Barger v. Gery

64 N.J. Eq. 263 | New York Court of Chancery | 1902

Stevenson, V. C.

No exact definition has been, or probably can be, formulated of either a marketable or an unmarketable title. Various descriptions have been attempted. Professor Pomeroy lays down the law as follows:

“A specific performance will never be decreed- at the suit of the vendor whenever the doubt concerning his title is one which can only be settled by a further litigation, or when the court can see that the purchaser will, with reasonable probability, be exposed to bona, fide adverse claims on the part of third persons, and to the risk of litigation for the purpose of removing such claims.” Pom. Spec. Perf. § 203.

Chancellor Runyon, in Dobbs v. Norcross, 9 C. E. Gr. 327, 331, and the court of errors and appeals, in Tillotson v. Gesner, 6 Stew. Eq. 313, 327, adopted the language of Professor Parsons, as follows:

“The purchaser should have a title which should enable him not only to hold his land but to hold it in peace; and if he wishes to sell it to be reasonably sure that no flaw or doubt will come up to disturb its marketable value.”

In all cases where the vendor seeks to force a title upon the vendee, it is the latter’s position, not at the commencement of the suit, but at its termination, which is to be regarded. The question is, not what kind of a title the vendor has, but what kind of a title the vendee will get if the court of chancery, or the court of errors and appeals, after reviewing the decree of the court of chancery, forces the offered title upon him.

Where the alleged doubt in regard to the offered title relates to a matter of law, a decision of the court in the suit for specific performance, undertaking to establish what the law is, must, of necessity, have some effect either to strengthen or dispel the doubt. How far the court will undertake to settle a disputed question of law out of which the doubt in regard to the title has arisen, has been the subject of a variance of judicial opinion, although the general trend has been toward enlarging the jurisdiction of the court of equity in dealing with the doubtful matter of law. Fry Spec. Perf. (3d Am. ed.) §§ 865, 868; Pom. Spec. Perf. § 202. The cases on this subject are discussed at length in the opinion of Vice-Chancellor Emery in Lippincott v. Wikoff, 9 Dick. Ch. Rep. 108, and a rule on the subject is therein indicated (at p. 120).

In Fahy v. Cavanagh, 14 Dick. Ch. Rep. 278, 282, 283, Vice-Chancellor Pitney expresses himself in favor of a broader rule.

But whatever curative power upon a doubtful title the court of chancery, or the court of errors and appeals, on appeal from the court of chancery, can exercise in a suit for specific performance, where the doubt relates to some general rule of law, or the construction of some form of language employed in a writing, practically very little, if any, such curative power can be exercised where the doubt relates to a mere fact. The reason is apparent. A disputed fact may be proved in one litigation to-day and be disproved in another litigation between different parties to-morrow. The evidence which clearly establishes a fact at one time may be wholly beyond reach a year or five years later.

In Tillotson v. Gesner, supra, the defect in the title, from which danger to the purchaser was apprehended, was a judgment recovered against a former owner, who had, immediately before its recovery, conveyed the land by a deed, the bona fides of which was open to doubt.

In Fahy v. Cavanagh, supra, the title rested upon a will, apparently witnessed by two persons, but without any attestation clause reciting the facts showing compliance with our statute of wills. Vice-Chancellor Pitney found that the will had been lawfully executed, but refused to force the title upon the purchaser, because he might, years after, be utterly unable to prove the will in an action of ejectment brought by the heirs of the testator.

That titles must be held marketable, although dependent, on the proofs of facts, cannot be disputed. If this were not so, a vendor holding title as heir or devisee, in a large number of cases, could not have the remedy of specific performance. But when wc come to inquire for rules as to the nature and quanlum of evidence necessary to render a title dependent on facts, which must be proved by witnesses, a marketable title, we find ourselves with comparatively little help from the decided cases. It must be true, from the nature of things, that every case must largely rest upon its own circumstances. We have the general rule that the purchaser has a right to a title which is reasonably safe—reasonably safe against loss and reasonably safe against attack. When the authorities speak of the hazard of litigation to which the purchaser must not be subjected, it seems to me that they must refer to a hazard which-is to be determined by the chance of successful attack as viewed by the court in the suit for specific performance. When, also, they speak of a doubt or a supposed flaw as affecting the salability of a title,, they must refer to the character of the doubt or flaw as the court views it, and not as it may be viewed by the indeterminate judgment of the real estate market. Some purchasers, guided by cautious counsel, will not accept a title against which the slightest possibility of doubt is suggested; and yet there is no title concerning which a possible doubt or the possibility of a future flaw cannot be raised.

