Coster v. Monroe Manufacturing Co.

The Chancellor. This bill is filed on a mortgage made by Francis Mann and John W. Berry to the complainant, to secure the payment of twenty thousand dollars. The validity of the mortgage is not questioned, but the defendant claims to have a deduction from its amount for the reasons stated in the answer. By the answer, which is sustained by the proofs, it seems that the mortgage covers what was formerly known as the Beaver woollen factory, but latterly the Rutgers cotton factory mills and buildings, and lot of land whereon they stand, in the town of Paterson. This mill, being owned by several persons, was divided by them into shares, and the several parties holding these shares conveyed the property to Mann and Berry, who, as part of the consideration, executed the mortgage to the complainant. The property has been conveyed in the usual and regular manner, by Mann and Berry, through several parties, to the defendants, “ The Monroe Manufacturing company,” which company now has the equity of redemption in the premises. The deed to Mann and Berry bears date the first day of February, 1831, (the same day with the complainant’s bond and mortgage,) and is made by the executors of Henry Rutgers, the executors of 'William Few, Ichabod Prail and wife, Jeromus Johnson, a,nd the — 474 — complainant and wife, as parties of the first part. In a recital' in the deed, the shares are stated to be six hundred and eighty-two, of which, at the time of the conveyance, the estate of Henry Rutgers held one hundred and sixty-four, the estate of William New one hundred and thirty-five, Ichabod Prall and wife fifty-six, Jeromus Johnson- one hundred and seventy-eight, and the complainant one hundred and forty-nine. The interest of these parties was distinct, and no way dependent on each other any farther than all share-holders in a joint stock company. Each had an interest to the amount of his shares, and no more. The deed purports and was no doubt made upon the consideration of twenty-five thousand dollars, of which sum the complainant’s-mortgage constituted twenty thousand dollars, and the remaining five thousand dollars was either paid in cash or otherwise secured»The covenants in the body of the deed are only against the acts of the grantors, for quiefr enjoyment and for further assurances; but there is a separate and independent covenant on the back of the deed for a warranty of title, made by the complainant alone. For a part of the lot conveyed in this deed, the title of the grantors turns out to be defective, and an action of ejectment has been brought, the cause tried,- and verdict and judgment in favor of the lessor against the title of the grantors in the deed. The execution was issued and about to be executed for the part recovered in the suit; when the defendants, rather than be dispossessed, paid the Society for establishing useful Manufactures, (the plaintiffs in ejectment,) five thousand dollars, and took their title for the portion of the premises so declared to belong to them. The defendants now insist that they are entitled to have an abatement-on the amount due the complainant on his mortgage, of the damages which they have sustained by the recovery of the Society for establishing useful Manufactures, by virtue of- the covenant entered into by the complainant on the back of the deed. This statement of the case will present two questions: 1st, Whether the defendants can avail themselves of this defence in this action ? and if so, then, 2d, To what extent is the com — 475 — plainant bound by bis covenant,; or. in other words, what is its true construction and meaning ? 1. Upon the first question, T am, after careful consideration, •dearly of opinion, that it is the bounden duty of this court to take notice of a defence of this character, and either stay the suit on the mortgage until the damages are ascertained by a suit at law, or by directing an issue to settle the liability, or by a reference to a master. To allow the holder of a mortgage to go on and under a decree to establish his claim to his whole demand, when the defendant shows by the record of recovery against him that a part of the very land for which he gave the mortgage did not belong to the mortgagee at the time he conveyed, and that too against the express covenant of the mortgagee, would, 1 think, violate that sound principle of the court which requires that complete justice he done to all parties, and not by halves. Take ¿his very case, where the title of a part only of the property turns out to be defective. A. decree for the whole amount might take from the defendant that portion of the property for which he has good title, when, if the abatement, was made for bis loss, it might be in his power to pay off the balance remaining against him, or make such arrangement as to save his property; and all this embarrassment created by the act of the mortgagee in selling property for which he bad no title. There is another obvious propriety in this course. The mortgagee may be unable to pay the damages at the end of a suit on bis covenant, and if so, he gets the whole of bis money on the mortgage, and the entire loss is visited on the purchaser. This must be understood as applying only to a case where the original parties aro before the court; what view should be taken if the mortgage is assigned to other hands, need not here be considered, for the original mortgagee and covenantor is the party now before the court as complainant. 1 confess I have not been able to find (his subject considered in the cases as Í bad expected, and yet it appears to me so obviously correct in principle, that I cannot doubt its propriety. The great objection is the difficulty in this court undertaking to settle — 476 — unliquidated damages. I know this is a difficulty, and yet in some cases a court of equity will, to effectuate justice, settle damages which are unliquidated. But if this obstacle should be deemed insuperable, still it would constitute no sound objection to the court staying the complainant’s recovery on his mortgage until a reasonable opportunity be afforded the defendant to ascertain his damages at law, and then allow that amount to be offset. Which of these courses, to ascertain the damages under the covenant, should be puisued, might depend on the peculiar circumstances attending the case, but it would seem to me it should as a general rule be referred to a master, unless the complainant requires a trial at law. If the defendant claims the allowance here, he should be content with the forms of proceeding in this court, which is by reference to a master. To settle the damages, and thus close the whole controversy in one action, accords well with the familiar principle of a court of equity; of preventing a multiplicity of suits. The fear expressed by the complainant’s counsel, that his client might not be protected by a decision here, but be called upon again in a court of law, and by the original parties to the covenant, cannot, I think, have any reasonable foundation. This is a covenant to them, their heirs and assigns; it was made on the same day with, and on the back of the deed, and must receive the same construction as if made in the body of the deed ; and I can view it only as a covenant running with the land to the extent of the complainant's interest in that land. The