Court Opinion

ID: 6126537
Source: CourtListenerOpinion
Date Created: 2022-02-04 20:32:20.827545+00
Date Added: 2024-06-11T08:34:18.982393
License: Public Domain

Learned, P. J.
(dissenting):
Mrs. Simons had sold the property in question to Allen, and had taken back a mortgage. Afterwards she lent him money and took another mortgage on the premises, making in all $10,500 of principal. Then Allen sold the premises with the furniture thereon, etc., to Mrs. Simons at the price of $15,000. She satisfied her two mortgages, and if the bargain had been fairly performed she should have given him a mortgage for the difference, say $4,500. But by Allen’s fraud and her mistake she gave him a mortgage for the whole $15,000, which was dated May 10, 1876. Allen had also executed on the premises another mortgage of $1,000, called the Taylor mortgage. This he falsely asserted to her had been paid. The next day after the execution of this $15,000 mortgage Allen assigned it to Mr. Hill, who had acted as attorney and had prepared the papers and was familiar with the whole transaction, and a month or so afterwards, June 17,1876, Hill assigned it to the plaintiff with a guaranty of collection.
Afterwards, on the 9th of February, 1877, Mrs. Simons, having *369previously learned of the existence of this $15,000 mortgage, made a contract, under hand and seal, with Mary A. Bates, the defendant. TTill acted for Mrs. Simons, and Mrs. Bates’ husband for her. This contract was the result of previous negotiations, by which Mrs. Simons was to sell the premises, with certain personal property, for $25,000, and was to take certain property from Mrs. Bates in payment.
The contract recited that Mrs. Bates had purchased the real estate and personal property of Mrs. Simons; that the deed of conveyance had been made out, and was in the hands of Hill; that Mrs. Bates had sold to Mrs. Simons certain land, the deed for which was also deposited with Hill for Mrs. Simons. It stated that Mrs. Bates was to have actual possession April 20, 1877; that all matters were considered as consummated, as of the date of the instrument; and either party was at liberty to make sales from that time. It also contained the following clause: “It is further understood that a certain mortgage of $15,000, dated the 10th of May, 1876, upon the premises conveyed to the said Mrs. Bates by Mrs. Simons, an extension of the payment of the interest due thereon shall be made until the 15th day of August, 1877; and, in consideration therefor, the said Bates shall execute and deliver a chattel mortgage, covering the personal property conveyed to her by Mrs. Simons as collateral security for the payment of the interest on said $15,000 mortgage, which will become due May 10, 1877, to the holder of said mortgage.” It appears, by an examination of the original contract, that, as first drawn, it read: “As collateral security for the payment of said $15,000 and interest to the holder of said mortgage.” This fact is important to show that the mortgage was recognized as valid to its full amount.
Testimony was given by Hill that Mrs. Simons had executed and put in his hands a deed of the premises m February, 1877, about the date of the contract, in which he inserted the name of Chester S. Bates, the husband of Mrs. Bates; that he showed it to Mrs. Bates, who said that it should be to Mrs. Bates; that Hill corrected it accordingly, and that about May 1, 1877, he delivered that deed. Mr. Bates denies this delivery, but not the existence of such a deed, and testifies that the only deed of the premises delivered was that dated September 25, 1877, and on this conflict of evidence the learned justice found with the defendant.
*370The Taylor mortgage above mentioned was foreclosed and the premises were sold July 3, 1877, to Mrs. Simons. Afterwards Mrs. Simons executed a warranty deed, dated September 25, 1877, to Mrs. Bates for the consideration of $25,000, as expressed, by which she conveyed the said premises with this clause: “ Subject also to a certain mortgage executed by the party of the first part to Thomas E. Allen for the sum of fifteen thousand dollars, bearing date the 10th day of May, 1876, and recorded in the Saratoga county clerk’s office on the 12th day of May, 1876, if there shall be found anything owing and unpaid upon the same.”
Mrs. Bates paid the $1,050 interest on the $15,000 mortgage which came due in the spring, but she paid no other sum on the mortgage. It was testified by Mr. Bates that in making the bargain in behalf of his wife for the purchase of these premises he dealt with one Jones, as agent of Mrs. Simons; that both Jones and TTill told him that there was a mortgage of $15,000 on the property which Bennett, the plaintiff, held, on which $1,050 would be payable May tenth. He testified that he was to pay for the house and furniture $24,050; that, deducting the $15,000 and the $1,050, there was a balance of $8,000, for which he arranged by the conveyance of certain property; that he was to take the premises subject to the mortgage of $15,000 and to pay the balance, $8,000.
It is very evident that a gross fraud was practiced by Allen on Mrs. Simons, and if the question now before us arose between him and her, or between his assignee and her, there could be little doubt what justice would demand. But Mrs. Simons is not the owner of the premises, and therefore has no interest in the question of the extent of the mortgage. She has been released frdm any liability on the bond, and therefore has no interest in any matter here involved. The fraud practiced upon her cannot in any way be redressed in this action, whatever be its result. Mrs. Simons might evidently, if she chose, waive the fraud that had been practiced upon her and ratify the mortgage. If she sold the premises and made them expressly subject to the full amount of this mortgage, the purchaser would have no right to insist that that full amount was not payable. If we look, then, at the transaction between her and Mrs. Bates we find in the first place that Mrs. Bates’ agent testifies that the bargain was that Mrs. Bates was to give $24,050 for *371the property; that the mortgage of $15,000 and the accumulated interest of $1,050 were to be deducted from that amount, and that Mrs. Bates was to pay Mrs. Simons $8,000, being the balance. That balance, and only that balance, Mrs. Bates paid. Mrs. Bates, therefore, accepted the property charged with the full amount of the $15,000 mortgage. Then, when that bargain was reduced to writing it is stated therein (though with some inaccuracy of language) that this $15,000 mortgage is on the premises; and, putting the matter beyond all doubt, Mrs. Bates agrees to give collateral security for the payment of the next interest “ on the said fifteen thousand dollar mortgage.” The alteration in the instrument shows that it was first requested by Mrs. Simons’ agent that this security should be for the payment of the said $15,000 and interest This is only, material as it corroborates the other testimony to the effect that the mortgage was treated by the parties as good for the full' amount.
