58 N.J. Eq. 339 | New York Court of Chancery | 1899
This is a bill for deficiency filed by the mortgagee against-Thistle, the obligor and mortgagor, and against the successive-grantees of the mortgaged premises, being Royle, Bray and McChesney, in the order named, who have, it is claimed,, assumed.the payment of the mortgage in their respective deeds. The mortgaged property was sold under foreclosure proceedings,, to which the mortgagor and the grantees were parties defendant, and a deficiency of over $900 exists. On the day before the-sale Thistle, the mortgagor, released his grantee, Mrs. Royle, from her covenant of assumption, and she also released her' grantee, Bray, from his covenant to assume made in her deed to-him. The covenant of McChesney, the last grantee, with Bray has not been released, but McChesney has died since the conveyance, and his executors, who are parties as his devisees, claim that the right to recover against them is barred by reason of the-failure of complainant to exhibit his claim under oath within the time limited by the order to bar creditors, upon which a decree barring creditors has been duly made. The sale under-foreclosure was not made, however, until after the expiration of the time limited 'by the order for presenting claims, and this defence of failure to present the claim must therefore be overruled on the authority of Terhune v. White, 7 Stew. Eq. 98 (Chancellor Runyon, 1881), which holds that before foreclosure the claim is contingent and cannot be proved against the estate. The first question in the case is the construction of the clause-of- assumption in the deed from Thistle to the defendant Mrs. Royle, then Mrs. Cross. The covenant is as follows (punetuatim et literatim):
“This conveyance is made expressly subject to a mortgage encumbrance of three thousand dollars, given by the said Hugh B. Thistle .to the said Josie-Downing Smith, dated October (1st., 1886) first, eighteen hundred and; eighty six. Together with interest.and taxes from October first eighteen hundred and eighty six. All of which are assumed by the party of the second< part."
The assumption of Mrs. Royle extends, therefore, to the payment of the mortgage, and as to form there is no question in reference to the subsequent assumptions by the other grantees. The question on these relates to the effect of th.e releases, which were made before the beginning of this suit, but after decree of foreclosure in a suit to which all parties to the foreclosure were parties, and in which suit they were made parties, as ultimately responsible for any deficiency resulting in the sale.
Complainant (by her amended bill) alleges that at the time of •making the releases, Thistle, the mortgagor, was insolvent, and ■that the releases were made in fraud of her rights as a creditor, ¡after notice of her claim. The defendants Thistle, Royle and Bray, answering separately, deny the fraud charged. Mrs. Royle and Bray deny the assumption of the mortgage by Mrs. Royle, and Bray alleges, in addition, that the clause of assumption in the deed from Mrs. (Cross) Royle to him was inserted by mistake. McChesuey’s executors also set up the insertion 'by mistake in the deed from Cross to Bray, and also that the ¡same clause was inserted by mistake in the deed from Bray to McChesney. If the releases had not been given, the defences ■of alleged mistake set up in these answers could perhaps be considered only on cross-bill. Green v. Stone, 9 Dick. Ch. Rep. 387 (Errors and Appeals, 1896), and cases cited p. 400. But it is claimed that the parties have the right by their releases to reinstate or restore voluntarily the equities which could otherwise have been enforced by suit, and that the question of fact is -whether the consideration of the releases was the bona fide restora
Under the former practice of obtaining a decree for deficiency in the foreclosure suit, no release' after suit brought to collect the deficiency in the foreclosure suit would have been effective. Green v. Stone, 9 Dick. Ch. Rep. 387, 396, 399. And although the decree for deficiency cannot now be obtained in the foreclosure suit, yet the commencement of a suit for foreclosure, to which the defendants assuming the mortgages are properly made parties, as ultimately liable for deficiency, is, in my judgment, such an acceptance of their obligation and action thereon as the mortgagee is entitled to rely on as.fixing his rights to enforce the covenant, and terminates the right to release by the voluntary act of the parties. After the filing of such a bill against the grantees, as having assumed the mortgage, and for the purpose of commencing the enforcement of their ultimate liability by settling finally for that purpose the amount of the debt and of the*deficiency, the mortgagee is entitled to have the equities, which are relied on as a basis for discharging the release, made an issue on the record and decided by the court after hearing the parties interested, and cannot be deprived of this right by the voluntary release between the parties subsequently made. Bring an action to foreclose and claim therein for deficiency is such au adoption of the covenant by the mortgagee as terminates the right to release. 1 Jones Mort. (2d ed.) ¶ 764, and cases cited.
In my judgment the action to foreclose, which under our present practice must precede the bill for deficiency, has the same effect if the grantees liable for deficiency are made parties to the bill for the purpose of settling the amount of their liability.
I find, therefore, that as against the complainant the releases are void and the parties are all liable, but in an order which has been affected by the releases. These, although void against complainant, are valid between the parties. Youngs v. Trustees, &c., 4 Stew. Eq. 290, 303 (Errors and Appeals, 1879). The order of liability will be, first, McChesuey’s executors; second, Thistle; third, Mrs. Royle, and fourth, Bray.