Oliphant v. . Burns

40 N.E. 980, 146 N.Y. 218, 66 N.Y. St. Rep. 594, 101 Sickels 218, 1895 N.Y. LEXIS 654

• Court: New York Court of Appeals
• Decided: May 21, 1895
• Status: Published

Opinion

Peckham, J.

Upon this somewhat complicated state of facts the defendants Charles W. Parker and Edward Burns, upon their appeal here, have argued several objections which they have urged as fatal to the plaintiffs’ judgment herein.

First. It is claimed that the plaintiffs’ testatrix took her mortgages subject to the provisions of the tripartite agreement as a substitute for the $150,000 mortgage above mentioned, and that under that agreement the lands covered by the mortgages were to be sold by Mr. Hawley, and fourteen-twenty-fourths of the proceeds of the sale were to go to Mr. Clapp and the balance to Mr. Hawley. The defendants urge that although the Seminary tract when conveyed to the Seminary was released from the lien of the $150,000 mortgage, yet by reason of the covenant in the deed to the Seminary the clause in the tripartite agreement which provides for the sale of all the property “ except that portion of the farm secondly above mentioned to which the General Theological Protestant Episcopal Church of the United States may retain title,” such Seminary tract upon being re-conveyed to Mr. Hawley became subject to the tripartite agreement, and became a portion of the land which under the provisions of such agreement was subject to be sold, and the proceeds divided as stated. The plaintiffs’ testatrix had in fact no notice of this tripartite agreement, but the defendants claim that the record thereof was constructive notice to all subsequent purchasers or mortgagees, and that the plaintiffs’ testatrix was, therefore, bound to know of its existence and its contents, and that when she took her mortgages she took them subject to all rights of third parties provided for in that agreement. It will be recollected that this tripartite agreement was made between the Hawleys and Mr. Clapp after the Hawleys had conveyed this Seminary tract to the Seminary, and before the Seminary re-conveyed it to Mr. Hawley. Tracing the title, therefore, of this tract from Mr. Clapp to Mr. Hawley, and from Mr. Hawley to the Seminary, and back from the Seminary to him, without searching against Mr. Hawley during the time when he had no title to the Seminary tract, this tripartite agreement would not appear. But it is urged on the part of the defendants that the title having once come into Mr. Hawley, it was the duty of any one searching the title to continue the search against Mr. Hawley after he had parted with the title and up to the time it again was vested in him, and that this duty was strengthened by reason of the condition and covenant contained in the deed from Hawley to the Seminary.

If this alleged duty had been discharged then it is said this agreement might have been discovered. I do not think that the record of the agreement was constructive notice to the plaintiffs’ testatrix of the existence of such agreement. The form of the deed to the Seminary left no title in Hawley. If during the time in which the title to the Seminary tract was in the Seminary, Mr. Hawley had conveyed that tract, not having the title in him, and had given a deed with warranty of title, the subsequent acquisition of the title by Mr. Hawley would inure at once to the benefit of his grantees with warranty, by virtue of such warranty and the estoppel which would arise therefrom. Mr. Hawley in such case would be estopped from setting up as against his grantee the fact that he was not vested with any title to the property which he conveyed with warranty at the time of such conveyance, and the privies of Mr. Hawley in law, in blood or in estate, would be equally bound by that estoppel. The title would pass to his grantees with warranty the very instant it was acquired by Hawley. Thus the record of the deed with warranty and the title of his grantees in such deed would both precede the record of the mortgages to the plaintiffs’ testatrix, and she would, in that case, have been bound by the estoppel, and the record would have been notice to her of the existence of the deed. Such is the case decided in the Commission of Appeals in Tefft v. Munson (57 N. Y. 97), cited by the learned counsel for the appellants. In that very case the learned judge who delivered the opinion of the court assumed it to be the rule that the record of a conveyance, made by one having no title, would ordinarily be a nullity, and constructive notice to no one. But it was held that the plaintiff in that case could not avail himself of this rule on account of the operation of the estoppel in the prior mortgage. The case of White v. Patten (24 Pick. 324) was therein cited as analogous to the case then at bar. A reference to the case in Pickering shows the same principle of an operation by estoppel on account of warranty.

