Crawford v. Bertholf

| New York Court of Chancery | Oct 15, 1831

The Chancellor.

The first ground taken by the complainants, is, that the mortgage given by Lloyd to Crawford, and by Crawford assigned to Hartshorne, is a legal and subsisting mortgage ; and therefore that Hartshorne is entitled to relief, simply as a mortgagee.

Whether the mortgage be a legal mortgage or not must depend, in a great measure, on the correct solution of the question, whether the deed was delivered in contemplation of law ? If the deed was actually delivered to the purchaser, the title passed with it, and the mortgage would be good, unless taken out of the general rule by some special circumstances. The delivery of the deed is expressly alleged in the bill, and as expressly denied in the answer; and the answer must be taken as true, unless overcome by the evidence. Several witnesses have been examined to this point on the part of the complainant, but they have altogether failed to establish it. Joseph Parker, jun. says there was no delivery of the deed ; that it was agreed between the parties that the deed was to bo delivered on the next second-day, when the note and security was to be given ; that the deed laid on the table, and W. L. Lloyd said, I suppose this belongs to me: Dr. Ten Broeck and Joseph Parker said no, you cannot have it till the conditions are fully complied with ; and the deed was accordingly left and Lloyd went away. Jacob Croxson, another witness called by complainant, was present and took the acknowledgment on the deed and mortgage. He was then going to hand the deed to William L. Lloyd, but Parker and Ten Broeck objected to it, till 1be conditions were complied with, and witness gave the deed to Joseph Parker. Lloyd never laid his finger on it after the acknowledgment was taken. The testimony of Logan Bennett, another witness of the complainant, would lead to a somewhat dike rent conclusion. He was present at an interview between Lloyd and Parker. Lloyd told Parker he had come to comply; he had Joseph H. Van Mater security, and wanted the deed that was left with Mr. Croxson. Mr. Parker said he would not accept of Mr. Van Mater as security, till he had first made the bonds good. Lloyd asked him if he had not made, signed, sealed and delivered a deed, and left it with Mr. Croxson, till he should bring Mr. Van Mater as security ; and he said he had. This is the only evidence of a delivery of the deed to Mr. Crox-son, or any other person ; and seeing that it is directly opposed to the testimony of the witnesses who were present when the transaction took place, and especially to that of Jacob Croxson himself, who must have known the fact if it actually occurred, I am induced to believe that the witness is under some mistake. The same witnesses were also examined at a different time, on the part of the defendants, to the same points. Why this was done I do not precisely understand ; but I would take this opportunity of saying, that the practice which sometimes obtains, of examining witnesses a second time on the same matters, is one -which does not receive the countenance of the court. The facts stated by the witnesses, so far as they touch the point under consideration, are substantially the same in both examinations. Such being the evidence, I cannot consider that the deed in this case was delivered.

It is not necessary that there should be an actual handing over of the instrument to constitute a delivery. A deed may be delivered by words without acts, or by acts without words, or by both acts and words: Shep. Touch. 58. A deed may be effectual to pass real estate, though it be left in the custody of the grantor. Thus, if both parties be present, and the contract is to all appearance consummated, without any conditions or qualifications annexed, it is still a complete and valid deed, notwithstanding it be left in the custody of the grantor : Souvebye v. Arden, 1 John. C. R. 240; Jones v. Jones, 6 Conn. Rep. 111; Doe v. Knight, 5 Barn. and Cress. 671; 4 Kent’s Com. 448. It is necessary, however, that there should be something evincing the intent. It must satisfactorily appear, if not from acts and express words, yet from circumstances at least, that there was an intention to part with the deed, and of course to pass the title. See the case of Folly v. Van Tuyl, 4 Hals. Rep. 153, and the authorities there cited.

In the case before me, the evidence very plainly opposes the idea that there was any delivery of the deed ; and it proves that, although there might have been an intention to deliver it, founded on a presumption that the contract was about to be consummated at, that time, yet that such intention was openly abandoned, and it was distinctly stated that the deed could not and would not be delivered at that time. It cannot be considered a delivery. There does not appear to be any room for inference or doubt; and without taking up further time on this part of the case, I am satisfied to say that the complainant has no standing in this court on the ground of his having a legal mortgage.

And this brings me to the second inquiry, which is, whether the complainant may not be considered, in this court, in the light of an equitable mortgagee; having, by reason of his situation, peculiar rights and interests, which a court of equity is bound to protect.

On this part of the subject, a correct understanding of the facts is essentially necessary to lead to a true result.

