Weinberg v. Schrank — 115 A.D. 247

Majority

p. 247

Max Weinberg and Sigmund Weinberg, Respondents, v. Pincus Schrank and Bertha Schrank, Appellants, Impleaded with Becky Rubin and Others, Defendants.

First Department,

November 5, 1906.

Headnote

Vendor and purchaser—when vendee not entitled to charge lands with equitable lien as against subsequent purchaser.

The plaintiffs entered into a contract with one. R. to purchase lands at a time when R. had no title or interest therein, the' plaintiffs paying a deposit. R. subsequently obtained a contract of sale from one who was not the owner of the lands, and assigned said contract to A., to whom the true owner subsequently conveyed the' premises. A. thereafter conveyed to the defendant S., who paid the consideration for the lands and conveyed them to his wife through mesne conveyances.

In an action to recover the deposit paid to R. by the plaintiffs, and to charge the lands with an equitable lien for that amount,

Held, that the title acquired by S. and his wife was not through R., with whom the plaintiffs had contracted, but through A., who took from the true owner; That R., under his contract to purchase from one who was not the owner, •acquired no title, legal or equitable, to which a lien could attach in plaintiffs’ favor.

.That, although the plaintiffs were entitled to recover the deposit from R. and those participating with him in the fraud, they were not entitled to impress the lands with an equitable lien as against S. and his wife, they being purchasers for value not deriving title through R.;

That, although the attorney who drew the contract between the plaintiffs and R., and who knew of the plaintiffs’ claim, also acted in the transfer of-the title to S. from the other parties, said knowledge Of the attorney, even if chargeable to S., was not notice that the lands were subject to the lien in the plaintiffs’ favor, as the information disclosed that R. had no title, legal or equitable, in the property.

Appeal by the defendants, Pincus Schrank and another, from a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of Hew York on the 21st day of December, 1905, upon the decision of the court rendered after a trial at the Hew York Special Term."

Charles Goldzier, for the appellants.

Milton Mayer, for the respondents.

The facts as found by the trial court, and upon which"the plaintiffs were awarded judgment, were as follows: On the 15th day of March, 1904, the plaintiffs entered into a contract with the defendant Becky Bubin, whereby the plaintiffs agreed to purchase, and said defendant agreed to sell and convey, certain premises in the city.of Hew York; “that the plaintiffs agreed to pay therefor the sum- of $22,000, of which they were to pay $3,000 in cash and the balance by taking the property subject to mortgages then existing and thereafter to be executed by the plaintiffs; that at the.time of the execution of the said contract the plaintiffs paid to the defendant Becky Bubin the sum of $1,250 in cashthat at and prior to the execution of this contract the defendants Bubin and Lavenburg represented to the plaintiffs that the property purchased yielded an annual income from the tenants occupying apartments therein of $2,400, and that -the defendant Bubin was the ■ owner of the said property, and that the plaintiffs executed the contract for the purchase of the said property, relying upon the said representations that the property yielded an annual income of $2,400 that the premises, at the timé of the said representations, did not yield an annual income of $2,400, but that they did yield a rental of about $1,800 per annum ; that these representations were false and fraudulent, and known to be so by the said defendants, and were made solely for the purpose of fraudulently inducing the plaintiffs to ■execute a contract for the purchase of the said premises.

By the contract,.which was introduced in evidence, the deed was to be delivered on the 4th of April, 1904, at the office of the defendant Eugene Cohn and Julius Levy, Ho. 99 Hassau street, Hew York city. The court found that on the 4th day of April, 1904, the plaintiffs attended at the office of the defendant Colin, Ho. 99 Hassau street in the city of Hew York, and that at that time the defendant Bubin was not ready, able .and willing to deliver a deed of the said property, in that she had not accpired title thereto, and'was" not the owner of the -premises, in fee simple or otherwise ; that on the 15th day of March, 1904, after the execution of the contract with the plaintiffs, the defendant Bubin made a contract for the purchase of the said property with one Minsky ; that in'making this contract with Minsky, Bubin acted for the defendant Lavenburg, who

