Effect of Persons in Possession of Real Estate Other Than The Owner/Vendor On A Buyer's Status As A Bona Fide Purchaser - NY State Court Cases

1 of 314 DOCUMENTS
Warning
As of: May 27, 2014
City of New York, Plaintiff, against Brooklyn LLC, VIVIAN FISHER a/k/a
VIVIAN FISCHER, PERGOL REALTY CORP., BERKSHIRE CREDIT LLC,
GIANNA EQUITIES, INC., MILLENNIUM ABSTRACT CORP., AND "JOHN and
JANE DOE,", SAID MOVING, DEFENDANTS, ET AL, Defendants.
13072/04
SUPREME COURT OF NEW YORK, KINGS COUNTY
26 Misc. 3d 1215(A); 907 N.Y.S.2d 99; 2009 N.Y. Misc. LEXIS 3592; 2009 NY Slip Op
52722(U)
December 18, 2009, Decided
NOTICE: THIS OPINION IS UNCORRECTED AND WILL NOT BE PUBLISHED IN THE PRINTED OFFICIAL
REPORTS.
PUBLISHED IN TABLE FORMAT IN THE NEW YORK SUPPLEMENT.
SUBSEQUENT HISTORY: [*1215A] [**99] Quieting Title--Determination of Claim to Real Property--Diligent
Title Search.
Reversed by, in part, Summary judgment denied by City of New York v. Brooklyn, LLC, 85 A.D.3d 707, 924 N.Y.S.2d
811, 2011 N.Y. App. Div. LEXIS 4904 (N.Y. App. Div. 2d Dep't, June 7, 2011)
PRIOR HISTORY: City of New York v. Brooklyn LLC, 41 A.D.3d 523, 838 N.Y.S.2d 604, 2007 N.Y. App. Div. LEXIS
7410 (N.Y. App. Div. 2d Dep't, 2007)
CORE TERMS: notice, block, recorded, purchaser, summary judgment, recording acts, mortgage, ownership, inquiry
notice, recording, diligent, searcher, indexing, tax liens, condemnation, lot numbers, diligent searches, transferred,
pendency, indexed, expired, constructive notice, free and clear, deed, conveyance, register, chain, condemnation
proceeding, record owner, failed to provide
COUNSEL: [***1] For Plaintiff: Michael A. Cardozo, Esq., Corporation Counsel of the City of New York, Arthur H.
Shaw, of Counsel.
Page 1
For Berkshire Credit LLC, Defendant: Borchert, Genovesi, LaSpina & Landicino, P.C.
For Millennium Abstract Corp., Brooklyn LLC, Defendants: Herrick, Feinstein LLP.
JUDGES: JUSTICE RICHARD VELASQUEZ, J.S.C.
OPINION BY: RICHARD VELASQUEZ
OPINION
Richard Velasquez, J.
This action was brought by the plaintiff City of New York ("City") to quiet title to the real property located at
331-369 Hinsdale Street, Brooklyn New York. It is also known as tax block 3784, lot 127 ("Premises"). The City has
alleged that it is the owner of the Premises by virtue of a condemnation order issued in 1996. Defendant Berkshire
Credit LLC is the holder of a mortgage dated July 25, 1988 and recorded on August 9, 1988, which defendant Berkshire
took by assignment from Vivian Fisher on February 26, 2004, the same time that defendant Brooklyn, LLC purchased
the Premises. This assignment of mortgage was recorded in Kings County on April 7, 2004. Defendant Berkshire Credit
LLC, whose members are the same as Brooklyn LLC, took the mortgage in Berkshire's name so as to prevent any
claims of merger.
On August 9, 2005, plaintiff City moved [***2] for summary judgment on its complaint and to quiet title.
Defendants Brooklyn LLC and Millennium Abstract Corp. cross-moved for an Order granting summary judgment and
dismissing the complaint. The Court granted defendants' motion and plaintiff appealed. The Appellate Division: Second
Department reversed this Court's decision on the granting of summary judgment finding that although defendants had
established their entitlement as a matter of law, plaintiff raised a triable issue of fact as to whether a diligent title
searcher should have discovered the plaintiff's interest in the subject property. City of New York v. Brooklyn LLC, 41
AD3d 523, 838 N.Y.S.2d 604 (2d Dept. 2007).
Defendants Brooklyn LLC and Millennium Abstract Corp. now move the Court for summary judgement, as the
Appellate Division found that defendants established a prima facie entitlement as a matter of law, if defendants' title
searches were "diligent" . Plaintiff has cross-moved for summary judgment alleging through experts that the searches
conducted by defendants, had they been diligent, would have revealed the plaintiff's interest in the property. Thus, the
sole issue before the Court herein is whether the title [***3] searches performed by defendants were diligent searches
that should have discovered the plaintiff's interest.
Discussion
What acts constitute a diligent search?
The general purpose of recording acts and recording is to give notice to the world that the title to
property has been transferred and by such notice to prevent the fraudulent sale of the same
property more than once to different purchasers. Accordingly, and in line with the general
principles concerning constructive notice, it is a well-settled rule that the recording of an
instrument affecting property is constructive notice to all subsequent purchasers, lienors, and
other interested parties of its existence and contents. NYJUR Records 108.
In New York counties using the "block and lot" indexing system, "a purchaser is charged with record notice of all
matters indexed under the block and lot numbers corresponding to the purchaser's property, regardless of whether such
information also appears in his or her direct chain of title. " Farrell v. Sitaras, 22 AD3d 518, 803 NYS2d 659 (2nd Dept.
2005) citing to Andy Assoc. V. Bankers Trust Co., 49 NY2d 13, 399 N.E.2d 1160, 424 N.Y.S.2d 139 (NY 1979). Kings
Page 2
26 Misc. 3d 1215(A), *1215A; 907 N.Y.S.2d 99, **99;
2009 N.Y. Misc. LEXIS 3592, ***1; 2009 NY Slip Op 52722(U)
County, New York employs a "block and lot" indexing system, [***4] thus a purchaser in Kings County is charged
with record notice of all matters indexed under such block and lot numbers. New York City's block and lot recording
system utilizes an index of documents recorded in the Office of the Register. Under the "block and lot" method of
indexing recorded conveyances, the title searcher is required to search and review the documents in the index of the
subject block and lot.
According to affidavits submitted by defendants to this action, "block and lot" searches of all matters indexed under
the block and lot numbers corresponding to the property at issue herein (Block 3784, Lot 127) were conducted on
behalf of defendant Brooklyn LLC beginning in August 2003. At that time, defendant Brooklyn LLC learned that the
City had issued a tax foreclosure notice against Pergol Realty Corp., recognized by the City as the then owner of the
Property. Defendant Brooklyn LLC contacted Pergol and negotiated a purchase price for the property. Defendant
contacted defendant Millennium Abstract Corp., to conduct a title search, which included a thorough review of all
documents recorded in the index of the Property on file with the City Register for Kings County and the [***5] Office
of the Kings County Clerk, and found the Property to be free and clear of any outside interests, including any interest of
any kind now claimed by the City. Defendant Brooklyn LLC then purchased the Property and promptly recorded the
deed.
In November 2003, defendant Brooklyn LLC learned that certain mortgages might be encumbering the Property,
and retained STG Associates to conduct a second title search of the Property and to provide a second abstract of the
title. The second search also found the Property to be free and clear of any outside interests, including any interest now
claimed by the City.
Subsequently, Brooklyn LLC was informed by the Kings County District Attorney's Office that it may have been
defrauded when it purchased the property, as the individual who had executed the deed to the Property on behalf of the
seller, was not an authorized agent of Pergol and had no power to convey title. Defendant Brooklyn LLC then identified
the true owners of Pergol and purchased the property. The defendant purchased title insurance on the Property through
Millennium and a third title search was performed. Again, it certified that Pergol could convey clear title to Brooklyn. A
[***6] second closing was held and a valid deed was delivered to Brooklyn from Pergol and thereafter, recorded. Two
weeks after closing, Millennium updated its title search and concluded again that the property was free and clear of any
outside interests.
In April 2004, the City made its first public claim to be the record owner of the Property, pursuant to a
condemnation order issued in 1996. After reviewing the City's claim, the title insurer (Fidelity) arranged for a fourth
independent title search of the Property to determine whether the City's claim that it had properly recorded evidence of
its alleged condemnation, had any merit. The fourth search, this time undertaken with the knowledge of the City's
claimed interest, yielded the same result as that reached by both Millennium and SGT. Fidelity found the Property to be
free and clear of any claimed interest by the City. Although Fidelity located a notice of pendency of the 1996
condemnation proceeding -- which had expired after three years in 1999 -- it was recorded and indexed against different
properties with different block and lot numbers, no notice of pendency was found to have been recorded against Lot
127.
In addition to the four [***7] searches, in January 2005, the City's Department of Health and Mental Hygiene
served defendant Brooklyn LLC with an Order finding defendant in violation of various health code provisions. The
Order stated that "City records show that [Brooklyn is] the owner or agent of: the Property", and imposed a fine against
defendant Brooklyn LLC. The City's Department of Finance, after the condemnation in 1996, continued treating Lot
127 as though it were privately owned by issuing tax liens against the property, and then selling said tax lien. The fact
that the City never recorded its interest in the Property is undisputed.
In its opposition to defendants claim that all four of its searches were diligent searches, plaintiff opposes
defendants' motion for summary judgment on two grounds: first, that Brooklyn LLC had actual knowledge of the City's
ownership interest in Lot 127, at the time Lot 127 was conveyed to it in 2004 by Pergol. Plaintiff alleges that the title
Page 3
26 Misc. 3d 1215(A), *1215A; 907 N.Y.S.2d 99, **99;
abstract prepared by Millennium in connection with Brooklyn LLC's title search "unequivocally states that the City is
the owner of Lot 127." Plaintiff, however, makes no reference to where this unequivocal statement is found in the
[***8] abstract, nor does it provide a photocopy of said statement and attach same to its papers. Neither of plaintiff's
experts made note of finding such an "unequivocal" statement of the plaintiff's ownership of said property in the
abstract prepared by Millennium. This Court undertook a search of the abstract for such a statement and was unable to
find any reference at all to plaintiff's ownership. Since the plaintiff has failed to provide any proof of said statement
being in the abstract prepared by Millennium, the Court will not consider this allegation in its determination.
Second, plaintiff City alleges that the defendants' expert affidavits are insufficient to controvert the expert affidavits
submitted on behalf of the City on the present motions and thus, fail to raise an issue of fact on the question of what
constituted a diligent title search. Unfortunately, plaintiff's experts had the benefit of knowing what they were looking
for when their searches were conducted. This fact certainly influenced the outcome of their searches and what steps they
took in attempting to track down the unrecorded Property interest claimed by the City.
Moreover, the "Expert Affidavit" of Christopher Beck [***9] states that pursuant to his search of the public record
he found the following: "After block 3784 lot 6 was subdivided in tax year 1999-2000 into lots 6, 106, 107, 108, 109,
110, 111, 112, 113, 114, 115, 116, 117 and 127, title to lot 6 and lots 106-117 was conveyed to Nehemiah Housing
Development Fund Company, Inc., by deed recorded in Reel 4018 Page 371. New lot 127 was not included in the
conveyance. Additionally, the old owner of lot 6 (prior to its subdivision) continued to be shown as the assessed owner
of new lot 127. That was consistent with the old owner's continued ownership of the newly subdivided lot". He also
found that "the assessed owner of block 3784 lot 127 was never changed f rom private ownership to the City of New
York or HPD. Indeed, taxes continued to be assessed on lot 127" indicating that the Property was still in private
ownership."
Caselaw demonstrates that factors and considerations that may constitute "inquiry notice". For purposes of
determining whether a purchaser is entitled to the protection of the recording act, a party will be deemed to have
inquiry notice when it had knowledge of facts that would lead a reasonably prudent purchaser to make inquiry.
[***10] Ward v. Ward, 52 AD3d 919, 859 NYS2d 774 (3rd Dept. 2008). In Washington Mut. Bank, FA v. Peak Health
Club, Inc., 48 AD3d 793, 853 NYS2d 112 (2nd Dept. 2008) the Court found that where a good-faith lender for value
records its mortgage first without actual or constructive knowledge of the prior mortgage, or of facts that would have
put there on "inquiry notice" of that mortgage, the good-faith lender was granted summary judgment.
Actual possession of a property by someone other than the seller imposes a duty of inquiry on the potential
purchaser. Further "the appraisal report is sufficient to put plaintiff on inquiry as to the existence of some right or
claim of title, and at such time the duty to inquire is imposed on plaintiff to decipher the extent, if any, of the adverse
claim" which may result from the person in actual possession. Mazza v. Realty Quest Brokerage Corp., 185 Misc 2d
162, 712 NYS2d 288 (N.Y.Civ. Ct. 2000). Also see, Fleming-Jackson v. Fleming, 41 AD3d 175, 838 NYS2d 506 (1st
Dept. 2007).
Defendants Unrebutted Contentions
The City does not claim that it had recorded a notice against the Property giving notice to the world in 2004;
The City does not claim that Millennium [***11] missed a notice that he City had recorded that would have
indicated that the City owned the Property;
The City does not claim that Millennium ignored a valid lis pendens referring to the City's condemnation
proceeding;
The City does not claim that its own internal divisions did not believe that Brooklyn was the record owner of the
Property when it sought to hold Brooklyn responsible for certain property violations; and
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26 Misc. 3d 1215(A), *1215A; 907 N.Y.S.2d 99, **99;
The City does not claim that it itself did not recognize that it was the record owner of the Property when it
filed and then sold a tax lien against the Property. Reply Memorandum of Law in Further Support of Defendants
Brooklyn LLC and Millennium Abstract Corp's Motion for Summary Judgment.
Plaintiff's Experts
In this Court's opinion, the search performed by the plaintiff's expert James Marcaldo was far more than diligent --
it was extraordinary. The purpose of the recording acts and recording is to give notice to the world that the property has
been transferred. The Block and Lot method of indexing has been found to be and is well settled that such an indexing
system enables the title searcher readily to find all conveyances within a given time frame which affect a particular
[***12] parcel of land. Under this system, "there is no need for the title searcher to resort to the more tedious and
cumbersome method of tracing a chain of title through successive grantors and assignors and, consequently, there is
little or no danger that a particular outstanding interest will be overlooked because it was recorded outside of the direct
chain of title.'"Andy Assoc. V. Bankers Trust Co., supra at 13.
Andy Assoc. goes on the say that there is a well-established policy in favor of applying the recording act in such a
way as to effect its underlying purpose. It's underlying purpose as previously noted is "to give notice to the world that
the title to Property has been transferred and by such notice to prevent the fraudulent sale of the same property more
than once to different purchasers."
The Court finds the expert affidavit prepared by Malcolm Engoron (an employee of plaintiff) on behalf of the
plaintiff to be conclusory and speculative, as it uses such phrases as "as a rule of thumb" when discussing the standards
by which a title search is conducted. Mr. Engoron is a Principal Title Examiner in the Title Bureau of the Tax and
Bankruptcy Litigation Division of the New York [***13] City Law Department. In Mr. Engoron's deposition after the
Appellate Division's ruling in this matter, he admitted that the City failed to follow proper procedure and did not file
any document in the record index of the Property that would give notice "to the world" of the City's alleged interest. He
made other admissions as well. Mr. Engoron admitted that there is no industry standard in performing a title search and
that "there's a wide variance on how people would orient their searching." He acknowledged that in 2003, a title search
would have revealed only a tax lien certificate by the City, and admitted that such a revelation is unusual where the City
is claiming ownership of real property. He further acknowledged that when the City acquires property through a
condemnation proceeding, it typically files either a Condemnation Order or a final decree in the index of register, but
that here, the City failed to do either until 2007, some three and one-half years after Brooklyn LLC purchased the
Property. Finally, Mr. Engoran admitted that the only way he was able to locate the City's alleged interest was to search
the County Clerk's files relating to a lis pendens that had expired [***14] in 1999 -- four years before Brooklyn LLC
purchased the property.
Conclusion
The Court finds as follows:
First the purpose and intent of the recording acts are: "to give notice to the world that the title to Property has been
transferred and by such notice to prevent the fraudulent sale of the same Property more than once to different
purchasers. Accordingly. . . it is a well-settled rule that the recording of an instrument affecting property is constructive
notice to all subsequent purchasers, lienors, and other interested parties of its existence and contents." Based upon the
undisputed facts of this case and the recording act's purpose, the Court finds that plaintiff City of New York did not
record its interest in tax block 3784, lot 127, and therefore failed to provide constructive notice to the world of its
interest.
Second, plaintiff also failed to provide any actual notice, despite their unsubstantiated allegation regarding the
alleged language in an abstract, and in fact, acted in a manner contrary to its having any interest in the property, by
placing tax liens on the property which its own Finance Department had recorded as being owned by Pergol Realty
Page 5
26 Misc. 3d 1215(A), *1215A; 907 N.Y.S.2d 99, **99;
Corp.
Third, the Court also [***15] finds that defendants conducted what appears to be the standard search recognized
by the Second Department in Andy Assoc. -- that is, a thorough review of the block and lot index for the Property and
all associated documents. Nothing in those searches would have given rise to inquiry notice particularly since the
plaintiff City, itself, recognized lot 127 as being privately owned and therefore taxable. Although there was a Notice of
Pendency filed against the Property in 1996, it expired by its own terms three years later, and nothing was recorded
thereafter by plaintiff. An expired Notice of Pendency provides no notice at all. See, CPLR 6513, and Da Silva v.
Musso, 76 N.Y.2d 436, 559 N.E.2d 1268, 560 N.Y.S.2d 109 (NY 1990). Defendants, herein, were only chargeable with
knowledge to make a diligent search "if reasonable facts excite suspicion and one fails to make some investigation".
Fischer v. Sadov Realty Corporation, 34 AD3d 630, 824 NYS2d 434 (2nd Dept. 2006). In the instant matter, the Court
finds no facts which would have reasonably excited suspicion.
Fourth, the Court finds that both of plaintiff City's experts were well informed as to what interest the City hoped to
find, and therefore conducted [***16] searches outside of what the Block and Lot recording act contemplated as
reasonable, and where no credible facts constituting reasonable inquiry notice were to be found.
Accordingly, the defendants' motion for summary judgment pursuant to CPLR 3212 is hereby granted dismissing
this action on the ground that Brooklyn LLC is a bona fide purchaser with respect to its interest in the Property, and
that reasonable searches were conducted by defendants' title searchers, which did not and could not have uncovered
plaintiff's unrecorded interest in lot 127. Plaintiff's claims against defendants are hereby dismissed in their entirety.
