Winslow v. McCall

Parker, J. The principal question in this case is whether the foreclosure of the mortgage by Cannon barred the assignee of the Heartt mortgage, and this I find a difficult — 244 — question. It was decided by Justice Hand, at special term, in Wetmore v. Roberts, (10 How. Pr. R. 51,) that an assignee of a junior mortgage, whose assignment was recorded, was entitled to notice, upon the foreclosure by advertisement of a senior mortgage. That is this case; and inasmuch as, aside from authority, the question is one of much doubt, I feel bound by that decision, not finding any which conflicts with it. If then Betts, who was an assignee of the Heartt mortgage, was entitled to notice on the foreclosure of the Cannon mortgage, no notice having been served on him, he was not foreclosed, and his rights under his mortgage were not affected by the foreclosure and sale. He stood after the foreclosure precisely as though none had been made. At the time of the foreclosure and sale, Pike was in possession; and was in, as I think, as the tenant of Cornwell. He entered under the lease from Cornwell, the term in which continued until the 1st of April, 1858. Cornwell was then the owner of the premises, subject to the mortgages, and so continued until the sale under the foreclosure proceedings, on the 12th day of October, 1858, to the defendant McCall. How although a memorandum was subjoined to the lease on the 10th day of March, 1858, signed and sealed by B. D. and W. P. Bandall, and the lessee Pike, as follows: “We, the undersigned, hereby mutually agree that the above lease may stand for one year from the first day of April next, and that for value received, we promise and agree, each to the other, to be governed in all respects by said lease for the term above specified;” still there is nothing to show that the Bandalls had or claimed any interest in the premises, and no such interest or claim can be inferred from the terms of the memorandum, but the inference rather is, that they stipulated on behalf of Cornwell, as his sureties, or possibly as his agents. The agreement is, that the lease shall stand for another year. Pike does not agree to pay any rent to the Bandalls, but to Cornwell. The . next succeeding year a similar extension is — 245 — signed by Cornwell himself. Pike, moreover, testifies that he has continued in possession ever since he first entered as tenant to Cornwell. I therefore hold that Pike, at the time of the foreclosure and sale, and at the time of the conveyance by the defendants to the plaintiff, and ever since, was and has been Cornwell’s tenant. Cornwell has never been divested of the possession of the premises since his first entry under his deed from Talbut. Cornwell’s interest in the premises, however, was subject to the Cannon mortgage; and on the foreclosure of that mortgage he was served with notice, and his equity of redemption was foreclosed against, and his interest divested. The possession which he thenceforth retained through Pike, his tenant, was not adverse as against the defendants, or the plaintiff, claiming under the Cannon mortgage, until he became the assignee of the Heartt mortgage. Pike’s possession, therefore, was not adverse at the time the defendants conveyed to the plaintiff. The defendants’ counsel insist that, inasmuch as the plaintiff, in her complaint, alleges that Pike was in possession under Cornwell, who was the owner of the premises and claimed title thereto, adversely to the defendants, at the time the defendants executed the deed to the plaintiff, she cannot gainsay the fact. But the defendants deny that fact, distinctly, as the plaintiff alleges it; and an issue being made upon it, neither party can rest upon the allegation of the other, but the issue must be decided according to the facts appearing in the case. On the 9th of March, 1859, Cornwell became the owner of the Heartt mortgage, with all the rights of Betts under it. On the 1st of April, 1859, that mortgage became forfeited by the non-payment of the amount remaining unpaid and which their became due, to wit, $100 and interest thereon from 1st April, 1858. Cornwell was then in possession—a possession legally acquired, and of which he had never been divested. I think he is from that time to be deemed a mortgagee in possession. It is not necessary that he should have obtained possession, as mortgagee, either by consent of the — 246 — mortgagor, or by legal proceedings. It is sufficient if he obtained the possession in some legal mode. After forfeiture, he is considered as having the legal estate, and being legally in possession, may defend until his debt