But in this case there was no conveyance, there was no warranty and there was no estoppel. It was not the mortgaging of after-acquired property. When the agreement was made by which Hawley bound himself to proceed and take measures to sell certain lands owned by him at auction and to divide the proceeds in a certain way, the title to the Seminary tract was not in him. He simply agreed that as to such land it should be included in the agreement, if the land came back to him. That is, he agreed in that event to sell to some one else at auction and divide the proceeds with Mr. Clapp. That was no such conveyance as operates by estoppel when the title is subsequently acquired and it is no such instrument that the recording of it when Hawley had no title to the Seminary tract, operates as constructive notice to a subsequent mortgagee after Hawley had title and who has his mortgage recorded. It might perhaps he doubted whether the language of the agreement in regard to its application to the Seminary land placed that land necessarily within the agreement, but it may here be assumed as the court found that it did. There is no claim that the plaintiffs’ testatrix had notice-in fact of the circumstances of this agreement and consequently when she took her first mortgage she was not affected, by the existence or provisions of that agreement.

The defendants urge, however, that in regard to the second mortgage to the plaintiffs’ testatrix in October, 1881, after the-trial in the action to enforce specific performance of the -tripartite agreement, she took such mortgage with notice of the-existence of the agreement by reason of the lis pendens in that action and by virtue of such judgment. She was no-party to that action. The judgment therein was not entered until February 1,1882, and sometime subsequent to the execution of the second mortgage. One of defendants’ objections-offered to receiving the judgment in evidence was that it was-not admissible as made after the delivery of the mortgages to-plaintiff. The complaint therein had been dismissed upon the trial as to her and from that time her name had been omitted from the title of the cause, from the findings of the-court and subsequently from the judgment entered thereon. She was, therefore, a stranger to the action and it could notoper ate to charge her with any notice of the existence of the agreement. The Us pendens was no notice because the complaint in the action excluded the Seminary tract and any agreement between third parties to include it therein and to insert it in the judgment was ineffectual to in any way affect her rights under her mortgages. There was nothing in the complaint to charge her with notice of the tripartite agreement as to this property. While proper enough as between the parties to the action who appeared upon the trial and consented thereto, the agreement to include the Seminary tract in the decree of sale had no effect upon the rights of the plaintiffs’ testatrix.

Second. It is urged, however, that this agreement and the provisions in regard to it are superior to all subsequent grantees or mortgagees, excepting those who occupy the position' of grantees or mortgagees for value, and there is no proof in this case that the plaintiffs’ testatrix occupied such a position. It is said that this is not alleged in the complaint, and that there is no proof in the case to that effect. It was not necessary to allege it in the complaint, although I think it is substantially set forth. The record of the tripartite agreement was not constructive notice, and, so far as she was concerned, there was a legal title on the record and unincumbered in Hr. Hawley at the time he executed the mortgages in question. He was not only clothed with the record title, but he was in possession thereof under that title, and as to plaintiffs’ testatrix there was no prior record of any conveyance which was constructive notice to her. There was, therefore, no reason for alleging in the complaint what the plaintiff was not presumed to know, that is, the existence of the tripartite agreement, and, therefore, it was not necessary for her to state the facts which would prove her a purchaser for value, or to allege that she was such purchaser. There was nothing on her side of the case to present the question of value. If the agreement had been necessarily a part of the plaintiffs’ case, and it became necessary for her to avoid the effect of its priority of execution, it might have come within the. rule which requires a subsequent grantee or mortgagee in certain cases to allege in his pleading and to show that he occupied the position of a purchaser for value. After the defendants proved the tripartite agreement, it may then have been the duty of plaintiff, when she had the case again, to show that she was a mortgagee for value, and if the objection had been taken on the trial the plaintiff might then have shown more fully the facts regarding the execution of the mortgages. The finding of the court upon the trial, if based upon any evidence, that there was due from defendant Hawley upon the bonds accompanying the mortgages the amount of some §10,000, no part of which had been paid, showed that the plaintiffs’ testatrix did occupy the position of a mortgagee for ■ value. The proof of the due execution of the bonds under seal upon the trial imported a consideration, and no point of Si failure of consideration or that plaintiffs’ testatrix had not advanced a valuable consideration was taken upon the trial. Mo motion to dismiss the complaint or for other relief on that ground was made, and, so far as the record shows, there was an entire absence of any action of defendants’ counsel based upon a lack of evidence of this kind. It is too late to urge a ground for reversal here which was never brought to the attention of the trial court, and which, if it had been, might have been at once obviated. There was proof upon the trial that the principal and interest of the two mortgages were due and unpaid. The evidence was sufficient to sustain the finding that such an amount was due, and to show, in the absence of all objection or evidence to the contrary, that plaintiffs’ testatrix was a purchaser for value.

