Wadsworth v. Lyon

On the'1st day of May, 1868, Bridget O’Day and her husband sold and conveyed certain lands to the defendant, Louisa L Lyon, and, to secure a part of the purchase-money, she and her husband, James S. Lyon, executed to Mrs. O’Day a bond conditioned to pay the sum of $4,000, and Mrs. Lyon executed , and delivered to Mrs. O’Day her mortgage on the lands as collateral security for the payment of the bond. On the 12th of June, 1868, Mrs. O’Day assigned the bond and mortgage to one Fellows, guaranteeing payment thereof. On the 17th day of January, 1873, Mrs. Lyon, by a deed, in which her husband joined with her as grantor, conveyed the lands to Mrs. Beck, wife of John Beck, which deed contained a covenant of warranty on the part of Mr. Lyon alone. The consideration of the conveyance was $10,000, which was the full

After this conveyance Mr. and Mrs. Lyon remained the principal debtors, and the lands were simply security for the debt due upon the bond. Mrs. Beck owned the lands charged with the debt of Mr. and Mrs. Lyon, which, as between her and them, they were bound to pay. (Barnes v. Mott, 64 N. Y. 397 , 402; 21 Am. Rep. 625 ; Thomas on Mortgages, 92, 94.) The primary liability of the obligors to pay the bond could not be shifted to the lands, except by a conveyance of the lands subject to the payment of the mortgage; or by deducting the bond from the consideration of the conveyance, or by some agreement between the grantors and grantee, charging the primary liability upon the grantee or the lands leaving, as between them, the grantors to stand as mere sureties for the bonded debt. If, while Mrs. Beck owned the lands, she had been compelled to pay the debt secured by the mortgage, she could have recovered the amount paid by her of the principal debtors, or she could have claimed subrogation to the rights of the holder of the mortgage, at the time of payment, and then enforced the bond against the principal debtors. She would have had these remedies, not because of the deed to her, nor by virtue of any implied covenant therein, but because, her lands standing as security for the debt of Mr. and Mrs. Lyon, she had been compelled to pay the debt to save her lands. It matters not that the deed was a quit-claim deed. That did not pay the debt of the grantors. It conveyed the lands, it is true, subject to the mortgage, necessarily subject to it, because it was a lien upon the lands,, but subject to it only as security for their debt. Until she paid the debt, or her lands were taken to pay it, she would suffer no damage, being in the same condition as any surety for a principal debtor. But the moment she paid the debt to save her lands, she would have a cause of action, not on account of any effect attributable to the deed, but because the principal debtors failed to pay their debt, and

On the 8th of April, 1874, one Stohl recovered a judgment, in the Supreme Court, against John Beck, for upwards of $6,000, and on the 16th day of October, thereafter, he commenced an equitable action against Mr. and Mrs. Beck to charge that judgment upon the lands, on the ground that they had been bought and paid for with the money of Mr. Beck.

On the 1st of December, 1874, Fellows began an action to foreclose the mortgage, and for judgment for deficiency, after applying upon the bond and mortgage the proceeds of the sale of the lands; and on the 25th of March, 1875, he recovered judgment by default, directing a sale of the lands; and the judgment also contained a provision for the entry of judgment against Mr. and Mrs. Lyon for any deficiency which should he shown by the sheriff’s report of sale to exist after applying upon the bond and mortgage the proceeds of the sale.

On the 20th of July, 1875, Fellows assigned the bond, mortgage and judgment to one Caldwell, and on the 15th day of August, thereafter, the sheriff offered the lands for sale by virtue of the foreclosure judgment, and the plaintiff bid at the sale some more than the amount due upon the judgment, and the lands were struck off to himbut he never paid any part of the bid, and it was never demanded of him. ISTo note or memorandum of the sale appears to have been made; the sheriff made no report of the sale, and the sale was abandoned. As that sale, even if binding upon Wadsworth, was never consummated, and was abandoned, it can have no effect, whatever, upon the rights of the parties in .this action, and may be treated as out of the case; and the foreclosure judgment must be treated as if no attempt had been made to execute it. Mr. and Mrs. Lyon certainly cannot complain that it was not executed, and that Wadsworth was not held to his bid, because they were