is paid. (15 Wend. 248.) Cornwell, then, as against the plaintiff, has a right of possession, paramount to her’s. It matters not that the paramount right, in the condition in which it now exists, did not accrue until after the execution of the conveyance by the defendants to the plaintiff. She cannot be prejudiced, in her claim under the covenant of warranty entered into by the defendants with her, by not having immediately taken the actual possession of the premises. She had the undoubted right to leave them vacant if she chose; and the fact that she might, by taking immediate possession, have prevented this mortgagee from becoming mortgagee in possession, until he should resort to legal proceedings, does not affect her right under the covenant. That would only have driven him to redeem the premises from the sale under the foreclosure proceedings, and thus to have ousted her of the possession. His right against that conveyed to her, existed in the hands of Betts at the time of the conveyance to her; and if he can, by virtue of that right, now resist her claim to the possession, and does in fact so resist, the covenant of warranty is broken, and this action can be maintained. (6 Barb. 172.) It is contended by the defendants’ counsel that the lien of the Heartt mortgage is transferred from the premises to the surplus remaining in the hands of Cannon, from the foreclosure and sale under the mortgage held by him, and such surplus being sufficient to satisfy the Heartt mortgage, that Cornwell has no right to the possession of the premises under that mortgage. The case of Slee v. Manhattan Company, (1 Paige, 48,) cited to sustain that position, does not, I think, sustain it. There, Slee owed the Manhattan Company $2000; and, holding a mortgage against Frear & Hallowell for $4000, he assigned it to the company as collateral security for the pay — 247 — ment of the $2000. The company foreclosed the mortgage, and hid in the premises for $700. And all that was held in that case upon the point now in question was, that the assignment authorized the assignee to foreclose the mortgage assigned; that if a stranger had purchased under the foreclosure, he would have taken a good title against the mortgagee who had assigned; that the foreclosure of the mortgage did not affect the right of the mortgagee in that mortgage, who had assigned it, to redeem Ms mortgage, Ms assignment being in the nature of a mortgage; but that Ms equity of redemption would, after the foreclosure of the mortgage so assigned, and a purchase of the premises by a stranger, attach itself to the money for wMch the land was sold, instead of the* land itself. It was held in Waller v. Harris, (7 Paige, 167,) that a subsequent incumbrancer has no claim to the surplus produced by a sale in a statute foreclosure, as his lien is not affected by the proceeding. The latter case, and not the former, states the rule applicable to the case under consideration. Upon the whole case, I do not see why the plaintiff is not entitled to recover. In regard to the damages, no question was made, on the trial, nor in the briefs submitted, as to the rule. The plaintiff claims to recover back the $500 of the purchase money paid by her at the time of the conveyance, but makes no claim in regard to the $900 bond and mortgage wMch she at the same time executed-to the defendants. On what principle she assumes $500, as the measure of damages, I do not quite understand. The title which she has obtained by the conveyance to her, is good against all the world, except this mortgagee in possession, and he is entitled to hold possession only until Ms debt shall be paid, by the rents and profits of the premises, or otherwise. When the debt is paid in that way or any other, the obstruction to her possession ceases, and her title is complete and umncumbered, except by the mortgage wMch she, herself, gave to the defendants. If the — 248 — entire title had failed, or if the amount due on the mortgage equalled the value of the land, then the purchase money and interest would have been the measure; and the §1400 would have been recoverable, less the §900, indeed, if the claim to such deduction were properly set up in the answer. But here the title has not failed absolutely; nor is the amount of the mortgage equal to the value of the land, evidenced by the consideration in the deed. In White v. Whitney, (3 Metc. R. 81,) it was held that when land, that is subject to a mortgage, is conveyed with a covenant of warranty, and the grantee is ousted by the mortgagee, the rule of damages upon a suit on the covenant, is the value of- the estate at the time of the