Astor v. Miller

The Chancellor. The decree of the late chancellor decides two questions which were not ¡intended to be subject to the re-examination of the master on the reference; and that decision cannot be reviewed here on the exception to the master’s report. In the first place it is declared and decreed that Madden the intestate, by the covenants in the lease, was bound to pay the amount assessed upon Astor’s interest in that part of the premises which had not been taken for opening La Fayette Place ; and that the estate of the intestate was chargeable with the amount of that assessment, to be paid in a due couse of administration. Secondly, it was declared and adjudged that the facts set forth in the bill and answers did not give the complainant any specific lien on the fund in the hands of the corporation, and which had been awarded to — 75 — the lessee for his damages. If either party was dissatisfied with the decree as to one or the other of these two particulars, the proper remedy was by an appeal from the decision of the court, or an application for a rehearing. The master is under a misapprehension in supposing the chancellor intended to refer it to him to review his decision on the last question, or to re-examine it himself on the coming in of the report. The claims of the different creditors of Madden, and their respective rights of priority of payment out of this fund, did not appear in the bill and answer. The chancellor anticipated that a different case might be presented as to the claims to priority between the complainant and other creditors of Madden, when their respective rights were proved before the master. The complainant was therefore permitted, notwithstanding this decision upon the facts stated in the pleadings, to insist upon and endeavor to establish by proof other facts which might entitle him to a priority in payment. The question now is, whether the new facts proved before the master give the complainant a right of preference which he was not entitled to on the facts stated in the pleadings- Before proceeding to the examination of this question I will briefly notice an objection made by the counsel for the mortgagees of the premises. This objection is founded upon a fact which occurred since the making of the decree by the late chancellor. It appears that Astor has neglected to pay the $4447 assessed on his interest in the premises which remain, and has suffered that part of the property to be sold, for eleven years, to pay the amount. If the sum assessed on Astor’s property had been raised by a sale of property belonging to Madden or to his estate, the claim of the complainant would have been extinguished. But I cannot see how a sale of the complainant’s own property for that purpose could change the rights of the parties. He had his election to pay the money, or to permit his property to be sold to satisfy the assessment; and it can make no difference to the other creditors whether he paid it in the one way or the other. The mortgage to The Mechanic’s Insurance Company and Moses Hoyt did not appear in the pleadings, and is one of — 76 — the new matters produced.in evidence before the master This mortgage was given by Madden upon the whole of the leasehold premises before any part was taken for the opening of La Fayette Place. It was therefore a specific lien upon Madden’s interest in the part taken for that purpose. The damages awarded. to Madden in lieu of that interest became a substitute therefor; and .upon the principles of equity, the mortgage then became a specific lien upon the fund, instead of his interest in that part of the land. The rights of mortgagees are not altered by turning the estate into money ; for the court directs the money to be applied according to the rights of redemption. (Belcher v. Butler, 1 Eden’s R. 530.) The fund in court therefore belongs to the mortgagees, unless the plaintiff is entitled to it through them, by virtue of the covenants in the' lease, they being considered as the assignees of the leasehold premises. Whether a mortgagee of leasehold premises who has never been in possession, or in the receipt of the profits of the estate, can be sued on the covenants contained in the lease as the assignee of the lessee, has for a long time been a disputed question. In Sparkes v. Smith, (2 Vern. 275,) a bill was filed by the lessor to compel the mortgagee of a term to discover whether the lease was not assigned to him. The defendant insisted that he was never in possession of the premises, or in the receipt of the rents. The court said it was the mortgagee’s own folly to take an assignment of the whole term by way of mortgage, and thereby subject himself to the covenants as assignee of the lease. But as he was only a mortgagee and had never been in possession, they would not assist the complainant to charge the defendant; but left the former to his remedy at law. In the subsequent case of Pilkington v. Shaller & Jefferies, (2 Vern. 374,) where a recovery at law had been obtained against a mortgagee under similar circumstances, the court of chancery refused to interfere for her relief. In the case of Eaton v. Jaques, (Doug. 438,) which came before the king’s bench eighty years afterwards, the judges of that court unanimously decided that the mortgagee, under such circumstances, was not answerable upon the covenants in the lease. Powell sup — 77 — poses the case of Lucas v. Comerford, (1 Ves. Jun. 235,) decided by Lord Thurlow in 1790, to be directly in opposition to the decision of the king’s bench in Eaton v. Jaques which had been made ten years previous to that time. (Powell on Mortgages, 241.) But upon examination of that case I see nothing inconsistent with the decision of the court of king’s bench in the casé reported by Douglas. It appears to be settled in England that a mortgagee, in possession, is liable on the covenants in the lease to