Hyperlawhypertext legal database McGuckin v. Milbank 65 N.Y. St. Rep. 79

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McGuckin v. Milbank

65 N.Y. St. Rep. 79 Court N.Y. Gen. Term Decision date 1895-01-18 English

Decision Majority — Parker, J. · Concurring — *83 Van Brunt, P. J.

Contents

Majority

p. 79
Henry J. McGuckin, Resp’t, v. Samuel W. Milbank et al., as Executors, etc., App’lts.
(Supreme Court, General Term, First Department,
Filed January 18, 1895.)

Headnote

1. Mortgage—Foreclosure—Parties.
In an action to foreclose a prior mortgage, a failure to make the mortgagee in a trust mortgage a party as such trustee does not discharge the lien of the trust mortgage.
2. Damages—Covenant against incumbrances.
Under the covenant against incumbrances, where no fraud intervenes, the grantee, where an incumbrance exists which no attempt has been made to enforce, can recover only nominal damages, unless he shall have paid the amount.
Motion for a new trial on exceptions ordered to be heard at general term in the first instance.
One Davies, prior to March, 1887, was theowner of lots Nos. 59, 61, 63, 35, 67, and 69 Bast 120th street, New York City. March 9, 1887, he executed and delivered to William A. Cauldwell a mortgage on each of said lots, each of which was given to secure $5,000, or such part as should be advanced towards improving the premises. June 27th following Davies made a further mortgage to George N. Manchester covering the six lots, which mortgage contained a clause, immediately following the description of the property, providing that the mortgage was in trust to secure the payment,.to various individuals therein named, of certain sums, aggregating $5,000. Cauldwell subsequently foreclosed this mortgage, and in the action of foreclosure made George N. Manchester a party, naming him individually and not as trustee. Decrees were entered in all of these foreclosure suits. Subsequently the properties were bought by Cauldwell at the foreclosure, who after-wards sold all the lots to this plaintiff. Plaintiff made no objection to taking the title on the ground that Manchester had been named individually as a defendant in the foreclosure suit, and it does not appear that either of the parties to the conveyance were aware that there was any basis for a claim that Manchester’s mortgage had not been cut off by the foreclosure. After plaintiff had obtained title, he made an application to the Metropolitan Life Insurance Company for a loan of $10,500 upon each of the lots. The loan was made, and thereafter plaintiff sold four of the lots, and as to them there is no controversy. In 1890 the Metropolitan Life Insurance Company commenced suits to foreclose its
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mortgages on Nos. .65 and 67, which resulted in judgments of foreclosure and sale, bearing date the 28th day of May of that year; the referee’s report of sale being dated October 20, 1890. It does not appear that at the sales the attention of any one was called to the fact that George N. Manchester was made a party defendant individually, and not as trustee in the Cauldwell foreclosure, and, so far as we are advised by the record, it does not appear that such fact was taken into consideration, or that it in any wise affected the bidding for the properties. After the commencement of such foreclosure suits the plaintiff made a contract for the sale of one of the two remaining houses to one Wittkowski, who subsequenty refused performance on the ground that the Davies mortgage was an incumbrance upon the property. Subsequent to the sale of the lots pursuant to the judgment of May 28, 1890, by which plaintiff was divested of title, a suit was commenced by George N. Manchester, as trustee, to foreclose the mortgage complained of, in which action all subsequent parties in interest were made defendants, including the plaintiff, and each of the persons who were cestuis que trustent under the Davies mortgage to Manchester. It resulted in. a judgment dismissing the complaint, adjudging that the sale under the six several judgments of foreclosure, obtained on the foreclosure of the Cauldwell mortgage, did actually divest the lien of the mortgage executed by Davies and wife to George N. Manchester as trustee. The court held that the plaintiff was entitled to recover, as damages, the proportionate part of the face of the mortgage which the two lots should bear, or one-third of $5,000, and in accordance with such holding he directed the jury to find a verdict in favor of plaintiff for $1,666.66.
Daniel P. Mahoney, for p’lff; John L. Cadwalader, for def’ts.

