Robinson v. Cropsey

| New York Court of Chancery | Nov 13, 1833

The Vice-Chancellor:

I do not perceive, in the proceedings between the parties, any thing inconsistent with a purchase under the agreement of the first of May one thousand eight hundred and nineteen: provided the agreement itself and the circumstances of the case will admit of its being so considered.

The two mortgages were held by the complainant, at the time of entering into the agreement, as security collateral to the account current; and there is nothing incompatible with this, in the complainant’s stipulation to give up the account current and the money due upon it as a part of the consideration for a purchase and to “ assign, cancel or make void” the mortgages so far as they were a security collatoral to the account—nor in the agreement or stipulation on the part of Sharp, that the same mortgages should stand as a security for another purpose, namely, of protecting the complainant from loss in the event of an unfavorable termination of the suit at law commenced against them. The chancellor must have been satisfied, by evidence, of such being the understanding and intention of the parties or he could not have made the decree. The written agreement was set out in the answer of the widow, who was the principal defendant in that cause; and it was relied upon by her, (and claimed by the bill) as an agreement for the purchase of all the interest which her husband, John Sharp, had in the house and the eight lots of ground. And she insisted, as the deeds conveying the same had been executed, that the two mortgages and the account current ceased to be of any effect, except as part payment of the ■ purchase money; and denied all knowledge of any agreement beyond what was contained in the written instrument. However they may have differed as to the extent of the agreement, it is obvious, from the pleadings, that the complainant and Mrs. Sharp considered a sale to be the result and the former a purchaser of the Brooklyn property and not a mere mortgagee by virtue of the agreement. Still, this does not, by any means, conclusively determine the character of the transaction. The court was not called upon to solve the point; and any admission or statement of Mrs. Sharp in her answer could not affect the rights of her then co-defendants, nor of those who are now in a similar position.

The question then is, upon the effect of the written agreement ; whether, under the circumstances disclosed, it was a conditional sale or a mere mortgage transaction ? If the former, the right to repurchase or open the sale is gone by lapse of time; but should it turn out to be a mortgage, then it is not too late for the defendants to be let in to redeem.

It does not become necessary to go into an examination of the numerous cases in the books where the question has arisen. There appears to me a marked test in all such cases. If the deed or conveyance be accompanied by a condition or matter of defeazance expressed in the deed or even contained in a separate instrument or exist merely in parol—let the consideration for it have been a pre-existing debt or a present ad~ vance 0f money to the grantor—the only enquiry necessary to be made is, whether the relation of debtor and creditor remains and a debt still subsists between the parties 1 For if it does, then the conveyance must be regarded as a security for the payment and be treated in all respects as a mortgage : Slee v. Manhattan Company, 1. Page’s C. R. 56) On the, other hand, where the debt forming the consideration for the conveyance is extinguished at the time by the express /agreement of the parties or the money advanced is not paid byway of loan so as to constitute a debt and liability to repay it, but, by the terms of the agreement, the grantor has the privilege of refunding or not at his election, there it must be deemed purchase money and the transaction will be a sale upon condition, which the grantor can defeat only by a repurchase or performance of the condition on his part within the time limited for the purchase and in this way entitle him-to a reconveyance of the property.

All this is fairly deducible from the cases referred to upon the argument; and more particularly from Goodman v. Grierson, 2. B. & B. 274. There, Lord Manners held, that a fair criterion, by which to decide whether a deed be a mortgage or not was, by asking: are the remedies mutual and reciprocal and has the grantee all the remedies to which a mortgagee is entitled 1 And if, upon a sale under a decree for a foreclosure; the proceeds should prove insufficient to discharge the amount and there could be no remedy over for the deficiency upon any bond, covenant or implied assumpsit, he considered it as decisive in showing the transaction not a mortgage, but a conditional sale. And in Conway’s Executors v. Alexander, 7. Cranch, 218., Chief Justice Marshall observes, “ the enquiry ffiust be, whether the contract, in the specific case, is a security for the repayment of money or an actual sale. If a security in the nature of a mortgage is intended, it is necessary that the mortgagee should have a remedy against the person of his debtor;—if this, remedy really exists, its not being reserved in terms will not affect the case ; but the remedy must exist, in order to justify a construction which overrules the express words of the instrument.”