The authorities, I think, establish the rule as a s'afe one that a title dependent on a fact must be regarded as marketable when (1) the fact is so conclusively proved in the suit for specific performance that a verdict against the existence of the fact would not be allowed to stand in a court of law, and (2) where there is no reasonable ground for apprehending that the same fact cannot be, in like manner, proved, if necessary, at any time thereafter for the protection of the purchaser.

In Shriver v. Shriver, 86 N. Y. 575, 584, Chief-Justice Eolger says: “A title may be doubtful—which is to say, unmarketable—because of the uncertainty of some matter of fact appearing in the course of the deduction of it, and if, after the vendor has produced all the proofs that he can, a rational doubt still remains, a title is not marketable. It seems that a rational doubt may be said to exist when a court of law would not feel called upon to instruct a jury to' find that the fact existed on the existence of which the vendor’s title depends.” See Hellreigel v. Manning, 97 N. Y. 56, 60; Moser v. Cochrane, 107 N. Y. 35; Ferry v. Sampson, 112 N. Y. 415.

In Ferry v. Sampson, supra, the Eew York court of appeals declared that “if the existence of the alleged fact which is supposed to cloud the title is a possibility merely, or the alleged outstanding right is a very improbable and remote contingency, which, according to the ordinary experience, has no probable basis, the court may compel the purchaser in such a case to complete his title.”

In Vought v. Williams, 120 N. Y. 253, 258, the above-quoted statement was repeated by the same court, although held inapplicable to the ease then before the court.

The English rule, stated by Professor Pomeroy (Pom. Spec. Perf. § 205), takes special account of any presumption favorable to the title, and apparently takes no account of the availability of the evidence produced in favor of the title for the future protection of the purchaser in a subsequent litigation between the purchaser and a third party—thus ignoring the class of cases to which Fahy v. Cavanagh, supra, belongs.

Coming, now, -to the consideration of the case before the court, my conclusion is that, whatever may be the-exact definition of a marketable title,'which is dependent on the proof of facts, if such a definition can safely be framed, this title is proved in this case to1 be a marketable one. It is conclusively proven, in my opinion, that the alleged mortgage held by John I. Anderson cannot be enforced against this purchaser, the defendant, and that there is no reasonable basis for any apprehension that the purchaser cannot, at all times, defend his title against this mortgage, or that any future intending purchaser should, as a reasonably prudent man, hesitate to accept the title which this defendant, the present purchaser, will be able to offer to him.

The sole fact Which is set up against the merger of the mortgage in the foreclosure decree is that apparently John I. Anderson owned the mortgage in 1875. No proof is offered that Anderson did not transfer the mortgage back to the New Jersey Mutual Life Insurance Company. Before the Anderson assignment was made the mortgage had already been transferred by this company, and, after changing hands several times, had been transferred back to the insurance company. After the Anderson assignment was made the bond and mortgage were in the possession of the insurance company, or of their later assignees, with an open claim of ownership. The complainant (Phillip) .'in the foreclosure suit produced the bond and mortgage, and he was adjudged to be the owner of it in the foreclosure suit. A bond and mortgage are assignable by delivery. Possession of a bond and mortgage, with claim of ownership, would seem, to- carry as strong a presumption of title as does possession of a chattel. The assignment of Anderson is not at all inconsistent with a subsequent ownership of the bond and mortgage by the insurance company and by Mitchel and Phillip.

It has never been the custom in New Jersey to make all the former holders Of encumbrances parties to a foreclosure suit in order to prevent all future question as to their having parted with their titles. The protection of titles derived from foreclosure sales may call for a wider rule than any which I shall apply in this case; but it seems to- me that where a bond and mortgage are produced by a complainant or a defendant in a foreclosure suit, and he is therein adjudged to be the owner thereof, public policy justifies a strong presumption that he was such owner, in favor of a purchaser at the foreclosure sale, and against a vendee from him, who merely proves that someone else owned the mortgage prior to the time when the party to the foreclosure suit acquired the title to the mortgage which was accepted in such suit. The burden in such case should, in my judgment, be placed, not upon the purchaser to prove that the former owner transferred his title, but upon his adversary to present some evidence that the former owner did not transfer his title or that some person can assert a title under him.