Third. The defendants Burns and Charles Warren Parker, however, claim that they are in possession of their respective pieces of property under tax titles, which are paramount to these mortgages and to the title of the mortgagors, and that the regularity or validity of such title cannot in any event and against their objections be tried in this action. They also claim that they are in a position to set up as against all the world such tax titles and all rights flowing therefrom. The defendant Burns says that he is in a position to set up such tax title as to the Seminary tract, because as matter of law he never took any title whatever to that tract by virtue of the referee’s deed to him purporting to convey such tract by virtue of a judgment in the action to enforce the provisions of the tripartite agreement. He says that he never took any such title because the complaint in that action excluded ,from its. operation the Seminary property, and that there is no amended complaint in the record bringing such property within its description of the land to be sold and that under such circumstances its inclusion in the judgment and an assumed sale of the property thereunder was wholly without jurisdiction, the sale was entirely void and no title whatever to the Seminary tract passed by virtue of the deed of the referee. Mr. Burns evidently did not believe this to be the case when he purchased the property at the referee’s sale under the judgment in August, 1889, and when he took the referee’s deed a month thereafter conveying the Seminary property to him. He certainly did not buy for amusement or take the referee’s deed for any such purpose. He had a month in which to examine the title to the lands which he purchased before taking a deed, and it is clear that when he did take one he supposed that he was purchasing something of value. That he supposed at that time that he was getting title to this Seminary property, and consequently that the proceedings leading up to the judgment in the action were regular and valid is also to be inferred from the fact that upon the trial of this action he asked the court to find as a fact, and the court did find, that an action for the specific performance of this agreement and to enforce the sale of the property therein mentioned; including this Semincvry i/ract, was commenced July 28,1880, and on the 14th of May, 1881, judgment was entered in that action directing the sale of property covered by that- agreement, including the said Seminary tract of 30 acres. -The-claim that he took no title is evidently an afterthought to Mr. Burns. It appears, however, that the plaintiffs in that action and the defendants Hawley were not only parties, but that defendants Hawley answered, were present on the trial through counsel and took part in it, and no objection appears to have been made to the including of the Seminary tract in the judgment and to the direction for the sale of such tract with the other lands described in the complaint. It would seem to have been a very proper agreement to make between these parties and thus to include a sale of all the property mentioned in the tripartite agreement, including the Seminary tract. Ho one else had any interest in the matter excepting Miss Morss, the plaintiffs’ testatrix, and as to her it would not, of course, be binding. The sale would necessarily, therefore, be'subject to her interests, but with that exception every one who had any interest in the property to be sold was before the court, and, as has been stated, no objection or exception to such proceedings appears to have been taken. It is inconceivable that the Seminary tract was thus included without the consent of these parties interested in this land, who were present upon and taking part in the trial and equally interested in the contents of the judgment. In such event, it is not only proper, but it is the duty of the court to presume that it was done with the consent of these parties, and that a proper amendment to the complaint was actually made, although no formal amendment appears on the record.

