Kraemer v. Adelsberger — 34 N.Y. St. Rep. 24

Majority

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Louisa Kraemer, Resp’t, v. Samuel Adelsberger et al., App’lts.^[1]

(Court of Appeals, Second Division,

Filed December 2, 1890.)

Headnote

1. VENDOR AND PURCHASER—TITLE—MORTGAGE—FORECLOSURE—PARTIES.

A. held title to real estate belonging to his firm for the benefit of the firm, and on its dissolution in 1871, by a deed absolute on its face conveyed it to B., a special partner, to whom the firm was indebted in the sum of $60,000. Afterwards B. made an agreement with the firm that whatever he realized over $30,000 he would pay to the others, holding it as a trustee. B. died in 1873 and A. in 1880, both leaving wills. In 1882 the agreement was recorded both as a deed and a mortgage. In 1881 the executors of B. assigned all his interest in the agreement to O., who without making B’s heirs parties to the action foreclosed it and on the sale conveyed to defendants. Plaintiff in this action after contracting to purchase of defendants, objected to the title and sued to recover back $500 paid on account. Held, that plaintiff’s objections to the title were not well taken and that she could not recover; that the deed and agreement together constituted a mortgage, so that it was a personal asset which passed to the executor for the purpose of administration and that upon the foreclosure thereof by the executor or his assignees, the heirs of B. were not proper parties.

2. Same. •

While it is true that if an instrument offered to establish a defeasance he entered into subsequently to a deed and not in pursuance of the agreement made at or before its execution and delivery, it cannot be read with the deed, still it is not essential that they should have been reduced to writing at the same time, or hear even date. It is sufficient if they constitute a part of the same transaction.

3. Same.

While the recording of the deed ten days before the date which the agreement of defeasance bears raised the presumption ■ that it had been delivered at or before the time that it was put on record, -it was not conclusive and could have been overborne by_ evidence that it had not then been delivered and was not until a later period.

Appeal from an order of the general term of the superior court of the city of New York, reversing a judgment in favor of the defendants and directing a new trial.

The action was brought to recover $500 paid by plaintiff to defendants upon a contract for the sale of the real estate known as No. 316 East Fifty-second street, New York city, together with expenses for examining the title. Both parties professed to be

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ready to perform the contract, but the plaintiff made certain objections to the title and thereupon refused to accept the deed which was tendered to her, or to pay the balance of the purchase price, and relying upon her objections to the title she brought this action to recover the deposit paid by her upon the contract.

The title to the property in question was conveyed to William S. Carr in 1869, who was at that time a member of the firm of William S. Oarr & Co., and he held it as partnership property for the benefit of himself and his partners. The firm was composed of William 8. Carr and Theodore Susemihl as general partners, and Andrew Henderson as special partner. This firm was dissolved about January 1, 1871, by the withdrawal of Mr. Henderson, the special partner, and at that time the general partners were indebted to him in the sum of $60,000.

A deed of conveyance of said premises and of other property dated March 21, 1871, from William S. Carr to Andrew Henderson, which was absolute upon its face, was recorded as a conveyance on March 22,1871. The object intended to be accomplished by this conveyance appears to have been set forth in a paper executed by all of the members of the late firm as of the date of April 1, 1871. It is as follows:

“ Whereas, Andrew Henderson, formerly a special partner in our firm, W. S. Carr & Co., is desirous of withdrawing the amount due him, we have mutually agreed and come to the following understanding: Andrew Henderson receives and takes from Wm. S. Carr, trustee for the firm, the deeds of the following property: house and lot in One Hundred and Thirty-second street, between Fifth and Madison avenues, subject to a mortgage for $6,000, valued at $15,000. House and lot in Forest avenue, Eltona, Westchester county, N. Y., subject to a mortgage of $2,500, valued at $12,000. House and lot No. 152 East One Hundred and Fifteenth street, subject to a mortgage of $5,000, valued at $10,000. House and lot No. 316 East Fifty-second street, subject to a mortgage of $6,000, valued at $14,000, as security for the sum of $30,000, with the understanding that whatever above that sum is realized by the sale belongs to Wm. S. Carr & Co., and Andrew Henderson agrees to pay the difference to them whenever received, and Wm. S. Carr and Th. Susemihl, comprising the firm of Wm. S. Carr & Co., agree to make good and pay over any difference to Andrew Henderson if that amount should not be realized. The sale to be effected inside of two years. Andrew Henderson has appointed Mr. George P. Labutat as his representative to receive the money for this real estate when sold. Andrew Henderson gives to Wm. S. Carr & Co. the right to rent and collect the rent for these houses and lots, the same as they have done heretofore, before the deeds were made over to him, and in return Wm. S. Carr & Co. agree to see that the taxes and assessments, as well as the interest on the first mortgages, are paid. It is further mutually understood that this property being only held by Andrew Henderson as trustee for the sum of .$30,000, as before mentioned, Andrew Henderson agrees to not

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dispose of any of this property for less amount than the deeds made over to him call for without getting the consent of Wm. S. Carr & Co., or else forfeit his claim on, Wm. S. Carr & Co. in case he should not realize the amount of $30,000, for which it is pledged. Wm. S. Carr & Co. give and Andrew Henderson receives their notes for $30,000, payable twelve, eighteen and twenty-four months from March 15, 1871, this being the balance of his claim on the firm. Wm. S. Carr & Co. agree further to pay over quarterly, that is, June 15th, September 15th, December 15th and March 15th, to Mr. Akin, as Andrew Henderson’s banker, the interest at the rate of seven per cent per annum, due on above $60,000, or after any of it has been paid, either of the notes or by disposing of some of the real estate, on the balance remaining.”