It appears that by the terms of the sale, Joseph Parker was bound to take in payment any claims that might lawfully be presented against the estate of his father. When Lloyd became the purchaser, he had in his hands some bonds purporting to be charges against the estate, but not enough to meet the purchase money. At this time, John Crawford held a single bill against the estate for a little upwards of two thousand dollars, payable to bearer. This bill Crawford agreed to let Lloyd have, to make up his payment, and Lloyd agreed to give Crawford a first mortgage upon the farm. Crawford attended at. the time the deed was to be made. He produced the bill, and handed it to Lloyd, who gave it to Parker in part payment, together with the other bills or bonds that he had against the estate. The interest was cast upon them. They were taken into possession by Parker. He tore the seal from two of the instruments, and Lloyd tore the seal from a third one. The seal w'as tom from Crawford’s note. The deed was produced and acknowledged, ready for delivery; and it was agreed that the deed should be delivered at some future day, either when a note with security should be given for the balance of the purchase money, or when the conditions should be fully complied with : but it was distinctly understood that the deed was not delivered, and was not to be delivered at that time. During all this time Crawford was present. He saw the notes or bills received and paid. He saw the seals torn from Some of them, and the deed executed and acknowledged. The mortgage was produced which was to be given by Lloyd to him: it was ac-knowled there at the same time the deed was acknowledged, and was passed over to him by Lloyd, as a security for the bond he had taken in lieu of the single bill, and it was afterwards recorded.

It turned out, however, that the contract was never carried into effect. Suspicions arose as to the genuineness of two of the bills passed by Lloyd to Parker, and Parker refused to deliver the deed, but offered to return to Lloyd the notes and bills or bonds received from him. Lloyd peremptorily refused to receive them. Both parties resorted to their legal remedies. Parker brought an ejectment to recover the possession. Lloyd filed a bill for a specific performance, and injoined Parker from proceeding in his action. A feigned issue was awarded out of this court to try the genuineness of the two suspected bills, and they were found to be spurious ; and the result was, that Lloyd’s bill was dismissed, and Parker recovered possession of the land.

Such I take to be the material facts relating to this part of the transaction ; and with these facts before me, I proceed to consider in the first place, the equity of Crawford, as derived immediately from Lloyd the purchaser, through the medium of the mortgage. This, of course, will depend on the equity of Lloyd the purchaser, as against Parker the vendor. It is a ride in equity, that when a contract is made for the sale of an estate, equity considers the vendor as a trustee for the purchaser of the estate sold, and the purchaser as a trustee of the purchase money for the vendor. As a consequence of this, it is admitted that a purchaser may sell or charge the estate before the conveyance is executed: he may come into this court claiming a specific performance, and compel the execution of a title. If he has paid any part of the purchase money, he will be considered as having a lien on the property for the amount thus paid, and a court of equity will not compel him to surrender possession until he shall have been fully satisfied. But all this proceeds upon the principle of honesty and good faith between the parties : without this, equity will not interfere. If there be fraud in the transaction, equity will not yield its aid to the wrong-doer, but leave him to his legal remedy. Where, then, is the equity of Lloyd ? He paid a part of the purchase money, it is true, in available securities; but for other part offered notes or bonds that were not genuine. He attempted, as has already been decided in this court, fraudulently to impose upon the vendor, and he was considered as being entitled to no equitable relief. He could not obtain a decree for a specific performance of the contract, but on the ground of the fraud his bill was dismissed out of this court with costs. Under these circumstances, I think that Lloyd personally had no lien on the property for the purchase money he had paid: be was entitled to a return of the money, or to recover it back of the vendor, but nothing more. It is a sound maxim, that he who commits inequity shall not have equity : Francis Max. 2 ; and in this case the maxim will well apply to Lloyd. Such being the case, he bad no equitable rights that he could convey to Crawford; and Crawford, when considered simply in the light of a purchaser under Lloyd, can have no rights as against the defendant. This is not the ordinary case of notice, in which it seems to be settled, that if one affected with notice, conveys to another without notice, the assignee, in case he has the legal estate, shall be protected. Here the assignee has not the legal estate ; his assignor was not affected with notice of any incumbrance or claim, but was guilty of fraud; and he is seeking protection, not from an incumbrance, but from the owner of the legal estate.

If Crawford is entitled to relief in this case, it is on the ground of fraud, actual or constructive, on the part of Parker. And under this head it is charged against him, that he knew Crawford had loaned the note to Lloyd to make up the amount of the purchase money, and that he was to be secured by a first mortgage on the property; that Parker was present when the note was passed over, and received it from Lloyd, and took it as so much money; that he saw Crawford take the bond and mortgage as his security, on the express agreement that when the note with security should be given for the balance, the deed should be delivered, and yet gave him no notice of the supposed fraud or forgery ; but afterwards refused to comply with his agreement, and kept the note without delivering it up to the owner; and also that he promised, if Crawford would not interfere in the suit with Lloyd, or press his mortgage, he should be fully paid, and his mortgage should be considered a lien on the premises. As to this last part, it is fully denied in the answer, and there is no evidencewhatever to support the allegation of the bill. Nor is there any evidence to show that Parker, in any part of the transaction, dealt with Crawford. Pie made no arrangement with him for his note, or concerning the mortgage. There was no privity or contract between them, so far as I have been able to discover. But it is evident that Parker knew of the loan by Crawford to Lloyd, and that Crawford was to be secured by a mortgage on the land ; and it is equally true that he saw Crawford take the mortgage, without giving any notice of his suspicions, or in any way putting him on his guard.