the mortgagor. • (Traherne v. Sadlier, 5 Brown’s Parl. Cases, 179.) And Lord Thurlow only extended this principle to an equitable mortgagee in possession of a leasehold estate. It does not appear from the report of the case in Tesey, that the mortgagee was in possession, but it is more fully reported by Brown, where that fact distincly appears. (3 Brown’s Ch. R. 166.) A case is mentioned by Woodfall of Stone v. Evans, decided by Lord Kenyon in 1799, in which he is said to have overruled the decision in Eaton v. Jaques. (Woodf. L. & T. ch. 3, § 18.) I should infer from the language attributed to him in Wood-fall’s note of that case, that the mortgagee had once been in the actual possession of the premises under the mortgage. But in a still later case, (Williams v. Rosanquet, East, term, 1819,1 Brod. & Bing. 72,) which was argued before ten of the English judges, although the decision in Eaton v. Jaques was considered law by some, a great majority of them were of opinion that it had not been rightly decided. It may therefore be considered as now settled in England, that a mortgagee of leasehold premises is liable to an action on the covenants in the lease, although he has never been in possesssion of the estate, or received any benefit therefrom. But I apprehend such a principle cannot be sustained here. In the English courts of common law, the mortgagee is still considered as the owner of the estate, and the mortgagor only as his tenant. (Patridge v. Bere, 1 Dow. & Ry. 272.) In this state, the mortgagee out of possession is considered at law, as well as in equity, as having nothing but a chattel interest in the estate; and the mortgagor, for every substantial purpose, is the real owner. (2 John. Dig. tit. Mortgage 111.) 'The master seems to' have come to the same conclusion; but — 78 — he supposes that by taking the money awarded to the mortgagor for damages,, the mortgagees are to be considered in equity as having taken possession.of the estate, and thus subjected themselves to the burthen of performing the covenants in the léase. As the court considers a fund arising from a sale of the estate as a substitute for the estate itself, and suffers the mortgage to attach on ..it as such, the conclusion of the master may be correct in principle ; but it is erroneous in its application to the peculiar circumstances of this case. In the view of the case which the master took, the mortgagees could only be considered as assignees of that part of the leasehold premises which was taken for La Fayette Place. The residue was sold under the judgment against Madden, and bid in by Mrs. Ehrick. She conveyed the same to Diver, and the mortgagees released to him all their claim thereon, for á nominal consideration. It was therefore discharged from the operation of the mortgage, and has since been .transferred to the complainant Where a covenant which runs with the land is divisible in its nature, if the entire interest in different parts or parcels of the land passes "by assignment to separate and distinct individuals, the covenant will attach upon each parcel pro tanto. (Touchstone, 199. Co. Litt. 385 a. Van Horne v. Crain, 1 Paige’s R. 455.) In. such a case, the assignee of each part would be answerable for his proportion of any charge upon the' land which was a common burden, and would be exclusively liable for the breach of any covenant which related to that part alone. Under such a lease as was given by the complainant in this case, if one half of the lease-. hold premises had been assigned by the lessee to A, and the - residue to B, each would have been answerable for the taxes and assessments imposed upon their separate parcels of the estate; but neither would' be answerable for the amount assessed upon the share of the other. By the act under which a part of the premises was taken for the use of the public, (2 R. L. 417, § 181,) it is provided that if part of a lot is taken which is under a lease or contract, all contracts and engage; ments between the landord and "tenant as to the part thus taken shall determine and be absolutely discharged, from the time of the confirmation of the report of the commissioners ; — 79 — but shall remain valid and obligatory as to the residue of the premises. There is also a provision that the dissolution of the relation of landlord and tenant as to that part shall not affeet any agreement between the parties as to the payment of any assessment under the act. The assessment in this case was not imposed on that portion of the premises of which the mortgagees now claim the proceeds, but upon the part which remained. This part, I have already shewn, never came into the possession of the mortgagees, but passed to Mrs. Eh-rick under the sheriff’s sale. The covenant for the payment of the taxes and assessments thereon continued to run with that part of the leasehold premises, in her hands and in the hands of the assignees, until it was finally merged by the complainant’s purchase of the outstanding term in October, 1828. Notwithstanding the sheriff’s sale, the estate of Madden continued liable for the payment of the assessment in consequence of his personal covenant to that effect. Mrs. Ehrick' and her assignees were also liable on the covenant as running with their interest in the land while they continued the owners thereof. But no assessment ever was imposed upon that part which was taken for the use of the public ; as to which the mortgagees may now be considered quasi assignees. It is impossible therefore tó give the complainant any pri- or claim upon the fund in court, without overturning the decision of the late chancellor, which I am inclined to think was correct; and the result is that the master’s report in this respect must be overruled. As the amount due on the mortgage exceeds the whole fund in court, the mortgagees are entitled to the whole in satisfaction of their mortgage debt.