Afterward, on the 31st of July, 1876, Stohl recovered a judgment in his equitable • action against Mr. and Mrs. Beck, declaring his judgment against Mr. Beck a lien on the lands ■ and directing that a receiver be appointed and the lands sold by him to satisfy the judgment. Thereafter, on the 12th of August, Mrs. Beck sold and conveyed the lands to the plaintiff by a quit-claim deed, for the consideration of $250. On the 15th of August one Deming was appointed receiver, in pursuance of the judgment in the equitable action, and he qualified as such. Afterward, Caldwell demanded of plaintiff the money due upon the bond, mortgage and judgment, and threatened to sell the lands by virtue of the judgment if the money was not paid; and thereupon, on the 19th day of August, at the request of the plaintiff, one Curtiss paid Caldwell the amount demanded, to-wit, $3,000, with interest thereon from August 1, 1875, and Caldwell thereupon assigned the bond, mortgage and judgment to Curtiss. On the 14th of October, 1876, in pursuance of an order of the court, Deming, as receiver, conveyed the lands to the plaintiff for the consideration of $200, which was paid by the plaintiff and applied on the judgment of Stohl v. Beck. After this conveyance, and the prior conveyance to plaintiff by Mrs. Beck, he took Mrs. Beck’s position in the title to the lands and had all the title thereto which either she or her husband had previously had. He acquired no equities and no rights from her against Mr. and Mrs. Lyon, because she had no claim of any kind against them. She had not paid their debt and her lands had not been taken to pay it. All plaintiff got from Mrs. Beck were the lands, and they came to him as they came to her, charged with the debt of Mr. and Mrs. Lyon, and in his hands they were as before, simply security for the debt. Mr.

On the 20th of November Curtiss assigned the bond, mortgage and judgment to Mrs. White, and she paid him the full amount due thereon, and on the 22d of August, 1877, she assigned the bond, mortgage and judgment to Nelson K. Hopkins, who paid her the full amount due thereon. All the assignments above mentioned were made at the request and by the procurement of the plaintiff. On the 6th of December, 1877, the plaintiff sold the lands to one McDonough for $4,000, by a deed which contained the usual covenant for quiet and peaceable possession, and at the same time he agreed with McDonough to clear the lands of the lien of the mortgage and judgment; and thereafter, Hopkins, at -the request of the plaintiff, released and discharged the lands from the lien of .the mortgage and judgment, reserving and retaining the right to enforce the bond against Mr. and Mrs. Lyon.

Out of the $4,000 received from the sale of the lands plaint-tiff paid to Mrs. White the consideration of her assignment to Hopkins. On the 7th of August, 1878, the Supreme Court gave plaintiff leave to sue the bond, notwithstanding judgment of foreclosure, and thereafter Hopkins made formal assignment of the bond to the plaintiff and then this action was commenced to recover the amount due thereon, to-wit, $3,000, with interest from August 1, 1875.

The defendants do not claim that they have paid their bond or that they have been in any way discharged or released from the payment of the debt created thereby, ,or that they have been damaged by any thing that has been done with it. Their only defense is that the bond became merged in the foreclosure

There has in fact been no recovery upon the bond. The judgment simply provides as follows: “ That if the moneys arising from said sale shall be insufficient to pay the amount so reported as actually due to the plaintiff, with interest thereon, and the costs, and expenses of sale as aforesaid, that the said sheriff specify the amount of such deficiency in his report of sale; and that on the filing of such report the defendants, James S. Lyon, Louisa L. Lyon and Bridget O’Day, who are personally liable for the payment of the debt secured by the said bond and mortgage, pay to the plaintiff the amount of such deficiency, with interest thereon from the date of said last-mentioned report, and that the.plaintiff have execution therefor.”

The judgment for deficiency is a mere contingency. It has not been actually entered, and is not a lien upon any property. It cannot be entered until the deficiency has been ascertained ; and that can be ascertained only after a sale of the lands. No execution can be issued upon it for any deficiency, as it now stands'. If there had been a sale, and the lands had sold for enough to satisfy the judgment and costs, then no judgment for deficiency could have been entered against the defendants. The proceeds of the sale would simply have satisfied the bond and mortgage, and the effect would then have been no other than if the owner of the lands, standing as surety for the debt, had paid the bond; and it is well settled that a surety can pay the principal obligation, and then take the obligation, notwithstanding payment, and enforce it against the principal debtor. (Champney v. Coope, 34 Barb. 539 ; S. C., 32 N. Y. 543 ; Harbeck v. Vanderbilt, 20 id. 395; Edgerly v. Emerson, 3 Foster [N. J.], 555.)