I think, therefore^ that in this case we start with a strong presumption in favor of the complainant, and against the existence of any valid title to this mortgage outstanding at the present day and held under the Anderson assignment.

But, aside from all presumptions, let us examine the evidence on the two questions:

First. Whether John I. Anderson parted with his title or estopped himself to set it up, and

Second. Whether, without regard to any possible transfer from Anderson back to' his assignor, the mortgage is enforceable at the present time under the statute of limitations. In discussing both questions, especially the first, we must regard, not only the evidence, but the probability of its availability for the protection of the defendant in the future.

.1. The mortgage was due in 1874, twenty-six years before the contract was made by these parties. There is no evidence, apart from the assignment to Anderson, that he ever had the mortgage in his possession, nor is there any evidence that he ever collected any part o'f the principal or interest secured by it. He was connected in business with Minot Mitchel, and knew of the foreclosure suit, and also knew of the purchase of the property by Mr. Drury, ten years after the foreclosure sale to Mitchel had taken place. The bond and mortgage remained apparently for over twenty-three years in tire custody of the lawyer who conducted the foreclosure suit, or of his executor—remained as dead and worthless papers—until the solicitor for the complainant in this suit had them looked up- and produced. The property was improved, rentable property, and has been occupied continuously, by a series of owners, under title derived from the foreclosure sale, for these twenty-three years before the contract between the parties to this suit was made. The inference is unavoidable that no attempt was made by Anderson, or anyone claiming under him, to- enforce this mortgage, although Anderson was alive for at least ten years after the foreclosure sale. Mr. Drury’s testimony strongly indicates that if Anderson had any title to this mortgage at the time of the foreclosure sale, he estopped himself to set it up, and also- indicates that there are other witnesses who can testify to the facts going to establish this estoppel. Every year that goes by may malee the proof of this estoppel, if there was one, more difficult, but this same lapse of time makes the probability of any attempt to assert the supposed Anderson title to- the mortgage more remote, and makes any such assertion of title more hopeless.

If this mortgage was not merged in the foreclosure decree, then we have a mortgage which was due twenty-eight years ago, on which the defendant in this suit does not show that any claim has ever been made since it was openly foreclosed, by a party who had possession of it, about twenty-five years ago. Inasmuch as the property in dispute has- all these years been rentable property, yielding an income, occupied by a succession of owners, it would seem as if the defendant might have been able to prove some assertion of the- Anderson title—some recognition of it by payment of interest or otherwise—if proof of that character could at any time be possibly obtained. The possession of the bond and mortgage during all this period by the solicitor who undertook to foreclose it, or his executor, is an additional indication that the mortgage, in fact, was merged in the foreclosure decree, and that the possible or presumed, former owner, Anderson, had lost what title to- it he ever had.

Upon the facts stated, in my judgment, the defendant has no right to stand upon the mere existence of this record of an assignment to- Anderson twenty-seven years ago, and the absence of any record of an assignment from Anderson; he is bound, whether a presumption is established against him by the foreclosure 'suit as indicated above or not, to bring some evidence to- show that the Anderson title has life to-day. He is not bound to establish the Anderson title, but out of all the witnesses who plainly can be produced to give positive or negative testimony in relation to this property and its encumbrances, he should be able to find one spark of testimony in favor of his contention— in favor of the doubt which he claims inheres in the title.

3. Without regard to- the question of the ownership of the mortgage, the evidence very strongly indicates that the statute of limitations is a complete bar to any attack upon this title based on the alleged existence of this mortgage as an encumbrance. The mortgage is twenty-eight years overdue. While the evidence of non-payment of interest is not as complete as might have been expected, no objection to the sufficiency of the proof on this subject, was made at the argument, and no claim was made that the mortgage had been kept alive by any such payments. It seems almost incredible that interest could have been paid by the owners of this property on the mortgage upon the foreclosure of which their title depended, and which was lying, with its accompanying bond, among the old papers of the lawyers who conducted the foreclosure.

In Ely v. Wilson, 16 Dick. Ch. Rep. 94, 104, Vice-Chancellor Pitney holds “that a payment on account of the debt, in order to- be efficient to preserve the mortgagee’s right against lapse of time, must be made by the party in possession of, and claiming title to, the mortgaged premises.”

