Seymour v. . McKinstry

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 233 [EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 235 The questions in this case are between the plaintiff, as an unpaid vendor of real estate, and the defendants, one as mortgagee and the other as assignee of the mortgage given by the vendee of the land. The controversy relates to the priority of their claims in those capacities. The court below decided in favor of the vendor's lien, and both defendants appeal. It appeared that on and prior to the 7th of August, 1872, the title to and the possession of the premises in question were in the plaintiff, and he on that day conveyed them to his son, one Ira B. Seymour, by a deed, with warranty, for the price of $9,100, of which all but $5,000 was paid or satisfactorily arranged for; that, to enable Ira B. to raise that *Page 236 sum, it was agreed between the plaintiff and Ira B. and the Equitable Life Insurance Society that Ira B. should execute to that company a first mortgage upon the premises, the amount of which should be paid by it directly to the plaintiff, and in reliance upon this arrangement he delivered the deed to Ira B. Seymour; that the company declined to make the loan, but, notwithstanding this, Ira B. caused the deed to be recorded, and on the twenty-third of September, without the knowledge or consent of the plaintiff, executed to the defendant McKinstry a mortgage of $5,000, which was recorded on the same day; at the same time, and before he advanced any of the consideration of the mortgage, McKinstry, as the court and jury find, "had knowledge that the plaintiff claimed to be entitled to $5,000 as part of the purchase-price of the premises therein described." The consideration for this mortgage was composed of a prior account of $2,400 due from Ira B. Seymour to McKinstry, two judgments of $300 against him, and $2,100.37 in a check payable to the order of Ira B., which he on the same day indorsed and gave to the plaintiff. On the twenty-eighth of September McKinstry sold the mortgage to the defendant Sabey for the sum of $5,000, and covenanted that there was unpaid and owing thereon the sum of $5,000. The court finds that "McKinstry before he assigned said mortgage, and before he advanced any part of its consideration, had notice of the equity of plaintiff arising from the non-payment of said purchase-money, and the defendant Sabey has not shown that he, when he took the assignment, did not have notice of plaintiff's equitable rights, or of the facts from which they arise," and, as matter of law "(1), the plaintiff has an equitable lien upon the premises for the balance due him for the purchase-price of the same; (2) that such equitable lien is superior to the lien of the $5,000 mort-mortgage given to said McKinstry, and assigned by him to said Sabey; (3) that the said Sabey, as assignee, has no better rights than his assignor McKinstry; (4) that the plaintiff is entitled to a decree establishing his equitable lien and declaring *Page 237 its priority, and that it is a first lien upon said premises, and directing a sale and foreclosure to enforce it." The judgment entered upon these findings has been affirmed by the General Term. We find no error in its conclusion. So far as McKinstry is concerned it is entirely plain that he was not a bona fide incumbrancer, nor a purchaser for value beyond the sum of $2,100.27 (Ins. Co. v. Church, 81 N.Y. 221), which he included in the check, and which was in fact indorsed by Ira B. to his father and paid to him. We may turn toSabey's Case as presenting the only question which requires discussion. He is not found to have had notice of the plaintiff's equities, and is charged because (1) he did not show that he took without notice, and (2) because he could, in the nature of the transaction, have no better right than McKinstry. On the other hand, the contention made on his behalf on this appeal is that the plaintiff is estopped from asserting a lien as against Sabey because he voluntarily conferred upon Ira B. Seymour the apparent absolute ownership of the premises and the apparent authority to mortgage the same. The learned counsel for the appellant says there is no finding nor evidence that he was not a purchaser in good faith. As we have seen, the finding is that Sabey has not shown that he took without notice of the plaintiff's equitable rights as an unpaid vendor. If this will not sustain the judgment the appellant must succeed. His contention is that the precise question came up in Simpson v. Del Hoyo (94 N.Y. 189), and was answered in his favor by this court. There is this important difference: In the Simpson Case the party giving the mortgage was clothed not only with the record title to the land mortgaged, but was in possession of it under that title. Here possession was in the plaintiff, and an inquiry of him would have led to a true statement of the situation. It does not appear that he made such inquiry, nor is there the slightest evidence that he informed the plaintiff he was about to purchase the mortgage, or had been asked to do so. He himself says that he did not call upon the plaintiff directly, but on the twenty-eighth of *Page 238 September went by the plaintiff's place of business on his way to dinner, "passed the time of day with him," and says: "I asked where 93 East Genesee street" (the property in question) "was; he said just below, and I walked down towards it; he sort of followed me down; as we arrived there, I think I asked him what the property was worth; he said it had been appraised at $10,000; he didn't consider it worth as much as that, between $8,000 and $9,000; I asked him if the mortgage in the hands of McKinstry, which his son had been to see me about, was a genuine bona fide mortgage; he said it was; I think that was all that was said; I don't know as I said anything