Court Opinion

ID: 6133008
Source: CourtListenerOpinion
Date Created: 2022-02-04 21:25:19.62781+00
Date Added: 2024-06-11T08:54:19.681545
License: Public Domain

Barker, J.
(dissenting):
I am of the opinion that the judgment dismissing the complaint should be reversed. If any part of the bond remained unpaid, then the mortgage continues to be a lien on the premises, and the plaintiff was entitled to the usual decree of foreclosure. It is wholly unnecessary in this connection to consider the question whether the personal representatives of Pox would be liable for any deficiency which might exist after the sale of the premises. The release of Williams from all personal liability on the bond did not pay the debt nor impair the securities held by the plaintiff, and she could enforce them for the purpose of securing the payment of her unsatisfied debt. The general rule is that when a debt is secured by a lien on property, either real or personal, and the debtor is released from his personal liability and the debt secured remains unpaid, the lien may be continued and enforced if such was the intention of the parties to the agreement. In this case the intention of the plaintiff not to release the mortgage was plainly expressed on the face of the instrument itself. The words of limitation used to qualify the general language of the instrument are as follows: “ But not intending hereby to effect or discharge the liability of said Arthur G-. Pox orhis estate therefrom, or to affect or discharge any other security for any of said demands other than the personal liability of the said Horace Williams.”
The release of Williams, therefore, did not discharge the mort*117gage lien as to so much of the debt as may have remained unpaid at that time. (Tripp v. Vincent, 3 Barb. Ch., 613; Goodrich v. Goodrich, decided in this Dept., April, 1885, not reported.) Among merchants it is customary to discharge their debtors from all personal liability on their debts and demands, stipulating at the same time not to surrender up such securities' as they may hold, but reserving the right to enforce their payment. These provisions are in no wise inconsistent with each other when inserted in an instrument of this character. When taken together they are construed as a.covenant on the part of the creditors not to pursue the debtor on his personal promise. In legal effect it is the same as when the mortgagor is discharged from his personal liability under bankrupt laws. (Newton v. Scott, 9 Mees. & Wels., 431.) Alien on property, as security for the payment of a debt, may exist where no person is liable to pay the debt. In such cases the lien may be enforced by proceedings in rem, and such was the nature of this action.
It is wholly unnecessary to determine now whether the release of Williams, the surviving partner of Fox, had the effect to discharge the personal representatives and heirs-at-law of the deceased partner from all liability on the bond. If such was the legal operation of the discharge, the debt still remained unpaid and the plaintiff could enforce all pledges and collaterals held as securities. If these views are correct then it follows that the legal conclusion of the learned trial court that the release of Williams operated to discharge the mortgage as a lien on the lands therein described was erroneous. The referee held as a conclusion of fact that the bond had been fully paid. If this finding is based upon competent evidence, then the complaint was properly dismissed upon the merits. I think, however, that Hamlin was not a competent witness for the personal representatives of Fox, and was disqualified by reason of the provisions of section 829 of the Code of Civil Procedure. The complaint was dismissed generally and upon the merits, and if payment of the bond was established the premises were discharged from the lien of the mortgage. Hamlin, as a stockholder in the Grape Sugar Company* was directly and immediately interested in the issue of fact arising onthe plea of payment. The judgment if permitted to stand will be competent and conclusive evidence as between the parties that the mortgage lien has been discharged by pay*118ment of the debt which it was given to secure. The Grape Sugar Company as well as the personal representatives of Fox and his heirs-at-law, all of whom were made parties defendant, can use this record as evidence in their favor in any other action against them or either of them founded on the bond and mortgage, whatever may be the nature or character of the same.
The degree of interest which will disqualify a witness under section 829, is the same as the one which prevails at common law. That rule, as stated by Mr. Greenleaf, is as follows: “ The true test of the interest of a witness is, that he will either gain or lose by the direct legal operation and effect of the judgment, or that the record will be legal evidence for or against him in some other action. It must be a present, certain, and vested interest, and not an interest uncertain, remote or contingent.” (Sec. 390; Hobart v. Hobart, 62 N. Y., 83; Miller v. Montgomery, 78 id., 283; Steele v. Ward, 30 Hun, 555.) As Hamlin had a direct pecuniary interest in the event of the action, he should not have been permitted to .give the personal conversations he had with the deceased mortgagee, relative to the payments which had been made upon the bond and mortgage. Without placing full and implicit reliance on the evi dence of this witness it is difficult to see how the issue on the ques tion of payment could have been found in favor of the defendants, who rely on that particular defense.
