Chadwick v. Island Beach Co.

| N.J. | Nov 15, 1887

The opinion of the court was delivered by

Beasley, C. J.

Unless it be the law that a person can ask a court of chancery to refrain from compelling him, in the ordinary course of a foreclosure suit, to execute an agreement entered into by him, and which is both legal and equitable, the decree in this case cannot be sustained.

The facts are these: One Edward P. Canfield, claiming to be the owner of the lands in question, executed a mortgage on them to Henry W. Town, to secure the payment of a bond for $15,000, and subsequently conveyed them in fee to the respondent, the Island Beach Company. The bill alleges that this conveyance was accepted by the respondent, “ subject,” in the language of the averment, “ to the payments, conditions and agreements specified and contained in the said mortgage, made by the said Edward P. Carpenter to Henry W. Town, as aforesaid.” The mortgage was assigned to the appellant, and has been foreclosed by her in this case, she having become the purchaser at the sheriff's sale made in pursuance of the decree. The Island Beach Company, that had been made a party defendant, as the owner of the equity of redemption, refused to surrender possession of the premises, although it had permitted a decree pro confesso to be taken against it; thereupon an application was mad.e to ’Vice-Chancellor Bird for a writ of assistance. This appeal has been brought from the disallowance of such process.

In the course of the testimony taken on the motion for the writ in question, it was shown on the part of the Island Beach Company that, before the filing of the foreclosure bill, but subsequently to its taking the conveyance from Carpenter, it had acquired a title to the mortgaged premises from the board of proprietors, which it claimed to be paramount to the title of the complainant, derived through her mortgage at the sheriff’s sale.

The vice-chancellor, regarding the title thus disclosed as unaffected by the decree of foreclosure, on that account refused the aid of the court to the complainant, being the purchaser under the decree.

The ground of this judicial determination is thus stated by the vice-chancellor: Referring to the title derived from the board of proprietors, the opinion says: “ So far as appears, the defendant had a right to take such title, and, if it be true that it has., the first survey and location, it may ultimately be established, however many difficulties may present themselves, that such title is superior to all others. I cannot now decide it; no issue has been made respecting it.” And, subsequently, it is. said the-complainant had it- in her power to raise this very issue by proper statements in her bill.

That the court could not, in the summary procedure then pending, have adjudged that the defendants’ title was either good or bad seems very plain; but it seems equally plain that the court was not called upon to make such an adjudication. What was due to the situation was, that it should be considered and declared whether, granting the existence of a legal title in the defendant, such title could be set up to bar the complainant from taking possession of the premises which she had purchased with the sanction of the court. This question was inherent in and circumscribed by the equities of the case as they appeared upon the record, and, therefore, as it would seem, the solution of it was a prerequisite to the determination of the complainant’s application for assistance. This aspect of the controversy appears to have escaped the attention of the court below, but it is in this light that this court will consider and dispose of the subject.

But, before approaching this theme, it seems to me proper to say a word, in passing, on the hypothesis on which this motion in the court below was decided, because I am not willing to let my silence be construed into acquiesence in the views there expressed.

The fundamental assumption of'the vice-chancellor is that, in a foreclosure suit in the ordinary form, a paramount title residing in one of the defendants is not- so far put in issue as to call for its disclosure in the proceedings, unless such title be expressly referred to and challenged by the bill. ' Such a' proposition is a wide one, and would very materially affect the course of practice in the court of chancery. No decision, or even dictum is recalled that seems to favor it, and, as it is deemed, it stands opposed to principles of equity, which are as plain as they are important. Indeed, it' may be said that the rule, as formulated, would be productive, never of good, but always of vexation and injustice. In this case the complainant, at the time of filing her bill, was ignorant of the existence of this pretended title; she therefore could not put it in issue by any direct averment, or otherwise than she has done, and if this doctrine is to prevail, she has unavoidably, and most unconscionably, been drawn into useless trouble and expense. Why should the record, in a foreclosure ■case, such as this is, be read in a sense to produce such inequitaable results? It does not appear to be the natural version, nor, as I think, is it the reasonable version. When a complainant alleges that he holds a mortgage in fee upon certain lands, and prays that a sale shall be made of such property, such a claim .seems, propria vigore, to include, inferentially, an assertion that a title paramount to such mortgage does not reside in any of the parties to the suit. By such an assertion the defendants are ■called upon to admit or deny the existence of such lien upon the property, and, plainly, if such lien exists, none of them can have a title superior to the right asserted in the bill. In the present instance the bill stated a mortgage, by force of which it claimed the right to have the land sold in fee under the decree of the ■court; the defendant, by force of the decree pro eonfesso, admitted this encumbrance, and that it was possessed of the efficacy ascribed to it; yet the doctrine criticised asserts that the defendant’s title was not put in issue, although he was directly required to admit a fact ■ which, if admitted, was subversive of the title field by him. I have said that no decision is known that seems in any measure to support such a view, and, although in the ■court of chancery, the case of Wade v. Miller, 3 Vr. 296, was cited in support of it, upon examination it will be found that the principle there laid down wears an entirely adverse aspect. “ I know of no way,” says the opinion in the case, “ in which a ■defendant can properly put in issue facts which are not charged in the bill, or which are not related to such facts by way of being an answer to them.” It is not apparent how it can reasonably be said that an averment of a superior title to the mortgaged premises, in a defendant in a foreclosure suit, is not a fact which is related to the facts in the bill by way of being an answer to ■them; certainly, if such title exists, the complainant would not be entitled to a decree.

