104 N.Y. 382 | NY | 1887
[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *385 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *387 The most important question in these cases grows out of the release executed by the plaintiff, which purports to discharge the party primarily liable for the mortgage debt from all responsibility for its payment. The bond in the first action was executed by Arthur W. Fox, and secured by the mortgage of Fox Williams. The bond in the second action was executed by both and secured in like manner. The mortgages incumbered parcels of land which had been conveyed by Fox Williams to the Grape Sugar Company by a full covenant deed, and for a price which covered the full value of the unincumbered fee; a fact which the trial court found upon sufficient evidence, and *389 which is inferable from the character of the conveyance and the scope of the covenants contained in it. Fox Williams were partners when the bonds were given; doing business at first in the name of Arthur W. Fox and later in that of Arthur W. Fox Company; and each of the bonds was given for and represented an indebtedness of the partnership. That fact is also found by the trial court upon evidence quite sufficient to sustain it. The mortgages covered other lands of Fox in addition to that conveyed to the Grape Sugar Company, which, upon the death of Fox, descended to his heirs, who were named among the parties defendant in the foreclosure actions. Williams, as survivor of the firm, in possession of its assets and liable for its debts, was thus left a primary debtor for the bonds in suit. An action upon two notes of the firm was brought in another State where he chanced to be, and resulted in negotiations for a settlement of his liability, which culminated in the payment by him to the administratrix of the mortgagee of $13,500 upon an agreement of release and discharge, put in writing and formally executed, the construction of which is to be ascertained and determined.
That instrument recites the two bonds and mortgages now sought to be enforced; the execution by Fox and Williams of two other collateral mortgages; the delivery of two notes of the firm to the plaintiff's intestate, one for $6,500, and one for $610; the existence of other dealings between the parties; and the willingness of the administratrix to release Williams without discharging any other party or liability; and then provides that Williams is discharged and released from "all several liability on account of said bond, mortgages, notes, and all other doings whatsoever," and from "all joint liability on account of said bond, mortgages, notes, and other dealings and demands in connection with said firms," and concludes thus: "But not intending hereby to affect or discharge the liability of said Arthur W. Fox or his estate therefrom, or affect or discharge any other security for any of said demands other than the personal liability of said Williams." Previous *390
to the execution of this release the Grape Sugar Company had discharged the Fox estate and Williams from all liability on their covenants of warranty; and assuming, what is denied and must later be considered, that the corporation stood in the attitude of a grantee buying for a full consideration, but without covenants, land incumbered by a mortgage, and so entitled on payment of the mortgage debt to enforce the bond against the mortgagor (Wadsworth v. Lyon,
But the appellant contends that even upon this construction the rights of the Grape Sugar Company were not infringed because it had already parted with those rights by its release of the Fox heirs and of Williams, previously executed. That release contains substantially two classes of provisions. It discharges the liability of the Fox heirs and of Williams upon the covenants in the deed, and then from all existing debts matured and unmatured. A large number of these, resting in notes of $5,000 each, are specifically mentioned, and a final covenant relating to the liabilities intended to be released, that the releasor has not parted with or impaired its title "to any such debts," indicates clearly that debts existing and to which the company had title were those referred to. It is not admissible to construe the release as operating upon debts non-existent, but possible to arise in the future. The argument on behalf of the appellant is, that a release of the covenants ipso facto discharged the equities possible to arise in favor of the covenantee against the covenantor. If that be true, the bare act of releasing the covenants made the land principal debtor for the mortgage, and amounted to an assumption by the Grape Sugar Company of the mortgage debt. No such agreement or intent is contained in the terms of the release, and must exist, if at all, as an inference, from the bare fact of a discharge of the covenants for a valuable consideration. I think that fact standing alone does not justify or compel the inference. If the actual consideration had been shown, and it had appeared that the covenantors paid to the covenantee the amount of the outstanding mortgages, or that for a less sum they agreed *393 to take the peril of a foreclosure, the inference would follow. But, where the consideration is unknown and unexplained, and may have been merely adequate to cover the technical breach of covenant already existing, and no agreement or purpose of assumption is proved, I think the asserted inference does not follow, the equitable duty of payment is not shifted, the debt remains the debt of Fox Williams, and the land chargeable only as surety. It is said that an express covenant destroys or restrains an implied one. That is true, but there are no implied covenants in a deed to be destroyed or restrained. The statute forbids them, and that fact demonstrates that the equities of a grantee whose land has been sold for another's debt, rest not at all upon any implied covenant, but upon the just needs of the situation as they appeal to the conscience of the court. Unless, then, the equities of the situation are changed by the fact of the release, they must necessarily remain. That the taking of covenants does not impair or destroy the equitable right of the grantee to be protected against the forced payment of a debt which he has not assumed has been often decided, and is established by the cases which on a foreclosure have preserved to the grantee, although holding covenants of warranty, the equitable right to have the lands of the grantor covered by the mortgage first sold and applied to its payment. If one equitable right survives the taking of covenants (Clowes v. Dickinson, 5 Johns. Ch. 235; Skeel v. Spraker, 8 Paige, 182), why may not another? It is possible that an equitable right precisely equivalent to the legal right on the covenants might prove to be suspended during the existence of such legal right, simply because equity does not waste its resources or act without necessity, but the equity would be merely suspended, and not killed. Its death could only come from such a change in the relation of the parties as would throw justly upon the grantee the burden of the debt. And so the question comes back and seems to me to be the ultimate inquiry whether the bare fact of a release of covenants of warranty for a valuable *394 consideration compels an inference that the releasor assumed as his own a mortgage debt of the grantor. I think not. Something more must appear to warrant the inference. In the present case, other and entirely different purposes may have occasioned the release. There may have been defects in the title not here disclosed and which the parties had principally in view; it may have had reference to the technical breach which already existed; or, what is more probable, it may have been given and received on the supposition that the grantors had already paid and settled the mortgage debt, or if not, that the releasors would have ample protection against loss in the very equities which they now invoke. For these reasons I cannot accede to the inference sought to be drawn, and since the equity remained and the necessity for its protection has come, I think it may be enforced.
All concur, ANDREWS, J., on second ground set forth in opinion.