“ In witness whereof, we have put this first day of April, 1871, our hands and seal.”

Wm. S. Carr & Co. continued in possession of the real estate and year after year collected the rent and out of it paid the taxes and interest on the first mortgages and paid over the balance during Henderson’s lifetime to his agent, and afterwards to his executor. Henderson died in 1873 leaving a last will and testament by which his brother Matthew Henderson was appointed executor and letters testamentary wrere issued to him. William S. Carr died in September, 1880, leaving a will, by which he devised and bequeathed his personal property to his wife and to his two children. In December, 1881, Matthew Henderson, as executor of Andrew Henderson, assigned and transferred to Edward C. Delavan the interests of said testator in said deed and defeasance, treating the same as a mortgage. Thereafter, in August, 1882, an action was commenced by Delavan to foreclose said instruments as a mortgage. The defendants named in that action were the widow and devisees of William S. Carr, deceased, and Theodore Susemihl, the surviving partner of Wm. S. Carr & Co., who had an interest in the equity of redemption as such surviving partner. This action went to judgment, the referee being appointed to make the sale; such sale was had and Edward C. Delavan became the purchaser and received a deed from the referee. Pending that action the deed to Henderson and the defeasance were recorded among mortgages, and the defeasance was also recorded among the conveyances.

The defendants in this action purchased from Edward 0. Delavan and received a deed from him.

Abner G. Thomas, for app’lts ; $. J. Spink, for resp’t

The plaintiff contends that the title obtained by the purchaser at the foreclosure sale was defective because the heirs of Andrew Henderson were not made parties to the action. She insists that the deed from Wm. S. Carr to Andrew Henderson was not a mortgage, but an absolute deed. That upon his death the title became vested in his heirs at law and still remains in them, for, not having been made parties to the foreclosure, they are not affected by the judgment.

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The plaintiff’s first proposition is that the deed being absolute upon its face, imposed upon the defendants the burden of showing that at the time of its making and delivery there was an agreement that it should not be treated as an absolute sale, but merely as security for the sum of $30,000, and was, in legal effect, a mortgage. And this, the plaintiff insists, was not proven because no attempt was made to show that there was an oral agreement contemporaneous with the execution of the deed which constituted a mortgage. While the writing upon which the defendants base their reliance, she urges, cannot have that effect, because it does not bear the same date as the deed, and, therefore, they cannot be read together. We think that, notwithstanding the difference in dates, the facts proven require them to be so read. The deed bears date March 21, 1S71, and was recorded on the day following, while the defeasance is dated April 1st of the same year. Mow, while it is true that if an instrument offered to establish a defeasance be entered into subsequently to a deed and not in pursuance of the original agreement made at or before its execution and delivery, it cannot be read with the deed, still it is not essential that they should have been reduced to writing at the same time, or bear even date. Harrison v. Trustees, etc., 12 Mass., 456 ; Lund v. Lund, 1 N. H., 39 ; 2 Washburn R. P., 56, 5th ed. -It is sufficient if they constitute a part of the same transaction, and while the recording of the deed ten days before the date which the agreement of defeasance bears, raised the presumption that it had been delivered at or before the time that it was put on record, it was not conclusive, and could have been overborne by evidence that it had not been delivered and was not until a later period. With reference to that question, the referee found as a matter of fact “ that on or about the date of delivery ” of the deed, Henderson, Carr and Susemihl executed the defeasance, which was thereafter recorded. Mo exception was taken to this finding, and as it is controlling here we need not consider the force and effect of the recitals and stipulations contained in the defeasance, but may assume that it was contemporaneous -with the delivery and acceptance of the conveyance, and that the conveyance never took effect until the defeasance was executed.

The plaintiff’s second position is that if the deed and agreement be read together they do not constitute a mortgage; that in legal effect the transaction was not a conveyance of lands as security for the loan or forbearance of money, but in payment of a debt. We think otherwise. It will be observed from a reading of the agreement (1) that an indebtedness by the firm to Henderson of $60,000 existed; (2) that payment was to be assured by Henderson’s receiving the notes of Wm. S. Carr & Go. (then solvent) for $30,000, and the conveyance of land as security for the remaining $80,000. The provision as to the condition upon which Henderson accepted the conveyance being stated as followss “ Henderson receives and takes from Wm. S. Carr, trustee, for the firm, the deeds * * * as security for the sum of §30,000.” (3) Meither the notes or the deeds were to be accepted in payment because (a) the firm were to continue to pay Hender