property having been conveyed by regular and lawful conveyances to the present defendants, they alone are entitled to the benefit of this covenant; they alone are the party injured; and having once submitted themselves to the jurisdiction of this court, they cannot, upon any principle, seek for further allowance at the hands of another. An actual eviction I do not deem necessary to give a right to the defendant to his damages on his covenant, provided there has been a trial and judgment in ejectment. This, it may be fairly — 477 — Inferred, was the chancellor’s opinion in the case cited by the counsel for the complainant from 2 John. Chan. 524. In that case a purchaser bought under covenants of warranty, and gave his bond and mortgage for a part of the purchase money. After-wards a suit was brought at law to recover the money on the bond, and an injunction obtained restraining that suit on an allegation that the title to the land conveyed turned out to be defective. The chancellor dissolved the injunction, saying, that before a court of equity could interfere, “a previous eviction or trial at law is as a general rule indispensable.” Here has been a trial at law, and no doubt remains on that part of the case. It has been repeatedly held, that the court will not act upon a mere allegation that a title is defective, it must first bo established at law; and where that, is done, and the proof of the ptoceedings properly made, this court will take notice of them and act accordingly. I refer also, as bearing upon this subject, to Bumpus v. Platner, 1 John. Chan. 213, and to an anonymous case in 2 Chan. Cases, 19. As between the original parties, then, where a title is shown to be defective in part by a recovery at law, the court will allow the defendant an opportunity to offset the amount of his damages sustained under a covenant, before decreeing a sale of the mortgaged premises under the mortgage. 2. This view leads me, necessarily, to consider the true construction of the covenant entered into by the complainant. The important part of the covenant is as follows: “ 1, John G, Coster, one of the grantors, in respect of my proportion, being one hundred and forty-nine shares out of the six hundred and eighty-two shares, and of the like proportion of the consideration monies, but notin respect of the residue of said shares or of the said consideration money, covenant and agree with Francis Mann and John W. Berry, their heirs and assigns, that I am the owner of the said one hundred and forty-nine shares, and have good right lo sell the same in manner within mentioned, and that the same are free of all incumbrances, and that I will warrant and defend — 478 — the title to the within premises to the extent of said shares and no furtherThe defendants insist that the words in this covenant, “ to the extent of said shares,” although the title to a part only of the premises proved defective, makes the complainant liable to the full amount of his consideration money, and which in this case would cover the whole loss. Such is not, in my opinion, the true construction of this instrument. This would-'make the complainant liable beyond his own shares ; he would clearly answer for the shares of others, when he declares expressly that he covenants only “ to the extent of his shares.” He does not mean to say any thing more, than that he will protect the purchasers so far as his shares are interested. Had the title to the entire property failed, he must have answered to the full extent, but as it failed partially, he must answer only partially. This is the construction, I think, upon the fair literal interpretation of the words used. But we are not left to so narrow a rule in arriving at the intent of covenants, for it is a settled rule, both at law and in equity, to look to the evident meaning of the parties. The intention of the parties is to be carried into effect: Platt’s Treatise on Covenants, 136. That writer says, very properly, “the intention is not to be collected from the language of a single clause in a deed, but from the entire context, and it is immaterial in what part of a deed any particular covenant may be inserted, for exposition must be upon the whole instrument, ex antecedentibus et consequentibus, and according to ¡the reasonable sense and construction of the words.” The complainant did not profess to own beyond a certain number of shares, and his covenant was that he owned those shaves, and had good right to sell them, that they were free of incumbrances, and to the extent of those shares he would warrant and •defend the title of the purchaser. There was no reason why he should go beyond this. There is nothing in the case to show that he had the slightest interest in the shares of the other grantors, and why should he enter into any obligation as to them? The fact that the mortgage was made to him for twenty — 479 — thousand dollars of the purchase money, cannot vary the case. That was doubtless the subject of some arrangement between the parties, and can have no bearing upon this question. My attention was properly called, by the counsel of the complainant, to the phraseology used in the covenants in the body of the deed, to show that the grantors had distinct and independent interests, and never intended to be bound in any way for each-other. In the commencement of the covenanting part of the deed, the language is, “And the said parties of the first part hereby severally, each for himself and his heirs, See., and his acts and not jointly nor one for the other, or heirs, &c. of the other, in their respective rights and character, and in regard to their respective proportions, aforesaid, and not one for the proportion of the other, covenant, &c.” Taking this language with that in the separate covenant made by the complainant at the same time on the back of the deed, which still goes on to state his proportionate share, and is confined to that, there is no room, in my judgment, to doubt what was the intent and meaning of the parties. If four men each own a quarter, and they covenant separately for their respective shares, if the whole title is defective, they must respond to the full amount, but if only a part of the property is lost, they are to answer for no more than their share in the part so lost. What, then, was the share of the complainant in that part of the property of which the title proved defective ? The value being ascertained by a comparison of the part so lost to the purchaser, with the entire property purchased, and dividing such ascertained value into six hundred and eighty-two shares, the complainant is bound for one hundred and forty-nine of those shares, and no more. In making this estimate, while the amount paid by the defendant for this land a second time is proper evidence to be considered by the master, it is no way conclusive upon his judgment. lie will be at liberty to vary it if he shall think it right so to do. I shall refer the case to a master, to ascertain the amount of damages which the complainant is answerable for to the de — 480 — fendant on his covenant, in conformity with the construction:' here given to that instrument, and to report the amount due the complainant on his bond and mortgage, after deducting such amount therefrom, and that he take the evidence down in- wri-ting, and send up the same to this court.- Order of reference.