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was her uncle, and who had acted at the same time as the agent of ' the plaintiffs; that on the twenty-ninth day of March the defendant Schrank and the defendant Lavenburg entered into a contract with Rubin whereby Rubin agreed to sell and Schrank and Lavenburg agreed to purchase the property for the sum of $21,000; that on the 15th day of March, 1904, when the contract between Rubin and the plaintiffs was made, Cohn and Levy, attorneys and counselors at law, acted for all of the parties as. attorneys in drafting said contract and as attorneys for the plaintiffs in the examination of the title to the property until about the 21st day of March, 1904, when the plaintiffs discontinued the services of the said Cohn and Levy, and on that day they were instructed not to act as attorneys or otherwise for the plaintiffs; that on the 29th day of March, 1904, when the contract between Rubin and the defendants Schrank and Lavenburg was made, Cohn and Levy acted for all the parties in drafting the contract; that at the time of the making of said contract Cohn knew that the plaintiffs claimed that they had been induced to enter into a contract with Rubin upon the representation that the said property yielded an income of $2,400, and that the said representation was false and untrue; that on the 4th day of April, 1904, the defendant Lavenburg was served with a summons and complaint in an action commenced by these plaintiffs, at the office of Cohn, in which Lavenburg and Rubin were charged with having made false and fraudulent representations whereby they induced the plaintiffs to purchase the said property and part with the sum of $1,250, and in which the plaintiffs demanded that the property be charged with a lien to secure the said sum of $1,250 ; that on the 5th and 6th days of April, 1904, while acting as attorney for the defendants Lavenburg and Schrank, in closing the title to said premises and accepting a deed on behalf of said Schrank and one John O’Brien, and while acting for and representing the defendant Lavenburg, the said Cohn knew of the commencement of the action by the plaintiffs charging fraud and misrepresentation in .connection with and relating to the said property; that the contract originally made by the defendant Rubin with said Minsky was assigned by her to the defendant Rosie Alexander, who acted solely as a representative of the defendants Lavenburg and Schrank; that on or about the 18th day of May, 1904, the defendant Bertha Schrank purchased of the

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defendant Lavenburg Ms interest in the said property, in which transaction Cohn acted as attorney for her and Lavenburg, and at * that time Cohn knew 5f the fraudulent representations made by Lavenburg. and Rubin to the plaintiffs and of the commencement of. an action charging Rubin and Lavenburg with fraud; that the trans-' fer of the said property by Schrank to Cohn was without consideration and that the defendants Pincus Schrank and Bertha Schrank acquired title to the said property through mesne conveyances - and contracts from one Solomon Mehrbach.

The court found as conclusions of law that the contract made between Rubin and the plaintiffs on the' 15th day of March, 1901, was induced by fraud and should be rescinded; that the defendants Schrank acquired title to- the said property chargeable with the knowledge that the plaintiffs had been defrauded by the defendants Lavenburg and Rubin as to the ownership of the said property and as to the time rental thereof; that the plaintiffs were entitled to the return of the payment which they made in advance on the signing of the contract, to wit, the sum of $1,250 and interest thereon from the 15tli day of March, 1904, and the court directed judgment for that sum, with costs and disbursements of this action, and that a certain sum of $1,750 deposited in this court under an order canceling the notice, of the pendency of this action in lieu of the real property be impressed with a lien to the extent of the said judgment. '

The only defendants who have appealed are Pincus Schrank and Bertha Schrank in whom the property" is now vested,. We must bear in- mind that the defendant Rubin was not the owner of this property. All that she ever had • was a contract of purchase made by Minsky, but lie had no title to the property but had a contract to purchase it from one Solomon Mehrbach. It seems that before this title was closed Rubin transferred her contract with Minsky to One Rosie Alexander; Canter, who was the owner of the property, conveyed to Rosie Alexander on the fourth of April. Alexander gave back the mortgage to Canter and then conveyed the property to the defendant Pincus Schrank and O’Brien as tenants in common. Subsequently, on May 12, 1904, O’Brien executed and delivered, to the defendant Pincus Schrank a deed conveying his undivided o.neIMf. interest to Schrank, the consideration recited being $100 and

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other consideration. Subsequently, on May 17, 1904, Pincus Schrank executed to Eugene Cohn a deed of the whole property, and subsequently, by a deed acknowledged on the 18th of May, 1904, Eugene Cohn and wife conveyed the property to the defendant Bertha Schrank.

So far as appears the defendant Schrank acted in entire good faith in the premises and furnished the money necessary to complete the transaction. There is no evidence that he ever heard of the plaintiffs, their action or their claim against Rubin or Lavenburg. The right of the plaintiffs to recover from Lavenburg and Rubin is not disputed. The question is whether Schrank who, so far as appears, acting in good faith, purchased and paid for the property, must repay to the plaintiffs a sum of money out of which Lavenburg has swindled them. There is no equity in fa-vor of these plaintiffs as against defendants Schrank. Assuming that plaintiffs acted- in entire good faith when they made the contract with Rubin to purchase the property in question and that they were induced to enter into the contract by fraud and that they rescinded the contract, they had a claim against Rubin and Lavenburg for the damages that they had sustained, or, the contract having been rescinded, would have a right to recover back the money that they had paid from the person to whom they had paid it, and in such an action might have been entitled to an equitable lien on such interest in the lands as the vendor had or subsequently acquired. But neither the vendor nor Lavenburg had at the time that the contract was executed, nor have either of them ever had- any title to the property, legal or equitable.