This is altogether a different case from that of Reynolds v. Stockton (140 U. S. 254, 265), cited by the learned counsel for the defendant. In that case a defendant appeared in an .action in a state court and responded to the complaint as^ filed, but he took no subsequent part in the litigation, was not present at the trial, and no consent to the proceedings on the trial could be presumed from the record in the case. The learned judge, delivering the opinion in that case, expressly said that they were not concerned therein as to the power of amendment of pleadings lodged in the trial court, or the effect of any amendment made under such power, for no amendment was made or asked! He further said “ there was no appearance after the filing of the answer, and no participation in the trial or other proceedings, and whatever may be the rule where substantial amendments to the complaint are permitted .and made and the defendant responds thereto, or where it appears that he takes actual part in the litigation of the matters determined, the rule is universal that where he appears and responds only to the complaint filed, and no amendment is made thereto, the judgment is conclusive only so far as it determines matters which, by the pleadings, are put in issue.” The learned judge also said: “ Nor are we concerned with the question as to the rule, which obtains in a ease in which, while the matter determined was not in effect put in issue by the pleadings, it is apparent from the record that the defeated party was present at the trial and actually litigated that matter. In such a case the proposition so often affirmed that that is to be considered as done which ought to have been done, may have weight, and the amendment which ought to have been made to conform the pleadings to the evidence may be treated as having been made.”

The very matter lacking in the case cited is present here. The defendants Hawley weré present at the trial, took part in the proceedings, and it must be presumed consented to an amendment and to the inclusion of the lands in the judgment directing their sale. We do not question the correctness of the rule laid down in the case cited from the Federal Supreme Court, and it is consistent with that which has obtained in the courts in this state and been frequently so decided. •

The facts in this case are so plain, and the inference of consent so incontestable, that we should be doing violence to every reasonable presumption if we were to hold that this land was included in the judgment against the objection and without the consent of the parties to be affected thereby. Ho court ought to run counter to so strong a presumption of fact. We must presume, therefore, what we have no doubt is in accordance with the facts of the case, that the complaint was treated and regarded as, though not perhaps formally, amended, and the land was inserted in the judgment with the consent of the parties to the action. Mr. Burns, therefore, upon the purchase of the Seminary lot under that judgment, obtained a title thereto the same as if the land had been at first and formally described in the complaint, and in accordance therewith had been included in the judgment.

On September 5, 1889, after he had received the deed of the referee, pursuant to that judgment, and being vested with the title to the Seminary land by virtue of such deed, we think it clear that he was not in a position to obtain a tax title to the same property under the circumstances detailed in the foregoing statement of facts. A perusal of the order of the court made in Hovember, 1889, under which these tax titles were obtained, shows conclusively that they were obtained with moneys arising from the sale of lands under the decree and judgment of the court in the action to enforce specific performance of the tripartite agreement. It was the duty of the mortgagor to pay the taxes and beep the property which he had mortgaged free from any lien of that nature. This duty he was discharging when, by virtue of the judgment, he was, through the referee as his agent, paying such taxes with the moneys arising out of the sale of the lands. As the lands were in law sold subject to the plaintiffs’ mortgages, the payment of the taxes cleared off incumbrances which might otherwise become and remain paramount to the mortgagor and the mortgages which he had given. The judgment in recognition of this duty of the mortgagor directed the referee, out of the moneys arising from the sale of the lands therein described, to pay “ any lien or liens upon said premises so sold at the time of such sale for taxes or assessments.” The order for the payment of these taxes was made upon the petition of the referee and the tax return of the supervisor of the town of Mamaroneck, showing over $12,000 of taxes due the town, and after hearing counsel for the motion and for the town, and also counsel for the purchasers at the sale by the referee, and the result of such order was a payment of the taxes at an amount agreed upon between the purchasers and the town less than the amount actually due, and such payment was made out of the proceeds of the sale of the land. It is true the purchasers were permitted by that order to take assignments of the leases and certificates for the purpose, as alleged, of the protection of the title of such purchasers. When consummated the taxes were, nevertheless, paid out of these proceeds of sale, and although the purchasers under this order of the court were allowed to take assignments instead of formally paying the amount of taxes agreed upon, yet such action did not alter the essential nature of the payment, and the taxes and titles were thereby extinguished. The payment by Parker, instead of by the referee, was, so far as the record shows, without the knowledge or consent of the parties to this tripartite agreement, without their appearance in court, without service of any notice of the motion upon them and in violation of the rights of the holder of these mortgages if the contention of the defendants should now prevail. The plaintiffs’ testatrix had the right to insist that the directions of the judgment providing for the payment of the taxes by the referee out of the proceeds of the sale of the lands should be complied with, and that upon such payment the taxes should be extinguished and not kept alive as an earlier incumbrance on the property over her mortgages. -She was a prior incumbrancer on the Seminary lands to every one excepting as to liens for taxes, and Hr. Burns could not in violation of the judgment so use the moneys of the mortgagor arising from a sale of those lands as to acquire and set up a title paramount to the mortgages in question. This is not trying the validity of these tax titles, but we hold that by virtue of the purchase of the Seminary tract by Burns under this decree he became incapacitated from thereafter availing himself of the funds which arose out of such sale, and he could not, contrary to the direction to the referee contained in the judgment, pay those taxes himself out of such moneys and hold the tax titles and set them up against these mortgages in question as a paramount title to the lands covered by such mortgages. This applies to the position occupied by Hr. Burns in relation to the Seminary tract. In this light the cases of Williams v. Townsend (31 N. Y. 411) and Ten Eyck v. Craig (62 id. 406) are wholly inapplicable.