If we apply the principle contained in these decisions to the case in hand, it will not be difficult to arrive at a correct result. The agreement provides for cancelling the account current with the mortgages held as collateral to it, as well as the Hildreth mortgage. These matters were evidences of Sharp’s indebtedness to the complainant; and the surrender of them formed a part of the consideration upon which the deeds were to be executed and delivered. The moment they were delivered, the account and the several mortgages ceased to be effectual in the hands of the complainant as general evidences of debt; they became extinct; a debt no longer existed ; the same having been converted, by force of the agreement, into a payment of so much of the purchase money or satisfied by conveying the property to the complainant and vesting him with title and possession. In this point of view the transaction is to be regarded as a sale; and I am at a loss for sufficient grounds upon which to give it a different construction. There is nothing in the agreement or the facts of the case to show or from which to infer an intention to let the debt remain with a reciprocity of remedies as between mortgagor and mortgagee. . The circumstance of the complainant’s afterwards claiming to hold the two mortgages on the Williamsburgh and Newtown property for another and distinct purpose, under a verbal agreement which he succeeded in establishing, has been shown already not to be incompatible with the extinguishment of the debt for which those mortgages were originally intended as a security.

Then, as to what appears upon the face of the written agreement itself:—Sharp was to convey the house and eight lots to the complainant by deeds absolute, containing covenants for title and against all incumbrances, except the Hicks’ mortgage ; and the complainant was, not only to take the property subject to such mortgage, but, also to assume the payment of it at all events and keep Sharp harmless against his liability on account thereof.

This was certainly requiring from the complainant more than is ordinarily demanded from a person taking a mere mortgage security upon property already under hypothecation ; and it goes far to show that the parties did not intend it to be a second mortgage. It is rendered still clearer that more than a mortgage security was intended, by the reason given'in the agreement for the complainant’s assuming the debt duetQ jjjc]cs . ti saj,j sum 0f 1000. dollars being allowed to him by Sharp out of the purchase money of said lots.” Thus expressly acknowledging the transaction to be a sale. They could use the words “ purchase money” upon no other proper ground.

There is another feature of the agreement having a tendency to mark its character. I refer to the' part whereby the complainant becomes a sub-lessee of a portion of the contiguous land for a term of nineteen years at a rent of thirty-five dollars per annum. It would hardly seem-to be consistent with a mere mortgage interest in the complainant for him to bear this additional burthen: As a purchaser and with a view to a permanent enjoyment (and which the fact would indicate) he might be willing to- do so; but not, if he were to hold the property only as- security for a subsisting debt.

I think it is manifest, from this clause in the agreement that-the parties intended a defeasible sale and not a mere mortgage. Nor is there any thing in the other parts of the writing at variance with tihs conclusion. The “ privilege of redeeming” (within one year,) are words not necessarily confined to the case of a mortgage. They are equally applicable to a sale where the seller has secured the right of taking back the property upon a repurchase; and “ redeem”, “repurchase” and words of like import, may be used indiscriminately to convey the same meaning in transactions of this kind.

Then, as to the sums of money specified to be paid upon-redeeming the house and lands. These are not mentioned as monies owing in the shape of a debt or demand which' Sharp was- liable or bound to discharge. The speaking of interest as being compensated by rents, does not necessarily show it to have been interest upon a subsisting debt: for it equally well applies to purchase money, provided such money was to be refunded. Judging of the transaction from what the parties have subscribed in writing for the purpose of making known their meaning, the whole appears to be a consistent act. It will bear no other safe construction than an intended defeasible sale, founded, partly, upon a pre-existing indebtedness which thereby became satisfied and extinguished: and not a mortgage to secure a subsisting debt. Extrinsic evidence and circumstances out of the written agreement have been relied upon, in argument on both sides, as elucidating the nature of the agreement and ascertaining its precise meaning. But, it is not necessary I should go into further particulars on this subject. They do not change the views already expressed.