Now, what is it to which a lien for the money that the plaintiffs had paid would attach ? Not to the property, because at the time the contract was made neither Lavenburg nor Rubin had any title to or interest in it. The plaintiffs acquired no equitable interest in the property by the contract to which a lien could attach. Subsequently Rubin obtained a contract for the purchase of the property, but that contract was not made with the owner of the property, and there was nothing to. show .that the person who executed that contract at the time of its execution had any interest in the property. Certainly, all that the lien could attach would be to Rubin’s interest in the contract with Minsky. That interest in the

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contract was subject to its performance by Rubin. If Rubin had performed the contract and obtained, title to the land, we may concede that the lien would attach to the land vested in Rubin.' But Rubin never did perform, never paid a dollar on account of the contract, and never had any interest i-h the property. By some transfer which is not very clearly stated, one Alexander got a right to enforce it. She completed that contract', received a deed of the property, and on April 5, 1904, conveyed the property to the defendant' Pincus Schranlc and John O’Brien. Just what relation John O’Brien bore to the property is not clearly disclosed by the record. The only evidence is that Lavenburg, who had joined with Schrank in the contract to. make the purchase from Rubin, directed Colin, the attorney who had charge of the transaction on behalf of Schrank and Lavenburg, to make the deed to O’Brien, which instruction Cohn carried out. It is quite apparent that the consideration for this conveyance from Alexander to Schrank and O’Brien was furnished by the defendants Schrank. If the plaintiffs acquired an equitable lien upon the contract to convey when it was subsequently obtained by Rubin, that contract was subject to the payment by Rubin of the consideration to be paid upon its completion. Ro equitable lien could attach to the land because the land was not owned by either of the-persons who made the contract with the plaintiffs, or, so far as appears, by the person who made the contract with Rubin. The defendants Schrank were not the assignees of that contract, but had an independent contract with Rubin to purchase the property from her. And when the title vested in Alexander and was by her conveyed to the defendant Schrank and O’Brien, the property had never been in such a relation to Rubin that it could be subject to an equitable lien in favor of the plaintiffs. The record shows that the defendants Schrank, who have since acquired O’Brien’s interest in the property, acted in entire good faith and paid the entire consideration for the purchase of this property, and' there is no equitable reason which would justify 'subordinating their title to the claim of the plaintiffs. Assuming that they were chargeable, with the knowledge that Cohn had of the prior transaction with the plaintiffs, Lavenburg and Rubin, and that Lavenburg had rescinded the contract that he had with Rubin, and was entitled to recover

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from Bubin the consideration that they had paid to her because of the fact that' Schrank had ■ employed Cohn to search the title of the property, this was not notice that the property conveyed by the deed of Alexander to Schrank and O’Brien was subject to any lien in favor of the plaintiffs. Assuming that Schrank had all of the knowledge that we have now of the condition of this title, he would know that Bubin never had any title to the property, that the conveyance from Alexander vested in him a good title to the property, subject only to the mortgages recited in the conveyance, and upon the faith of that conveyance he paid the money necessary to complete the contract for the purchase of the property, certainly a lien of the plaintiffs would not be.superior to a lien of the defendant Schrank for the money that he had actually paid to complete the contract, as any interest that Bubin had in the contract was subject to the payment of the amount that the defendant' Schrank paid on the completion of the contract and the .plaintiffs’ lien, therefore, would be subject to that payment. It does not seem that that precise question has been determined in any of the cases cited by counsel for either side unless it be the case of Carter v. Cook (Wright [Ohio], 443), and that case would seem to be an authority in favor of the appellants. It is, however,' the general rule in courts of equity that such an equitable lien is not favored as “ against, the general policy of our law, which looks with disfavor upon secret interests in real estate, and requires generally that titles to real estate shall be created by some writings which shall be spread upon the public records for the protection of those who might trust to titles apparently sound but afflicted with secret infirmities. It generally gives way to a legal interest or to a superior equity, and as it is a matter of purely equitable cognizance it should never be enforced when it would be inequitable to do so. Hence, it is never allowed to prevail against one who takes an incumbrance upon the land, or an interest therein, or a conveyance thereof, in good faith without notice of the lien and for a valuable consideration parted with before such notice.” (Maroney v. Boyle, 141 N. Y. 462 .)

Here the defendants Schrank purchased this property without any express notice of any infirmity. They employed a lawyer to examine the title who was recommended to them as a competent attorney for that purpose. They accepted' his certificate of title

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and upon the delivery of a deed which conveyed to them a good title ito the property, paid the consideration therefor.. The only ■ notice they could possibly have charged against, them is that an attorney "who was examining the title had notice that the plaintiffs made a claim of an equitable lien upon the premises for the return of the money that they paid, but it seems to me that it would be most inequitable to subordinate the title of these appellants to this property which they have purchased in good faith to the plaintiff’s claim.

I think, therefore, that the judgment appealed from should be reversed and anew trial ordered,, with costs "to the appellants to abide the event.

Patterson, Laughlin, Houghton and Scott, JJ., concurred. "

Judgment reversed and new. trial ordered, with "costs to appellants to abide event.

Cases cited

Maroney v. Boyle 141 N. Y. 462 N.Y. 1894-02-27 p. 253