Date: December 18, 2009
JUSTICE RICHARD VELASQUEZ, J.S.C.
Page 6
26 Misc. 3d 1215(A), *1215A; 907 N.Y.S.2d 99, **99;
2 of 314 DOCUMENTS
Analysis
As of: May 27, 2014
Mary Harris against Sylvia Thompson, et al.
296152008
SUPREME COURT OF NEW YORK, QUEENS COUNTY
51919(U)
September 10, 2009, Decided
REPORTS.
CORE TERMS: mortgage, deed, mortgage loan, causes of action, leave to intervene, foreclosure action, collateral
estoppel, foreclosure, subject property, encumbrancer, bona fide, counterclaims, fraudulent, assignor, refinance,
ownership, doctrines of res judicata, foreclosure sale, fee simple, preliminary injunction, market value, refinancing,
purchaser, quiet, fraudulent misrepresentations, judgment of foreclosure, subject premises, amounts greater, fail to state,
fraudulently
HEADNOTES
[*1248A] [**59] Mortgages--Foreclosure--Collateral Estoppel.
JUDGES: [***1] Frederick D.R. Sampson, J.
OPINION BY: Frederick D.R. Sampson
OPINION
Frederick D.R. Sampson, J.
Plaintiff alleges that she is a disabled senior citizen who is the true owner in fee simple of the premises known as
Page 7
119-26 177th Place, Jamaica, New York, having continuously resided there since 1970 when she purchased the property
with her late first husband. She claims to have lost record title to, and equity in, the property by virtue of a fraudulent
scheme perpetrated by defendants Sylvia Thompson, Sylvia Banks, Jason Leslie and Robin Gray. Plaintiff Harris claims
that during a period in 2005, when she was experiencing financial difficulties, defendant Banks, a mortgage broker,
contacted her, after learning through Harris's daughter that Harris desired to refinance her mortgages.
Plaintiff Harris claims that defendant Banks told her that her credit was insufficient to obtain a good interest rate in
her own name, but a third party with good credit was willing to help her, and would cosign the mortgage loan.
Defendant Banks allegedly represented that Harris would pay the mortgage for one year, during which time Harris
could improve her credit score, and then remove the cosigner's name from the mortgage. Plaintiff [***2] Harris alleges
that defendant Banks took steps to gain her trust, with the objective of inducing her to "refinance" her mortgages.
Plaintiff also claims she grew to view defendant Banks as a friend who wanted to help her, and, therefore, she went to
Banks's office, believing Banks's representation that she needed to sign documents to effectuate a refinancing of her
mortgage loans. Plaintiff Harris alleges that at that time, she may have unwittingly executed a contract of sale, selling
the subject property to defendant Leslie.
Plaintiff Harris claims that she thereafter attended a closing, which she believed was a refinancing transaction,
where she unwittingly executed a deed conveying title to the subject property to defendant Leslie. Defendant Leslie
encumbered the subject property by obtaining two mortgage loans in the principal amounts of $ 252,800.00 and $
47,250.00 dated October 31, 2005, from Ohio Savings Bank (OSB), the assignor of defendant AmTrust. Plaintiff Harris
allegedly did not intend to transfer ownership of her property, and after signing all the documents at the closing, first
learned from defendant Banks, that Leslie's name "would be added" to the deed, and "would [***3] be removed from
the mortgage documents and [the] deed once [her] credit improved." Plaintiff Harris alleges that she was not provided
with a copy of any of the documents she signed, and, thus, was unaware defendant Leslie had received title in fee
simple to the property and her name had been removed from the deed into Leslie.
At the closing, plaintiff Harris was allegedly introduced to defendant Gray, a lawyer who was listed on the closing
documents as the attorney purportedly representing Harris in connection with the transaction. Defendant Gray allegedly
instructed Harris to sign a document denominated "LETTER OF UNDERSTANDING AND AGREEMENT
BETWEEN MARY COLE HARRIS AND JASON LESLIE" (Letter Agreement) which, among other things, required
that plaintiff Harris deposit a sum of money equal to "12 months of mortgage payments for the sole purpose of having
the mortgage paid on the [subject] property...." Plaintiff Harris alleges that defendant Gray represented that the Letter
Agreement would protect Harris's interests.
1
Plaintiff Harris alleges she signed the Letter Agreement, because the
Letter Agreement recited that she was the "current owner," and appeared to promise that defendant Leslie [***4] would
have no access rights to the property, and would transfer "full ownership to [her] at any time within 12 months when
SHE [was] able to refinance." Plaintiff Harris claims she received two checks totaling approximately $ 78,000.00,
which she endorsed over defendant Banks to cover 12 months of mortgage payments, and an additional $ 5,000.00,
which Harris used for home improvements. Plaintiff Harris alleges that although she knew defendant Leslie would
receive some money, she was unaware defendant Banks received approximately $ 52,000.00 as a result of the
transaction.
1 The submissions do not indicate whether the Letter Agreement was ever submitted for recording against the
property by defendant Gray.
Plaintiff Harris alleges that following the closing, she continued to function as the property's owner, paying debts to
improve her credit score, and in March 2006 signed more documents at the behest of defendant Banks, believing the
papers would serve to transfer full ownership of the property back to her. Plaintiff Harris claims that notwithstanding
defendants Banks's and Leslie's promises that Leslie would reconvey his title once she (Harris) was "able to refinance,"
she learned in [***5] November 2006 that defendant Leslie had conveyed title to the premises by deed dated October
30, 2006 to defendant Thompson, the aunt of defendant Banks. Plaintiff Harris additionally discovered that defendant
Thompson had financed the acquisition of the property by a loan from OSB, in the principal amount of $ 375,000.00,
Page 8
24 Misc. 3d 1248(A), *1248A; 899 N.Y.S.2d 59, **59;
secured by a mortgage dated October 30, 2006 and recorded on December 18, 2006. Plaintiff Harris allegedly
expressed her concerns to defendant Banks, who assured her that the mortgage would be "paid off for another year" and
that she had no reason to worry. Plaintiff Harris allegedly continued to rely upon such assurances until she received a
letter addressed to her deceased first husband stating that a judgment of foreclosure and sale had been obtained against
the property. At that juncture, plaintiff Harris sought legal assistance.
On the morning of the scheduled foreclosure sale, Harris moved, by order to show cause, for, among other things,
leave to intervene in a foreclosure action entitled AmTrust Bank v Thompson (Sup Ct, Queens County, Index No.
21253/2007) and serve an answer with counterclaims and cross claims, claiming that she resided in the property and
[***6] was its true owner.
2
By order dated October 16, 2008, the court denied the motion, without prejudice to any
claim Harris might seek to pursue by means of a separate action as against Thompson, Banks, Leslie or Gray. The
AmTrust court noted that because Harris was not a named defendant in the foreclosure action, her interest as an alleged
occupant of the premises remained unaffected by the judgment of foreclosure and sale.
2 Defendant AmTrust had commenced the AmTrust action, seeking to foreclose the mortgage given by
Thompson on the subject property, due to Thompson's default in payment thereunder. In that action, AmTrust
obtained a judgment of foreclosure and sale dated January 7, 2008.
Plaintiff Harris commenced this action by filing a copy of the summons and complaint on December 11, 2008,
seeking a judgment declaring she is the sole owner in fee simple of the premises, and the Leslie and Thompson deeds
and the OSB mortgages are null, void and unenforceable, and awarding damages. In essence, she claims that defendants
Banks, Leslie, Gray and Thompson acted to fraudulently procure the deed to the property by misrepresenting she was
refinancing her mortgages with respect to the property [***7] when, in fact, she was unknowingly transferring the
entire property to defendant Leslie. Plaintiff Harris asserts causes of action against defendant AmTrust based upon
negligence, fraud and pursuant to RPAPL article 15.
Plaintiff Harris obtained the instant order to show cause seeking a preliminary injunction to prevent the property
from being sold at foreclosure (or otherwise), and her eviction from the premises. The order to show cause included a
stay of the foreclosure sale of the property.
Defendant Thompson, an 84-year-old Brooklyn resident, appears in support of plaintiff Harris's motion, asserting
that she (Thompson) was fraudulently induced by defendants Banks and Grays to sign documents effectuating the
mortgage loan to her from OSB. According to defendant Thompson, defendant Banks approached her and asked
Thompson to "help" an elderly woman, who was about to lose her home to foreclosure. Defendant Thompson states
defendant Banks misrepresented that Thompson's name would be added "temporarily" to the deed for the property, and
that moneys would be held to pay a mortgage thereon for one year, thus protecting against any default during the period
Thompson's name was on the deed. [***8] Defendant Banks allegedly also misrepresented that at the end of one year,
all documents signed by Thompson would be cancelled. Defendant Thompson also states that because she trusted her
niece and desired to help a senior citizen in financial trouble, she agreed to sign the mortgage documents,
notwithstanding she has never met the "elderly lady." Defendant Thompson also states that she does not believe she
received any proceeds from the transaction, or recall endorsing any checks in connection with it.
Defendant AmTrust opposes the motion of plaintiff Harris, and in lieu of serving an answer, cross-moves to dismiss
the complaint pursuant to CPLR 3211(a)(5) and (7), asserting that plaintiff is barred by the doctrines of res judicata and
collateral estoppel from pursuing this action, and that the claims asserted against it fail to state a cause of action.
With respect to the cross motion to dismiss the complaint based upon the doctrines of res judicata and collateral
estoppel, defendant AmTrust asserts that Harris made the same allegations, regarding the fraudulent scheme to deprive
her of her ownership interest in the property, in the AmTrust action when she sought to intervene therein [***9] and
serve a proposed answer with counterclaims against it. Defendant AmTrust argues that the court in the AmTrust action
determined Harris' proposed counterclaims against it were devoid of merit, and because Harris failed to appeal timely
Page 9
24 Misc. 3d 1248(A), *1248A; 899 N.Y.S.2d 59, **59;
the order dated October 16, 2008, denying her motion for leave to intervene, she is bound by such determination.
Plaintiff Harris counters that because her motion for leave to intervene in the AmTrust action was denied, she was
neither a party to, nor in privity with any party to the Amtrust action, and cannot be bound by the doctrines of res
judicata and collateral estoppel with respect to the determination of issues therein, citing Pouncy v Dudley (27 AD3d
633, 814 N.Y.S.2d 641 [2006]).
In Pouncy, the plaintiff sued for a judgment pursuant to RPAPL article 15, declaring a deed to certain real property
was void and that he was the owner in fee simple of the property. The defendant cross-moved pursuant to CPLR
3211(a)(5) and (7) to dismiss the complaint asserted against it arguing the plaintiff was collaterally estopped from
pursuing the quiet title action based upon the foreclosure judgment obtained in another action. By order of the Supreme
Court, the cross motion [***10] was denied, and the Appellate Division, Second Department, affirmed the order, with
costs (27 AD3d 633, 814 N.Y.S.2d 641 [2006]). The Appellate Division held that since the plaintiff had not been a party
to, or in privity with a party in the prior foreclosure case, he could not be bound by the doctrine of collateral estoppel
with respect to the issues in the quiet title action. The Appellate Division noted that although the plaintiff had moved for
leave to intervene in the foreclosure action,
3
the defendant had opposed the motion on the ground, among others, that
the plaintiff's remedy was not intervention in the foreclosure action, but rather was to bring an action to quiet title. The
Appellate Division also noted that the order denying the motion for leave to intervene had been affirmed (see Bankers
Trust Co. of Cal., N.A. v Dudley, 13 AD3d 567, 788 N.Y.S.2d 398 [2004]) on the ground the motion for leave to
intervene had been made too late in the litigation. The Appellate Division further noted that had the defendant expected
to impose preclusion consequences on the plaintiff, it should have consented to, or at least refrained from, opposing the
application for intervention.
3 The proposed intervenor in the foreclosure [***11] action had sought to interpose an answer with
counterclaims including claims pursuant to RPAPL article 15 and negligence.
The facts and circumstances presented herein fit squarely within the holding in Pouncy. In AmTrust, Amtrust
opposed Harris' motion for leave to intervene and the court denied the motion on the ground that Harris failed to make a
sufficient showing of a real and substantial interest in the outcome of the foreclosure action. Thus, the branch of the
cross motion by defendant AmTrust pursuant to CPLR 3211(a)(5) to dismiss the complaint asserted against it based
upon the doctrines of collateral estoppel and res judicata is denied.
With respect to that branch of the cross motion by defendant AmTrust pursuant to CPLR 3211(a)(7) to dismiss the
complaint asserted against it based upon failure to state a cause of action, on a CPLR 3211 motion to dismiss, the court
will accept the facts as alleged in the complaint as true, accord the plaintiff the benefit of every possible favorable
inference, and determine only whether the facts as alleged fit within any cognizable legal theory (see Leon v Martinez,
84 NY2d 83, 87-88, 638 N.E.2d 511, 614 N.Y.S.2d 972 [1994]).
Plaintiff Harris alleges in her complaint that defendant [***12] AmTrust's assignor negligently originated loans to
defendant Leslie and Thompson in an amount "equal to or exceeding the estimated value of the subject property
securing the underlying loans." Assuming such allegation can be read to constitute an allegation that OSB negligently
made the mortgage loans without regard to the fair market or appraised value of the property, such allegation fails to
support a cause of action against defendant AmTrust. Although a prudent lender normally investigates, prior to the
origination of a mortgage loan, whether the fair market value of a property is sufficient to protect its interest in the event
of foreclosure and avoid a deficiency, it owes no duty to do so to the prospective borrower or a third party in the
absence a contractual duty requiring such investigation or a fiduciary relationship with the borrower or third party.
Plaintiff Harris has failed to allege any contractual or fiduciary relationship between her and OSB. The complaint,
therefore, fails to state a claim against defendant AmTrust based upon OSB's negligence in underwriting the mortgage
loans in amounts greater than or equal to the fair market value of the property.
Defendant AmTrust [***13] argues that plaintiff Harris also has failed to state a cause of action against it based
Page 10
24 Misc. 3d 1248(A), *1248A; 899 N.Y.S.2d 59, **59;
upon fraud, because Harris fails to allege that OSB engaged in any fraudulent conduct or made any fraudulent
misrepresentations to her, and because plaintiff Harris was obligated to read the various documents, including the
contract of sale and the deed into Leslie, before signing them.
Plaintiff Harris makes no claim that OSB, defendant AmTrust's assignor, itself made any fraudulent
misrepresentations to induce her to sign the Leslie deed or was itself involved in any trickery or deception to cause her
to sign it, or made any fraudulent misrepresentations to cause her to refrain from acting to set aside any transfer of her
interest in the property to Leslie. Under such circumstances, plaintiff Harris has failed to state a cause of action against
defendant AmTrust based upon fraud.
With respect to the claim pursuant to RPAPL article 15, defendant AmTrust claims that its assignor was a bona
fide encumbrancer, and, thus, it is protected in its interest as holder of the Thompson mortgage. Plaintiff Harris argues
that OSB was not a bona fide encumbrancer, insofar as she was in open and continuous possession [***14] and
occupancy of the subject premises, and OSB made the mortgage loans to Leslie and Thompson without inquiring as to
Harris' presence there. Plaintiff Harris alleges that an inquiry as to her status at the time of the making of the mortgage
loans to defendants Leslie and Thompson, would have alerted OSB as to the alleged fraud being perpetrated upon her
by defendants Banks, Leslie, Gray and Thompson.
" A bona fide purchaser or encumbrancer for value is protected in its title unless it had previous notice of the
fraudulent intent of its immediate grantor' (Fleming-Jackson v Fleming, 41 AD3d 175, 176, 838 N.Y.S.2d 506 [2007];
see Real Property Law 266; Fischer v Sadov Realty Corp., 34 AD3d 630, 631, 824 N.Y.S.2d 434 [2006]; Karan v
Hoskins, 22 AD3d 638, 638, 803 N.Y.S.2d 666 [2005])" (Mathurin v Lost & Found Recovery, LLC, 65 AD3d 617, 884
N.Y.S.2d 462, 2009 WL 2516872, 2009 NY App Div LEXIS 6077). "Actual possession of real estate is sufficient notice
to a person proposing to take a mortgage on the property, and to all the world, of the existence of any right which the
person in possession is able to establish" (Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109 [1890]; see Leeds v State
of New York, 20 NY2d 701, 703, 229 N.E.2d 446, 282 N.Y.S.2d 767 [1967]; see also Greenpoint Sav. Bank v McMann
Enterprises, Inc., 214 AD2d 647, 625 N.Y.S.2d 273 [1995]). [***15] Under such circumstance, the purchaser or
encumbrancer is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have
been guilty of a degree of negligence equally fatal to its claim to be considered as a bona fide purchaser or
encumbrancer (see Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109 [1890], supra; Vitale v Pinto, 118 AD2d 774,
500 N.Y.S.2d 283 [1986]).
When taken together, the allegations of plaintiff Harris in her complaint and in her affidavit are sufficient to state a
cause of action against defendant AmTrust pursuant to RPAPL article 15 (see Mathurin v Lost & Found Recovery, LLC,
65 AD3d 617, 884 N.Y.S.2d 462, 2009 WL 2516872, 2009 NY App Div LEXIS 6077, supra; LaSalle Bank Natl. Assn. v
Ally, 39 AD3d 597, 599-600, 835 N.Y.S.2d 264 [2007]; see also Fischer v Sadov Realty Corp., 34 AD3d 630, 631, 824
N.Y.S.2d 434 [2006], supra; cf. Merritt v Merritt, 47 AD3d 689, 689, 849 N.Y.S.2d 888 [2008]; Fleming-Jackson v
Fleming, 41 AD3d 175, 176, 838 N.Y.S.2d 506 [2007], supra; Deutsche Bank Natl. Trust Co. v Fitzworme, 22 Misc 3d
1134[A], 881 N.Y.S.2d 362, 2009 NY Slip Op 50426[U]).
That branch of the cross motion by defendant AmTrust pursuant to CPLR 3211(a)(7) to dismiss the complaint
asserted against it is granted only to the extent of dismissing those portions of the complaint based upon OSB's
negligence [***16] in underwriting the mortgage loans in amounts greater than or equal to the fair market value of the
property and fraud.