But, beyond this, it seems to me that, in view of a familiar and very essential principle of equity, a defendant, in the juncture stated, is bound to disclose his title. To remain silent, in such a position, is to be guilty of constructive fraud. The doctrine is established beyond controversy, and has been applied in innumerable instances. Treating of the subject, Judge Story (1 Eq. Jur. § 385) says: “ Thus, if a man, having a title to an estate, which is offered for sale, and, knowing his title, stands by and encourages the sale, or does not forbid it, and thereby another person is induced to purchase the estate, under the supposition that the title is good, the former, so standing by, and being silent, will be bound by the sale, and neither he nor his privies will be at liberty to dispute the validity of the purchase.” If this be the law, as it unquestionably, is, how can it be said that the defendant was not called upon to divulge his title, when he stood by and saw the suit proceed to decree and sale ?

In my opinion, a defendant in a foreclosure suit, if he has a title paramount to that of the mortgagee, and he intends to enforce it, must set it up in his answer.

But, as has been already x'emarked, these particulars of the case have not been refex-red to with the object of deciding them, there being no necessity for such a course, as the appellant’s right to the relief prayed for is clear on another ground. That ground springs out of the agreement of the Island Beach Company to take its title from Carpenter, subject to the mortgage which the latter had before placed upon the px’operty. It will be remexxibered that this stipulation was to hold the premises, “ subject to the payments, conditions and agreements specified ” in that encumbrance. The defendant got possession of this land from the mortgagoi’, and when he agreed to hold in subordination to the mortgage previously created, his stipulation was, in effect, to accord to the íxiortgagee all the rights inherent in his estate, one of which was that, upon the conditions being broken, he might eixter and take possession of the property. In the respect which is, at present, alone important, the position of the grantee of the mortgagor is not dissimilar fi’om that of a tenant, relatively, to his landlord. These respective relationships are often assimilated in the discussion of the question whether the grantee of the mortgagor can put in controversy, while in possession of the property, the title by fox’ce of which he entered. Maxxy of the decisions on the subject are collected in Bigelow on Estoppel 401, 413, 586. To suffer a grantee of a mortgagor to retain the possession of the mortgaged premises, in despite of the rights of the mortgagee, which he has covenanted to respect, would be to sanction a palpable fraud. Whether such title of the defendant be good or worthless, is not in question, for, be that as it may, it cannot bar the appellant’s right to the possession. All that this court, on the present occasion, is required to decide, and, consequently, all that it does decide, is that the appellant has a right to the process asked for, on the ground that the defendant agreed to he subordinated to his rights.

The decree should be reversed.

With respect to the question upon which testimony was taken, and which occupies considerable space in the briefs of counsel, it is sufficient to say that its pertinency to the matter to be decided does not appear. That testimony seems to be directed to the inquiry whether certain lands, claimed to be embi’aced in the defendant’s alleged title, are embraced in the mortgage. With that inquiry this court has no concern. Certain premises have been Bold under the authority of the court of chancery, and the writ of assistance will.puttheappellantinto possession ofthose premises. The decree of the court, with respect of the extent of the appellant’s right on that subject, is not open, on this motion, to controversy.

For affirmance — Paterson—1.

For reversal — The Chancellor, Chief-Justice, Dixon, Reed, Scudder, Van Syckel, Clement, McGregor — 8.