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son interest on the full sum of $60,000 after the execution and delivery of the notes and the deeds until some portion of the notes were paid or a sale of a part of the land should reduce the amount secured by the conveyance and then upon the remainder unpaid. (6) The firm were to retain possession of the premises, collect and receive the rents, pay all taxes and interest on firm mortgages and pay over the net proceeds to Henderson to be applied in payment of the principal and interest of the indebtedness secured by the conveyance, (c) The land was not to be exchanged for other property or retained for the benefit of the grantee and his heirs at his'option, but was to be sold within two years. (d) Henderson was not to sell for a less sum than that mentioned in the several deeds without getting the consent of Wm. S. Carr & Co. If he should, it was provided that he should be charged with the consideration expressed, (e) It was provided that when the lands should all be sold, that the moneys remaining after the payment of the $30,000 and interest should be paid over to Wm. S. Carr & Co. (/) And that if the sales of some of the different parcels should be made at a less sum than the consideration expressed, but with the consent of Wm. S. Carr & Co., then the firm should pay to Henderson whatever sum was required to make good to him the. $30,000 and interest.

We think we need not further analyze the agreement, for it is apparent, from the portions of it so far considered, that it was not the intent of the parties that Henderson should become the purchaser of these lands for the sum of $30,000 and that to such extent the firm indebtedness to him should be paid, but that it was the purpose of the conveyance, as manifested by the agreement, to secure Henderson to the extent of $30,000. The indebtedness remaining after the transaction as before and continuing in the full sum of $60,000 until by the application of rents and sale of parcels of land or the payment of moneys by the firm it should be reduced.

Whether a conveyance be absolute or as a security must generally be determined by the intention of the parties as disclosed by the contract, James v. Morey, 2 Cow., 246 , and a deed absolute in terms but given simply as security for the payment of money is a mortgage with all the incidents of that instrument. Odell v. Montross, 68 N. Y., 499 .

In determining whether a contract is to be treated as a mortgage or a conditional sale, or a conveyance in fee, courts have commented upon the presence or absence of various particulars which commonly accompany mortgages, but the essential, feature necessary to create a mortgage is that it should be a conveyance intended as a security. Such evidently was the purpose of the contract before us, but the plaintiff calls attention to the absence of a covenant to pay the amount of the indebtedness. It was agreed that interest should be paid on the full amount; that after sales should be made the proceeds should be applied in reduction of the amount of the then existing obligation and that the firm would pay the difference if any should remain. So that, while there was not an agreement in terms to pay the entire indebted

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ness, such may be said to have been the purpose and effect of the agreement; but in any event the absence of such a covenant is not conclusive but is a circumstance to be considered in construing the contract. Horn v. Keteltas, 46 N. Y., 605 ; Morris v. Budlong, 78 id., 543, 552.

The fact that the deed contained a covenant assuming the payment of a prior mortgage is also a circumstance entitled to consideration in determining what was the purpose of the parties in making the contract, but it is not controlling.

Having given that as well as all other provisions of the contract due consideration, we agree with the finding of the referee “ that it was the intention of the two instruments * "x" * that the instrument and conveyance * * should be a security to said Henderson for the payment of the indebtedness of said Carr and Susemihl to said Henderson."

Macaulay v. Porter, 71 N. Y., 173 , and Randall v. Sanders, 87 id., 578, do not support the plaintiff’s contention. In Macaulay's case the action was brought to have a deed recorded as a conveyance declared a mortgage. The trial court held that the instrument was not a mortgage, but a deed, and in affirming the judgment, this court said: “ It is difficult to see how the court could have arrived at any other conclusion; the agreement was not a defeasance which was to render the deed void on the payment of any sum of money, nor was there anything in the transaction of the nature of a mortgage. Porter was not a creditor, taking the land to secure any debt. Ho debt existed or was created in respect to the $2,500 paid for the property. If the land had depreciated Porter would have had no claim for reimbursement, nor was the privilege reserved to redeem it on payment of any sum. These circumstances are of great importance in determining the character of the transaction.”

Randall's case was an action of trespass. A deed had been delivered for a present cash consideration duly paid, and the grantee-gave to the grantor an agreement to re-purchase within three years. The action was an attempt to resume possession of the property without complying with the terms of the agreement. Rapallo, J.? in delivering the opinion of the court, said: “ After a careful consideration of these instruments, we are of the opinion that the relations of debtor and creditor formerly existing between the parties were terminated by the conveyance of December 5. That the conveyance was given and received in satisfaction of the prior indebtedness, and was not intended as security merely, but as an absolute conveyance, and the agreement of December 6th was not intended as a defeasance, but a contract to re-sell.”

As we have reached the 'conclusion that the deed and agreement together constitute a mortgage, it follows that it was a personal asset which passed to the executor for the purposes of administration, and upon a foreclosure thereof by the executor or liis assignee, the heirs of Henderson were not necessary parties.

The plaintiff’s objections to the title were not, therefore, well taken, and the trial court rightly dismissed the complaint.

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The order should be reversed, and the judgment entered on the report of the referee affirmed, with costs.

All concur, except Haight, J., absent.