With respect to the motion by plaintiff Harris, the court may grant a preliminary injunction in its discretion where
the plaintiff shows: (1) probability of success on the merits; (2) danger of irreparable injury in the absence of an
injunction; and (3) balance of the equities in its favor (see CPLR 6301; W.T. Grant Co. v Srogi, 52 NY2d 496, 517, 420
N.E.2d 953, 438 N.Y.S.2d 761 [1981]; Ying Fung Moy v Hohi Umeki, 10 AD3d 604, 781 N.Y.S.2d 684 [2004];
Hightower v Reid, 5 AD3d 440, 772 N.Y.S.2d 575 [2004]). In the absence of injunctive relief prohibiting defendant
AmTrust from taking any steps to continue to prosecute the AmTrust action, encumber, rent, sell or transfer any interest
Page 11
24 Misc. 3d 1248(A), *1248A; 899 N.Y.S.2d 59, **59;
in the property, or evict Harris, a later judgment herein, in Harris' favor, may be rendered ineffectual (see Hightower v
Reid, 5 AD3d 440, 772 N.Y.S.2d 575 [2004], supra). The equities lie in favor of preserving the status quo (see Ying
Fung Moy v Hohi Umeki, 10 AD3d 604, 781 N.Y.S.2d 684 [2004], supra).
Accordingly, a preliminary injunction is granted to the extent that defendant AmTrust is enjoined from taking any
steps to prosecute the AmTrust action, including scheduling a foreclosure sale, [***17] selling, transferring, conveying
or encumbering title or seeking the eviction or removal of plaintiff Harris from the subject premises. The foregoing is
conditioned upon plaintiff Harris paying the continued carrying charges, including hazard insurance premiums, and
filing an undertaking in accordance with CPLR 6312. The parties are directed to appear before this court in Part 31, on
September 24, 2009 at 10:00 A.M. for a hearing to determine the undertaking at 25-10 Court Square, Long Island City,
NY.
Dated: September 10, 2009
J.S.C.
Page 12
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16 of 314 DOCUMENTS
Caution
As of: May 27, 2014
John W. Gibson, Respondent, v. George A. Thomas et al., Defendants, and The
Ulster and Delaware Railroad Company et al., Appellants
[NO NUMBER IN ORIGINAL]
Court of Appeals of New York
180 N.Y. 483; 73 N.E. 484; 1905 N.Y. LEXIS 1104
January 12, 1905, Argued
February 21, 1905, Decided
PRIOR HISTORY: [***1] Appeal from a judgment of the Appellate Division of the Supreme Court in the first
judicial department, entered August 7, 1903, affirming a judgment in favor of plaintiff entered upon a decision of the
court on trial at Special Term.
Gibson v. Thomas, 85 App. Div. 243, affirmed.
DISPOSITION: Judgment affirmed.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant railroad sought review of a decision by the Appellate Division of the
Supreme Court (New York), which affirmed a judgment in favor of plaintiff mortgage holder allowing the mortgage
holder to foreclose on certain land in the possession of the railroad.
OVERVIEW: The mortgage holder held a mortgage to certain property that the railroad possessed. The railroad had
been deeded its portion of the property by the original mortgagors. The release to the railroad was never actually
recorded, but remained in the clerk's office for record from the date last named to the commencement of the action. The
mortgage holder sought to foreclose on the entire property including the portion in the possession of the railroad. The
lower courts found in favor of the mortgage holder. Upon appeal, the court affirmed, holding that the mortgage was of
record and not discharged. The court found that the railroad took possession subject to the mortgage and that the
railroad failed to record its lease from the mortgage lien. The court found therefore that the mortgage holder had no
knowledge, actual or constructive, of the release.
Page 13
OUTCOME: The court affirmed the judgment in favor of the mortgage holder.
CORE TERMS: mortgage, railroad, recorded, deed, farm, notice, Recording Act, conveyance, mortgagor, occupancy,
strip of land, conveyed, mortgaged premises, purchaser, mortgagee, constructive notice, occupation, assignee, free and
clear, chargeable, notorious, assignor, acquire, acres, reasonable man, visible possession, proposing, clerk's, clerk's
office, piece of land
LexisNexis(R) Headnotes
Real Property Law > Financing > Mortgages & Other Security Instruments > Transfers > General Overview
[HN1] Mortgages and assignments of mortgages are conveyances within the intendment of the Recording Act, 1R.S.
756, 1, 36, 37, 38, 41.
HEADNOTES
Mortgage -- Recording Act -- When Assignee for Value May Enforce Mortgage Against Purchaser of Part of
Mortgaged Property Having Unrecorded Release Thereof. Where the owner of a farm, some years after the execution
of a mortgage thereon, conveyed a strip of land through the farm to a railroad company, which had the deed recorded,
entered into possession of the land and ever since has maintained and operated a railroad thereon, and, about the same
time, the owner of the mortgage, holding it by mesne assignments from the mortgagee, all of which had been recorded,
executed to the mortgagor a release of the land conveyed to the railroad company, which was delivered to the company,
but not recorded by it, a subsequent purchaser of the mortgage for full value, holding it under a recorded assignment,
and who, at the time of the purchase of the mortgage, had no knowledge [***2] of the existence of the release, had not
seen the farm and did not know that the railroad ran through it, is protected under the Recording Act in his lien upon the
entire premises, unaffected by the release.
SYLLABUS
The plaintiff, as the assignee of a mortgage, affecting a certain farm property through which the road of the Ulster
& Delaware Railroad Company runs, sought, by this action in foreclosure, to compel the payment of the principal sum
due under the mortgage. The defense was made, in the railroad company's answer, that the land occupied by its railroad
was not subject to the mortgage lien; but had been released therefrom. Thomas, the owner and the mortgagor, some
years after the execution of the mortgage in question, conveyed to the Delaware & Otsego R. R. Co., now a part of the
Ulster & Delaware R. R. Co., a strip of land through his farm. It entered into possession, with all usual evidences of
railroad occupation, and has, since that time, operated its railroad upon the land. Mrs. Rogers, the then holder of the
mortgage by mesne assignments from the mortgagee, for a nominal consideration, executed a release of the land to the
mortgagor; which was delivered to the company. [***3] The deed and the release were left at the county clerk's office
with certain instructions; but by whom it does not appear. These instructions were testified by the clerk to be as
follows: "I herewith hand you deed from George A. Thomas for right of way; also release from Helen B. Rogers from
the F. R. Gilbert mortgage. I presume the assignment from Gilbert to Newell has not been recorded, nor the will of
Newell, the father of Mrs. Rogers. I have written Thomas all about the matter and he is to cause to be recorded all
necessary papers to invest Helen B. Rogers the owner of the mortgage and then you may record this release." Several
years later, Mrs. Rogers assigned to this plaintiff the mortgage, in consideration of the payment by him of the whole
amount unpaid thereon at the time. This assignment was duly recorded, as all the previous ones had been; but the
release of the railroad lands had not actually been recorded up to the commencement of the action. The plaintiff resided
at a distance from the mortgaged premises and his testimony is not disputed that, at the time of purchasing the
mortgage, he had not seen the farm and did not know that the railroad ran through it; [***4] nor of any release of the
land. The plaintiff had judgment in the trial court; which has been affirmed by the Appellate Division, in the third
Page 14
180 N.Y. 483, *; 73 N.E. 484, **;
1905 N.Y. LEXIS 1104, ***1
department.
COUNSEL: Lewis E. Carr and F. M. Andrus for appellants. The plaintiff, as the assignee of the mortgage Helen B.
Rogers owned in 1887, acquired no greater or broader right to the enforcement of the mortgage than his assignor had at
the time she assigned the mortgage to him. ( Bush v. Lathrop, 22 N. Y. 535; Schaffer v. Reilly, 50 N. Y. 61; Greene v.
Warnick, 64 N. Y. 220; Trustees of Union College v. Wheeler, 61 N. Y. 88; Owen v. Evans, 134 N. Y. 514.) The
plaintiff's right to enforce his mortgage against the land conveyed by Thomas to the railroad company, and released
from the mortgage by its then owner, cannot be sustained under the Recording Act. ( Rayner v. Wilson, 6 Hill, 469;
Green v. Warnick, 64 N. Y. 220; Campbell v. Vedder, 1 Abb. Ct. App. Dec. 295; Gillig v. Moss, 28 N. Y. 191; N. Y. L.
Ins. Co. v. Smith, 2 Barb. Ch. 82.) The release was in fact recorded within the meaning of the Recording Act, and so
was not an instrument falling within [***5] the condemnation of the statute relating to unrecorded conveyances. ( M.
L. Ins. Co. v. Dake, 87 N. Y. 257; Bedford v. Tupper, 30 Hun, 174; Reid v. Town of Long Lake, 44 Misc. Rep. 370; M.
Co. v. Lambier, 108 N. Y. 578.) If, however, the release was not recorded the plaintiff had such constructive notice of
the rights of the railroad company as forbids the upholding of his claim against the land released from the mortgage. (
Frear v. Sweet, 118 N. Y. 462; Phelan v. Brady, 119 N. Y. 587; Trustees of Union College v. Wheeler, 51 N. Y. 88;
Cavalli v. Allen, 57 N. Y. 508; Baker v. Thomas, 61 Hun, 17; Briggs v. Thompson, 86 Hun, 607; Merritt v. N. R. R. Co.,
12 Barb. 605; Page v. Waring, 76 N. Y. 463; Van Epps v. Clark, 25 N. Y. S. R. 896; Anderson v. Blood, 152 N. Y. 285.)
Marion M. Palmer for respondent. An assignee of a mortgage becomes a purchaser under the Recording Act. An
assignment of a mortgage, the satisfaction of a mortgage, and a release of a part of the mortgaged premises are
conveyances within the provisions of the Recording Act. (1 R. S. 756, 1; L. 1896, [***6] ch. 547, 241; Briggs v.
Thompson, 86 Hun, 607; St. John v. Spalding, 1 T. & C. 483; Belden v. Meeker, 47 N. Y. 307; Baker v. Thomas, 61 Hun,
17; Bacon v. Van Schoonhoven, 87 N. Y. 446; Decker v. Boice, 83 N. Y. 215; Brewster v. Carnes, 103 N. Y. 562; Van
Keuren v. Corkins, 66 N. Y. 77; Westbrook v. Gleason, 79 N. Y. 23; Frear v. Sweet, 118 N. Y. 463; Larned v. Donovan,
84 Hun, 533; M. L. Ins. Co. v. Wilcox, 55 How. Pr. 43; Smyth v. K. L. Ins. Co., 84 N. Y. 589.) An assignee in good faith
and for value of a mortgage, by recording his assignment, may gain priority over a prior unrecorded mortgage and also
gain rights, although such priority and rights could not be claimed by his assignor. ( Briggs v. Thompson, 86 Hun, 607;
Baker v. Thomas, 61 Hun, 17; St. John v. Spalding, 1 T. & C. 483; Decker v. Boice, 83 N. Y. 215; Brown v. Volkening,
64 N. Y. 76.) The release in question is void as to the plaintiff in this action. ( Briggs v. Thompson, 86 Hun, 607; Baker
v. Thomas, 61 Hun, 17; Decker v. Boice, 83 N. Y. 215; Brown [***7] v. Volkening, 64 N. Y. 76.) One who seeks to
establish a right in hostility to a recorded title to, or security upon land, under and by virtue of a prior unrecorded
conveyance or prior equities, must show actual notice to the subsequent purchaser of his rights, or prove
circumstances such as would put a prudent man upon his guard, and from which actual notice may be inferred and
found. ( Holland v. Brown, 140 N. Y. 344; Cook v. Travis, 20 N. Y. 400; Brown v. Volkening, 64 N. Y. 76; Pope v. Allen,
90 N. Y. 298; Staples v. Fenton, 5 Hun, 172; Seymour v. McKinstry, 106 N. Y. 230; Baldwin v. Golde, 88 Hun, 115;
Marden v. Dorthy, 12 App. Div. 188; Brown v. Thomas, 61 Hun, 17; Fassett v. Smith, 23 N. Y. 252; M. L. Ins. Co. v.
Wilcox, 55 How. Pr. 43.) The occupation of the Delaware and Otsego railroad and the Ulster and Delaware railroad was
not inconsistent with the title of Helen B. Rogers as assignee of the mortgage, but was consistent therewith. ( Briggs v.
Thompson, 86 Hun, 607; Cook v. Travis, 20 N. Y. 400; Fassett v. Smith, 23 N. Y. 252; M. L. Ins. Co. v. Wilcox [***8] ,
55 How. Pr. 43; St. John v. Spalding, 1 T. & C. 483; 1 Am. & Eng. Ency. of Law, 245.) The strip of land occupied by
the Ulster and Delaware railroad is subject to the lien of the mortgage in question. ( Early v. Roosa, 35 N. Y. S. R. 900;
Syres v. Rathbone, 9 Abb. [N. S.] 277; Jackson v. Collins, 3 Cow. 89; Jackson v. Bush, 10 Johns. 223; Webb v. Bindon,
21 Wend. 99.)
JUDGES: Gray, J. O'Brien, J. (dissenting). Haight, J. (dissenting). Cullen, Ch. J., Vann and Werner, JJ., concur with
Gray, J.; Bartlett, J., concurs with O'Brien and Haight, JJ.
OPINION BY: GRAY
OPINION
Page 15
180 N.Y. 483, *; 73 N.E. 484, **;
1905 N.Y. LEXIS 1104, ***4
[*487] [**485] The appeal presents the question of how far the plaintiff was protected, in his transaction with the
holder of the mortgage, by the Recording Act. (1 R. S. 756, 1, 36, 37, 38, 41.) Was he, in purchasing from her the
mortgage, for the whole amount due upon it and without knowledge, actual, or constructive, of a portion of the
mortgaged premises having been released, nevertheless, concluded by the fact of a partial release having been given? If
he was, then he was bound by a transaction, to which he was in nowise a party, of which he had no knowledge, [***9]
and which was subsequent to the mortgaging of the premises by their owner. That he would have occupied no better a
position than did his assignor, prior to the passage of the Recording Act, may be conceded; but, with that act upon the
statute books, was he not entitled to rely upon the title as it appeared of record? Was that not its purpose? I think that
he was and that the failure of the railroad company to cause its release of the land to be recorded was an omission,
which permitted the subsequent assignee of the mortgage, by recording his instrument of assignment, to gain priority
over the company's right. We may dispose, at once, of the claim that the release was, in fact, recorded. It, clearly, was
not delivered to the clerk to be recorded, until some other papers were sent for record. In other words, it was left with
the clerk conditionally and not for immediate record. The facts, therefore, differ materially from what they were in Mut.
Life Insurance Co. v. Dake, (87 N. Y. 257). [*488] The position of the appellant is, and must be, therefore, that there
was, in its visible and notorious possession and occupancy of the land conveyed by the deed to it, such [***10]
constructive notice of its rights as to defeat the claim of the respondent to have all of the property affected by the
mortgage subjected to its payment. That argument is rested, somewhat, upon the general proposition that an assignee
takes subject to the equities enforceable against his assignor. But those equities are such which attended the transaction
between the original parties. ( Trustees of Union College v. Wheeler, 61 N. Y. 88, 104.) There were no original equities,
however, which, as between mortgagor and mortgagee, would bind the latter and those taking under him. The only fact,
upon which an equity is sought to be based, is that the plaintiff's assignor had released to the mortgagor, (not to the
purchaser from the mortgagor), a portion of the mortgaged premises. But that is a situation, which the Recording Act
was designed to meet. [HN1] Mortgages and assignments of mortgages are conveyances within the intendment of that
act. That is clear from its language and is settled by authority. ( Decker v. Boice, 83 N. Y. 215.) The purpose of the act
was, not merely to regulate the relations to each other of successive assignees of the mortgagee of the same mortgage;
[***11] but it was to confer that priority over all kinds of conveyances, which, all things being equal, the date of the
record entitled each to. And this would apply, where the assignor of the mortgage was disabled from claiming a
priority. ( Decker v. Boice, supra, at p. 221.) In brief, the earlier recorded assignment of a mortgage should give it
relative priority over every other form of conveyance of an interest in the land affected.
The argument based upon possession and occupancy, as constituting notice to persons acquiring subsequent
interests in the land, is fallacious. Doubtless, possession and occupancy under an unrecorded conveyance may
constitute notice to him, who proposes to acquire an interest in the land, whether by conveyance, or by mortgage. (
Cavalli v. Allen, 57 N. Y. 508; Phelan v. Brady, 119 ib. 587.) But, unless the possession [*489] and occupancy be so
inconsistent with the existence of a mortgage lien, as to suggest to a prudent person a claim of title adverse to the
mortgagee, they would mean nothing more to him than the evident facts. Briggs v. Thompson, (86 Hun, 607), in which
case the present chief judge of this court concurred [***12] in the decision, is precisely in point [**486] as an
authority, and I do not find any case in which it has been questioned. This appellant took its title from the mortgagor of
the land and was not a stranger; in which case the respondent would have been chargeable with some notice of its
claims to possession. The respondent knew, or is presumed to have known, of the recorded deed conveying the land to
the appellant; but why should that fact lead him to suppose that it did not take from the mortgagor subject to the
mortgage? The mortgage was of record and, apparently, undischarged. There is no reason why railroad corporations
should not take lands subject to mortgages. That their properties are, as a rule, subjected to mortgages is a notorious
fact. Here the company took its title from the mortgagor; for the release was not to it and gave, of itself, no right to
possession; it did not record the release from the mortgage lien and the plaintiff purchased the mortgage without
knowledge, actual or constructive, of the release and with nothing to lead him to believe that the possession of the
company was hostile to his mortgage. It seems to me that a fair and just construction [***13] of the Recording Act
makes its provisions applicable for the protection of the plaintiff's right to the full security of the mortgage. To so hold
is to infer, legitimately, the full beneficial purpose of an enactment intended for the protection of persons, who, in good
faith and for value, acquire an interest in lands.
Page 16
180 N.Y. 483, *; 73 N.E. 484, **;
1905 N.Y. LEXIS 1104, ***8
I advise the affirmance of this judgment, with costs.
DISSENT BY: O'BRIEN; HAIGHT
DISSENT
O'Brien, J. (dissenting). This was an action to foreclose a mortgage, and judgment was ordered in favor of the
plaintiff granting the relief demanded in the complaint. There is but one question involved in the appeal. The question
is whether the lien of the plaintiff's mortgage covered certain lands, of [*490] which the railroad corporation, which is
made a defendant, was in possession and to which it claimed title free and clear from the mortgage. The courts below
have decided against the contention of the railroad.
