Trotter v. Hughes — 12 N.Y. 74

Majority

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Trotter against Hughes and others.

Headnote

Where the owner of the equity of redemption in premises, who was not legally or equitably personally liable to pay the amount secured by the mortgage, or interested in its payment except as the same was a charge upon the premises, conveyed the same by a full covenant deed containing a statement that the premises wore subject to the mortgage for $1400 and interest, which formed the consideration of the conveyance; Held, that the grantee in the deed w as not liable to pay the mortgage or any deficiency which might exist after applying the proceeds of the premises to the satisfaction of the amount secured thereby.

The acceptance of a deed of mortgaged premises, containing a provision that the grantee is to pay the mortgage, binds him as effectually as though he bad signed the deed. Per Denio, J.

A party who accepts from a person liable to pay a debt secured by mortgage, a conveyance of the mortgaged premises by the terms of which he agrees to pay the debt, is liable to the holder of the mortgage for any deficiency which remains after the application of the proceeds of the premises to the satisfaction of the debt.

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.But where the grantor of mortgaged premises is not personally holden for the debt, and the conveyance from him contains covenants of seizin and warranty and a statement that the premises are subject to the mortgage, thd’payment of which is assumed by the grantee, the latter is not pcrsonably liable for the mortgage debt or any part of it. Per Denio, J.

In 1837, Jonathan Trotter, the plaintiff, executed to Mrs. Gertrude A. Stryker, one of the defendants, his bond and a mortgage on two lots of ground situate at the corner of Division and Sycamore streets, Brooklyn, conditioned for the payment of $1400 and interest thereon in one year. On the 30th of July, 1845, John A. Hughes, the other defendant, and one Charles W. Trotter entered into a written agreement, by which Hughes agreed to furnish materials and do the mason work for three houses, according to certain specifications, for the sum of $2300, and C. W. Trotter agreed to pay Hughes this amount in cash at specified times, as the work progressed, after which the agreement proceeded as follows; “ andin consideration thereof, John A. Hughes agrees to buy the brick house and two lots of ground, corner of Division and Sycamore streets, for $1400, the mortgage on it.” Hughes furnished the materials and did the work according to the contract, .and C. W. Trotter paid him therefor the $2300. In October, 1845, C. W. Trotter, in pursuance of the contract, executed and delivered to Hughes a deed of the two lots mentioned in the contract, being the same covered by the mortgage to Mrs. Stryker. This deed expressed and acknowledged one dollar as the consideration therefor; and, after the description of the premises and the usual habendum clause, contained the following provision ; “Subject, nevertheless, to a certain indenture of mortgage made by Jonathan Trotter and wife, bearing date the 3d of August, 1837, to Gertrude A. Stryker, to secure the payment of the sum of fourteen hundred dollars and interest, and recorded in the office of the clerk of the county of Kings, in lib. 52 of mortgages, page 100, which mortgage forms the consideration money in this deed.” The deed

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contained covenants of seizin and warranty on the part of the grantor in the usual form, and also a covenant that the premises were free from incumbrances,, excepting the mortgage above mentioned. In July, 1851, O. W. Trotter,by an instrument under seal, sold, assigned and transferred to Jonathan Trotter the written contract between him and Hughes, and all the right, claim and demand which he, C. W. Trotter, had against Hughes upon or arising out of the contract, or for the sum of $1400 therein mentioned.

In August, 1851, Jonathan Trotter commenced this suit in the city court of Brooklyn against Hughes and wife, and Mrs. Stryker, the mortgagee, alleging in his complaint the facts above stated, and also that Hughes had never paid the mortgage to Mrs. Stryker; that the whole amount thereof, deducting a small sum received by her for damages to the mortgaged premises by the opening of a street, was due, and that Hughes had not paid to C. W. Trotter, or the plaintiff, the $1400 mentioned in the contract as the purchase price of the premises, and praying that Hughes be adjudged to pay to the plaintiff the sum of $1400, with interest thereon from the 30th of July, 1845, or that he pay and satisfy the mortgage executed by the plaintiff to Mrs. Stryker, or that the premises described in the mortgage, which were conveyed by C. W. Trotter to Hughes, be sold, under the direction of the court, to satisfy the amount due on the mortgage, and that Hughes be adjudged to pay any deficiency which might exist.