Now, this written and sealed agreement recites an actual purchase, not merely a contract to purchase, and an actual execution by Mrs. Simons of the deed. And. it declares that matters are consummated as of its date. Mrs. Bates, as her husband testifies,, went into possession of the premises under that contract, and ever since April 19, 1877, has been in possession thereof. Mrs. Bates’ title, therefore, at least in equity, was good from that date, by virtue of the contract and of her payment and her possession; and it was good, even if the deed, which the contract admits to be in Mr. Hill’s hand, was in fact never delivered. That such a deed was in existence Mr. Bates himself testifies. For he says that, after the contract was executed, he saw in Hill’s office a deed indorsed Fanny K. Simons to Chester S. Bates, and opened it and told Hill the deed should be made to his wife. This is the deed which Hill says he corrected accordingly and delivered. Both the oral negotiation, therefore, and the sealed contract establish the fact that Mrs. Bates accepted the land, subject to the $15,000 mortgage. (Freeman v. Auld, 44 N. Y., 50.) So, too, Mrs. Bates paid the interest (payable annually) on $15,000, which came payable that spring, and for which she had given, or had agreed to give, collateral security. By giving this security she obtained an extension of time on this interest for some three months. If she had not agreed that the premises were subject to the whole $15,000, then she would not have paid a year’s *372interest on that amount. But it is urged by the defendant that the clause contained in the subsequent deed of September twenty-fifth has changed the right.s of the parties. Assuming that no previous deed had been delivered, it must still be noticed that Mrs. Bates had been in possession for some five months under a valid and sealed contract; and that, as early as February 8,1877, she had paid for these premises by the execution of deeds of the property, given in exchange. Her rights were complete, certainly in equity'. By the agreement with Mrs. Simons, she had bought property estimated at $24,000, for $8,000 actual payment, because it was incumbered for $15,000 and $1,050 interest.
The case cited by the defendant of Russell v. Kinney (1 Sand. Ch., 34) was one where the 'court held that there was in fact no defense to the mortgage. The question of estoppel as to a purchaser did not arise. In the case of Hartley v. Tatham (10 Bosw., 273; S. C., 1 Keyes, 222) the mortgage was assigned to plaintiff May 13, 1862. On the 3d of May, 1862, Tatham, the holder of the equity of redemption, by taking an assignment from one Arinent of a certain claim, did practically pay a certain amount on the mortgage. Tatham’s deed was in terms subject to the mortgage. There is nothing in the case to show that in purchasing the premises from one Smith, Tatham in any way agreed upon the amount payable on the mortgage. These are the only cases cited which seem to bear on the point. The defendant insists that the present case is similar to one of a partial payment made upon a mortgage. But there is a very decided difference. A' payment on a mortgage pro tanto discharges it and reduces the amount thereof. It may be doubtful whether any transaction between the mortgagor and a third party could do away with the effect of an actual payment, or make the mortgage a lien for more than the balance actually due thereon. But this is not the case of payment. It is the case of a fraud. And it lies with the defrauded party to assert the fraud in such way as she may choose. She might sue Allen, and perhaps Hill, for damages by reason of the fraud, instead of setting up the fraud as a defense to the mortgage. If the defendant’s position is sound, then Mrs. Simons can never obtain redress for the fraud practiced upon her. Because, if the darhages sustained by her are admitted in this action to reduce the amount of the *373mortgage, the only person who is thereby benefited is Mrs. Bates And Mrs. Simons’ right of action against Allen and Hill will be lost; inasmuch as it will then appear that she had sold, the property, subject only to so much as might be payable on the mortgage after deducting the damages occasioned by the fraud. And the inference will necessarily be that she had obtained (say) $10,100 more for the property than she would have obtained, if the mortgage had been valid for $15,000. So that the result of allowing this defense is to take (say) $10,500 from Mr. Bennett and give it to Mrs. Bates; and further, to deprive Mrs. Simons of any future opportunity to recover damages against Allen or Hill.
Mrs. Bates did not personally agree to pay the mortgage. No question, therefore, arises as to the power of the grantor, Mrs. Simons, to release Mrs. Bates from a liability thus assumed. (Knickerbocker Life Ins. Co. v. Nelson, 78 N. Y., 137.) Nor is there any pretense that, in this case, the land has. not been made the primary fund for the payment of the mortgage debt. It was such by the contract, and it was such by the deed. Nor can it be doubted that by the contract of February, 1877, fully performed at that time, and by the possession taken in April following, Mrs. Bates accepted this property with an incumbrance thereon, agreed to be $15,000 of principal. If the deed of September, 1877, was intended to change the effect of that bargain it was of no avail for that purpose. Like the releases and covenants in Hartley v. Harrison (24 N. Y., 170), a case which seems to be analogous.
The judgment should be reversed, new trial granted, costs to abide event.
Judgment reversed, new trial granted, costs to abide event unless defendant consents to modify as stated in opinion. If defendant so modifies, then affirmed, without costs. .