ouster, unless that value exceeds the amount due on the mortgage; but if it it exceed that amount, then that amount is the measure of damages. Chief Justice Shaw says, in giving the opinion of the court in that case, “ If the right of redemption is not foreclosed, and the land may be redeemed for less than its value, the amount to be paid for such redemption—the amount due on the mortgage—-will be the measure of damages, because it will afford the plaintiff complete indemnity. Cases may be supposed where the outstanding mortgage, though assuming the form of a paramount title, which, if not redeemed, would take-the whole estate, and evict the covenantor; yet, being very small in amount in comparison with the value of the estate, it would be plainly for the interest of the owner and holder of the equity of redemption to redeem. In such a case it would be quite unreasonable to hold that the covenantee, on such an eviction, should recover damages to the full value of the estate.” In Donahoe v. Emerey, (9 Metc. R. 63,) it was held that when a grantee, who is evicted by the holder of a mortgage, made prior to his grant, sues his grantor on his covenant for quiet enjoyment, he is not entitled to recover damages beyond the amount of the mortgage debt, if the mortgage be not foreclosed. Justice Wilde says, “ The rule laid down was adopted in" — 249 — Tufts v. Adams, (8 Pick. 550,) and confirmed in White v. Whitney, (3 Metc. 81,) and it seems founded on a principle of reciprocal justice. The plaintiff'is entitled to indemnity, no more, and to compel the defendants to pay the full value of the estate, would be unjust if it exceeded the amount of incumbrance.” The same principle has been held in this state. In Guthrie v. Kingsley, (12 John. 126,) the defendants had conveyed in fee, to the plaintiff, with covenant of seisin; they, in fact, had only a life estate in four-sixths of the premises, and an estate in fee in two-sixths, and no more passed to the plaintiff by their conveyance. In an action on the covenant it was held, that as to two-sixths there was no failure of title, but as to the residue, as the conveyance carried to the plaintiff a life estate, his damages were four-sixths of the consideration money, deducting therefrom the value of the life estate. The principle is recognized also in Wager v. Schuyler, (1 Wend. 553,) and in Rickert v. Snyder, (9 id. 423.) In the latter case, the plaintiff, to whom the defendant had conveyed in fee, with covenant of warranty, was ousted from the possession by the holder of a term for years, and in an action on the covenant was allowed, at the circuit, to recover the whole value of the land, with interest. The court, on a motion for a new trial, say : “ The plaintiff was permitted to recover the whole value of the land. This was wrong. The record did not show that Kline was seised of the premises, which he recovered, but on the contrary, that he was possessed of a term. The extent of that term, and the annual value, or the interest of the purchase money, should have been the measure of damages.” According to the principle of the cases above cited, the plaintiff is entitled to recover such sum as will afford her a complete indemnity, for the breach of the covenant, and that is held to be the amount due on the mortgage, which, at the commencement of this suit, was $107.29. That amount she was then entitled to from the defendants, and she is now entitled to interest on that sum from the commencement of the suit to the date of — 250 — the referee’s report; the sum which she is entitled to recover being, in the aggregate, §117.63. This fully indemnifies the plaintiff for the breach of the covenants; for Cornwell, the mortgagee in possession, is to account to her for the rents and profits of the premises, and these, as between them, go to satisfy, or lessen the amount due on the mortgage, to the extent of their value. [Cortland Special Term, January 9, 1860. Parker, Justice.] As no question was made by the defendants, on the trial, in regard to the amount claimed by the plaintiff, so that they might, perhaps, be deemed to assent to her right to recover that amount, if entitled to recover at all, I should not have started that question, did I not find myself confronted with it, and were it not one, a wrong decision of which would be cause for a reversal of the judgment, as it would be entirely competent for the defendants to except to the report of the referee for any error in the rule of damages adopted- in it. I am, therefore, compelled to meet and decide the question, and both from the principle and authority, to hold the rule above stated.