82 N.Y. 385 | NY | 1880
This case turns upon the question whether the doctrine ofLawrence v. Fox (
Independently of Lawrence v. Fox, the covenant of a grantee in an absolute deed, who, as part of the consideration, assumes and agrees to pay incumbrances on the land for the payment of which the grantor is personally bound, may be enforced by the creditor in an equitable action upon the doctrine of equitable subrogation. (Halsey v. Reed, 9 Paige, 446; King v.Whitely, 10 Paige, 465; Garnsey v. Rogers,
We think the true result of the decisions upon the effect of an assumption clause in a deed is, that it can only be enforced by a lienor, where in equity the debt of the grantor secured by the lien becomes, by the agreement between him and his grantee, who assumes the payment, the debt of the latter. On the other hand, if the assumption is in aid of the grantor, upon the security of the land, and not as between them, a substitution of the liability of the grantee for that of the grantor, or in other words, if, in equity as at law, the grantor remains the principal debtor, then the assumption clause is a contract between the parties to the deed alone, and the liability of the grantee, for any breach of his obligation, is to the grantor only. Where the grantee is in equity bound to pay the debt as his own, then the covenant, according to the case of Burr v. Beers, may be treated as a promise made for the benefit of the lienor, and may be enforced in a legal action, although, even in that case, it would seem that the primary object of the covenant is to protect the grantor against his personal liability for the debt secured upon the land.
We come, then, to consider the question whether upon the evidence the deed from Gaylord and wife to the defendants, created between them the relation of vendor and purchaser, so as to give the plaintiff a right of action. We concur in the opinion of the court below that the deed was intended as a security to the defendants, for their debt against Gaylord and for any advances which they should make under the covenant to pay the existing liens, and that it was not the intention of either party that the defendants should become the purchasers of the premises. The situation of the parties and the circumstances do not, we think, admit of a different conclusion. The lands embraced in the conveyance were incumbered by mortgages and other liens to the amount *390 of about $47,000, and a second mortgage for $20,000 was being foreclosed. The defendants held Gaylord's indorsements for $5,000, upon which a suit was pending, in which Gaylord had interposed the defense of usury. Gaylord regarded the lands as of the value of $80,000. In this condition of his affairs, Gaylord, by his attorney, applied to the defendants, who were bankers, to advance the money to take up the mortgage then being foreclosed, so as to save the property from sale, and as an inducement to the defendants to aid in protecting his property from the perils which threatened it, he offered to withdraw the defense of usury and allow them to take judgment in their action against him. Some negotiation followed. The liens, together with the plaintiff's debt, amounted to $54,689. It was proposed by Gaylord, or his attorney, that the defendants should take a deed of the property, expressing the consideration of $54,689, and at the time executed a contract to convey the premises to Mrs. Gaylord, on the payment by her to the defendants of the sum mentioned as the consideration of the deed. The defendants proposed that Gaylord should give them a mortgage for their debt, upon their giving him a writing, binding themselves to carry the incumbrances. But he declined this proposition for the reason, as may be inferred, that he desired that the title to the property should ultimately be vested in his wife. The arrangement proposed by Gaylord was finally agreed upon. Gaylord and his wife deeded the land to the defendants, by deed, containing the assumption clause in question, and the defendants concurrently therewith entered into a contract to convey the premises to Mrs. Gaylord for the exact amount of the liens and indebtedness above stated; she, on her part, agreeing to pay that amount with interest, at a time specified, and Mrs. Gaylord meanwhile was to have possession of the premises. Afterward the answer in the suit against Gaylord was withdrawn, and in accordance with the understanding of the parties judgment was entered against him for the amount of the notes.
The clear inference from the evidence is, that the intent of the parties in making the deed and contract was to secure the *391
debt owing to the defendants, and the advances which they might make in discharging liens on the property, and to vest in Mrs. Gaylord the right of redemption or payment of the defendants' debt and advances. It was not a sale of the property to the defendants in the ordinary sense of a sale. There was no treaty for a purchase. The securing of Gaylord's debt to them was the only possible benefit which the defendants could derive from the transaction if Mrs. Gaylord performed her contract. The debt of Gaylord to the defendants was not intended to be paid by the conveyance, as the subsequent entry of judgment against Gaylord, pursuant to the arrangement made when the deed was given, shows. If the contract had provided for the reconveyance of the land to Gaylord, instead of to his wife, there would be no reasonable doubt that the transaction would in equity be deemed a mortgage (Peterson v. Clark, 15 Johns. 205; Lane v. Shears, 1 Wend. 433; Despard v. Walbridge,
It is also claimed that to constitute a mortgage the defeasance must be in favor of the grantor himself, and not of any third person. It is laid down in Touchstone, as one of the requisites of a defeasance, "that it must be made between the same parties that were parties to the first deed," p. 397. (See, also, Jones on Mortgages, § 241, and cases cited.) But in equity, a transaction may be a mortgage although the defeasance be to some other than the grantor. (Flagg v. Mann, 2 Sum. 486;Stoddard v. Whiting,
In this case the giving of the contract to Mrs. Gaylord was required by Gaylord for his own purposes as part of the transaction. She was, in substance, his appointee to take the title. The obligation to pay the liens entered into by the defendants was, in substance, an agreement to make advances for the benefit of Gaylord, on the security of the land. If the defendants had made the advances they would have been entitled to be subrogated to the position of the lien creditors and to enforce the debts against Gaylord. The breach of their covenant to make advances was a question between the defendants and Gaylord alone, and the covenant did not inure as a contract between the defendants and the plaintiff, so as to give them a right of action. Looking at the whole transaction in the light of equitable principles we think that the defendants, by the deed, acquired only a defeasible title, redeemable by Mrs. Gaylord upon payment of their debt and advances. The recent cases show that the court is disinclined to extend the rule in Lawrence v.Fox. ALLEN, J., in Ætna National Bank v. Fourth NationalBank (
Upon the whole case we are of opinion that the plaintiff was not entitled to maintain this action, and the judgment should, therefore, be reversed.
All concur, except MILLER, J., not voting.
Judgment reversed.