The question involved in the appeal arises upon undisputed facts and no question of fact is involved in the case. On
the 7th day of December, 1868, George A. Thomas and wife executed a mortgage to Francis R. Gilbert upon a farm in
Delaware county to secure the [***14] payment of three thousand five hundred dollars. The farm is described as
containing one hundred and ninety-five acres. This mortgage was recorded in the clerk's office of the county on the
17th of December, 1868. On the 12th of November, 1870, Gilbert assigned the mortgage to one Newell and this
assignment was recorded on the 9th of March, 1871. On the 12th of February, 1880, Newell having died, his executors
assigned the mortgage to Helen B. Rogers, which assignment was recorded February 18, 1884. On the 5th of May,
1894, Helen B. Rogers assigned the mortgage to the plaintiff and this assignment was recorded May 9th of the same
year. This is the history of the plaintiff's title to the mortgage in question.
The title of the railroad to a small strip of land that runs through the farm is as follows: On the first day of June,
1887, Thomas and wife, the original mortgagors, conveyed to a railroad, whose rights the defendant railroad in this
action subsequently acquired. This conveyance to the railroad was of a portion of the mortgaged premises containing
2.36 acres of land, being a strip of land sixty-six feet wide through the farm. That deed was recorded August 22, 1887.
It [***15] conveyed the land to the grantee named, in fee, free and clear of all incumbrances. On the 21st of July,
1887, Helen B. Rogers, then the owner of the mortgage in question, executed a release in the form of a quitclaim deed
of the premises described in the deed to the railroad company from the lien of the mortgage. Such release was delivered
to the railroad company. The Thomas deed to the company and the Rogers release were sent to the clerk's office for
record at the same time, [*491] that is, on August 22, 1887. The release was not actually recorded, but remained in the
clerk's office for record from the date last named to the commencement of this action. The consideration named in the
Thomas deed to the railroad company was paid. The company went into possession of the land described in the deed
under it; fenced the land, constructed a railroad upon it, and thereafter operated such railroad over it, and at all times
since the delivery of the deed the railroad company named as grantee and its successor, the defendant in this action,
have been in possession of the land. This action to foreclose the mortgage was commenced January 8, 1902, and the
railroad was made a party [***16] defendant. The railroad company answered the complaint and denied that the
portion of the mortgaged premises which was in its possession was, at the time of the commencement of the action,
subject to the lien of the mortgage, and asserted that, by the Thomas deed, the Rogers release and the actual and open
occupation of the land for and as a railroad the land described in such deed and release became and was freed from the
lien of the mortgage. This defense presented the only issue for trial and the only question tried in the case. The question
is whether, upon these facts, the 2.36 acres in the possession of the railroad should have been included in the judgment
of foreclosure, which directed that the same be sold with the rest of the farm. It was virtually held that the deed and
release to the railroad above described, and its possession and occupancy of the piece of land was no defense as against
the plaintiff's mortgage.
The learned counsel for the railroad has argued the question from more than one standpoint, but there is only one
proposition asserted in his argument that is necessary [**487] to deal with. There is no dispute about the fact that, at
the time the plaintiff [***17] took the assignment of the mortgage, the railroad was in the actual, open and visible
possession of the strip of land which it claims to own, and it is not only admitted but asserted by the learned counsel for
the plaintiff that the assignee of a mortgage becomes a purchaser under the Recording Act. An [*492] assignment of a
Page 17
180 N.Y. 483, *489; 73 N.E. 484, **486;
1905 N.Y. LEXIS 1104, ***13
mortgage and the satisfaction of a mortgage and the release of a part of the mortgaged premises are conveyances within
the meaning of that statute. At common law a mortgage had the effect of vesting the whole title in the mortgagee.
Under the law, as it exists in this state, a mortgage is a grant with a defeasance clause and a power of sale in the
mortgagee. When the plaintiff was about to buy the mortgage in question he sought to acquire an interest in land,
though it was a mortgage interest or such an interest as a mortgage vests in the person who holds it. Therefore, when
the plaintiff took the assignment of this mortgage he acquired an interest in the farm in question. If he had purchased
the farm, I think that all admit that he would be bound by any existing facts that would constitute constructive notice to
him of the rights of others, and it is [***18] difficult to see why the same principle would not apply when he sought to
become the owner of a mortgage which conveyed to him an interest in the farm.
There is as already stated no dispute whatever about the fact that, at the time that the plaintiff took the assignment
of the mortgage the railroad was in the actual, open and visible possession of that part of the farm which it now claims
to own. The right of way of a railroad, inclosed by fences, upon which trains are operated day and night, constitutes an
open, visible and notorious claim of right upon its part to the land, upon which its operations are conducted, and the
question is whether this situation existing at the time that the plaintiff purchased the mortgage in question, was not
constructive notice to him of the right which the company now asserts. We think it was, and while it may be true that
distinctions have been made or sought to be made affecting this principle, yet we think that it is the law of this state.
This, we think, will appear from a few citations from cases in this court.
In Trustees of Union College v. Wheeler (61 N. Y. 88, 98) it is said: "The effect of the release was to discharge the
land [***19] of those holding contracts of purchase at the time the mortgage was given. The actual occupancy of the
parties as [*493] to whose lands the judgment of the Special Term was affirmed, by a residence in dwellings erected
thereon and making improvements, was constructive notice to Nott of their rights, and he was chargeable with the
consequence thereof, and could not do anything in derogation of those rights or to their prejudice."
In Cavalli v. Allen (57 N. Y. 508, 517) it is said: "It is a very plain proposition of law that a person in the actual
possession of real estate gives notice to all the world proposing to deal with it of his legal and equitable rights, and
every one deals at his peril if he fails to make due inquiry."
In Frear v. Sweet (118 N. Y. 454, 462) it is said: "Although the deed to Clement Sweet was not recorded until long
after it was made, the notice which possession would afford of his rights was furnished by the fact that he went into
actual possession of and occupied the five acres from the time he took the conveyance."
In Phelan v. Brady (119 N. Y. 587, 591, 592) it is said: "Actual possession of real estate is sufficient notice [***20]
to a person proposing to take a mortgage on the property, and to all the world of the existence of any right which the
person in possession is able to establish."
It is difficult to see why the same principle does not apply to a person proposing to buy an existing mortgage as to
one who proposes to take a mortgage as an original security. The principle asserted in the case last cited was applied in
the case of Holland v. Brown (140 N. Y. 344), and again in a more recent case ( Cornell v. Maltby, 165 N. Y. 557, 560),
where it was said that the open, visible possession and actual occupancy of premises was constructive notice to all the
world of the existence of any right which the plaintiff might be able to establish in the mortgaged premises. The same
doctrine was laid down in the case of Seymour v. McKinstry (106 N. Y. 230) and in Sanders v. Riedinger (30 App. Div.
277, 284). The principle was thus stated by the Supreme Court of the United States: "The law is perfectly well settled,
both in England and in this country, except perhaps in some of the New [*494] England States, that such possession,
under apparent claim of ownership, is notice to [***21] a purchaser of whatever interest the person actually in
possession has in the fee, whether such interest be legal or equitable in its nature, and of all facts which the proposed
purchaser might have learned by due inquiry." ( Kirby v. Tallmadge, 160 U.S. 379, 383.) The rule was thus stated
upon the authority of leading cases upon the subject in that court and as deduced from text writers of high authority.
Inasmuch as it is conceded that the assignment of the mortgage conveys an interest in land and is within the scope of the
Recording Act it is difficult to see why the principle does not apply with full force to the plaintiff.
Page 18
180 N.Y. 483, *492; 73 N.E. 484, **487;
1905 N.Y. LEXIS 1104, ***17
The learned trial court held that the possession and occupation of the railroad and the general situation existing at
the time that the plaintiff acquired title to the mortgage was consistent with the lien originally acquired. It may be that
plausible reasons can be given for the support of this proposition, [**488] but it does not seem to us to be correct. It
may be true that, in some cases, railroads have gone into possession and expended large sums of money in the
construction and equipment of a road without having acquired good title to the [***22] land constituting its right of
way, but such cases, if they exist at all, must be in the nature of things quite exceptional. The general and natural
conclusion that any reasonable man would arrive at when about to purchase a mortgage on such a piece of property,
would be that the railroad had some rights that he was bound to take notice of. When the plaintiff purchased the
mortgage in question he was chargeable with notice of the situation existing upon the farm upon which he was about to
acquire a lien. He found a strip of land fenced in, upon which the railroad had constructed its roadbed and laid down its
tracks. He found that a railroad was being operated upon this piece of land and that it had been so operated for many
years. Can it be supposed that, as a reasonable man, he could come to the conclusion that the railroad had gone into
possession with no title except the Thomas deed, which was on record, leaving an outstanding mortgage [*495] to
menace its title in the future? If he was really justified in such a view, it may be that he could assure himself that the
situation was not inconsistent with the lien of the mortgage which he was about to purchase. But it does [***23] not
seem to us that any reasonable man, viewing the situation as it was, could fairly come to any such conclusion. There
was certainly enough in the situation to put the plaintiff upon inquiry and if he was bound to inquire, then he is
chargeable with all the knowledge that such an inquiry would furnish. Pursuing such an inquiry he would have found
that the mortgage which he was dealing with had been released by the person who then owned it and that the railroad
had a title free and clear from the lien of the mortgage. We think it is a reasonable rule to hold in such cases that the
plaintiff was bound to take notice of the situation that existed upon the farm covered by the mortgage and that such a
situation was sufficient to put a reasonable man upon inquiry as to the right which the railroad claimed in the land
which it had fenced and separated from the farm and constructed a road upon. So we think that the piece of land in the
possession of the railroad was improperly included in the judgment of foreclosure and sale. It follows that the judgment
should be reversed and a new trial granted, with costs to abide the event.
Haight, J. (dissenting). I think this judgment should [***24] be reversed. I concur in the opinion of O'Brien, J.,
but wish to add thereto an additional reason. The trial court held that the possession and occupation by the railroad
company of the strip of land in dispute was not inconsistent with the existence of the lien of the mortgage; or, in other
words, that its occupancy and possession were subject to the mortgage. In this, I think, the trial court erred. The records
of the county clerk's office disclosed the fact that the railroad company held title through a deed executed by George A.
Thomas and wife, who were then the owners, containing full covenants, including that the premises conveyed were free
and clear of "all incumbrances whatsoever." This covenant is to the effect [*496] that the lien of the mortgage had
ceased to exist so far as the strip of land in question was concerned, and the possession and occupation of the railroad
company thereunder would be inconsistent with the presumption that it held subject to the mortgage. This, I think,
accompanied with the exclusive and notorious occupation and possession by the railroad company, of which the
plaintiff had notice at the time he purchased the mortgage, was sufficient [***25] to put him upon inquiry with
reference to the rights of the railroad company, and distinguishes this case from that of Briggs v. Thompson (86 Hun,
607), upon which the trial court based its decision.
Page 19
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1905 N.Y. LEXIS 1104, ***21
17 of 314 DOCUMENTS
Caution
As of: May 27, 2014
Warner M. Sweet, Respondent, v. Augustus W. Henry et al., Appellants
175 N.Y. 268; 67 N.E. 574; 1903 N.Y. LEXIS 977
May 1, 1903, Argued
June 2, 1903, Decided
PRIOR HISTORY: [***1] Appeal from an order of the Appellate Division of the Supreme Court in the fourth
judicial department, entered December 2, 1901, reversing a judgment in favor of defendants entered upon the report of a
referee and granting a new trial.
Sweet v. Henry, 66 App. Div. 383, reversed.
DISPOSITION: Order reversed, etc.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant lessor sought review of an order of the Appellate Division of the Supreme
Court in the Fourth Judicial Department (New York), which reversed a judgment in his favor. Plaintiff land owner had
requested an injunction to restrain the lessor from removing a building structure from his premises. The lessor argued
that the owner was charged with constructive notice of his alleged right to remove the building.
OVERVIEW: The court held that the land owner would have received, if he had examined the conveyance, additional
and impressive notice that there were existing rights as to the building. The court found that if the land owner had
carefully investigated his chain of title, he would have found in all the deeds and the mortgage, through the foreclosure
of which his title was derived, the exception which reserved the use of the land upon which the building stood for a term
of fifteen years. The court held that when the lessor became vested with the fee of the premises in question, he took the
place of the original lessor, with the ultimate right to the full enjoyment and ownership of the premises at the expiration
of the lease. The court found that, by virtue of the situation disclosed in the chain of title, the land owner was charged
by reason of constructive notice. The court sustained the conclusions of law made by the trial court and required a
Page 20
dismissal of the land owner's complaint.
OUTCOME: The court reversed the judgment of the appellate division, with costs, and affirmed the judgment entered
upon the report of the referee.
CORE TERMS: lease, skating rink, conveyance, referee, merger, reservation, chain, deed, mortgage, grantee,
constructive notice, lessees, chargeable, expiration, reversible error, real estate, foreclosure, immaterial, recorded,
beneficial, purchaser, presumed, judgment roll, quitclaim deed, afterwards, reversal, conveyed, removal, lessor, rink
Contracts Law > Types of Contracts > Bona Fide Purchasers
Real Property Law > Deeds > Covenants of Title
Real Property Law > Financing > Mortgages & Other Security Instruments > Mortgagee's Interests
[HN1] A recital in a deed forming a link in the chain of title of any facts which should put a subsequent grantee or
mortgagee upon inquiry and to cause him to examine other matters by which a defect in the title would be disclosed, is
constructive notice of such defect. Where a purchaser of land has knowledge of any facts sufficient to put him on
inquiry as to the existence of some right or some title in conflict with that which he is about to acquire, he is presumed
either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of a degree of
negligence equally fatal to his claim to be considered as a bona fide purchaser.
Real Property Law > Ownership & Transfer > Equitable Interests
[HN2] It is the rule that merger is always a question of intention when two estates vest in one and the same person, and
if the grantee manifests no intention on the subject, then in equity he could elect that which was most beneficial to him.
HEADNOTES
1. Real Property -- Deeds -- Constructive Notice. A grantee is presumed to have examined the conveyances in his
chain of title and is chargeable with constructive notice of a lease of a portion of the premises for a term of years, and of
the rights of the lessees thereunder, although the lease was never recorded, where all the conveyances, except the deed
to such grantee, contained exceptions and reservations of the rights of the lessees under the lease, especially where an
assignee of such lease was occupying the leasehold premises and the slightest inquiry by the grantee would have
disclosed the facts.
2. Merger -- Fee -- Lease. The acquisition by the owner of real property in fee of an outstanding lease of a portion
of the premises for a term of years, under which a building erected thereon by the lessees is declared in legal effect to be
personal property [***2] subject to the right of removal at the expiration of the term, does not merge the title to such
building in the fee of the land, since such title does not rest upon the law of merger, but upon the terms of the lease.
3. Appeal -- Findings -- Conclusiveness. The Court of Appeals is confined to the findings of fact made by a referee
and is not permitted to look into the record for additional facts.
4. Evidence -- Immateriality. The erroneous admission of immaterial evidence does not constitute prejudicial and
reversible error when it has no bearing upon the issues.
5. Same. The admission of incompetent and immaterial evidence by a referee in a cause tried before him is not
ground for reversal where it worked no such prejudice as to constitute reversible error.
Page 21
175 N.Y. 268, *; 67 N.E. 574, **;
1903 N.Y. LEXIS 977, ***1
SYLLABUS
The referee found in substance as follows: In July, 1884, one Van Dresser was the owner and in possession of
certain hotel property in the town of Hume, in the county of Allegany, and on that day he leased to Baker and Sweet, for
a period of fifteen years, a vacant strip of land forty feet wide and one hundred and twenty feet long, the lease
providing: "Said second parties agree that they will during said term maintain [***3] on said premises a skating rink or
public hall, for which purpose alone these premises are leased, which building and fixtures thereto belonging second
parties may remove at the end of their term." This lease was never recorded. Thereafter Baker and Sweet erected the
building contemplated, placing it upon stone abutments and not a continuous wall.
In May, 1885, Van Dresser conveyed to one Crandall. This deed contained the following exception: "Also
excepting and reserving the use of the land on which a certain skating rink now stands for the use of said rink for the
term of fifteen years from the year 1884." This deed was duly recorded.
At this time Crandall gave to Van Dresser a mortgage to secure the payment of $ 2,200.00 of the unpaid purchase
price and inserted therein the above-quoted exception. This mortgage was duly recorded. In September, 1885, Van
Dresser assigned this mortgage to one Relief Sweet.
In March, 1886, this mortgage was assigned to John Dunn, who died owning it.
In May, 1886, Crandall conveyed the property to the defendant Augustus W. Henry, the deed containing the same
exception as his deed from Van Dresser. This deed also contained the following: "This [***4] conveyance is subject to
a mortgage, made by C. Sherman Crandall to Charles D. Van Dresser on the first day of May, 1885, on which there is
now due $ 1,974.50, and which mortgage is now held by John Dunn of Genesee Falls, N. Y. That when said uses
relating to the skating rink, lock-up and watering trough shall have lapsed by expiration of time, the fee absolute of the
lands upon which the same stand shall become vested and pass by this conveyance as though such had never been
created. The said premises being the same real estate referred to in said deed of Van Dresser to C. Sherman Crandall
except as shall relate differently to said Meaches' land." Following the covenant of warranty in this deed were these
words: "Except as against the exception and reservation and against the mortgage above mentioned."
It appears that Augustus W. Henry, one of the defendants, entered into the possession of the hotel property at the
time he took the above conveyance and occupied the same continuously as a hotel until after the foreclosure sale under
the Dunn mortgage in March, 1898, shortly after which he vacated the hotel, and with his wife, the defendant Hettie
Henry, moved into and occupied a [***5] portion of the skating rink building as a dwelling house, and so continued to
the time of the trial of this action.
About two years after Augustus W. Henry took title to the hotel property, and on the 6th day of June, 1888, he
received from Baker, one of the lessees of said land on which stood the skating rink, an assignment of the interest of
Baker in the rink and the personal property contained therein; and in the same instrument there was also a transfer of
Baker's interest in the lease of the land on which the rink stood.
On the 8th of June, 1888, Augustus W. Henry received from Sweet a like transfer of all his interest, Sweet retaining
title to the property sold until the same should be paid for according to the terms of the agreement; such transfer was
filed in September, 1888, in the clerk's office of the town of Hume.
