Opinion
July Term, 1902.
Henry M. Earle, for the relator.
John C. Davies, Attorney-General, and George H. Stevens, Deputy Attorney-General, for the respondents.
It must be held, I think, that, as between Mrs. Romeyn and the relator in this matter, the agreement of March 20, 1899, should be treated in equity as an equitable mortgage, and that as against her it would be enforced as such. It is true that such agreement itself does not purport to create a present lien upon the premises in question, but there is contained in it a distinct and positive agreement to execute a mortgage to secure the $2,000 therein mentioned in the event that the foreclosure proceedings then threatening to divest her of such lands should, for any reason, not proceed to judgment. The intent is plain. By the instrument itself she gives to Mathews Co. a lien upon the surplus moneys that she then expected to receive through the judgment in foreclosure, but if that expectation was not realized on account of the action being discontinued, she agrees to give him a lien, by mortgage, upon the land itself. And such mortgage is to be given whenever Mathews Co. shall demand it. I do not agree with the Attorney-General that such demand was a condition precedent to any liability on Mrs. Romeyn's part under such agreement. Her obligation arose at once, to give the mortgage whenever she was asked to, and I discover nothing in such agreement that required Mathews Co. to demand the mortgage as soon as the discontinuance of the action occurred. By delay such firm took the chances of some bona fide purchaser intervening; but so long as no intervening equity arose they could enforce such promise against Mrs. Romeyn unless the debt was otherwise discharged. (Pom. Eq. Juris. § 1237; Lynch v. Utica Ins. Co., 18 Wend. 236; Husted v. Ingraham, 75 N.Y. 251, 257; Deeley v. Dwight, 132 id. 59, 64; Kribbs v. Alford, 120 id. 519, 524; Sprague v. Cochran, 144 id. 104, 112, 113; Hamilton Trust Co. v. Clemes, 163 id. 423, 427; National Bank of Deposit v. Rogers, 166 id. 380, 390.)
If Bowers was a bona fide grantee for value, and if the loan commissioners were bona fide mortgagees, then this equity could not be enforced against the premises. Bowers in that event would have acquired through his conveyance from Mrs. Romeyn a title to the premises freed from the lien above suggested.
So, also, if Bowers had acquired such a title the loan commissioners, although they had notice of such equity, could rely upon that title and hold the premises acquired from him. (Pom. Eq. Juris. § 754.)
It is averred in the petition, and not disputed in the return, that the commissioners, when they took the mortgages from Bowers, had actual notice of the instrument of March 20, 1899, and so, of course, they had notice of the agreement by which such equity is created. But there is no charge in such petition that Bowers had such notice when he took his conveyance from Mrs. Romeyn, and the burden is upon the one who claims the benefit of such outstanding equity to establish that the one who claims under the record title had notice of such equity. (See Brown v. Volkening, 64 N.Y. 76.)
But I am of the opinion that the record shows that Bowers also had notice of such agreement and equity. The affidavits of Earle and of Davidson used upon the hearing, show that in June and July, 1899, Bowers had purchased two other parcels of the land referred to in this agreement of March 20, 1899, and had mortgaged them to such commissioners, and that on the application of Davidson, who was then acting as Bowers' attorney as I understand the statement in his affidavit, the firm of Mathews Co. released such parcels from the lien created by such agreement and such releases were put upon record. In the face of that fact we must, I think, conclude that on August 30, 1900, when he took the conveyance of the remaining part of such premises he still had notice of such agreement, and that, unless released, such parcel also would be subject to such lien. Such deed was taken to Bowers on the thirtieth and the mortgages executed on the thirty-first; evidently it was one transaction, and the commissioners took the title upon the understanding that Mathews' debt had been paid and that a release for this last parcel was not necessary. When one of the commissioners afterward ascertained that the debt was not paid and tried to get the release, he stated these facts to Mathews' attorney. This appears from the affidavit of Earle and is not contradicted.
We must conclude then that both Bowers and the commissioners had actual knowledge of this agreement creating this equitable lien and that neither took the title to these premises as purchasers in good faith. The lien was and still is a prior one to their title, and, inasmuch as the commissioners represented the State in acquiring the title to such lands the State now holds such title subject to such lien.
These conclusions require that the determination of the Commissioners of the Land Office be reversed, with fifty dollars costs and disbursements.
All concurred.
Determination of the Land Commissioners reversed on law and facts, with fifty dollars costs and disbursements.