Pajunent by the makers of the bond, Mr. and Mrs. Warren, would not keep the mortgage alive. If, during the past twenty years, or during twenty years preceding this contract, either of the three owners of this property paid interest upon the mortgage to any person, this unknown person, whose possible existence is held to1 create the fatal doubt in this case, apparently must have had notice of the foreclosure sale and of the title adverse to his mortgage which the occupants of the property'held. It ■may be added that apparently the statute of limitations began to run against John I. Anderson at least when Minot Mitchel took possession of the property, twenty-five years ago.

In Foreman v. Wolf, 29 Atl. Rep. 837, the court of appeals of Maryland declares that in that state it was “well settled that a title by adverse possession for over twenty years, where the only persons who could claim were all under no disability, is marketable, and such as a court of equity will compel a purchaser to take.”

Kip v. Hirsh, 103 N. Y. 565, is very similar in its essential facts to the one at bar. A mortgage upon certain vacant lots was made in 1835. In 1840 the mortgagor made a general assignment for the benefit of his creditors, which reserved to him any surplus. The assignment was recorded. The mortgage was foreclosed and the lots were sold in 1841. The assignee was not made a party. The lots were enclosed and leased in 1867, and were occupied thereafter. In 1875 the defendant contracted to purchase the lots, but refused to accept a deed, claiming that there was a defect of title, by reason of the omission to make the general assignee a party to the foreclosure suit. The court held that the “presumption of payment attaches to all the debts, and it can hardly be conceived that any facts can exist which would entitle any person to enforce the trust.” The court therefore reversed the court below, and held that the defendant would acquire a good and marketable title.

A doubt which can avail to defeat the vendor’s remedy of specific performance “must be reasonable, and, so far as it depends upon contingent events and uncertain facts, their occurrence or existence must be fairly probable.” Pom. Spec. Perf. § 204.

In my opinion no verdict of a jury ’in favor of the existence of any enforceable claim under the title to the mortgage in question-alleged to have existed in John I. Anderson in 1875 would be allowed to stand. The proof before this court, composed of presumptions, positive evidence on the part of complainant, and the absence of evidence on the part of defendant, appears to me to be conclusive in favor of the existence of the facts and conditions which are necessary to render the title which will be forced on the vendee in this case a marketable title.

As a general rule, it seems to me that any order for costs in a vendor’s suit for specific performance must be made with regard to the status of the defendant (the vendee), not at the end of the suit, but at its commencement—at the time when he refused to' take the offered title. Where the suit has exercised a curative effect upon the title, and the vendee was justified, under his contract, in demanding that such cure should be made, the expense of the suit may be a necessary incident to the performance of the contract by the vendor. Not only should the vendee not be mulcted in the costs of the vendor, but, in some cases, I think the payment of the entire costs and expenses of the vendee by the vendor should be a condition upon which the decree in favor of the latter should be made. The English rule, cited by Mr. Fry (Fry Spec. Perf. (3d Am. ed.) § 876), and embodied in a dictum of Sir George Jessel, in Osborne v. Rowlett, L. R. 13 Ch. Div. 774, 798 (1880), to the effect that even if the vendee was justified in refusing the title until decree in its favor, still he should be ordered to pay the costs, “so as to assure his title and show that the court entertains no doubt upon it”—if there is such a rule—is, in my judgment, one not to be adopted by this court. Most vendees would prefer to accept the title forced upon them by suits, which they have properly required the vendor to bring, without this unsolicited and expensive “assurance” from the court.

In Radford v. Willis, 7 Ch. App. 7, 11 (1871), the action and declaration of the court in regard to costs are inconsistent with the above-cited supposed rule.

Where the dispute over the title is about a fact, ordinarily, as we have seen, the decree can have little curative power. The decree, in most, if not all, cases, establishes the marketability of .the title which the vendor offered, not merely the marketability of the title which the vendee will take as the result of the suit for specific performance.

Nevertheless, the vendee, in all cases, is not under any obligation to search for evidence and produce the witnesses who can establish the title of the vendor. In this case the evidence to support the offered title was not presented by the vendor to the vendee; a very important part of it.was obtained-by the vendor after this suit was commenced.

Under the circumstances, which always control a decree in equity in regard to this matter, no costs will be allowed to either party.