About a year after the defendant Augustus W. Henry took these assignments from Baker and Sweet, and in the
summer of 1889 he refinished the inside of the building by ceiling the same overhead and upon the sides, placing
therein a stage and balconies, and converted the same into an opera house, place or hall for holding theatricals, public
meetings and political [***6] gatherings. Defendant Henry expended upon said improvements upwards of a thousand
dollars. Thereafter the building was used for public purposes as was designed in its erection.
The referee finds that the maintenance of this skating rink building was, owing to its close proximity to the hotel, a
Page 22
175 N.Y. 268, *; 67 N.E. 574, **;
1903 N.Y. LEXIS 977, ***2
great advantage to the defendant Henry by increasing its patronage.
On the 25th day of June, 1897, about two years before the commencement of this action, Augustus W. Henry, for
an express consideration of five hundred dollars, executed an instrument under seal, which purported to convey and
transfer to his mother, Rosetta Henry, her executors, administrators and assigns, among other personal property, "one
opera house, being the opera house which I purchased of Nelson B. Baker and R. Duane Sweet, and all the personal
property there now is in said opera house," etc.; this bill of sale was delivered to Rosetta, with the keys of the building.
On the 12th day of June, 1899, Van Dresser executed and delivered to Hettie Henry, one of the defendants, an
instrument in form a quitclaim deed, which purported to convey to her all the unexpired term of fifteen years which was
excepted and reserved [***7] in the deed of Van Dresser to C. Sherman Crandall, dated May 1st, 1885. The referee
finds the commencement of this action and the arrangement by which the plaintiff was permitted to remove the building
on execution of a bond for damages.
In June, 1897, Nellie Dunn, executrix of John Dunn, foreclosed the mortgage assigned to him in 1886, judgment
being entered in January, 1898. The judgment directed the sale of the property to satisfy the mortgage debt and
contained the same exception as to the lands on which the skating rink stood as was contained in the mortgage; the
referee in March, 1898, sold the premises pursuant to a notice containing, with the description of the property, the same
exception and reservation of the lands on which the skating rink stood as was contained in the mortgage and judgment.
This notice was read to the bidders at the sale, and Nellie Dunn bid in the property and received the referee's deed.
On April 28th, 1898, Nellie Dunn conveyed by a quitclaim deed to one Howden, which contained the same
exception and reservation as to the use of the lands on which stood the skating rink as contained in the mortgage.
On April 29th, 1898, the plaintiff, Warner M. [***8] Sweet, appears upon the scene. On the last-mentioned day
Howden entered into a contract with Sweet, agreeing to convey to him the Ingham House hotel property, including all
the property deeded by Nellie Dunn to him.
In April, 1900, and after this action was commenced, Howden conveyed by quitclaim deed the premises to this
plaintiff, omitting in the description in the said deed the exception and reservation as to the use of the lands on which
stood the skating rink, which had theretofore been contained in all the conveyances in the chain of title to the plaintiff.
This deed was executed in pursuance of the agreement hereinbefore referred to, made between Howden and the plaintiff
on April 28th, 1898.
The last finding of fact reads as follows: "Thirteenth. That it was not the intention of said Augustus W. Henry,
when he purchased the said skating rink, or at any time thereafter, that the title to the said building should merge in the
fee of the land, or that the same should come under and be subjected to the lien of the said Dunn mortgage, and it was
for his interest and more beneficial to him that such merger should not occur."
The referee then decided, as conclusions of [***9] law, as follows: "First. That when the defendant Henry took to
himself a conveyance of the term for years from Baker and Sweet, such term was merged and extinguished in the fee
then vesting in him, but that such building as between the original lessor and lessees was personal property, and was not
converted into real estate by such merger, and that the title to such building was not merged or sunk in the fee of the
land by the acquisition of the term of the lease by the said Henry.
"Second. That by the terms of the judgment of foreclosure and the exceptions and reservations in the deeds
constituting the plaintiff's chain of title which expressly excepts from their operation the use of the land on which the
skating rink stood, the plaintiff is estopped from asserting here the fact of merger, or to claim that such building became
subjected to the lien of the said mortgage, or that title to the building passed to him under the mortgage sale and
subsequent conveyances."
COUNSEL: J. H. Waring, E. E. Harding and G. W. Harding for appellants. The plaintiff must be deemed to have
Page 23
175 N.Y. 268, *; 67 N.E. 574, **;
1903 N.Y. LEXIS 977, ***6
investigated the title and examined every deed and instrument on record which formed a part of it, [***10] and to have
known every fact disclosed by them and every other fact which an inquiry suggested by them would lead to. (
McPherson v. Rollins, 107 N. Y. 316; Acer v. Wescott, 46 N. Y. 384; Anderson v. Blood, 152 N. Y. 285; Williamson v.
Brown, 15 N. Y. 354.) Defendants' possession was notice of their claim. ( Page v. Waring, 76 N. Y. 463; Freer v. Sweet,
118 N. Y. 454.) The proofs in the case do not show that the plaintiff did not have actual knowledge of the defendants'
claim to the building at the time he entered into his agreement to purchase and before he had paid any part of the price.
( Jewett v. Palmer, 7 Johns. Ch. 65; Simpson v. Del Hoyo, 94 N. Y. 189; Seymour v. McKinstry, 106 N. Y. 230; Boulton
v. Jack, 6 Robt. 166; Stevens v. Benedict, 79 N. Y. 254; Devoe v. Brandt, 53 N. Y. 462.) There was no merger. ( Asche v.
Asche, 152 N. Y. 332; James v. Morey, 2 Cow. 285; Champney v. Coope, 32 N. Y. 543; Smith v. Roberts, 91 N. Y. 476;
Curtis v. Moore, 152 N. Y. 159.) The lease gave Baker and Sweet the right to remove the building at any time during
[***11] the term. The structure was, therefore, personal property while it remained in their hands. ( G. M. M. Co. v.
Quinn, 76 N. Y. 23; Mott v. Palmer, 1 N. Y. 564; Ford v. Cobb, 20 N. Y. 344; Tifft v. Horton, 53 N. Y. 377; McFadden v.
Allen, 134 N. Y. 494.) The foreclosure judgment conclusively establishes there was no merger. ( Doty v. Brown, 4 N. Y.
71; Castle v. Noyes, 14 N. Y. 329; Burt v. Sternburgh, 4 Cow. 549; Kingsland v. Spaulding, 3 Barb. Ch. 341; Embury v.
Conner, 3 N. Y. 511; Le Guen v. Gouverneur, 1 Johns. Ch. 436; Ethelridge v. Osborn, 12 Wend. 399; Kamp v. Kamp, 59
N. Y. 212.)
F. A. Robbins and H. H. Relyea for respondent. Plaintiff is not estopped from claiming title to the building because of
the terms of judgment of foreclosure and the exceptions and reservations in the deeds constituting the plaintiff's chain of
title. ( Edmonston v. Edmonston, 13 Hun, 133; De Sollar v. Hancome, 158 U.S. 216; Campbell v. Consalus, 25 N. Y.
613; Shaw v. Broadbent, 129 N. Y. 114; Banta v. Merchant, 173 N. Y. 292; Blackman v. Stuker [***12] , 142 N. Y. 555;
Duryea v. Mayor, etc., 62 N. Y. 592; Smith v. Cornell University, 21 Misc. Rep. 220; Maloney v. Horan, 49 N. Y. 111;
McFadden v. Allen, 134 N. Y. 489.) The report of the referee cannot be sustained upon the theory that the plaintiff had
actual or constructive notice of the right of the defendants to remove the building under the terms of the lease. (
Simpson v. Del Hoyo, 94 N. Y. 189; Clemans v. S. A. R. S. of G. F., 131 N. Y. 485; Comstock v. Ames, 1 Abb. Ct. App.
Dec. 411; Meyer v. Amidon, 45 N. Y. 160; Armstrong v. Du Bois, 90 N. Y. 95; Beach v. Cooke, 28 N. Y. 508; L. F. Co. v.
L. G. & F. Co., 82 N. Y. 476; Jackson v. McChesney, 7 Cow. 360; Wood v. Chapin, 13 N. Y. 509; Ward v. Isbill, 73 Hun,
550.) Upon the evidence of the defendants themselves the building was part of the realty at the time of the foreclosure
sale. ( Cornell v. Maltby, 165 N. Y. 557; L. F. Co. v. L. G. & F. Co., 82 N. Y. 476; Kinkead v. U. S., 150 U.S. 483; Mott
v. Palmer, 1 N. Y. 564; Leonard v. Clough, 133 N. Y. 292; Rowland v. Swarts [***13] , 17 N. Y. Supp. 399; Mayor, etc.,
v. H. F. Ins. Co., 10 Bosw. 537; Mayor, etc., v. B. F. Ins. Co., 41 Barb. 231; Kellan v. McKinstry, 69 N. Y. 264; P. Mills
v. Miller, 4 N. Y. S. R. 787.) The admission of the judgment roll in the action brought by Hettie Henry against James
Hodnett and another was error. ( Clark v. Norman, 68 Hun, 372; Chapman v. Frank, 5 N. Y. Supp. 448; De Graff v.
Hovey, 16 Abb. Pr. 120; Jefferson v. N. Y. E. R. R. Co., 132 N. Y. 483; Foote v. Beecher, 78 N. Y. 155; Gilman v. Healy,
11 N. Y. S. R. 517.) The admission of the conversation between plaintiff and defendant in reference to purchasing the
building was error. ( Tennant v. Dudley, 144 N. Y. 504; Smith v. Satterlee, 130 N. Y. 677.)
JUDGES: Bartlett, J. Parker, Ch. J., Gray, O'Brien, Vann, Cullen and Werner, JJ., concur.
OPINION BY: BARTLETT
OPINION
[*275] [**575] The plaintiff, as the owner of certain premises, brought this action to restrain by injunction the
removal of a building therefrom. A temporary injunction was granted, and afterwards modified by consent of parties so
as to permit the defendants to remove [***14] the building [**576] on giving a bond for damages.
The single point is presented whether the plaintiff was chargeable with constructive notice of the alleged right of
the defendants to remove the building in question.
This opinion is preceded by a statement of the facts showing in detail the chronology of the case and the disclosures
Page 24
175 N.Y. 268, *; 67 N.E. 574, **;
1903 N.Y. LEXIS 977, ***9
in the chain of title under which the plaintiff received his deed.
The referee found, in substance, that the plaintiff was chargeable with constructive notice of the right of the
defendant Henry to remove the structure known as the "skating rink" from the premises. He, therefore, dismissed the
complaint on the merits with costs.
The learned Appellate Division, with a divided court, reversed the judgment entered upon the report of the referee.
This reversal was upon the law only.
The material facts may be briefly stated as follows: Van Dresser, the owner of certain real estate, leased a strip
thereof to Baker and Sweet, for a period of fifteen years, the instrument providing that the second parties agree "that
they will during said term maintain on said premises a skating rink or public hall, for which purpose alone the premises
are leased, which [***15] building and fixtures thereto belonging second parties may remove at the end of their term."
This lease was not recorded. Thereupon the skating rink was erected. Later there were a series of conveyances, each
one of which was recorded and contained the following reservation and exception: "Also excepting and reserving the
use of the lands on which a skating rink now stands for the use of said rink for the term of fifteen years from the year
1884."
[*276] At the time that Van Dresser, the original owner of the premises, and who gave the lease, conveyed to one
Crandall in May, 1885, he took back a mortgage for the unpaid purchase money, which contained the same reservation
and exception. This mortgage was foreclosed many years thereafter, the judgment of foreclosure not having been
entered until the year 1898. In this foreclosure suit the complaint, the judgment and the notice of sale by the referee all
contained the same reservation and exception.
John Dunn died owning this mortgage, and his executrix, Nellie Dunn, foreclosed the same and took title at the
sale; on the 28th day of April, 1898, she conveyed by a quitclaim deed to one Howden, which deed contained the same
reservation [***16] and exception as to the use of the lands for the purpose of the skating rink. Howden conveyed by
quitclaim to the plaintiff, omitting the exception and reservation which had theretofore appeared in the chain of title.
The rule of law is well settled that [HN1] a recital in a deed forming a link in the chain of title of any facts which
should put a subsequent grantee or mortgagee upon inquiry and to cause him to examine other matters by which a
defect in the title would be disclosed, is constructive notice of such defect.
Where a purchaser of land has knowledge of any facts sufficient to put him on inquiry as to the existence of some
right or some title in conflict with that which he is about to acquire, he is presumed either to have made the inquiry
and ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim
to be considered as a bona fide purchaser. ( Acer v. Westcott, 46 N. Y. 384; Williamson v. Brown, 15 N. Y. 354;
McPherson v. Rollins, 107 N. Y. 316; Anderson v. Blood, 152 N. Y. 285.)
The plaintiff's chain of title extends back through the foreclosure sale, the mortgage on which it [***17] is based
and the mesne conveyances leading up to Van Dresser, the lessor and owner of the fee. The fact that Howden omitted
from his quitclaim deed to plaintiff any reference to the exception and reservation [*277] mentioned in the prior
conveyances is of no importance, as under the rule, to which reference has been made, the plaintiff is presumed to have
examined the conveyances in his chain of title and to have investigated all facts therein disclosed in any way affecting
his rights under the conveyance he was about to accept. If he failed to make such an investigation, but relied on
quitclaim deed, he is chargeable with negligence and is estopped from availing himself of any benefit he might have
derived by reason of due inquiry.
Assuming that the plaintiff had carefully investigated his chain of title, what would have been disclosed to him? He
would have found in all the deeds and the mortgage, through the foreclosure of which his title is derived, the exception
reserving the use of the land upon which a certain skating rink building stood for the use of said rink for the term of
fifteen years from the year 1884.
Page 25
175 N.Y. 268, *275; 67 N.E. 574, **576;
1903 N.Y. LEXIS 977, ***14
It is true that the lease conferring the right upon the [***18] owner of the skating rink building to remove it at the
end of the term was not recorded, but we here have a distinct reference to the existence of such a right which should
lead any purchaser, possessing ordinary caution, to investigate its origin and the written instrument, if any, upon which
it rested.
At the time the plaintiff took title, or at the date of his contract which afterwards resulted in a conveyance, the
defendant Augustus W. Henry was in the occupancy of the building known as the skating rink, and the slightest inquiry
of him by plaintiff would have revealed the true situation, to wit, the existence of the unrecorded lease for fifteen years
from the year 1884, with the right in the lessees to remove the building at the end of the term. There were other parties,
whose names were disclosed in the chain of title, of which inquiry could have been made.
The fact that Augustus W. Henry, one of the defendants, appeared as a grantee of the fee of these premises is of no
special importance, as his conveyance contained the [**577] exception and reservation common to all the deeds in the
chain of title. Furthermore, if the plaintiff had examined this deed from [*278] [***19] Crandall to Augustus W.
Henry given in May, 1886, he would have discovered that it contained in addition to the exception and reservation
already referred to, the following: "This conveyance is subject to a mortgage made by C. Sherman Crandall to Charles
D. Van Dresser on the first day of May, 1885, on which there is now due $ 1,974.50, and which mortgage is now held
by John Dunn of Genesee Falls, N. Y. That when said uses relating to the skating rink, lock-up and water trough shall
have lapsed by expiration of time, the fee absolute of the lands upon which the same stand shall become vested and pass
by this conveyance as if such had never been created. The said premises being the same real estate referred to in said
deed of Van Dresser to C. Sherman Crandall, except as shall relate differently to said Meaches' land." Following the
covenant of warranty in this deed were these words: "Except as against the exception and reservation and against the
mortgage above mentioned."
Here the plaintiff would have received, if he had examined this conveyance, the additional and impressive notice
that there were existing rights as to the skating rink and other matters that would lapse by expiration [***20] of time,
and their precise nature and origin would have been disclosed by inquiry made of Augustus W. Henry on the premises
in question.
The referee decided as a conclusion of law: "That when the defendant Henry took to himself a conveyance of a
term for years from Baker and Sweet, such term was merged and extinguished in the fee then vesting in him, but that
such building as between the original lessor and lessees was personal property and was not converted into real estate by
such merger, and that the title to such building was not merged or sunk in the fee of the land by the acquisition of the
term of the lease by the said Henry."
Undoubtedly, Henry, on becoming vested with the fee of the premises in question, took the place of the original
lessor, with the ultimate right to the full enjoyment and ownership of the premises at the expiration of the lease. To this
extent only there was a merger. As to the skating rink building, [*279] however, it constituted no part of the real estate,
as by the terms of the lease it was declared in legal effect to be personal property, subject to the right of removal at the
expiration of the term.
The rights of the owners of the skating [***21] rink building do not rest upon the law of merger, but on the terms
of the lease, as already pointed out.
[HN2] It is the rule that merger is always a question of intention when two estates vest in one and the same person,
and if the grantee manifests no intention on the subject, then in equity he could elect that which was most beneficial to
him. ( Asche v. Asche, 113 N. Y. 232; James v. Morey, 2 Cow. 285; Champney v. Coope, 32 N. Y. 543; Smith v. Roberts,
91 N. Y. 476; Curtis v. Moore, 152 N. Y. 159, 165.)
Chief Judge Ruger said ( Asche v. Asche, supra, at pages 235-6) that "In equity the union of legal and equitable
estates in the same person does not effect a merger unless such was the intention of the parties and justice and equity
Page 26
175 N.Y. 268, *277; 67 N.E. 574, **576;
1903 N.Y. LEXIS 977, ***17
require it."
The referee has expressly found as a fact, "That it was not the intention of the said Augustus W. Henry, when he
purchased the said skating rink, or at any time thereafter, that the title to said building should merge in the fee of the
land, or that the same should come under and be subjected to the lien of the said Dunn mortgage, and it was for his
interest and more beneficial to him that such [***22] merger should not occur."
If the law of merger were applicable to this situation, we have here the distinct finding that it was not the intention
of the defendant Augustus W. Henry that merger should take place as to the building, resting upon sufficient evidence.
This finding, if material, is binding upon this court.
It further appears from the findings of fact that the defendant Augustus W. Henry occupied the adjacent hotel
property for many years, and that the existence and maintenance of the skating rink building was beneficial to him, as it
increased the patronage of the hotel by reason of its close proximity.
[*280] There are a variety of facts disclosed by the findings and discussed in the briefs which we deem it
unimportant to examine, as the situation disclosed in the chain of title, and with which the plaintiff is chargeable by
reason of constructive notice, sustains the conclusions of law made by the referee and required a dismissal of the
complaint.
No error of law is disclosed in this record justifying the reversal of the judgment by the Appellate Division, entered
upon the report of the referee, unless the objections and exceptions taken by the plaintiff to [***23] the admission of
evidence present such error.