The judgment as to the foreclosure is final, but not as to the bond. As to that, it is simply decided that the obligors are hable thereon. The judgment is not as broad as the bond, and not as good as the bond, and hence the bond should not he held to be merged in it. The judg

W hen the principal and surety are sued upon any obligation securing a debt, as between the plaintiff and the defendants, the obligation becomes merged in the judgment; but it is not necessarily merged as between the defendants. In Clark v. Rowling ( 3 N. Y. 216 ), it was held, as stated in the head-note, that “ a judgment upon a contract technically merges the demand, but not in so complete a sense that the courts may not look behind the judgment to see upon what it is founded for the purpose of protecting the equitable rights connected with the original relation of the parties ; ” and Hurlburt, J., in his opinion, said: “A judgment, instead of being regarded strictly as a new debt, is sometimes held to be merely the old debt in a new form, so as to prevent a technical merger from working injustice.” In Kelsey v. Bradbury ( 21 Barb. 531 ), judgment was recovered against the maker and indorser of a promissory note. The indorser paid the judgment and took up the note and transferred it to Bradbury, and it was held that he could enforce payment of it against the maker, and that the note was not merged in the judgment. In Freeman on Judgments (§ 221), the rule is well formulated thus: “ The merger of a cause of action has no effect upon the liabilities of the co-plaintiffs or the co-defendants between each other. Those liabilities are not in issue in the case, and therefore are not affected by the final determination of the action. In extinguishing a demand a judgment has no greater effect than mere payment. It leaves the liability of other parties to the defendant unaffected. A recovery upon a note against the maker and in

The act of bringing the suit to foreclose the mortgage was not the act of the plaintiff, and it is difficult to perceive how it could have'any effect upon his rights. He had the right, as owner of the lands which stood as security for the bond, at any time, to pay the bond, and then enforce it against the principal debtors. He does not occupy simply the position of the assignee of a bond and mortgage, having merely the rights which the mortgagee or assignee had; but he occupies the position as well of a surety, entitled to be subrogated to all the securities which the creditor held for the debt against the principal debtors; and by virtue of that principle of equity he was entitled to take this bond, after payment, and enforce it against the defendants. The right of subrogation in such a case is sanctioned by clear and well-established principles Uniformly applied by the courts, and rests upon the broad and deep foundations of natural justice and moral obligation. (Hayes v. Ward, 4 Johns. Ch. 123 ; Hunt v. Amidon, 4 Hill, 345 ; Lewis v. Palmer, 28 N. Y. 271 ; Ellsworth v. Lockwood, 42 id. 89; Cole v. Malcolm, 66 id. 363.)

The defense set up is an extremely technical one; in no way involving the merits of the controversy between these parties. So far as I can perceive, it could make no difference with these defendants whether the plaintiff sued them upon the bond, or for the money, which he was obliged to pay to relieve his land from the lien of the mortgage. The recovery would be just

We are, therefore, of the opinion that this bond was not so merged in the judgment of foreclosure as to deprive the plaintiff, standing really in the position of surety for the debt, of the right to take it and enforce it against the defendants.

It matters not that plaintiff’s equities are not set up, or mentioned in the complaint. He had the right, as surety, to pay the bond, take an assignment thereof, and bring his action thereon. Upon the trial he could prove his equities, in answer to any defense which the defendants attempted to establish, to sustain his right to recover as assignee of the bond. But the whole case was proved on both sides, without any objection to the form of the complaint, and all the facts showing plaintiff’s equitable rights were found by the trial judge. "Under such circumstances the plaintiff should have had such relief as the facts proved and found entitled him to.

The defendants, Mr. and Mrs. Lyon, are absolutely without any equities. They gave their bond for full value and have never paid it or devoted any property to pay it. If the plaintiff cannot enforce payment thereof, then no one can, and they have become absolved from payment by some strange legerdemain of law and facts as remarkable as incomprehensible.

The judgment should be reversed and a new trial granted, costs to abide the event.