that I was about to buy it; I don't know whether I did or not." Upon this testimony the counsel for Sabey asked the court to find that "the plaintiff is estopped from asserting his lien against the defendant, Sabey, by reason of his silence when questioned by Sabey with reference to the genuineness and bona fides of the mortgage of September, 23, 1872," and on his refusing to do so, excepted. There are many circumstances in the case which would have warranted this refusal, but it is enough that the plaintiff flatly contradicted the statement of the defendant Sabey in every respect and particular, saying not only "I never saw him at the time the conversation is alleged to have taken place," but also, "I never had any conversation with him on the subject in any manner or form; I should certainly have remembered it if I had; I never had any conversation with him until this suit was commenced." The general testimony creates no surprise that the trial court did not credit the defendant in face of this contradiction. But as it was a question clearly within its province, and not within that of this court, the case must stand on its conclusion, and we have only to see whether the burden of alleging and proving innocence and good faith in the transaction was upon Sabey. In the first place it was sufficient to put Sabey on inquiry that the property was in the actual possession of the plaintiff (Cook v. Travis, 20 N.Y. 400), and it was his duty to ascertain *Page 239 whether the plaintiff had any interest in it, and if so, to what extent, and for this purpose to have some communication with or from him (Spofford v. Manning, 6 Paige, 383). In theSimpson case (supra), attention is called to the fact that the mortgagor had possession as well as the apparent title, and that "she was in possession thereof at the time of the execution of the mortgage and of its assignment to the pliantiff," and in that case it was held sufficient it inquiry was made of the mortgagor. The reason of this limitation does not apply here. The plaintiff and not the mortgagor was in possession, and an inquiry of him would have led to a disclosure of the equities of the plaintiff. There is a like or greater difference between the present case and the others cited by the appellant. Fisk v. Potter (2 Keyes, 64), was an action to enforce an equitable lien for the purchase-money against a subsequent purchaser under a mortgage executed by the vendee while in possession, and failed for that and other reasons which have no place in the record before us. To meet the question of pleading and proof the appellant relies upon an averment in the answer that "he took the assignment of the mortgage upon the faith of plaintiff's admission that the mortgage was a valid mortgage, accompanied by a denial of knowledge or information of the alleged facts upon which the allegations of fraud or conspiracy are based." So far as reliance is placed upon the admission, it is the finding that none was made, and as a pleading the allegations are far short of the affirmative allegation which the law requires of one who is bound to allege that he took his security without notice. Moreover, he must both allege and prove it. It is a defense founded upon new matter. The plaintiff's lien, as an unpaid vendor, is good against the vendee and against the whole world, unless waived by the vendor or defeated by an alienation of the property by the vendee to a purchaser without notice. (Dusenbury v. Hulbert, 59 N.Y. 541.) It was not necessary for the plaintiff in this case to allege that he had not waived his lien. The defendant might and did *Page 240 rely upon the plaintiff's waiver as a defense, and so pleaded and sought to prove it. He failed. That issue has been found against him. It was not necessary for the plaintiff to allege that the defendant Sabey took with notice, for his case was made out when his lien was established against his vendee and against McKinstry, unless Sabey was a bona fide purchaser from McKinstry, and if Sabey relied upon the fact that he took without notice, it should have been set up in the answer. (Weaver v.Barden, 49 N.Y. 286.) The reason for this rule may be the same ascribed to the doctrine which requires the holder of a note, shown to have been fraudulently obtained to prove under what circumstances and for what value he became the holder, viz.: That when there is fraud the presumption is that he who is guilty will part with the instrument for the purpose of enabling some third person to recover upon it, and such presumption operates against the holder and it devolves upon him to show affirmatively the facts essential to overcome that presumption and relieve himself from its effect. (First Nat. Bk. v. Green, 43 N.Y. 298, OceanBk. v. Carll, 55 id. 441; Farmers' Bk. v. Noxon, 45 id. 762.) So where the true owner sues to recover goods against a person claiming from the fraudulent vendee, the burden is upon the claimant to prove good faith and value. (Stevens v.Brennan, 79 N.Y. 258.) Indeed, the rule is entirely well settled that if a claim can be sustained only upon the ground that the person asserting it is an innocent bona fide purchaser, he must positively deny notice even though it be not charged. (Denning v. Smith, 3 John. Ch. 332.) No error was committed therefore by the trial court in giving force to Sabey's omission to deny notice of plaintiff's rights and making it, in connection with other circumstances, a ground for postponing his mortgage to the plaintiff's lien for the unpaid purchase-money. The other questions raised by the appellant relate to facts depending on evidence and have been found against him by the trial court and the General Term. They require no other *Page 241 discussion. Upon those findings the judgment is without error and should be affirmed. All concur, except RUGER, Ch. J., not sitting. Judgment affirmed.