Fourth. As to the lands which are included in the conveyance by Hawley to Waters and by Waters subsequently reconveyed to Hawley, and then included in the mortgages by Hawley to the plaintiffs’ testatrix, the defendant Chas. W. Parker occupies a different position. These lands, excepting lots 70 and 71, which will be spoken of hereafter, were not included in the judgment for sale in the, tripartite agreement action, and when the defendant S. Webber Parker bought them or the leases at the tax sale he had no other title to the lands and was not in any position which would preclude him from their purchase, and if made with his own money he would have taken such title as the leases gave him unaffected by any of the circumstances above described. If S. Webber Parker had taken possession of this Waters land under his tax title, he might have set up such title and claimed it to be paramount to the title of the mortgagor Hawley and to override the title under the mortgage, and such claim by title paramount it would not have been proper in this foreclosure action to litigate under an objection to a trial as to its validity. (See Cromwell v. MacLean, 123 N. Y. 475.) Although the title was not really a valid one, because the taxes were in fact paid as already stated, yet the foreclosure action was not the proper one in which to test that validity. The rule as to the impropriety of trying the question as to the validity of a paramount title in such an action as this against the objection of a defendant has been reiterated in this court as lately as in the cases of Jacobie v. Mickle (144 N. Y. 237) and Nelson v. Brown (Id. 384). (See, also, Lewis v. Smith, 9 id. 502.)

Mr. S. Webber Parker did not, however, retain his title to these lands. He conveyed the same to his son, Charles Warren Parker, one of the appellants in this action, and such conveyance was made in terms “ subject to all liens and incumbrances now existing on the several pieces of property or any of them,” and at the time of the commencement of this action the same Charles Warren Parker was in possession of these premises conveyed to him by his father, subject, as stated, to existing incumbrances. The counsel for appellants admits that if plaintiffs’ mortgages were in fact at that date subsisting liens, then it might be that the clause in question would estop the appellants from disputing their' validity. He insists, however, that they were not existing liens because the tax leases had cut them off. If the taxes had been paid then the mortgages had not been cut off. The title of Mr. Parker was in that event not paramount. Upon these facts, and by reason of .that clause in the deed, it was proper to show the whole truth regarding the existence of the tax title, and if, upon the facts shown, such tax title did not exist and had on the contrary become extinguished, then the mortgages .were existing liens and Parker’s title was subject to them. An inquiry as to this question was rendered proper by reason of the clause in the deed to Parker from his father. The issue was whether the mortgages in suit were still liens, and they were if the taxes had been paid.