Hughes alone answered the complaint, and alleged and insisted that by the contract the premises were to be conveyed to him for a nominal consideration, subject to the mortgage, without any agreement on his part to pay therefor the amount due on the mortgage, or any sum whatever • that he fully performed the contract on his part by accepting the deed of the premises, subject to the lien of the mortgage; that the premises were not conveyed to him by the deed, subject to the payment by him of the amount secured by the

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mortgage; and that he did not in any way agree or become liable to pay the amount due on the mortgage, or any sum except the one dollar named as the consideration in the deed. He further insisted that the plaintiff did not by his complaint state facts entitling him to the relief demanded.

On the trial of the cause before Judge Greenwood in the city court of Brooklyn, the facts above mentioned appeared. It was not proved upon what consideration or by what kind of conveyance the title to the premises passed from Jonathan Trotter to O. W. Trotter, dr that the latter assumed or agreed with any one to pay the amount due upon the mortgage, or any part thereof. Judgment was rendered by the city court of Brooklyn dismissing the complaint, with costs. On an appeal, the supreme court sitting in the 2d district reversed this judgment, and gave judgment that Hughes pay to Mrs. Stryker the amount due on the mortgage, and in default of his so doing, that the premises be sold and the proceeds applied to the payment of such amount, and that Hughes pay the deficiency, if any should exist. From the judgment of the supreme court Hughes appealed to this court.

James Campbell, for the appellant.

T. H. Rodman, for the responden

If Mrs. Stryker, the mortgagee, had been the plaintiff, and had sought to enforce against the defendant Hughes the liability which is insisted upon by the present plaintiff, the case of King v. Whitely (10 Paige, 465) would have been precisely in point to show that she could not prevail. If there is any distinction between the cases, the one cited is stronger for the pretensions of the mortgages than the one under review. There the party seized of the equity of redemption had conveyed the mortgaged premises to the defendants, subject to the mortgages thereon, and the

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conveyance recited that the grantees assumed the payment of such mortgages, and were to pay them off as a part of che consideration of the conveyance; while in this case there is no undertaking in terms, by the defendant, either in the preliminary contract or in the conveyance, to pay off the mortgage. All that is said is, that the conveyance is subject to the mortgage, and that the latter forms the consideration of the deed. No distinction in principle arises out .of the fact that in the case referred to the defendants did not execute the deed, and that in the one under consideration the defendant signed the contract which preceded the conveyance. In this class of cases, the acceptance of a conveyance, containing a statement that the grantee is to pay off an incumbrance, binds him as effectually as though the deed had been inter partes, and had been executed by both grantor and grantee. (Halsey v. Reed, 9 Paige, 446; Curtis v. Tyler, id., 432; Blyer v. Monholland, 2 Sandf. Ch. Rep., 478; Rawson's Administratrix v. Copland, id., 251; Ferris v. Crawford, 2 Denio, 595 .) In the case first referred to, as well as in the one nowhefore the court, the grantor was not personally holden to pay the mortgage debt. While he continued to own the equity of redemption, he was interested to have that debt paid, because it was a burthen upon his estate; but when he parted with the land he had no further connection with the mortgage, and was only concerned to have his conveyance contain such expressions as would qualify the general terms of his covenants of title, and protect him from the consequences of an eviction by paramount title derived from the mortgage. The chancellor held, in the case cited, that where a party thus situated conveys the mortgaged premises subject to the mortgage, and the grantee engages to pay it off, such agreement must be construed as a mere declaration that the property was conveyed to him subject to the lien of the mortgage thereon, and that the general covenants of seizin and warranty in the conveyance are not intended to extend to this particular

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incumbrance, of which the grantee assumed the payment in case he should wish to retain the title of the lands conveyed to him. We are satisfied that the conclusion is in accordance with, the intentions of the parties, and is a sound exposition of the law.

