In Wilson v. Parshall, 129 N.Y. 223, the court say: "The security of titles and sound public policy require that a party alleging that a deed absolute in form is, nevertheless, a mortgage should show it by very satisfactory evidence, and, where he attempts to show it by oral evidence, his proof should amount to more than a mere guess or surmise, or even inferences which are just as consistent with one theory of the deed as the other."Summary of this case from Sheehan v. Sullivan
Argued October 29, 1891
Decided December 1, 1891
A.B. Cruikshank for appellant. H. Arlington for respondent.
This action was brought to recover damages for the breach of the covenants contained in a full covenant deed of real property situate in the city of New York, which was purchased of the defendant by the plaintiff in 1880. The plaintiff's claim is that there were breaches of the covenants of seisin, of a right to convey and against incumbrances. The court directed a verdict against him, and he claims that, at least, the evidence should have been submitted to the jury.
The real estate formerly belonged to John W. Bockhorn, and on the 3d day of December, 1877, he conveyed it to the defendant by a deed absolute in form containing full covenants, subject, however, to two mortgages, one for $6,000 and another for $5,100, the latter having been executed to secure an indebtedness from him to the firm of H.K. Thurber Co. The plaintiff claims that this deed was executed to the defendant, who was connected with that firm, to secure the same debt, and that, therefore, it was in fact and legal effect a mortgage, and that thus his title was imperfect.
These deeds in form conveyed a perfect title to the real estate, and the burden was upon the plaintiff, in this action for a breach of the covenants, to show that they did not; and in this he utterly failed.
The security of titles and sound public policy require that a party, alleging that a deed absolute in form is, nevertheless, a mortgage, should show it by very satisfactory evidence, and where he attempts to show it by oral evidence, his proof should amount to more than a mere guess or surmise, or even inferences which are just as consistent with one theory of the deed as the other. In limine, it may be observed that it is entirely improbable that Thurber Co., already having a mortgage to secure their debt, should take another mortgage on the same property for the same debt, without any apparent reason or advantage, and then record it as a deed. But the proof shows without any doubt that this deed was not intended as a mortgage. While Bockhorn, a witness for the plaintiff, testified in a general way that the deed was given to secure the debt to Thurber Co., he also testified that the debt did not survive the deed, and that he was not thereafter indebted to them, and that Thurber Co. were to sell the land, and, after paying the liens thereon, including the debt to them, they were to account and pay over the balance to him; and H.K. Thurber, the only other witness upon the same subject, testified substantially to the same effect. Thus it is clear that the debt was to be secured and really paid by an absolute unconditional transfer of the real estate to the defendant, and by vesting the absolute title in him for the benefit of Thurber Co. and thereafter Bockhorn had no further title to or interest in the land as such, his only interest being in the proceeds to be realized on a sale thereof by the defendant. There was then no defect in defendant's title. He did with the land exactly what he had the right to do, under the parol arrangement with Bockhorn. And Bockhorn's only right was to call him to account for the proceeds. In the end they appear to have proved insufficient to pay the liens upon the land.
The mere fact that Bockhorn, or some one in his behalf, or representing him, claims that the deed was intended as a mortgage, does not render the title conveyed by the defendant defective, or make the defendant liable for breach of any of the covenants in his deed. Any absolute deed may be assailed by parol evidence given for the purpose of showing that it was intended as a mortgage. But a grantee sueing for a breach of the covenants in the deed to him in such a case must show not only that the claim is made that his grantor's deed was a mortgage, but he must establish that it was in fact intended as a mortgage. This the plaintiff failed to do.
There may be an apparent cloud upon the title to real estate conveyed by a full covenant deed, and the circumstances may be such that a court of equity would not compel a purchaser under an executory contract to take a deed; yet if he takes the deed and then sues for a breach of the covenants, the suit is well defended by proof satisfactory to the court upon all the evidence submitted that the title was in fact not defective. Evidence which will defend an action for specific performance is not always sufficient to maintain an action for breach of covenants. The one action may concern apparent defects in the title, and the other must concern real defects.
The judgment should be affirmed with costs.