thert'eof the mortgagor conveys the premises to the mortgagee’s wife and, other liens exist making a sale necessary to perfect the title — a disaffirmance and ■ tender of a deed by the mortgagerr a/re necessary — effect of the conveyance to the wife being set aside as in fraud of the mortgagoi'’s creditors—no deficiency fragment against the mortgagor allowed.
In an action brought to foreclose a purchase-money mortgage, the court found that the mortgagor had been induced to purchase the mortgaged premises by false and fraudulent representations made to him by the plaintiff, the mortgagee; that after discovering the fraud, it was agreed that the mortgagor should reconvey the premises to the mortgagee for a certain sum; that thereafter the mortgagee and his wife induced the mortgagor to convey the premises to the mortgagee’s wife without consideration; that the latter deed had been subsequently set aside as fraudulent and void as against the mortgagor’s creditors.
Meld, that while it would have been proper for the court to refuse to award a deficiency judgment against the mortgagor, the court was not justified in refusing to foreclose the mortgage, particularly as it appeared that subsequent to the conveyance of the premises to the mortgagor other parties had acquired liens upon the property and that the only way in which the title could be cleared was by a foreclosure of the mortgage;
'That to justify the court in refusing to enforce the mortgage, the mortgagor was required to disaffirm the sale and to tender the title of the property to the mortgagee;
That as the mortgagor had, after the discovery of the fraud practiced upon him, voluntarily conveyed the property to a third person, he had put it out of his power to comply with this condition and was estopped from rescinding the sale and asking to have the mortgage canceled:
That it was immaterial that the third party to whom he conveyed the premises was the wife of the mortgagee or that the conveyance was made at the latter’s request;
That the fact that the conveyance to the mortgagee’s wife had been set aside as against the mortgagor’s creditors did not change the situation,
Patterson, J., dissented.
Appeal by the plaintiff, Solomon Jacobs, from a judgment of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Bew York on the 22d day of December, 1902, upon the decision of the court, rendered after a trial at the blew York Special Term, dismissing the complaint upon the merits and canceling and discharging of record a bond and mortgage given to the plaintiff by certain of the defendants.
H. Aaron, for the appellant.
Alfred Epstein, for the respondents.

Opinion:
Ingraham, J.:
The action was brought to foreclose a purchase-money mortgage given to secure the payment of a bond for $9,500, upon which there is due the sum of $8,500. The mortgagor answered, admitting the execution and delivery of the bond and mortgage, alleging that he had been induced to purchase the mortgaged premises by false and fraudulent representations made to him by the plaintiff; that shortly after, the mortgagor obtained knowledge of the falsity of the representations made and he attempted to sell the mortgaged premises ; that subsequently the mortgagor agreed with the plaintiff to convey the said mortgaged premises back to the plaintiff for the sum of $33,625, and that thereupon "this plaintiff and his wife, Sarah Jacobs, conspired by trick and device and by false and fraudulent representations, induced said defendants to execute and deliver a deed of said premises, No. 66 Thompson street, New York city, to said Sarah Jacobs, wife of said Solomon Jacobs, and one of the defendants in this action, who is now the owner of said premises, without any consideration therefor to these defendants," and the answer also set up a counterclaim for damages occasioned by the fraudulent and false representations.
The court found that the purchase of the property by the defendants was induced by false and fraudulent representations made by the plaintiff to the defendants; that shortly after the defendant Edelson had obtained possession of the premises, he ascertained that the representations and statements made by the plaintiff, as to the cost value and rents of the said premises were wholly false and untrue, and upon his informing plaintiff of this fact, it was agreed that defendants should reconvey the premises to plaintiff for the sum of $33,625; and plaintiff and his wife, Sarah Jacobs, induced the defendants to execute and deliver a deed of said premises to said Sarah Jacobs, one of the defendants in this action, without" any consideration therefor, and this latter deed was subsequently set aside as fraudulent and void as to the mortgagor's creditors by a judgment and decree of this court.
We assume that there was evidence to sustain this finding, but we think that upon this finding a dismissal of the complaint and a refusal to allow a foreclosure of the mortgage was error. Undoubtedly this finding was sufficient to justify the court in refusing to award a judgment against the mortgagor for a deficiency, but there was nothing to justify the court in refusing to foreclose the mortgage. It appeared that subsequent to the conveyance by the plaintiff to the defendant Charles Edelson of the mortgaged premises, other parties had acquired liens upon the property, and the only way in which the title could be cleared was by a foreclosure of this mortgage. To justify the court in refusing to enforce the mortgage given upon the property to secure the payment of a portion of the consideration, the defendants were required to disaffirm the sale and tender back to the plaintiff the title to the property. After he had acquired knowledge of the fraud, by his voluntary act he conveyed the property to a third party, and thus put it out of his power to comply with this condition, which was necessary before there could be a rescission of the sale or an avoidance of the mortgage given to secure a part of the consideration for the conveyance of the property. By this voluntary conveyance he surrendered the title to the property and has no interest in preventing the enforcement of the mortgage. He was not, therefore, in a position to ask that the mortgage be canceled. It is a well-settled principle that " the law not only requires a disaffirmance of the contract at the earliest practicable moment after discovery of the cheat, but a return of all that has been received' under it and a restoration of the other .party to the condition in which he stood before the contract was made. To retain any part of that which has been received upon the contract is incompatible with its rescission." The defendant " could not, with knowledge of the fraud which had been practiced upon ,him, take any benefit under the contract or change the condition of the property, the subject-matter of the contract, and then repudiate the contract." (Cobb v. Hatfield, 46 N. Y. 537.)
The mortgagor having conveyed all of his title to the property to a third party, it is quite immaterial whether that third party was or was not the wife of the plaintiff, or that that conveyance was made at his request. The mortgagor in conveying the property, after full knowledge of the fraud, acted in a manner entirely inconsistent with his right to rescind. He could hold the property and sue the plaintiff for the damages sustained in consequence of the fraud practiced upon him; but upon discovery of the fraud he was put to his election, and when he conveyed the property it was a ratification of the contract which estopped him from rescinding the sale and asking to have the mortgage canceled.
The judgment setting aside the transfer of the property to the plaintiff's wife as to the mortgagor's creditors did not change this situation or entitle the mortgagor to rescind. ' That judgment did not affect the title of the property except so far as it related to the creditors of the mortgagor. They were parties to this action, and if they had any rights in this property as against either the plaintiff or the grantee in the conveyance from the mortgagor they could have appeared and defended in this action and protected whatever rights they had. But this mortgagor, who did appear and defend, having no interest in the property, and not being in a position to insist in this action upon a rescission, was not entitled to any relief as against the mortgage. Assuming that he had the title to the property, neither in his complaint nor upon the trial did he offer to convey, nor did he tender a deed to the plaintiff which would insure to the plaintiff the title to the property which had belonged to him and which he had conveyed to the defendant as the consideration of which the mortgage in suit was given.
I think the judgment appealed from should be reversed and a new trial ordered, with costs to the appellant to abide the event.
Van Brunt, P. J., McLaughlin and Laughlin, JJ., concurred ; Patterson, J., dissented.