It is a general rule in equity, that where a person having rights, and knowing those rights, sees another person take a mortgage upon property without disclosing his title, he shall not be allowed afterwards to set up his title to defeat the mortgage. Thus, if a first mortgagee stand by and suffer a second mortgagee to advance his money, on the supposition that he is about to have the legal estate, without disclosing his own prior incum-brance, it is an acquiescence in the transaction, and the sufferance of a fraudulent treaty to go on, for which he will lose his priority : 2 Pow. 437. So, in like manner, if a mortgagee permit a person who has purchased the equity of redemption without notice, to continue building on the estate without giving him notice of the incumbrance, it was held by Ld. Haidwicke to be a reason why a court of equity would not assist him in setting up the incumbrance : Steed v. Whitaker, Barn. C. C. 220. The case of Haring v. Fernes, Gilb. Eq. Ca. 85, is a strong case, in which a fraudulent concealment was relieved against. A father, tenant for life, made a lease to plaintiff for thirty years ; who, supposing his lessor to have full power to demise for that period, laid out considerable sums of money in repairs. The defendant was the eldest son of the lessor, and next tenant in tail to the estate. The son knew his father had no power to make the lease, and told him so, while the improvements were going on, but never acquainted the tenant with the fact; on the contrary, he wrote to him to keep the premises in repair. On the death of the father, the son brought ejectment and recovered: whereupon the tenant brought his bill to be quieted in his possession for the residue of the lease ; and the the court decreed in his favour, on the ground of a fraudulent concealment. There are a great variety of cases under this head of equity, to which it is not considered necessary to advert particularly. They go on the ground of misrepresentation or fraudulent concealment, whereby an innocent person is induced to do what he otherwise would not do.

In the case before me, I do not find any misrepresentation on the part of Parker ; for the fraud must be brought home to him. It is not sufficient that fraud was practised by Lloyd ; there is no pretence that Parker participated in that. Then as to the concealment; Crawford was present during the whole time. He knew there wTas no delivery of the deed, no actual transfer of the title, but that the matter was to be consummated at some future day. The time when and the mode in which this consummation was to take place, was also known, and doubtless it was the expectation of all that the title would be perfected. But for the fraud of Lloyd it would have taken place. I can see no ground to charge Parker, except that he did not apprise Crawford of his suspicions that the bonds were forged. But these were mere suspicions, he had no knowledge of the fact; and I think it would be carrying the doctrine too far to say, that because he did not at that time, and under the circumstances of delicacy in which he was placed, communicate his suspicions to Crawford, therefore he is to be considered as liable to the imputation of fraud. A party, to be charged on the ground of concealment, should be aware of his rights. Fraud implies knowledge. If there was a mistake, this court will not consider it fraud. In the case of Cholmondely v. Clinton and al., 2 Mer. 361, Ld. Eldon says: “ If, indeed, Ld. Orford had been aware of his title, and had stood by and seen persons advancing money on the estate, on the faith of its belonging to Ld. Clinton, some question might be made on the ground of acquiescence. 13ut Ld. Orford could not be said to acquiesce in acts which he did not know he had any right to dispute ; and therefore, all that has been said about acquiescence, seems to be irrelevant in a case where all parties were under the influence of a common mistake.”

It is said, however, that Parker was guilty of a fraud in not delivering the bill back to Crawford ; but I cannot concur in that view of the case. As before remarked, Parker did not deal with Crawford. When Lloyd failed to comply, he was entitled to receive back what he had paid ; and it was offered him, and he refused to take it. This single bill came from Lloyd to Parker, and not from Crawford. It belonged to Lloyd, for he had purchased it, and it would have been singular if Parker had offered it to Crawford and not to Lloyd, from whom he got it. It is to be remembered, too, that Crawford knew the contract was not completed ; that the deed was not made and would not be made. If he had taken the least trouble or pains, he might have recovered the possession of bis bill, and would have been in as good a situation as before he passed it to Lloyd. The mutilation of the note, by tearing' off the seal, could not have affected its validity or impaired his rights; and the probability is he would have received his money. That the estate and property to which he must look for payment, has since become wasted, in consequence of which the complainant may suffer loss, does not alter principles ; nor can it, in this case, furnish a substantive ground for relief.

The result of this view of the case is, that the complainants have shown no sufficient ground of equity to entitle them to relief. Without, therefore, giving any opinion as to the defence of Ber-tbolf, who claims to be a bona fide purchaser from Parker, without notice and for a valuable consideration, I shall order the bill to be dismissed, with costs.