The ruling of the court, that-the Manchester mortgage constituted an incumbrance upon the property at the time of the conveyance from Cauldwell to this plaintiff, is in accord with the decision of the court of appeals in Landon v. Townshend, 112 N. Y. 93 ; 20 St. Rep. 223 , and 129 N. Y. 169 ; 41 St. Rep. 419 , because Manchester was not made a party in his official capacity, nor was it made to appear on the face -of the complaint, hy answer, or by the appearance of Manchester in the capacity of trustee, that the trust which he represented was intended and understood to be affected by the suit. The trial court rightly. decided, as we think,. that the plaintiff was not estopped, by the judgment in the suit of Man-Chester as trustee against Davis et al, from asserting the existence of the incumbrance at the time of the conveyance to him, and its continuance during the period in which he had title to the property. It is true that he was made a party defendant in that suit, as were all the parties interested in any way in the property subsequent to the execution of the Manchester mortgage, including the cestuis que trustent thereunder, but he-made default; and thereupon, as against him, the plaintiff was at liberty to enter judgment for the relief demanded in the complaint, and to that extent; had

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judgment been so entered, he would have been concluded. He might have been concluded by the judgment rendered in favor of the defendant Cauldwell against the plaintiff, had he been served with a copy of Cauldwell’s answer as directed by section 521 of the Code of Civil Procedure, but that was not done; hence, as between him and his co-defendant Cauldwell, nothing was determined. Ostrander v. Hart, 130 N. Y. 406 ; 42 St. Rep. 513 .

"Upon the question of damages, we think, the plaintiff, under •the evidence, was only entitled to recover nominal damages. The covenant against incumbrances was broken the instant the conveyance was made to him, because the Manchester mortgage constituted an incumbrance, but the plaintiff was not evicted because of it, nor was any proceeding taken to enforce the incumbrance during the time that the title to the property was vested in him, and he did not pay it, or pay anything on account of it, nor was he requested to. Delavergne v. Norris, 7 Johns. 358 , is a leading case on that question in this state. The premises, which were conveyed by deed containing a covenant against incumbrances, were covered by several prior mortgages, which had been duly recorded, securing in the aggregate the sum of $2,000. The plaintiff paid mortgages aggregating $1,163.44 prior to the commencement of the action, leaving unpaid the sum of $835.30; and the question presented was whether he was entitled to recover the aggregate sum secured by the mortgages, or only the sum which he paid. And the court held that as to the mortgages remaining unpaid he could only recover nominal damages, as he might never be disturbed by an effort to enforce their collection. The court stated the rule as follows:

“If the plaintiff, when he sues on a covenant against incumbrances, has extinguished the incumbrance, he is entitled to recover the price he has paid for it; but if he has not extinguished it, but it is still an outstanding incumbrance, his damages are but nominal, for he ought not to realize the value of an incumbrance on a contingency where he may never be disturbed by tt. This is the reasonable rule, for, if he was to recover the value of an outstanding mortgage, the mortgagee might still resort to the defendant on his personal obligation, and compel him to pay it; and if the purchaser feels the inconvenience of the existing incumbrances, and the hazard of waiting until he is evicted, he may go and satisfy the mortgage, and then resort to his covenant.”

In Hall v. Dean, 13 Johns. 105 , the incumbrance was a judgment, which the grantee paid before commencing the action, and the court held, citing Delavergne''s Case, supra, that, the covenant being broken, the grantee was only entitled to nominal damages without discharging the incumbrance, but, having paid it, he is entitled to recover the amount paid. The same rule was asserted in De Forest v. Leete, 16 Johns. 123 . In Stanard v. Eldridge, Id. 255 , the deed contained a covenant which was held to be, in effect, a covenant against incumbrances. The covenant was broken because there was in existence, at the time of the conveyance, a mortgage which covered the premises with others. At the time of thecommence

