Opinion
Argued March 17, 1890
Decided April 15, 1890
Austen G. Fox for appellant. Noah Davis for respondent.
It is unnecessary to examine many questions discussed in the argument for the appellant, and which appear in the record, for the reason that the attorney for the defendant Tufts, who is the party interested in this appeal, has, by stipulation appearing in the case, expressly waived the right to review any of the exceptions or questions arising thereon, except the principal one set forth in the second defense of the answer interposed by him.
The action was brought to foreclose a mortgage given to secure the payment of $125,000, bearing date January 29, 1883, and duly recorded the next day, upon ten several lots of land in the city of New York, upon which houses were being constructed at the time of the execution and delivery of the mortgage; the houses having been completed at the time of the commencement of this action. Nine of the lots were released from the lien of the mortgage from time to time, as payments were made, and prior to the commencement of the suit. The complaint states that the sum of $3,603.22 was due and unpaid upon the mortgage, but the referee found that the amount so due was $1,801.61.
Only one of the ten lots is sought to be sold under the prayer of the complaint and the terms of the decree entered in the action.
The mortgage in question was executed by Mary Duffy and her husband to the plaintiff, and its purpose was to secure the payment of the purchase-price of the lots, and also certain advances of money made, or to be made, from time to time to the mortgagor for the purpose of aiding in the construction of buildings upon the lots.
The controversy in the case arises out of the answer of the defendant Tufts, that after the execution of the mortgage, and on the 7th day of August, 1883, Mary Duffy, the mortgagor, conveyed the lot directed by the decree in this action to be sold to him; that his deed was duly recorded on the 8th day of August, 1883, and that then the mortgage in question was a lien upon his lot, and also upon another lot which the mortgagor afterwards, and on the 29th day of August, 1883, conveyed to one James Kane; that the plaintiff having full notice of the rights of the defendant Tufts, nevertheless, thereafter, and in the month of October, 1883, without defendant's knowledge or consent, released and discharged the lot conveyed to Kane from the lien of the mortgage, and that the premises so released were, in value, more than sufficient to pay any sum due for principal and interest on the mortgage.
The referee has found that the conveyances to Kane and Tufts, and the release of the mortgage upon his lot, were made and delivered at the respective dates set forth in the answer, and the defense interposed by Tufts would be good were it not for other facts and other transactions connected with the deed to Kane which will presently be noticed.
The general equitable rule that when a mortgage covers several parcels of land that are separately and at different dates sold by the mortgagor, they are each liable to sale in satisfaction of the mortgage, as against the purchasers from the mortgagor, in the inverse order of alienation, is not disputed. Where the holder of a mortgage, with notice of the conveyance of a separate parcel of the land to a purchaser from the mortgagor, releases a part of the land subject to be sold first for the satisfaction of the mortgage, that fact generally constitutes a defense to the earlier purchaser to the extent of the value of the land released. ( Trustees, etc., v. Wheeler, 61 N.Y. 88; Kendall v. Woodruff, 87 id. 7; H. Ins. Co. v. Halsey, 8 id. 271.)
This general rule, however, is, in equity, made to yield to the requirements of justice. It was said in Kendall v. Woodruff ( supra) that "it is not always that a release of a part of the mortgaged premises, given with knowledge of a prior conveyance of another part that remains unreleased, is held inequitable. It is not a technical discharge of that part, nor is it an equitable release or discharge, unless upon principles of natural equity and justice it ought to operate against the mortgagee giving the release."
The referee has found, upon sufficient evidence, that the contracts in writing entered into with Kane, though in form signed by the husband of the mortgagee and owner of the land, were yet her contracts, made under her direction, and bound her in the same way as if she signed them herself.
Whether the discharge by the plaintiff of the lien of his mortgage upon the lands to Kane, operated in equity to the prejudice of the defendant Tufts, is not to be ascertained or tested by the mere fact that Kane's deed was made and delivered at a later date than that of the defendant Tufts. The referee has found that at the time the plaintiff released his mortgage upon the lot conveyed to Kane, he had notice of the conveyance, prior in point of date, to the defendant Tufts. But behind the conveyance and release to Kane are certain facts and equitable considerations which cannot be overlooked in adjusting the rights of the parties.
As early as February, 1883, Mrs. Duffy, the mortgagor and owner, entered into a contract with Kane for the sale of the lot which was afterwards conveyed to him. Kane was to pay $9,000 for it by performing certain work and labor in the plumbing of the houses then in process of construction and to furnish the materials for that purpose. It is found that as early as July, 1883, he had performed his contract, paid the purchase-price as provided by the contract, and entered into the possession of the premises. Prior to this time the plaintiff had full notice of the contract and of all of Kane's rights under it, his payments thereon and his possession. Thus it will be seen that a month prior to the deed of the mortgagor to the defendant Tufts, Kane had contracted to purchase the lot afterwards conveyed to him, and had gone into possession of the same, and paid the consideration therefor. This in equity constituted him the owner. True he did not receive the deed to the premises until the twenty-ninth of August following, but he had possession, and every right in equity of an absolute owner in fee, and we think the case should be determined in the same way as if Kane received his deed at the time he fulfilled his contract and went into possession. On the seventh of August thereafter, when the defendant Tufts took his conveyance, Kane's possession of the other lot was notice to him and to all the world of his rights. Therefore, we think that the mere fact that Kane's deed was executed and delivered at a later date than that of the defendant Tufts, is not a controling circumstance, in view of his antecedent rights and equities.
It appears also by the findings of the referee, that the consideration of the deed given by the mortgagor to the defendant Tufts, was a past due debt, while Kane at the time of taking his contract above referred to obligated himself to pay in the future the sum of $9,000 in furnishing the material and the performance of the work in the construction of the houses upon the lots in question. Manifestly Kane's equity is stronger than that of Tufts, and while Kane is not a party to this action we think that the act of the plaintiff in executing the release to him is nothing more than he could be compelled to do, if Kane had been made a defendant.
We think that the case was correctly decided in the court below, and that the judgment should be affirmed with costs.
All concur.
Judgment affirmed.