One further point, however, remains to be noticed. It is ■contended, for the defendants, that even should this be considered a conditional sale and not a mortgage or security for a subsisting debt, yet a Court of Equity may relieve against •a forfeiture for a breach in failing to repay the money in time, because compensation can be made, and, under the circumstances, such relief ought to be granted. It is a familiar head of Equity jurisdiction to relieve against a forfeiture or penalty, upon the principle of making compensation. But the present is not a case of forfeiture. The owner of the property, Mr. Sharp, sold his estate ; and there is no proof of the price having been inadequate. He made it a part of his contract—-and I must presume the price was fixed with reference to the event—of having the privilege of redeeming, or, which is the same thing, repurchasing within one year by paying a certain amount of money. Time, consequently, was of the essence of the contract; and performance necessary to regain the estate with which, by his voluntary contract, he had parted:—not that non-performance works a forfeiture and divests a title and estate already in him.

In such cases, equity does not interfere : because it would be varying the express terms of the contract and giving to the party a benefit of extension in point of time for which he has not stipulated. No fraud, accident or mistake is charged as a cause of his not having availed himself of the privilege within the time appointed. The true principle will be found in the recent case of Davis v. Thomas, 1. Russ. & M. 506., decided, in the first instance, by the master of the Rolls and afterwards upon an appeal by Lord Chancellor Brougham, and this case may be cited as having a strong bearing, in other respects, upon the present one. There, the plaintiff mortgaged an estate and then, in satisfaction of the mortgage debt and in consideration of an additional sum paid to him, released to the defendant, the mortgagee, the equity of redemption. Some months afterwards the defendant demised to the plaintiff the premises, for a term of ninety nine years, at a certain rent; and, upon the lease, stipulated that in case the the latter paid the rent regularly, he should be at liberty, at any time within five years, to repurchase the premises at a specified price, but if default were made in payment of the rents at the stated periods, then the agreement was to be void. The plaintiff failed to pay the rents at the periods stated; but, within the five years, he applied to repurchase and, at the same time, tendered the arrears. The defendant refused to permit the repurchase ; and the bill was then filed by the plaintiff to have the benefit of the stipulation or to be let in to redeem. Upon neither ground was the bill sustained. The mortgage no longer existed; a right of redemption was gone. And with respect to the repurchase, it was held to be a privilege conferred upon him, provided he complied strictly witn his contract; and not having done so and as no fraud, surprise or accident was alleged, therefore he had lost the right. The principle of the decision upon the last point is this: that although the court will relieve against a penalty or forfeiture introduced for the purpose of security in a case where compensation can be made, yet, when it is not a question of penalty or forfeiture, but of a privilege conferred upon payment of money ar a stated period, the privilege is lost if the money be not paid and the court will not restore it to the party. This is a sound rule.

I shall decree that the defendants, as the. representatives of John Sharp or as standing in his place, have no right to redeem or repurchase under the agreement of the first day of May one thousand eight hundred and nineteen. This is all the complainant has asked for upon the hearing. I am of opinion he must pay the costs of the defendants in the present suit, saving, however, so much as may have accrued from the examination of Mrs. Sharp as a witness. The bill was filed for the complainant’s ease and to quiet his own apprehensions. These defendants had not questioned or even threatened to impeach his title. I do not perceive there has been unnecessary litigation on their part. Several of them are infants. The bill is one of double aspect. It seeks an alternative relief; the defendants had a right to point out and insist upon what was most favorable to them ; and in doing so, although they have not succeeded; I am not disposed to leave them burthened with costs. There are instances of defendants setting up claims of right and failing, and yet are considered as entitled to costs against a complainant : Beames on costs, 94. and cases there; 2. Chitty’s Eq. Dig. 933. (u) ; Ib. 934. (w)