In this way we are brought back to the question as to the effect of the transactions resulting in the payment of the moneys to the town of Mamaroneck and the assumed assignment of the leases and certificates by that town to Mr. 0. W. Parker. We have seen that the effect of the transaction was the payment of those taxes with the moneys arising from the sale of the lands sold under the judgment in the action to enforce the specific performance of the tripartite agreement. Those moneys, in fact, paid the taxes on the Waters lands, although these lands were not included in the judgment, just as much as they paid them on the Seminary lands, and Mr. Parker had no more right to claim a payment by him of the taxes on the Waters lands than Mr. Burns had on the Seminary lands, for they were both paid with moneys of the mortgagor which did not belong to either of them.

It is argued, however, that there is no proof that the order which provided for the payment of the taxes as already mentioned was carried out and that all that appears is the order itself. The purchasers Burns and Parker made themselves parties to this order by appearing by counsel and substantially asking that it be made. Although made upon the petition of the referee, the whole order shows that it was a proceeding in their interest, for their accommodation and instituted by them. Subsequent to its entry the referee made his report of the sale under the judgment, and of his proceedings under that order, in which it was stated that he had paid the money provided for in the order, to Mr. Parker, one of the purchasers, and had taken his receipt for the same, and also a release of the referee of all responsibility and claims against such referee individually or otherwise by reason of the taxes or tax leases against the property, or in any order of record affecting the premises sold by such referee. The referee in his report also produced the voucher provided for in the order as evidence of the payment of the tax to the town by Parker. Ho exception or objection to that report was ever made or taken by either of these defendants, purchasers, and its statements were not contradicted on this trial, and it remains of record in the action. The defendants object that this referee’s report is no evidence whatever against them of the payment of the moneys spoken of in the order and report and that there is no other evidence in the case showing such payment. The case of Mills v. Odell (21 Weekl. Dig. 61) is cited in favor of the view that this report of the referee is-not competent evidence of the facts therein stated against these purchasers. The case does not bear out the contention of the counsel. It was there held that the report of the referee in partition was not evidence against a county treasurer who-had no connection with the action in any form other than to-receive the money or a mortgage directed by the decree to be given to him. He was a stranger to the whole proceeding,, knew nothing whatever about it and ought not to be bound by the statements contained in the referee’s report of his proceedings in such an action. The case here is different. These parties were purchasers at the sale; they made themselves particularly parties to the proceedings which resulted in the payment of these taxes, and we think that the report of the referee in such case is some evidence, not conclusive, but. enough in the absence of. all contradiction to show the payment of moneys even as against Mr. Burns and Mr. Parker..

" Fifth. The lots 70 and 71 (part of the lands conveyed to-Waters) were included in the sale under the judgment in the-tripartite agreement action and were purchased by Mr. S.. Webber Parker. They were never released from the lien of’ the $150,000 mortgage and were included in the tripartite-agreement, and in that respect they differ from the other lands, but in regard to these lotSj Mr. Parker having purchased them at the referee’s sale, occupies the same position in regard to them as the defendant Burns does in regard to the Seminary tract, and he was, therefore, incompetent tó make use of the money of the mortgagor for the purpose of pur chasing the tax title and of setting it up as a title paramount to the mortgage of the mortgagees in this action. As they were, however, never released from the lien of this $150,000 mortgage, these lots could not he sold excepting subject to that lien or its substitute, the tripartite agreement, and they were directed to be so sold in the judgment in this action. We see no error in that.

Sixth. It is claimed that there is some inconsistency among the conclusions of law found by the learned court below, and that some are inconsistent with the one which provides for the foreclosure and sale of the lands described in these two mortgages. We think, taking the whole facts and conclusions of law together, there is nothing to prevent the enforcement of the judgment of the Special Term, and that such judgment as affirmed by the General Term of the Supreme Court must be here and in all things affirmed, with costs.

All concur.

Judgment affirmed.