If I correctly understand the position of my brethren, with whom I am unable to agree in affirming the judgment, they concede that Hamlin was directly interested in the result of the action, but hold that he was a competent witness for the representatives of Fox and his heirs because his interest- on the question of payment was balanced. The position that the witness was indifferent as to the result of the issue of payment is founded on the contention of the respondents, that if it had been determined that the mortgage was a valid lien on the premises and a decree of foreclosure and sale awarded, then the Grape Sugar Company could have paid the decree and been subrogated to the position of the plaintiff and enforced a payment of the bond out of the Fox estate.
If it should be conceded that the Grape Sugar Company, on paying off the mortgage for the purpose of protecting its interest in the pi’emises, could have recourse to the Fox estate for indemnity, *119then I do not concur in the argument that Hamlin’s interest on the-question' of interest were balanced. (1 Greenl. Ev., §§ 399, 120; Benedict v. Hecox, 18 Wend., 490; Collins v. Ellis, 21 id., 397; Wilmot v. Richardson, 6 Duer, 336.) But I do not deem it necessary to consider this question further, as I place my objection to the competency of the witness, on the ground that the Grape Sugar Company would not have had any remedy over against the Fox estate if it had been compelled to pay the bond and mortgage to protect its rights and interests. The release executed by that company, discharging both. Williams and Fox from all liability on their covenants contained in. their deed conveying the premises to it, had the legal effect to make, the deed a mere conveyance of their equity of redemption in the premises, and the rights of the parties should be now determined, the same as if such had been the character of the deed at the time of its delivery. The release in effect struck out every covenant in-the deed and discharges the grantors from every right of action which the grantee had against them on account of such covenants,, and the comprehensive language used is as follows: “ The Buffalo' Grape Sugar Company has released and discharged, and by these-presents does release and forever discharge the said Horace Williams- and the personal representatives, lieirs-at-law and next of kin of said Eox, from all liability for any cause on account of any covenants contained in the deed, from the said parties to the Buffalo Grape Sugar Company, or on account of any breach in such covenants, past or future.”
Treating the conveyance as a quit-claim, the legal presumption is that the grantee paid the grantors, as- a- consideration for their conveyance, the value of the premises at the time of the conveyance; less the amount of the mortgage lien.. The genei’al rule on that, subject is when the grantor conveys by a quit-claim deed, absolute!}!silent, as to the outstanding, incumbrances of which the grantee has. notice, he takes the premises-subject to the incumbrances, unless it is made to appear that, he paid the full value therefor. (3 Pomeroy’s Eq., § 1205; 3 Wash. on Real Prop., 380; Shuler v. Hardin, 25 Ind., 386.)
If, however, the grantee- pays the full value of the premises to-the grantor as the-consideration for the deed, and there-is an existing personal liability on the part of. the. grantor to pay the debt: *120secured by tbe lien, then such liability continues and the debt cannot be shifted on to the lands as the primary fund out of which payment is to be made. In snch a case if the grantee pays the lien to save his lands, he may be subrogated to the rights of the creditor and enforce the personal liability of the grantor. (Wadsworth v. Lyons, 93 N. Y., 201.) But if the amount of the lien be deducted from the purchase-price, then the lands are the primary fund out of which the debt is to be paid as between the parties to the conveyance. Where there are no covenants in the deed, and no reference is made to the incumbrance thereon, the presumption exists that the amount of the lien was deducted from the consideration money.
In Wadsworth v. Lyon (supra) the fact appeared that the grantee paid full value for the lands, and no reference whatever was made on the face of the deed to the incumbrance and it was held that the primary liability of the obligors to pay the bond could not be shifted on to the land, but it is distinctly stated in the opinion of the court that the rule would be otherwise if the incumbrance was deducted from the consideration of the conveyance, or by some agreement between the grantor and grantee charging the primary liability upon the grantee, leaving as between them the grantors to stand as mere sureties for the bonded debt.
In the case at bar there is no finding that the grantee paid full value for the premises, nor any evidence produced from which the fact could be found. It is disclosed by the evidence, and the question is left in no doubt whatever, that the officers of the Grape Sugar Company knew, when they executed the release, of the existence of this bond and mortgage, and that it was not paid up nor discharged. The legal presumption should prevail, as no evidence was produced meeting the presumption that the price paid for the premises was their value, less the incumbrance. The deed contained a covenant against incumbrances, and therefore as soon as the deed was delivered, as well as at the time the release was executed, the grantee had a right of action against the grantors which was satisfied by the discharge. It is impossible to conceive of any purpose on the part of Williams and Fox in procuring a discharge from their covenant, unless it was to be relieved from all liability, present, prospective or contingent, arising from the existence of the mortgage lien at the time of their conveyance. The release may be construed as a *121covenant on the part of the grantee not to sue Williams and Fox in any form of action for indemnity in case any portion of the mortgage lien was enforced against the premises, or as an agreement between the grantor and grantee charging the lands, as between those parties, with the primary liability to pay the debt.
For these reasons I think the judgment should be reversed and a new trial granted.
Judgment affirmed, with costs.