The first question which demands consideration in this case is, whether the claim of the plaintiff, which is sought to he enforced herein, is barred by the judgment and the sale made upon the foreclosure of the mortgage, collateral to the bond in suit, by Fellows, the former owner and from whom title was acquired by the plaintiff, by virtue of several intermediate assignments. Said judgment recited the amount due upon the bond, and directed a sale of the mortgaged premises, the payment of the moneys arising therefrom upon the judgment, in the usual form, and, in case of a deficiency that the respondents, who

The premises were offered for sale and bid off by the appellant, who was the highest bidder, there being other bidders at the time, for an amount sufficient to satisfy the mortgage, and the costs and expenses of the foreclosure. The amount of the bid was not paid by the appellant, the premises were not conveyed to him, and no report of sale was made and filed. Subsequently the owner of the judgment, and of the bond and mortgage, assigned the same to one Curtiss. After this the premises were sold at a receiver’s sale, upon a judgment against one Beck, who was adjudged at the time to be an owner, to the appellant, and at a still later period the appellant became the assignee of the bond and mortgage and of the judgment.

It is insisted by the appellant’s counsel that there was no sale or report of sale, no deficiency on the sale, or confirmation of the report, and no judgment upon the bond in which the debt could merge, and that there was no merger or extinguishment of the debt or judgment upon the bond, and the latter was not merged in the judgment. So far as the proceedings on the foreclosure of the mortgage and the judgment thereupon, and the sale under the same are concerned, we are unable to discover any such irregularity or defect as would render them inoperative and without force. The action was brought to foreclose the mortgage, and the complaint set forth the bond and mortgage, as the basis of the cause of action and alleges that no proceedings at law had been had for the recovery of the same. The decree, as already stated, provided for a sale and the payment of the amount due upon the bond and mortgage, and in case that was insufficient to pay the same, that the deficiency be specified in the report of sale, and upon filing the report, the respondents in this action, who were adjudged to be personally liable therefor, should pay the same. The respondents were made parties in that action as mortgagors, and as liable upon the bond, and were adjudged to be personally liable. The grantee of the mortgagors, under whom the plaintiff claims,

The principle laid down cannot be denied, and applying it to the case before us, it is difficult to see why the judgment and proceedings in the foreclosure action, with the sale to the plaintiff for the full amount of the bond and mortgage, is not a bar to this action, and a merger of all the rights which the plaintiff had acquired by virtue of the assignment of the bond and mortgage to him or from any other source. Whatever equitable rights he had as owner arising from the bond and mortgage, its lien upon the land, and its covenant in the deed of Lyon to Mrs. Beck, were derived from parties in the foreclosure action, and were proper subjects for consideration and 'determination in that suit. The sale therein disposed of the title and interest of the mortgagors in the land. The amount bid covered the entire sum due on the bond and mortgage, and the plaintiff, as the purchaser, took the land and acquired a right to a conveyance thereof hy the purchase which he had made. He was entitled to the land in payment of the mortgage, which with the bond became extinguished by the sale, and the mortgage was canceled and discharged as a lien thereon. It is not apparent, after having thus become the purchaser with the right to a conveyance of the mortgaged premises, what claim remains in the plaintiff by virtue of the bond and mortgage against the mortgagors. The sale and the bid made by the plaintiff were actually and virtually in the nature of a payment which canceled all claims under the mortgage or right to enforce the bond personally against the respondents.

The order of the court which allowed the plaintiff to bring the action upon, the bond cannot be regarded as any thing more than a permission to prosecute the bond with a view of testing the question as to the right of the plaintiff to sue upon the same after the foreclosure and sale by virtue of the mortgage, and the purchase of the premises by the plaintiff.

The claim that the bidding in of the property was not a sale, as no money was paid, or memorandum or contract signed, or report of sale made .or confirmed, is not meritorious. It does not appear why the plaintiff did not pay his bid, or take a deed from the sheriff, or that he refused upon any of

The authorities cited by the appellant’s counsel in this connection do not uphold the doctrine contended for, and as there was a bona fide sale for the whole amount unpaid and due upon the mortgage, it is very obvious that it must be regarded as a satisfaction of the judgment of foreclosure upon which it was founded. The sheriff who sold the property was an officer of the court, and if he failed to perform his duty in respect to the sale, upon an application for that purpose, the court would by order have compelled him to sign the terms of sale mrncpro tune and to make a report of sale and execute a conveyance to the purchaser. In a sale by a sheriff or referee it is not necessary that the purchaser should sign the terms of sale to make it valid, and the statute of frauds does not require any such signature. (Miller v. Collyer, 36 Barb. 250 ; Willets v. Van Alst, 26 How. Pr. 325 ; National Fire Ins. Co. v. Loomis, 11 Paige, 431.) The purchaser, by bidding at the sale, places himself under the jurisdiction of the court, and may be compelled to fulfill or be punished for contempt for not doing so. In 11 Paige (supra), the chancellors

The appellant’s counsel also claims that he occupied the position of a surety for the debt, and if the sale was good the debt would not have been extinguished because the purchase by the surety of his own premises would be nothing more than a redemption. We think that the rule contended for has no application when the real estate covered by a mort

It should also be observed in this connection that at the time of the sale under the foreclosure judgment, plaintiff had no title to, or interest in, the premises. He acquired the interest under which he claims the rights of a surety, by virtue of a deed dated August 12, 1876, from Mrs. Beck, the former owner, and the deed from the receiver appointed in the creditor’s suit, executed the 14th day of October, 1876.