It appears from the findings that about two years before the commencement of this action Augustus W. Henry
transferred to his mother, Rosetta Henry, the skating rink building and the personal property that it contained, delivering
to her the keys thereof.
It is in evidence, but not found as a fact by the referee, that Rosetta Henry afterwards transferred the property to
Hettie Henry, a defendant, the wife of Augustus. This last transfer is a fact that we cannot take cognizance of, not being
found by the referee. This court is confined to the findings of fact and is not permitted to look into the record for
additional facts.
It appears that the defendant's counsel offered in evidence the judgment roll in an action wherein Hettie Henry was
plaintiff [**578] and the sheriff of Allegany county and others were defendants, such action being replevin, to recover
certain property, including the building in question, taken on an execution against Augustus W. Henry.
It further appears from the judgment roll that the judgment was entered upon an offer made by the sheriff and
accepted by the plaintiff. This offer allowed judgment to be taken [***24] against the sheriff and other defendants for
the recovery of the possession of the chattels described in plaintiff's complaint, but without damages for the detention
thereof and without costs of the action.
This judgment roll was doubtless immaterial, but as it had [*281] no bearing upon the issue as to an existing right
to remove the building, its admission did not constitute prejudicial and reversible error. Whether the lease was owned
by the original lessees or by their assigns did not concern the plaintiff.
The plaintiff was asked on cross examination, "Did you try to buy this building?" This was objected to as not
material and made for the purpose of settlement. The plaintiff replied "I did in a way; I told him that I would give $ 300
rather than go any further with it." It was in evidence that the building was worth a far greater sum.
This evidence was doubtless incompetent and immaterial, but as there was no jury it worked no such prejudice to
the plaintiff as to present reversible error.
Page 27
175 N.Y. 268, *279; 67 N.E. 574, **577;
1903 N.Y. LEXIS 977, ***21
The order appealed from should be reversed, with costs, and the judgment entered upon the report of the referee
affirmed.
Page 28
175 N.Y. 268, *281; 67 N.E. 574, **578;
1903 N.Y. LEXIS 977, ***24
18 of 314 DOCUMENTS
Analysis
As of: May 27, 2014
Amelia Cornell, as Successor in Interest of Prudence Carr, Deceased, Appellant, v.
Jerome B. Maltby, Respondent, Impleaded with Others
165 N.Y. 557; 59 N.E. 291; 1901 N.Y. LEXIS 1446
December 17, 1900, Argued
PRIOR HISTORY: [***1] Appeal from certain parts of a judgment of the Appellate Division of the Supreme Court
in the fourth judicial department, entered December 20, 1898, modifying and affirming as modified a judgment entered
upon a decision of the court on trial at Special Term which set aside as fraudulent certain transfers of property.
Carr v. Maltby, 35 App. Div. 630, affirmed.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff former property owner sought review of a decision of the Appellate Division of
the Supreme Court in the Fourth Judicial Department (New York), which modified the trial court's judgment by striking
the portions of the trial court's judgment that stated that defendant subsequent property purchaser's mortgage was
subject to the former property owner's right of possession of the property and to the rents and profits thereof during her
life.
OVERVIEW: The former property owner filed an action against the subsequent property purchaser to set aside as
fraudulent a bill of sale of personal property, certain deeds, an assignment of a land contract, and a mortgage. The trial
court determined that the deeds, bill of sale, and assignment by land contract were obtained by fraud and undue
influence, practiced upon the former property owner, and provided that the subsequent property purchaser's mortgage
was subject to the former property owner's right of possession of said premises and to the rents and profits thereof
during her natural life. The intermediate appellate court modified the trial court's judgment by striking the portions of
Page 29
the trial court's judgment stating that the subsequent property purchaser's mortgage was subject to her right of
possession of the property and to the rents and profits thereof during her life. The court affirmed the intermediate
appellate court's judgment. The court held in part that under the rule of constructive notice, the subsequent property
purchaser was chargeable only with knowledge of such facts that he might have ascertained from the former property
owner as to her rights.
OUTCOME: The court affirmed the intermediate appellate court's modification of the trial court's judgment with
respect to the appellate court's striking of the portions of the trial court's judgment that stated that the subsequent
property purchaser's mortgage was subject to the former property owner's right of possession of the property and to
the rents and profits thereof during her life.
CORE TERMS: mortgage, deed, grantee, notice, mortgagee, constructive notice, life estate, fraudulent, mortgaged,
conveyed, land contract, chargeable, bill of sale, good faith, visible possession, modification, perpetrated, conveyance,
suitable, voidable, execute, deliver, void, ejectment, equitable, rents, natural life, real property, transferring, ascertained
Real Property Law > Estates > General Overview
Real Property Law > Financing > Mortgages & Other Security Instruments > Formalities
[HN1] Possession operates as constructive notice to all the world of the existence of any right which the former
property owner might be able to establish in the mortgaged premises.
Real Property Law > Estates > Present Estates > Life Estates
Real Property Law > Purchase & Sale > General Overview
[HN2] Under the rule of constructive notice, a subsequent property purchaser is chargeable simply with knowledge of
such facts as he might have ascertained from former property owners as to their rights.
Real Property Law > Deeds > Enforceability
Real Property Law > Ownership & Transfer > General Overview
[HN3] A fraudulent grantee of real property may create a valid incumbrance upon it in favor of innocent parties, since,
as to such parties, he has the title and has been clothed with the power to deal with the property. When the owner of
land executes and delivers to another a deed of it, the title passes to the grantee named therein, although the former was
induced by fraud to execute and deliver the instrument. The deed is not void, but voidable, and, until set aside, it has the
effect of transferring the title to the fraudulent grantee, and the latter being thus clothed with all the evidences of good
title may encumber the property to a party who becomes a purchaser in good faith.
HEADNOTES
Mortgage -- Constructive Notice -- Fraud. A mortgagee who, in reliance upon the record title, takes a mortgage
upon property from one to whom it has been transferred by a fraudulent grantee, is not chargeable with constructive
notice of the fraud, although the person defrauded occupies the property, where at the time she was ignorant of the fraud
perpetrated upon her and could not have disclosed the fact to the mortgagee had he made inquiry.
SYLLABUS
The nature of the action and the facts, so far as material, are stated in the opinion.
Page 30
165 N.Y. 557, *; 59 N.E. 291, **;
1901 N.Y. LEXIS 1446, ***1
COUNSEL: James O. Sebring for appellant. Upon the facts proven upon the trial and established by the decisions of
the Special Term, confirmed by the Appellate Division, the plaintiff is entitled to judgment setting aside the Maltby
mortgage. ( Marden [***2] v. Dorthy, 160 N. Y. 39; Ford v. James, 4 Keyes, 300; Rapps v. Gottlieb, 142 N. Y. 164;
Barnard v. Campbell, 58 N. Y. 73; Trustees v. Smith, 118 N. Y. 634; Wilcox v. Howell, 44 N. Y. 398; Ritter v. Worth, 58
N. Y. 627; Lawrence v. Conklin, 17 Hun, 228; A. C. S. Bank v. McCarty, 149 N. Y. 71; Knox v. E. M. A. Co., 148 N. Y.
441.)
Francis A. Williams for respondent. All the evidence tends to show that Mrs. Carr remained and lived upon the
premises in question by the permission of the parties holding title under the deed and assignment, by her duly executed
and acknowledged and delivered, as specifically found in the foreclosure case and impliedly found in the case at bar.
Hence her possession, however notorious, was not antagonistic or hostile to her grant, and in no way put upon
subsequent incumbrancers the duty of making inquiries of her as to what rights, if any, she claims in the lands in
question. ( Cook v. Travis, 20 N. Y. 400; Pope v. Allen, 90 N. Y. 298; Brown v. Volkening, 64 N. Y. 82; Chapman v.
Rose, 56 N. Y. 137; Simpson v. Del Hoyo, 94 N. Y. 189; [***3] Valentine v. Lunt, 115 N. Y. 496; Simson v. Bank of
Commerce, 43 Hun, 156; Page v. Krekey, 137 N. Y. 307.)
JUDGES: Werner, J. Landon, J. (dissenting). Parker, Ch. J., and Gray, J., concur with Werner, J., for affirmance, and
Haight, J., concurs in result; O'Brien and Cullen, JJ., concur with Landon, J., for reversal.
OPINION BY: WERNER
OPINION
[*558] [**291] This action was brought to set aside as fraudulent and void a bill of sale of personal property,
certain [*559] deeds, an assignment of a land contract, and a mortgage. Prior to July 2d, 1888, the plaintiff was the
owner in fee of lots Nos. 36, 37 and 38 in block No. 32 in the city of Corning, N. Y. She also held a land contract of an
adjoining lot known as No. 35, from one Mallory. On said second day of July, 1888, the plaintiff executed and
delivered to one John W. Hedden a bill of sale of her household goods and effects. On the same day she conveyed to
one Hungerford said lots 36, 37 and 38, who at once conveyed the same to said Hedden. At the same time the plaintiff
executed and delivered to said Hedden an assignment of said land contract. Hungerford, who was the brother-in-law of
Hedden, [***4] took title for the sole purpose of immediately transferring it to the latter. On the 30th day of
December, 1888, Hedden obtained a deed from Mallory of the lot described in the land contract assigned to the former
by the plaintiff. On the 7th of January, 1889, Hedden mortgaged all of said lots to one Drake for $ 1,500.00, and on
April 15th, 1891, he further mortgaged said lands to one Robertson for $ 600.00. On the 31st day of December, 1894,
said Hedden and his wife conveyed said lands to one Barnard. On September 16th, 1895, Barnard mortgaged said lands
to the defendant Maltby for $ 2,600.00, and with the proceeds of the mortgage paid the Drake and Robertson mortgages.
This is the naked record history of the conveyances, the validity of which are attacked by the plaintiff. It is unnecessary
to recite the circumstances which culminated in these transfers, as the trial court decided that the said deeds, bill of sale,
and assignment of land contract, were obtained by fraud and undue influence practiced and exercised by the said
Hedden upon the plaintiff, and this decision has been unanimously affirmed by the Appellate Division.
The sole question presented upon this appeal is [***5] whether the modification, by the Appellate Division, of the
judgment entered upon the decision of the trial court, is right. This question requires a brief discussion of the facts
which bear upon the status of the Maltby mortgage. The evidence discloses that, in consideration of the transfers and
conveyances [*560] from the plaintiff to Hedden, the latter orally agreed to do certain things which were afterwards,
on the 28th day of August, 1891, expressed in writing. This agreement provided that Hedden "will, during the natural
life of the party of the second part (plaintiff), in addition to the rentals and profits of the said premises, support,
maintain, clothe and care for the party of the second part (plaintiff) during said life, in a suitable manner, becoming her
station." The oral testimony adduced on behalf of plaintiff discloses that in addition to the things expressed in the
written agreement Hedden was to provide a suitable burial for plaintiff upon her death. Under this agreement the
plaintiff continued in "the open, visible possession and actual occupancy of said premises" as found by the trial court,
Page 31
165 N.Y. 557, *; 59 N.E. 291, **;
1901 N.Y. LEXIS 1446, ***1
until after Maltby had taken his mortgage [***6] thereon. This [HN1] possession operated as constructive notice to all
the world of the existence of any right which the plaintiff might be able to establish in the mortgaged premises. (
Phelan v. Brady, 119 N. Y. 587; Holland v. Brown, 140 N. Y. 344; Anderson v. Blood, 152 N. Y. 293.) This is but
another mode of stating that Maltby was chargeable with notice of any facts which he might have ascertained had he
made actual inquiry as to plaintiff's rights when he took the mortgage from Barnard. (2 Pomeroy's Eq. Jur. sec. 614;
Wade on Notice, sec. 273.) What would Maltby have discovered had he made such inquiry? It must be borne in mind
that plaintiff had parted with her title in July, 1888. Maltby took his mortgage in September, 1895. This action was not
commenced until February, 1896. The decision of the trial court contains no finding as to the time when plaintiff
became advised that a fraud had been perpetrated upon her by Hedden; but it may be assumed that it was not until after
Maltby had taken his mortgage, as any other conclusion would necessarily impute to the plaintiff a degree of negligence
[**292] which would of itself defeat her action against [***7] Maltby. Proceeding upon this assumption we think we
may properly conclude that any inquiry which a reasonably prudent man in Maltby's position would have made,
would have disclosed [*561] nothing more than the fact that plaintiff had conveyed her premises to Hedden in
consideration of the agreement to provide for her during her life, and give her a suitable burial at her death.
The trial court evidently concluded that this agreement reserved to the plaintiff a life estate in said premises. While
there is no express finding to that effect, no other view of the case could have sustained the legal conclusion that
Maltby's mortgage was subject to the plaintiff's rights in the premises. The Appellate Division modified the judgment
entered upon the decision of the trial court by striking therefrom the portions which provided that the Maltby mortgage
was subject to plaintiff's right of possession of said premises and to the rents and profits thereof during her natural life.
Although no opinion was written in the Appellate Division, it is apparent that this modification of the judgment must
have been made upon the theory that no life estate in said premises was reserved to the plaintiff [***8] by said
agreement, and that the implied provision for the retention of the rents by the plaintiff was purely personal and did not
affect the land. We think this disposition of the case was right. While it is plain that a gross fraud was perpetrated upon
the plaintiff by Hedden, the defendant Maltby was not a party to it, and is not shown to have had any knowledge of it.
The latter took his mortgage and parted with his money in good faith, upon the strength of an apparently good record
title in Barnard.
[HN2] Under the rule of constructive notice above adverted to, Maltby was chargeable simply with knowledge of
such facts as he might have ascertained from the plaintiff as to her rights. The history of the case raises the almost
conclusive presumption that inquiry from the plaintiff would have revealed nothing more than the fact that she was in
possession under the agreement referred to, and this, as we have seen, did not create a life estate in the plaintiff.
Appellant's counsel, in his brief and upon the oral argument, claims that Marden v. Dorthy (160 N. Y. 39) is decisive of
this case. But that case is clearly distinguishable from this. In the Marden case the [*562] [***9] mortgages which
were asserted as liens were held invalid because the deed, upon the faith of which they were taken, never had any valid
inception. Although the alleged deed in that case contained the genuine signature of Mrs. Marden, it was held to have
been obtained under circumstances which precluded the assumption that she had ever intended to sign a deed, so that its
use for that purpose was in fact a forgery, and this, together with the fact that the alleged acknowledgment of the paper
was equally fraudulent, rendered the instrument void ab initio. But the rule which is applicable to this case was there
clearly stated in the following language: "It is doubtless true that [HN3] a fraudulent grantee of real property may create
a valid incumbrance upon it in favor of innocent parties, since, as to such parties, he has the title and has been clothed
with the power to deal with the property." "When the owner of land executes and delivers to another a deed of it, the
title passes to the grantee named therein, although the former was induced by fraud to execute and deliver the
instrument. The deed is not void, but voidable, and, until set aside, it has the effect of transferring the [***10] title to
the fraudulent grantee, and the latter being thus clothed with all the evidences of good title may incumber the property
to a party who becomes a purchaser in good faith."
In this case there is some evidence tending to show that plaintiff was ignorant of the nature of the paper which she
signed. This is negatived, however, not only by other equally cogent evidence, but by the findings of the trial court,
affirmed by the Appellate Division, which conclusively establish the fact that plaintiff did consciously and intentionally
Page 32
165 N.Y. 557, *560; 59 N.E. 291, **291;
1901 N.Y. LEXIS 1446, ***5
execute a conveyance of her real property. The transfer was none the less real because it was executed under
circumstances which rendered it voidable at the election of the plaintiff and upon proof of the fraud by which she was
deceived. The logical and necessary import of the decision made by the trial court is that the plaintiff signed the bill of
sale, deed and assignment of land contract, knowing their purpose and effect, but under circumstances which would
render them voidable as to [*563] her upon discovery of fraud and undue influence under which she was induced to
act. As to the Maltby mortgage, an entirely different question is presented. [***11] That mortgage is unaffected by the
fraud of Hedden, since the decision declaring it valid imports that it was taken upon the faith of the record title and
without actual notice, in the mortgagee, of such fraud. The constructive notice with which he was chargeable could not
operate to create an estate in the plaintiff which did not in fact exist. The plaintiff never had a life estate in these lands.
All that she had at the time Maltby took his mortgage was an enforceable agreement for her support and maintenance
during her life, and that did not create an estate in the land. We may, therefore, emphasize our conclusions by repeating
that if the plaintiff at the time Maltby took his mortgage knew of the fraud by which she was led to part with her
property, her own negligence would defeat her action against said mortgagee. If, on the other hand, she did not then
know of such fraud, the law imputes to the mortgagee notice of [**293] nothing more than he could have learned upon
inquiry from her; and such inquiry would have revealed simply the existence of the agreement for support and
maintenance.
The modification of the judgment herein by the Appellate Division was right. The [***12] judgment as modified
should be affirmed and judgment absolute entered in favor of the defendant Maltby against the plaintiff on the
stipulation, without costs.
DISSENT BY: LANDON
DISSENT
Landon, J. (dissenting). The consideration of the deeds was Hedden's oral promise to plaintiff to give her the rents
and profits of the lands for her life and also to support her for her life. As security for the performance of this promise,
Hedden allowed the plaintiff to retain possession of the lands, and she has ever since been and still is in the open,
notorious and visible possession of them.
Hedden recorded his deeds, and his grantee mortgaged the lands to Maltby, who thus, notwithstanding the record
title of [*564] his mortgagor, took them subject to all the rights the plaintiff was thus openly and notoriously enjoying.
Although the plaintiff conveyed her lands, she did not deliver possession of them, and as between herself and her
grantee, Hedden, she had a right to retain it, and his grantees were, by such actual possession, charged with notice of
it, and, therefore, stand in his shoes. Had he or they brought ejectment, she could have successfully interposed this
agreement and her possession [***13] under it as an equitable defense. In equity her right to the possession was better
than theirs, and in an ejectment this would be enough. Ejectment is a possessory action. It is not needful that you
should have title enough to regain possession; it suffices that your adversary has not enough to put you out. Now,
Maltby, the mortgagee, if the judgment of the Appellate Division is right, can eject the plaintiff, and thus do in this
action what his grantee could not have done in a direct action for the purpose under his deed.
The prevailing opinion states that "the plaintiff never had a life estate in these lands." It is true that she did not
reserve to herself a legal life estate. So long as she retains the open and visible possession of the lands as the
consideration of her parting with her legal title, she does not need a legal title in order to defend her right of possession.