Where a mortgagee is permitted to resort to a subsequent grantee of the mortgaged premises, who has agreed with his grantor to pay off the mortgage, to recover a deficiency after applying the proceeds of the sale, it is by virtue of the doctrine of subrogation in equity, by which the creditor is entitled to all the collateral securities which the debtor had obtained to reenforce the primary obligation. The mortgagor in such a case is looked upon as occupying the position of a surety; while the grantee having undertaken, upon a competent consideration, to pay the debt is regarded as the principal debtor. (Halsey v. Reed, supra.) In this case, C. W. Trotter, after his conveyance to the defendant Hughes, ceased to have any connection with the mortgage debt, and therefore cannot be considered as a surety for its payment; and for this reason the mortgagee could not claim the benefit of any engagements which the defendant may have contracted with him. Mrs. Stryker, the mortgagee in this case, has no title to call upon the defendant Hughes to respond personally for this debt. He would be a necessary party defendant to an action at her suit to foreclose the mortgage, .but the only remedy she could ask against him would be that his equity of redemption in the mortgaged premises should be foreclosed and that the land might be sold for the payment of the debt. She would also be entitled to a .personal decree for any deficiency against the mortgagor on his bond, but not against the defendant Hughes who had incurred no personal obligation to her, or to any one to whose rights she was entitled to succeed. One objection to the judgment rendered by the supreme court, therefore, is, that it gives to the mortgagee, who is made a defendant, a xemedv against Hughes to which she is not entitled, for by

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its provisions Hughes is required to pay to her any deficiency of the mortgage debt which may remain after applying thereto the proceeds of the sale of the premises. In effect, the judgment is precisely such as would have been rendered upon a foreclosure suit instituted by her, if it had been determined that the defendant Hughes was liable to her for such deficiency. This is of course in direct hostility to the case of King v. Whitely, with the principles of which we have expressed our approbation.

Aside from the rights of Mrs. Stryker, there is no ground for sustaining this suit. Hughes was to pay nothing to 0. W. Trotter for the land, the sole consideration between them being the mortgage debt due to Mrs. Stryker, in regard to which, as before remarked, Trotter had no interest or concern. If he had brought his suit, instead of assigning the demand to the plaintiff, it would have been impossible for him to show that he had any interest in its determination one way or the other. Indeed, he could have no possible legal or pecuniary motive for instituting such an action, as he would have been a stranger to the subject of ,the litigation.

The plaintiff, it is true, has a very obvious motive in sustaining a judgment which shifts the personal liability for any deficiency which may arise from his own shoulders upon those of Hughes. His difficulty, however, is, that he has no equitable right to ask for such a transfer of that burthen. Independently of the assignment from C. W. Trotter, he could not require.Hughes-to stand between him and such a liability, for he neglected to require an engagement to that effect from the person to whom he conveyed the premises. So far as is shown, he rested satisfied that they would sell for sufficient to pay the mortgage debt, and conveyed simply by a quit-claim deed.¡ By the assignment, he acquired no other rights than such as C. W. Trotter had; and we have seen that he had none whatever as against Hughes. He rested satisfied with a statement in his contract and convey

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anee, the legal effect of which was, that he would not guarantee against the effect of the mortgage, and that Hughes should himself satisfy it if he wished to protect the . land against it. The plaintiff’s situation was not, therefore, improved by his assignment.

I am of opinion that the city court of Brooklyn was right in its judgment, by which the complaint was dismissed with costs, and that such judgment should be affirmed and the judgment of the supreme .court reversed.

All the judges, except Ruggles, J., who took no part in the decision, concurred.

Judgment accordingly.