Pardee v. Steward

YaNN, J: The leases that were executed and recorded before the mortgage' was given, were not affected by the foreclosure. The covenants contained therein' ran with the land, and bound the grantees thereof. Post v. Kearney, 2 N. Y., 394; Dolph v. White, 12 id., 296, 301; Van Rensselaer v. Hays, 19 id., 68; Van Rensselaer v. Read, 26 id., 558.) The third lease was executed and recorded after the mortgage, through which the defendant derived title, but before the commencement of the action to foreclose the same. As the lessors' were not made parties to the foreclosure suit, their rights were not cut off by the judgment or the sale thereunder. (Brainard v. Cooper, 10 N. Y., 356.) The lessee, who was also the mortgagor, was a party, and his equity of redemption was foreclosed, but the question arises, did the purchaser at the foreclosure sale take the water rights which the mortgagor acquired by the third lease given after the execution of the mortgage % If he obtained the right te use the water freed from the restrictions in the old leases, or, in other words, the benefits of the third lease, he must bear its burdens also. It is now settled that the effect of a deed in foreclosure is to vest in the purchaser the entire interest and estate of the mortgagor and mortgagee as of the date of the mortgage, and unaffected by subsequent incumbrances and conveyances by the mortgagor. (Rector, etc., Christ's Church v. Mack, 93 N. Y., 488; 2 R. S., 192, § 158; Code Civil Pro., § 1632.) In the ease last cited, however, the plaintiffs, who sought to retain the benefit of an easement reserved by them upon conveying a lot which was subject to a mortgage, were made parties to the foreclosure of such mortgage. The court held that the purchaser at the foreclosure sale took the absolute title unincumbered by the easement, and that the plaintiffs to save their rights should have appeared in the action, and by offering to bid the full amount of [263] the mortgage and costs, subject to the easement, sought to have the judgment modified so as to direct such a sale. But where, as in this case, the persons holding the subsequent lien or interest were not parties to the foreclosure action, and who could not appear and protect their rights in the manner suggested by the Court of Appeals, it is still unsettled whether they, as against the purchaser, can enforce covenants running with the land made by the mortgagor after he gave the mortgage. This question, in substance, was thoroughly discussed on both sides, but not decided in Packer v. The Rochester and Syracuse Railroad Company (17 N. Y., 283). Judge DisNio maintained that the purchaser holds by title paramount the estate as held by the mortgagor before the mortgage, while Judge Peatt insisted that as to persons not parties to the foreclosure he holds as grantee from the iportgagor as óf the date of the foreclosure. With great deference we think that the latter is the correct position as applied to the circumstances of this case. As the rights of the lessee under the third lease were cut oif, while the rights of the lessors were not affected by the foreclosure, the latter can still collect the rent from some one while the former cannot enjoy the benefits for which rent is paid. As the lessors can still collect rent it follows that they must perform on their part, and therefore some one can have the benefit of such performance, or the right to use the water, freed from the restrictions in the old leases. No one but the owner of lot 52 can enjoy this right, because the water, according to all the leases, can be used nowhere else. Hence the defendant, who through the sheriff’s. deed became the owner of lot 52, can enjoy the benefits of the third lease and he must, therefore, bear its burden. He cannot enjoy the right free from the conditions upon- which it was granted. The water rent of $1,000 still remains a charge upon the premises notwithstanding the foreclosure, and the defendant took the land subject to that charge. As the lease was recorded he had constructive notice of the lien and the covenants and accepted title subject to them. (Phoenix Ins. Co. v. Con. Ins. Co., 87 N. Y., 400, 408). This lien might have been, but was not extinguished by the foreclosure. It might have been extinguished by opening the foreclosure suit and bringing in the lessors as parties, but as long as the [264] defendant continues to own the premises subject to that lease, with tbe covenants therein in full force as to the lessors, they are binding upon him as owner of the land with which such covenants run. As the water could be used only on lot 52 and the rent was a charge on lot 52, and the covenant to pay rent ran with lot 52; that lot could not be conveyed either voluntarily or by operation of law without making the purchaser liable for the rent, unless the rights of the lessors were in some way extinguished. Title, simply, to lot 52, with the third lease in force as to the lessors, requires performance of the covenant to pay rent. By force of the contract embraced in the lease, any grantee of the premises by merely accepting title becomes obligated to keep that covenant. If, instead of the mortgage in question, a mortgage upon the Yariek canal, prior to the third lease, had been foreclosed and the .plaintiffs, but not the owner of lot 52, had been made parties, would not the purchaser be entitled to recover the rent from such owner ? His right to use the water and hence his obligation to pay for it would not be affected by the foreclosure. That obligation would not, in the case supposed, be discharged by payment to the plaintiffs because their rights would have been extinguished by the foreclosure. Therefore, unless he had the water free from rent, he would have to pay to the purchaser. So, in the case under consideration, unless the defendant can use the water rent free he must pay the rent reserved to the plaintiffs. (Thomas on Mortgages, 366; Hart v. Wandle, 50 N. Y., 381; Vanderkemp v. Shelton, 11 Paige, 28.) The sale of the premises for taxes did not relieve the defendant from liability. The leases from the plaintiffs and their predecessors were perpetual, while the tax deed was for fifty years only. An assignee of a lease or a grantee of demised premises subject to a rent charge running with the land can terminate his liability only by parting with his entire term or estate. (Taylor’s Landlord and Tenant, § 452; Davis v. Morris, 36 N. Y., 569; Van Rensselaer v. Gallup, 5 Den., 454, 460.) The judgment should be affirmed, with costs. HaediN, P. J., and Foilett, J"., concurred. Judgment affirmed, with costs.