Her equitable defense suffices. No one could take the legal title without notice of her equitable right to the possession
which she was actually enjoying, and thus subject to it.
Where the purchaser has paid the purchase price and also taken possession under an oral contract for the sale and
purchase [***14] of lands, his vendor cannot eject him, unless equity also requires it, and in such case the vendor must
restore the consideration. Here the plaintiff never surrendered her possession, and paid for her lifelong right of retaining
Page 33
165 N.Y. 557, *562; 59 N.E. 291, **292;
1901 N.Y. LEXIS 1446, ***10
it by giving her vendee the legal title to the lands. There is no pretense of restoring to her the consideration. She is
entitled to one or the other. The mortgagee is entitled to no more than his mortgage covered, namely, legal title in the
mortgagor, subject [*565] to the possession in the plaintiff. The record and his good faith protect his mortgage upon
the naked legal title, but the plaintiff by her actual possession gave him notice that the record could not override or
displace her right to such possession, and equity makes the legal title subject to it.
I advise that the judgment of the Appellate Division be reversed, and the judgment of the trial court be affirmed,
with costs to the plaintiff.
Page 34
165 N.Y. 557, *564; 59 N.E. 291, **293;
1901 N.Y. LEXIS 1446, ***14
21 of 314 DOCUMENTS
Caution
As of: May 27, 2014
Hannah Jane Marden, Respondent, v. Ella M. Dorthy, John F. Dorthy, Hiram L.
Barker and The Monroe County Savings Bank, Appellants
160 N.Y. 39; 54 N.E. 726; 1899 N.Y. LEXIS 1136
May 1, 1899, Argued
October 3, 1899, Decided
PRIOR HISTORY: [***1] Appeal from a judgment of the Appellate Division of the Supreme Court in the fourth
judicial department, entered December 23, 1896, affirming a judgment in favor of plaintiff entered upon a decision of
the court on trial at a Monroe Equity Term.
Marden v. Dorthy, 12 App. Div. 188, affirmed.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant bank sought review of a decision of the Appellate Division of the Supreme
Court (New York), which affirmed a judgment of a trial court that set aside written instruments of title to property in
appellee property owner's action that alleged the instruments were fraudulent.
OVERVIEW: The bank asserted that a deed, mortgage, and a second mortgage were enforceable against the property
owner because the property owner's signature on the instruments was genuine and because the instruments were
properly recorded. The court rejected the bank's contentions, finding that the instruments were void because the
property owner never had any intention of executing the instruments. The court ruled that the bank was remiss in
putting faith in the instruments without making any further inquiry because the property owner was in possession of
the property at all times which was notice to the bank of the property owner's rights. The court held that the registrar's
recording of the instruments was not a recording of a conveyance of the property because the instruments were false
records.
Page 35
OUTCOME: The court affirmed the judgment of the lower court. The court held that the instruments were void
because the property owner never intended to convey her property and because the false instruments were not converted
into genuine instruments by the act of recording.
CORE TERMS: deed, mortgage, mortgagee, signature, procured, artifice, trick, genuine, certificate, grantee, notice,
acknowledgment, recorded, daughter, forgery, innocent, purporting, estoppel, estopped, grantor, real estate, bona fide
purchasers, conveyance, mortgagor, genuine signature, bona fide holders, fraudulent, fictitious, purchaser, recording
Civil Procedure > Appeals > Appellate Jurisdiction > General Overview
[HN1] The jurisdiction of the Court of Appeals is limited to questions of law. The question whether a finding of fact, or
a verdict upon issues of fact, is sustained by evidence, though in its very nature one of law, is not reviewable here, when
the court below has decided unanimously that the judgment should be sustained. The Court of Appeals must accept the
findings as they are in their fair scope and meaning, without adding to or taking anything from them, and, applying
them to the case, the only question that can arise is whether they support the legal conclusions drawn from them by the
courts below.
Civil Procedure > Appeals > Standards of Review > General Overview
[HN2] No unanimous decision of the Appellate Division that there is evidence supporting or tending to sustain findings
of fact, shall be reviewed in the Court of Appeals, not only as to the facts affirmatively stated in favor of the successful
party, but also as to those expressly or impliedly negatived against the party appealing.
Contracts Law > Negotiable Instruments > Negotiation > Indorsement > Blank Indorsements
[HN3] A party cannot make a deed without some assent of the will. It must be a conscious act, accompanied by an
intention.
[HN4] The act of signing a deed is only one step in the process of changing the title to real property. The instrument is
perfected only by delivery.
Contracts Law > Formation > Tender & Delivery
[HN5] A fraudulent grantee of real property may create a valid incumbrance upon it in favor of innocent parties, since,
as to such parties, he has the title and has been clothed with power to deal with the property. When the owner of land
executes and delivers to another a deed of it, the title passes to the grantee named therein, although the former was
induced by fraud to execute and deliver the instrument. The deed is not void, but voidable, and, until set aside, it has the
effect of transferring the title to the fraudulent grantee, and the latter, being thus clothed with all the evidences of good
title, may encumber the property to a party who becomes a purchaser in good faith.
Real Property Law > Estates > Present Estates > Marital Estates > Community Property
[HN6] The possession of a married woman of her house is not affected by the circumstance that her husband lived with
her and attended to the property, including the payment of taxes.
Page 36
160 N.Y. 39, *; 54 N.E. 726, **;
1899 N.Y. LEXIS 1136, ***1
Criminal Law & Procedure > Criminal Offenses > Property Crimes > Forgery > General Overview
[HN7] Forgery is defined by the common law to be the fraudulent making of a writing to the prejudice of another's
rights, or the making malo animo of any written instrument for the purpose of fraud and deceit. The false making of an
instrument which purports on its face to be good and valid for the purpose for which it was created, with the design to
defraud. The false making or material alteration, with intent to defraud, of any writing which, if genuine, might
apparently be of legal efficacy or the foundation of a legal liability. The fraudulent making of an instrument in writing
to the prejudice of another's rights. Forgery may be committed by fraudulently procuring the signature of another to an
instrument which he has no intention of signing.
Criminal Law & Procedure > Criminal Offenses > Property Crimes > Forgery > Elements
Criminal Law & Procedure > Scienter > General Intent
Governments > Legislation > Types of Statutes
[HN8] The term "forgery" includes the false making of a written instrument, N.Y. Penal Law 520, and under N.Y.
Penal Law 521 it is forgery to utter or put off as true, with intent to defraud, a forged deed, knowing it to be forged. A
false certificate of an acknowledging officer to an instrument purporting to be a deed, that the same was acknowledged
by a party thereto, is forgery under N.Y. Penal Law 510, and while the absence of knowledge or a criminal intent on
the part of the officer would absolve him from liability, yet that circumstance cannot change the character of the
instrument of which the certificate is an essential part, or make it any the less a forgery.
Criminal Law & Procedure > Accessories > Accessory Before the Fact
[HN9] By N.Y. Penal Law 29 one who directly or indirectly induces or procures another to commit a crime is a
principal.
Real Property Law > Priorities & Recording > Bona Fide Purchasers
[HN10] The Recording Act applies to genuine instruments and not to forged ones. It is legally impossible for any one to
become a bona fide purchaser of real estate, or a purchaser at all, from one who never had any title. It is equally
impossible to construct an estoppel against the real owner upon a forged instrument, placed upon record without the
authority of any one. Void things are as no things.
HEADNOTES
1. Appeal -- Non-reviewable Question Whether Finding of Fact is Sustained by Evidence. Since the adoption of
the present Constitution, the question whether a finding of fact is sustained by evidence, though one of law, is not
reviewable by the Court of Appeals, when the Appellate Division has affirmed the judgment by a unanimous decision.
2. Conclusive Findings of Fact. When findings of fact have been affirmed by the Appellate Division in a
unanimous decision, the Court of Appeals must accept them as they are in their fair scope and meaning, without adding
to or taking anything from them, and, applying them to the case, the only question that can arise is whether they support
the legal conclusions drawn from them by the courts below.
3. Scope of Conclusiveness of Findings. The provision of the Constitution (Art. 6, 9) and the statute (Code Civ.
[***2] Pro. 191), that no unanimous decision of the Appellate Division that there is evidence supporting or tending to
sustain findings of fact shall be reviewed by the Court of Appeals, applies not only to the facts affirmatively stated in
favor of the successful party, but to those expressly or impliedly negatived against the party appealing.
4. Real Property -- Cancellation of Recorded Deed, Bearing Genuine Signature of Grantor Procured by Artifice,
Page 37
160 N.Y. 39, *; 54 N.E. 726, **;
1899 N.Y. LEXIS 1136, ***1
and Mortgages Made by Grantee to Third Parties for Value. In an action brought to cancel, as fictitious and void, a
recorded deed purporting to have been made by the plaintiff to her daughter, and two later mortgages upon the premises
made by the plaintiff's daughter and son-in-law to third parties for value, it was expressly found by the trial court that
the plaintiff never executed, acknowledged or delivered the deed and did not know of its existence until shortly before
bringing suit; that no consideration therefor ever passed to her; that although the signature to the deed was genuine, the
plaintiff signed her name without any knowledge or information that the paper was a deed of her premises or that it in
any way affected her interest [***3] therein; that her signature was procured by her son-in-law by some trick or artifice
unknown to the plaintiff; that the certificate of acknowledgment was false, and that the signature of the notary, though
genuine, was obtained by the plaintiff's son-in-law in some way which did not appear, but without any acknowledgment
by the plaintiff, and without her authority. The plaintiff obtained a judgment canceling the mortgages as well as the
deed, which was unanimously affirmed by the Appellate Division, and the defendants appealed to the Court of Appeals.
Held, that the conclusive findings of fact supported the legal conclusions of the courts below, and therefore required an
affirmance of the judgment.
5. Effect of Absence of Findings of Negligence on the Part of the Plaintiff, of the Status of the Defendant
Mortgagees as Bona Fide Purchasers, or of the Plaintiff's Estoppel. The defendants sought a reversal on the grounds
that although the plaintiff never intended to sign a deed, and did not know that she had, her genuine signature having
been procured by some trick or artifice, yet it was the result of negligence on her part; that the defendants holding the
two mortgages are [***4] bona fide purchasers, without notice or knowledge of the plaintiff's rights; and that the
plaintiff is estopped by the spurious deed and the false record of the same from raising any question against the validity
of the mortgages. Held, that these propositions were unavailing, since they involved matters of fact, not only not found,
but negatived by the decision on the trial.
6. Non-applicability of Rule as to Liability of the One of Two Innocent Sufferers whose Act Enabled the Wrong to
be Done. The rule, that where one of two innocent parties must suffer from a wrong committed by a third party, he
must bear the loss whose action enabled the wrong to be done, has no application against the signer of a recorded deed,
where the signature, although genuine, was procured by trick or artifice, and the deed was never in fact executed,
delivered or acknowledged; where the record was made by the production of a spurious paper to the notary, who was, in
some way and by another trick or artifice, induced to attach his official signature to a false certificate; where there was
no act or declaration on the part of the signer of the deed that enabled any one to deceive others by means [***5] of a
false record; and where the persons who acted on the false record failed to make inquiry of the true owner, in
possession of the premises.
7. Forged Instrument not Strengthened by Recording. Recording adds nothing to the legal efficacy of a false and
fabricated, and therefore forged, writing, such as a deed, the signature to which, although genuine, was procured by
trick or artifice, and bearing a false certificate of acknowledgment, having a notary's genuine signature, but also
obtained by trick or artifice.
8. Finding as to Signature Procured by Artifice, without Finding of Negligence. A judgment canceling a recorded
deed, and subsequent mortgages made by the grantee, affirmed unanimously by the Appellate Division, is sustained on
appeal by a specific finding of fact that the plaintiff's signature to the deed was procured by one of the defendants "by
some trick or artifice perpetrated by him, in some way or manner which does not appear and is unknown to the
plaintiff," with no finding that the plaintiff was negligent.
9. Absence of Estoppel. The grantor in a deed which was not knowingly executed or voluntarily delivered by him is
not estopped from alleging the fact that [***6] his signature was procured through fraud, trick and artifice, as against
the grantee or the grantee's mortgagees; and a deed never delivered, but obtained without the knowledge or consent of
the grantor, does not divest the grantor's title, and a subsequent purchaser or mortgagee from the grantee without
notice for value will not be protected.
10. Recording Act. The Recording Act never was intended to be a protection to innocent purchasers or
Page 38
160 N.Y. 39, *; 54 N.E. 726, **;
1899 N.Y. LEXIS 1136, ***2
mortgagees against theft, forgery, fraud or duress.
SYLLABUS
The nature of the action and the facts, so far as material, are stated in the opinions.
COUNSEL: David Hays and Wm. B. Lee for appellants Hiram L. Barker and the Monroe County Savings Bank. The
conclusions of law of the trial court were erroneous; if the plaintiff was induced to sign the deed by some fraud of
Dorthy, on whom she relied, she, and not the mortgagees, must suffer the consequences of that fraud. ( Chapman v.
Rose, 56 N. Y. 137; Simpson v. Del Hoyo, 94 N. Y. 189; Valentine v. Lunt, 115 N. Y. 496; Simson v. Bank of Commerce,
43 Hun, 156; 2 Jones on Real Prop. 1316; Page v. Krekey, 137 N. Y. 307; Lawrence v. G. I. Co. [***7] , 51 Kan.
222; Jordan v. McNeil, 25 Kan. 459; Gavagan v. Bryant, 83 Ill. 376; Briggs v. Jones, L. R. [10 Eq.] 92; Hunter v.
Walters, L. R. [11 Eq.] 292; L. R. [7 Ch. App.] 75.) The findings of the trial judge that the plaintiff was in possession,
and his conclusion therefrom that the mortgagees may not be regarded as purchasers without notice, were erroneous. (
McNeil v. Jordan, 28 Kan. 7; Cook v. Travis, 20 N. Y. 400; Staples v. Fenton, 5 Hun, 172; Van Keuren v. C. R. R. Co.,
38 N. J. L. 165; Bloomer v. Henderson, 8 Mich. 395; Wilson v. Hicks, 40 Ohio St. 418; 3 Washb. on Real Prop. 337; 1
Jones on Mort. 597; Pope v. Allen, 90 N. Y. 298; Brown v. Volkening, 64 N. Y. 82.) Substantial errors were made by
the trial judge in the reception and in the exclusion of evidence. ( Lawrence v. Farley, 24 Hun, 293; Geissmann v. Wolf,
46 Hun, 289; Kain v. Larkin, 131 N. Y. 300; Foote v. Beecher, 78 N. Y. 155.)
John Van Voorhis for appellants Ella M. Dorthy and John F. Dorthy. The evidence given by the plaintiff against the
objection and exception of the defendants, [***8] in the nature of a confession of the execution of the papers and its
avoidance, was all erroneously received. ( Chu Pawn v. Irwin, 82 Hun, 607; Beecher v. Schuback, 1 App. Div. 359;
Kley v. Healy, 149 N. Y. 346; Elting v. Dayton, 17 N. Y. Supp. 849.)
Theodore Bacon for respondent. So far as the Dorthys are concerned, if the facts found in the decision existed, the
relief directed by the judgment necessarily followed them. The two mortgagees, the savings bank and Mr. Barker, are
in no position to benefit by the crime of their mortgagors. ( Rapps v. Gottlieb, 142 N. Y. 164; Phelan v. Brady, 119 N.
Y. 587; Kirby v. Tallmadge, 160 U.S. 379; Boyes v. Chandler, 160 Ill. 394.) The plaintiff's case against the mortgagees
might have rested upon the proposition, if the fact had existed, that she made the deed in question, but that it was
procured from her by fraudulent representations of Dorthy, and was, therefore, not void, as in a case where the signer
had no intention of signing any such paper, but simply voidable, on the ground that it was procured by fraud. But upon
such a fact it does not rest, for the facts found [***9] by the court are the wholly independent and distinct facts that she
never signed, sealed, delivered or acknowledged the execution of the paper purporting to be a conveyance from her to
Mrs. Dorthy. (2 Black. Comm. 304-307; Doorley v. O'Gorman, 6 App. Div. 593; Bank of Havana v. Magee, 20 N. Y.
355; Briggs v. Langford, 107 N. Y. 680; Hill v. Hoole, 116 N. Y. 299; Rapps v. Gottlieb, 142 N. Y. 164.)
JUDGES: O'Brien, J. Haight, J. O'Brien and Haight, JJ., read for affirmance; Parker, Ch. J., and Martin, J., concur.
Gray and Bartlett, JJ., read for reversal. Vann, J., not voting.
OPINION BY: O'BRIEN; HAIGHT
OPINION
[*43] [**726] The plaintiff in this action invoked the jurisdiction of a court of equity to cancel certain
instruments purporting to be conveyances of real estate, which she alleges are fictitious and void. It appears from the
allegations of the complaint that at the time of the transactions stated therein, and for many years prior thereto, the
plaintiff was the owner and in possession of the dwelling house and lot where she resided and still resides. The relief
demanded is that three written instruments of record purporting to affect [***10] her title to the property be declared
void and canceled. It is charged that the three instruments were fictitious and fraudulent. They were described as
purporting to be (1) A deed bearing date and purporting to have been executed and acknowledged on the 31st day of
Page 39
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1899 N.Y. LEXIS 1136, ***6
October, 1892, and recorded December 12th, 1892, from the plaintiff to her daughter, the defendant Ella M. Dorthy, the
wife of the defendant John F. Dorthy.
[*44] (2) An instrument purporting to be a mortgage, covering this house and lot, made by the defendant Ella M.
Dorthy and her husband to the defendant, the Monroe County Savings Bank, for $ 5,000, bearing date May 6th, 1893,
and recorded May 8th, 1893.
(3) An instrument purporting to be another or second mortgage on the same premises, made by the same parties,
bearing date and recorded November 19th, 1894, to the defendant Hiram L. Barker, to secure the payment of $ 1,300. It
is alleged that on the second day of April, 1895, the savings bank commenced an action to foreclose the mortgage first
mentioned, in which action a notice of pendency was filed. It does not appear that the plaintiff was made a party to that
action.
The present action was commenced [***11] about a month after that by the bank, and the plaintiff avers that she
never executed or delivered the paper purporting to be a deed to her daughter; that she never acknowledged it, and never
saw or heard of it until a few days before she instituted this action. It is further stated that she never knew or heard of
the two mortgages above described until the same time, and that the three instruments were absolutely and wholly
fictitious and fraudulent.