Concurrence

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ment of the action the plaintiff had not paid nor had he suffered any disturbance in consequence of it, and the court held, on thq authority of Delavergne’s Case, that the plaintiff could only recover nominal' damages. In Dimmick v. Lockwood, 10 Wend. 142 , the court cites with approval Mr. Justice Yan Ness’ statement that the covenant against incumbrances was strictly a covenant of indemnity, and the grantee may recover to the full extent of any incumbrance upon the land which he should have been compelled to discharge, and no more. The authorities referred to supra are-also cited with approval, but in that case the grantee was actually evicted by the foreclosure of the incumbrance, and the measure of damages was held to be the consideration paid-by the grantee,, with interest. In Grant v. Tallman, 20 N. Y. 191 , a grantee of land, with covenants against incumbrances, in an action to recover the purchase money, alleged as a defense an outstanding incum* brance which his grantor had made a primary charge upon other lands which were of sufficient value to secure its payment. ■ The court said:

“It is, I think, well settled that where the incumbrance has not been paid off by the purchaser of the land, and he has remained in quiet and peaceable possession of the premises, he cannot have relief against his contract to pay the purchase money, or any part of it, on the ground of defect of title. The reason is that the in, cumbrance may not, if let alone, ever be asserted against the purchaser, as it may be paid off or satisfied in some other way, and then it would be inequitable that any part of the purchase money should be retained.”

In this case it may be remarked, in passing, that the incumbrance was never asserted against the plaintiff, and the evidence is that, since plaintiff was divested of his title through the foreclosure of a mortgage given by him, it has been satisfied other than by payment, in an action brought to enforce it. In Soule v. Dixon, 17 St. Rep. 360 , and Barlow v. St. Nicholas Nat. Bank, 63 N. Y. 399 , the cases of Delavergne v. Norris and Hall v. Dean, supra,. were cited with approval upon the proposition that a covenantee will be restricted to nominal damages if his possession has not been interfered with, unless he has paid the incumbrance. To the same effect is Sedg. Dam. (8th Ed.) 976 ; 2 Suth. Dam. (2d Ed.) § 622 ; Rawle, Cov. (4th Ed.) 288. Our attention has not been called to any case in this state in which the authority of the cases we have referred to is questioned, and the rule which they establish is that under the covenant against incumbrances, where no-fraud intervenes, the grantee, where an incumbrance exists which no attempt has been made to enforce, can only recover nominal damages, unless he shall have paid the amount. This plaintiff did not pay the amount of the incumbrance. His possessiop was not, interfered with because of its existence, and no attempt was ever made to enforce it until after his title and that of his grantee had, been divested by the foreclosure of a mortgage given by the plaintiff. The attempt which was then made to enforce it has resulted in an adverse judgment. The exceptions should be sustained, and a new trial ordered, with costs to the defendant to abide the event.

I concur in the result, and in the result only, of the opinion of Mr. Justice Parker in this case. I do. not think that the case of Landon v. Townshend, 112 N. Y. 93 ; 20 St. Rep. 223 ; and 129 N. Y. 167 ; 41 St. Rep. 419 , necessarily applies to this case; and the doctrine in that case should not be extended beyond its actual requirements, as the result must, of necessity, be the unsettling of titles as to which there has heretofore been no question. The mortgage of Davies to Manchester was to him individually. He is described as a party individually. It is true that in a subsequent part of the mortgage it is declared that the mortgage is executed and delivered to Manchester as trustee for certain firms, of which Manchester’s firm is one. The habendum clause, however, is:

“ To have and to hold the above-granted, bargained, and described premises, with the appurtenances, unto the said party of the second part (Manchester), his heirs and assigns, to his and their own proper use, benefit, and behoof, forever.”

The premises were to be held by Manchester, his heirs and assigns, not his successors and assigns. In Landon v. Townshend, Waddell, an assignee, virtióte officii, took the title, and only in that way,—a very different state of the proof from that presented in the case at bar.

O’Brien, J., concurs.

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