It is claimed by the appellant’s counsel that when defendants conveyed the mortgaged premises to Sarah Beck they remained primarily liable on the bond to pay the debt, and the land was a mere surety collateral and secondary to the bond, and several authorities are cited to sustain this position. The case of Barnes v. Mott ( 64 N. Y. 397 ) is particularly relied upon, and while the rule there laid down in the opinion may be regarded as applicable to the case there considered, we are unable to perceive how it applies to the circumstances which are developed in this ease. That action was brought to restrain the sale, upon an execution, of certain premises owned by the plaintiff, and to have the lien of the judgment upon said premises discharged ; also to restore the lien of the mortgage upon said premises, alleged to have been satisfied by mistake. The facts presented a case where the plaintiff was clearly entitled

Another answer to the claim of the plaintiff in this action is that the action is at law on the bond, and there is no rule which allows the equities to be brought in in such a ease. To entitle the plaintiff to relief, if he had any claim, he should have brought his action in equity at the proper time to redeem the land or to be subrogated ; in which action the equities of the parties could have been properly adjudicated. Having failed to do this'it is too late now to claim that in an action on the bond he can obtain equitable relief. It is no answer to this position to say that the point was not taken upon the trial. It appears that it was adjudged that the complaint be dismissed as to the defendants, no ground being stated. Under such circumstances the decision shotild be upheld if it can be sustained upon any valid ground. It may also be observed that if the plaintiff has any remedy it is upon the covenant in the deed and not by an action upon the bond. The deed from Sarah Beck to the plaintiff was a quit-claim deed without any covenants, and which only conveys her reversionary interest after the payment of the judgments against her husband. The deed to Mrs. Beck contained a covenant by which James Lyon did covenant to warrant and defend the said Sarah Beck in the quiet and peaceable possession of the premises. Under this covenant, if at all, plaintiff alone can maintain -his claim and has no remedy against the defendants upon the bond. In such a case the rule is well settled that a party is remitted back

We are unable to discover, after full consideration, any ground upon which the plaintiff can maintain this action.

The judgment was, therefore, right and should be affirmed.

Upon this reargument the question is more distinctly presented and fully discussed as to the position of Mrs. Lyon in reference to the quit-claim deed which was executed to Mrs. Beck. It is insisted by the respondents’ counsel that she stood in the same position as if she had conveyed expressly eum onere, i. e., subject to all claims, incumbrances and defects. We think this rule is well established in this State in reference to deeds without covenants. The Revised Statutes (1 R. S. 738, § 140) abolished all implied covenants in deeds in fee, and hence a mere quitclaim deed conveys simply the right, title and interest of the grantor subject to all incumbrances, claims or defects in the title, and the grantee has no remedy or redress on account of the same. He only becomes entitled to the interest of his grantor, whatever that may be, and cannot recover of such grantor the amount of any liens or incumbrances, or damages for any defect in the title. Wasburn in his work on Real Property (vol. 3, 3d ed. 380), lays down the rule thus: “ If the deed contains no covenant the purchaser is wholly without remedy. The right of the grantee to relief, either in law or equity, on account of defects or incumbrances in the title, depends solely upon the covenants for title which he has received.” Applying the doctrine laid down to the case considered it is difficult to see upon what ground the plaintiff can maintain this action. Even if Mrs. Beck paid a full consideration for the value of the land it cannot alter the rule, for whatever she received she only gave for it and her grantee only received, her rights in the land as it stood ; it was conveyed, and Mrs. Beck took it, subject to all liens and incumbrances. This included the mortgage then on the premises and which was collateral to the bond now in question. The question, therefore, whether Mrs. Beck

No other question is raised upon this reargument, which is not sufficiently considered in my opinion on the former argument, and the judgment should be affirmed.

All concur with Earl, J,, except Miller and Daneorth, JJ., dissenting.

Judgment reversed.