These vital allegations concerning the execution of the deed, and the execution of the two mortgages, were denied
by the answers of the several defendants. The issues in the case, important as they certainly appear to be, were all issues
of fact and presented nothing but questions of fact for trial. The decision and findings of the trial court were in favor of
the plaintiff, and the three instruments were set aside. It [**727] is distinctly found that the plaintiff never executed or
acknowledged the deed; that she never knew of its existence until the time above stated; that it was never delivered to
her daughter, and that the latter never knew of its existence until the time it was discovered upon record by her mother,
the plaintiff, [***12] just before the commencement of this action. Moreover, it was found that the certificate of
acknowledgment [*45] attached to the instrument first described was false, and that the signature of the notary, though
genuine, was obtained in some way not appearing, but without any acknowledgment by the plaintiff to the officer, or
any one else. These findings having been unanimously affirmed at the Appellate Division are decisive of this appeal.
Even if they were not so well sustained by the proofs in the case as they appear to be, the result, so far as this court is
concerned, would necessarily be the same, since we are not permitted to question them, or even look into the evidence
upon which they are based. [HN1] The jurisdiction of this court is limited to questions of law, and in the present case
the findings having been affirmed in the court below in a unanimous decision, we must assume that they are sustained
by evidence. Since the adoption of the present Constitution the question whether a finding of fact, or a verdict upon
issues of fact, is sustained by evidence, though in its very nature one of law, is not reviewable here, when the court
below has decided unanimously that [***13] the judgment should be sustained. This one question of law has,
therefore, in such cases, been withdrawn from the cognizance of this court, as well as all questions of fact. We are not
at liberty to disturb a judgment in such a case by giving to the findings of fact a strained or unwarrantable construction,
any more than we are to set them aside upon a direct review. We must accept the findings as they are in their fair scope
and meaning, without adding to or taking anything from them, and, applying them to the case, the only question that can
arise is whether they support the legal conclusions drawn from them by the courts below. These propositions would be
quite sufficient to dispose of this case, but nevertheless the learned counsel for the defendants contend that upon these
findings the judgment should have been in their favor. It is quite obvious that the argument in support of this contention
not only ignores the conclusive character of the findings as made, but assumes other facts by way of defense not found
or even alleged. The decision of the courts below was in favor of the plaintiff generally, and, hence, we are bound to
assume not only that all [*46] facts alleged [***14] by the plaintiff are sustained by evidence, but that all facts alleged
by the defendants by way of defense, not found, have been rejected or expressly negatived. The Constitution and the
statute which declare that [HN2] no unanimous decision of the Appellate Division that there is evidence supporting or
tending to sustain findings of fact, shall be reviewed in this court, apply not only to the facts affirmatively stated in
favor of the successful party, but to those expressly or impliedly negatived against the party appealing. ( Szuchy v.
Hillside Coal & Iron Co., 150 N. Y. 219; Amherst College v. Ritch, 151 N. Y. 282.) It is quite important, therefore, in
Page 40
160 N.Y. 39, *43; 54 N.E. 726, **726;
1899 N.Y. LEXIS 1136, ***10
view of the contention in behalf of the defendants, to state with more particularity just what facts have been found for
the plaintiff, and what facts relied upon by the defendants have been negatived.
The most important finding for the plaintiff is the fourth, the first paragraph of which is in the following words:
"Fourth. That the plaintiff never executed or acknowledged the said instrument, and never knew of the existence
thereof until sometime in the month of April, 1895, when a rumor came to her that such an [***15] instrument had
been made, which was confirmed by an examination of the record thereof, in the said Monroe county clerk's office,
made by her on or about the 23d day of May, 1895. That although the signature affixed to said instrument is genuine,
the plaintiff signed her name to the paper upon which said instrument was written without any knowledge or
information that the paper was a deed of her said premises, or that it was an instrument which in any manner affected
her interest in said premises. The said plaintiff never at any time had any intention of selling, conveying or incumbering
her said premises, and her signature to said paper writing purporting to be a deed of her said premises was procured by
the defendant John F. Dorthy by some trick or artifice perpetrated by him in some way or manner which does not appear
and is unknown to the plaintiff." The finding then proceeds to state: "That said plaintiff never acknowledged the
execution of said instrument in [*47] any manner and never appeared before the officer, whose certificate of her
acknowledgment is affixed to said instrument, for the purpose of acknowledging the execution thereof. That the
signature to said certificate [***16] of acknowledgment is genuine, but the same was in some manner obtained by the
said defendant John F. Dorthy, in what way does not appear, but without any acknowledgment by the plaintiff to the
said officer, and without her authority given in any manner whatever. That said instrument was never delivered to the
defendant Ella M. Dorthy, and she never authorized any one to receive the same for her, and no consideration for or on
account of said instrument ever passed between the plaintiff and the said defendant Ella M. Dorthy, or between the
plaintiff and said defendant John F. Dorthy. The said defendant Ella M. Dorthy never had any knowledge of the
existence of the said pretended deed of the plaintiff to her."
It would seem to be a difficult problem which the learned counsel for the defendants [**728] have assumed to
elucidate, since it is nothing less than an effort to show that their clients, and especially the bank, have become vested
with an interest in the plaintiff's real property under what they call a deed, which, it is conclusively settled, the plaintiff
never executed, acknowledged or delivered. It must be admitted that to sustain such a position requires both courage
[***17] and ingenuity, and, accordingly, they have with commendable industry constructed an argument based upon
three propositions of fact: (1) That, although the plaintiff never intended to sign a deed, and did not know that she had,
her genuine signature appearing on the paper having been procured by some trick or artifice, yet it was the result of
negligence on her part. (2) That the defendants holding mortgages are bona fide purchasers without notice or
knowledge of the plaintiff's rights. (3) That the plaintiff is estopped by the spurious deed and the false record of the
same in the clerk's office from raising any question against the validity of the two mortgages.
The counsel in framing the argument have evidently overlooked or ignored a very important consideration, and that
is [*48] that every one of these propositions involved matters of fact, not only not found, but negatived by the decision
at the trial, so that the very basis of the whole argument is swept away. There is no finding, and there was no request to
find, either that the plaintiff was negligent in placing her signature upon the paper, or that the defendants holding
mortgages were bona fide purchasers [***18] without notice of the plaintiff's rights, or that they relied upon or were
misled by any act or word on her part. On the contrary, the plaintiff having had judgment in her favor on the whole
case, it has been found, impliedly, that she was not negligent; that the defendants are not bona fide holders without
notice, and that there was no act or word on her part upon which the defendants relied, and hence no estoppel. These
findings having been unanimously affirmed by the court below, it is very difficult to understand how there can be any
question of law before us for review. It was never permissible in this court to go behind the findings into the evidence
for some fact upon which to base a reversal, and to do it now in this case, after a unanimous decision below, is simply to
disregard the Constitution. If we can go into the evidence in such a case for new facts to overthrow or neutralize those
found, the purpose of the constitutional provision can always be defeated or evaded.
It is urged that since the court found that the signature of the plaintiff to the instrument was genuine, that she,
therefore, signed a deed of her property, and having done that, and the defendants [***19] having advanced money on
Page 41
160 N.Y. 39, *46; 54 N.E. 726, **727;
1899 N.Y. LEXIS 1136, ***14
the faith of the false record, are entitled to be protected by a court of equity. The fallacy of the whole argument is found
in the assumption that the genuine signature of the plaintiff was made to a deed, whereas the finding is that she never
executed, acknowledged, delivered or was aware of the existence of such an instrument; that she never intended to
execute a deed, or any other instrument affecting her title to the property. These findings plainly mean that she never
signed a deed, since if she did she must have executed it, and the fact that her signature is genuine is entirely consistent
with the [*49] previous part of the finding. [HN3] A party cannot make a deed without some assent of the will. It
must be a conscious act, accompanied by an intention, and every one of these elements are wanting in this case as
appears from the finding. The genuine signature of a party may be procured by some trick or device to a piece of blank
paper, and a deed or other instrument subsequently written over it without his knowledge. It may be that a party could
procure another to sign a paper by means of hypnotic suggestions or influences, but a signature [***20] procured under
such circumstances could have no more effect than if made by the hand of the hypnotiser. It does not follow in such a
case that because the signature is genuine that the party signed a deed or other contract. It is simply a spurious paper
and of no more effect than any other forgery.
But the argument wholly ignores the other part of the finding, that the instrument was never acknowledged or
delivered, and that the grantee named therein was not herself aware of its existence. [HN4] The act of signing a deed is
only one step in the process of changing the title to real property. The instrument is perfected only by delivery, and in
this case that most important fact is negatived by the findings. No one can now claim that the grantee in the spurious
paper ever received any title whatever under it, and, of course, she could not convey any better title through the
mortgage than she had herself, unless some estoppel was established, and none was found. So that, even if the court
had found that the plaintiff signed the deed of her house, instead of finding, as it did, that she did not, the other fact, that
it was never delivered, would be a complete answer to the argument in [***21] support of the mortgages, since they
must rest entirely upon the deed.
The learned counsel has cited cases in this court, and in other jurisdictions, which he claims sustain his contention.
( Chapman v. Rose, 56 N. Y. 137; Simpson v. Del Hoyo, 94 N. Y. 189; Valentine v. Lunt, 115 N. Y. 496; Simson v. Bank
of Commerce, 43 Hun, 156; affirmed, 120 N. Y. 623; Page v. Krekey, 137 N. Y. 307; Lawrence v. G. I. Co., 51 Kan. 222;
[*50] Gavagan v. Bryant, 83 Ill. 376; Hunter v. Walters, L. R. [11 Eq. Cases] 292; L. R. [7 Ch. App.] 75; Briggs v.
Jones, L. R. [10 Eq. Cases] 92; Heyder v. E. B. L. Assn., 42 N. J. Eq. 403.) The distinction between these cases and the
one at bar is so broad and so [**729] plain that it is difficult to see how it could be supposed that they had any
application. In all of them it will be seen that the party sought to be charged consciously and voluntarily executed a
contract, obligation or conveyance of some kind or character, and for some purpose. There was an intention to execute,
and an actual execution of the instrument, in every case, followed by an actual delivery. [***22] There was the assent
of the will to the use of the paper or the transfer, as the case may be, though that assent may have been induced by
fraud, mistake or misplaced confidence. In such cases when the obligation is put in circulation, or when some
instrument which clothes another with the indicia of title to property is used by him, the equities of innocent parties
must be considered. But these principles have no application to this case, for the plain reason that, upon the findings,
the plaintiff never intended to execute, and did not sign or deliver, any obligation, contract or conveyance whatever.
There is absolutely no act of the plaintiff upon which any right or equity can be based in favor of the mortgagees. It is
doubtless true that [HN5] a fraudulent grantee of real property may create a valid incumbrance upon it in favor of
innocent parties, since, as to such parties, he has the title and has been clothed with power to deal with the property.
When the owner of land executes and delivers to another a deed of it, the title passes to the grantee named therein,
although the former was induced by fraud to execute and deliver the instrument. The deed is not void, but voidable,
[***23] and, until set aside, it has the effect of transferring the title to the fraudulent grantee, and the latter, being thus
clothed with all the evidences of good title, may incumber the property to a party who becomes a purchaser in good
faith.
But in this case it would be preposterous to assert upon the facts found that the plaintiff's daughter, whose name
appears [*51] as grantee in the spurious deed, ever had any title, or that she was ever clothed by any one with the
slightest power or authority to mortgage the property. In the face of the findings that the plaintiff never executed,
Page 42
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1899 N.Y. LEXIS 1136, ***19
acknowledged or delivered the deed, no one is willing to assert that she ever had any title to convey. That the cases
cited have not the slightest application to this case is, therefore, to my mind, a proposition too plain for argument.
Nor is there any basis for the proposition that the plaintiff is estopped from assailing the mortgages, any more than
there is for questioning the deed. There was no act or declaration on the part of the plaintiff to create an estoppel. It does
not appear that the party who took the mortgages ever saw the genuine signature of the plaintiff, or acted upon it.
[***24] What they acted upon was a false and fictitious record, which the plaintiff had no hand or part in making. That
was made possible only by the genuine signature and false certificate of the acknowledging officer, who, though
innocent of any wrong, had been imposed upon, as the officers of the bank were, subsequently. It is manifest that the
genuine signature of the plaintiff played no part in the creation of the false record upon the faith of which the defendants
loaned their money, since even the notary did not act upon it. No one who had anything to do with the transaction
seems to have known or seen the signature, and for all the purposes of the case, in view of the findings, it might as well
have been simulated.
The rule that where one of two innocent parties must suffer from a wrong, he must bear the loss whose action
enabled the wrong to be done, has no application to the case. In a recent case in this court it was shown that this rule, at
best, is one applicable only in peculiar emergencies, and the limitations upon it were very clearly pointed out by Judge
Finch. ( Rapps v. Gottlieb, 142 N. Y. 164.) If we were to ask what it was that the plaintiff did to enable [***25] the
wrong in this case to be committed, it would be difficult for the learned counsel to answer it. The only answer to be
found in his argument is that she signed the deed; but it has been shown, I think, that [*52] this proposition has no real
foundation, in fact or in law. Moreover, although the plaintiff's signature to the paper is genuine, procured by some
trick or artifice, it was never delivered or acknowledged by the plaintiff, and these two acts must be imputed to her
before any one can say that she, in any degree, contributed to the success of the fraud. There was no act or declaration
on her part that enabled any one to deceive third parties by means of a false record. That record was made by the
production of a spurious paper to the notary, who was, in some way and by another trick or artifice, induced to attach
his official signature to a false certificate.
It is further found that during all the time covered by these several transactions the plaintiff was in possession of the
real property in question. Her name appeared in large letters on the front door and on the horse block in front of it, and
while the possession of the plaintiff may have been somewhat obscured [***26] by the presence in the house with her
of the son-in-law and his wife, this circumstance cannot change the legal effect of possession as notice of her rights to
all the world. ( Phelan v. Brady, 119 N. Y. 587; Holland v. Brown, 140 N. Y. 344; Kirby v. Tallmadge, 160 U.S. 379.)
I assume that no one will claim that the plaintiff changed or lost the possession of her house when she took in her
daughter and son-in-law to live with her. In the case of Mygatt v. Coe (147 N. Y. 456) we held that [HN6] the
possession of a married woman of her house was not affected by the circumstance that her husband lived with her and
attended to the property, including the payment of taxes. Assuming that case to be [**730] still law, it is difficult to
perceive how the plaintiff's possession was affected by the presence in the house with her of her daughter and her
daughter's husband. The possession in fact and in law was still in the plaintiff, and that possession was notice to all the
world of her rights. The parties who made loans on the faith of a false record, had they but inquired of the plaintiff all
the facts would have been revealed. They all resided in the same [***27] city, and all that was necessary for the
mortgagees to do in order to defeat the [*53] fraud and save themselves from loss, was to visit the premises and take
note of what such a visit would disclose. In omitting such a plain precaution the parties who proposed to loan money to
Dorthy on the faith of a fictitious paper title have deprived themselves of the right to say that the plaintiff's genuine
signature was the primary cause of their loss. If it be said that the plaintiff was not sufficiently vigilant in guarding
against the fraudulent use of her signature by her son-in-law, as a means of depriving her of her property, though that
fact is negatived by the findings, it must also be said that the mortgagees were quite as remiss in putting faith in a
fictitious record when they could have discovered the fraud about to be practiced upon them by calling at the plaintiff's
house. The defendants cannot be heard to claim that they were not bound to make any inquiries of the true owner,
while insisting at the same time that she is bound by any trick or artifice by means of which her signature was made to
appear on a false paper.
Page 43
160 N.Y. 39, *51; 54 N.E. 726, **729;
1899 N.Y. LEXIS 1136, ***23
The case has thus far been discussed strictly upon [***28] the findings of the trial court, unanimously affirmed on
appeal, but the defendants' contention would not be aided much if it is viewed in the broadest aspect, or enlarged by a
departure from the findings. I have said that the defendants' claim rests upon a spurious or fabricated paper, but this
expression does not describe the true character of the instrument. It was simply a forgery in every legal or moral aspect
in which it can be considered. [HN7] That crime is defined by the common law to be the fraudulent making of a writing
to the prejudice of another's rights (4 Black. Com. 247), or the making malo animo of any written instrument for the
purpose of fraud and deceit. (2 East P. C. 852.) The false making of an instrument which purports on its face to be good
and valid for the purpose for which it was created, with the design to defraud. (1 Leach, 366; Black's Law Dic. 508.)
The false making or material alteration, with intent to defraud, of any writing which, if genuine, might apparently be of
legal efficacy or the foundation of a legal liability. (2 Bish. Crim. [*54] Law, 523.) The fraudulent making of an
instrument in writing to the prejudice of another's rights. [***29] ( People v. Cady, 6 Hill, 490; People v. Shall, 9
Cowen, 778; People v. Harrison, 8 Barb. 560; Harris v. People, 9 Barb. 664.) So it is held that forgery may be
committed by fraudulently procuring the signature of another to an instrument which he has no intention of signing. (
State v. Shurtliff, 18 Me. 368; Gregory v. State, 26 Ohio St. 510; Com. v. Foster, 114 Mass. 311.) The true character of
the instrument which is the sole basis of the defendants' contention is well illustrated by the case of the State v. Shurtliff
(supra). In that case a party agreed with another to sell to him one acre of his farm, and the intended grantee procured a
draft of a deed describing the one acre intended to be conveyed, and presented it to the grantor who examined it and
found it correct. The execution of this deed was, however, delayed and the draft remained with the grantee, who
afterwards fraudulently procured the draft of another deed which covered and described the grantor's whole farm, and
presented it to the latter for execution as the deed before examined, and it was executed and delivered. The grantee was
convicted of [***30] forgery, and upon a review of the case upon appeal the court said: "Forgery has been defined to
be a false making, or making malo animo, of any written instrument for the purpose of fraud and deceit. (2 Russ. 317,
and authorities there cited.) The evidence fully justifies the conclusion that the defendant falsely made and prepared the
instrument set forth in the indictment, with the evil design of defrauding the party whose deed it purported to be. It is
not necessary that the act should be done in whole or in part by the hand of the party charged. It is sufficient if he cause
or procure it to be done. The instrument was false. It purported to be the solemn and voluntary act of the grantor, in
making a conveyance, to which he had never assented. The whole was done by the hand, or by the procurement, of the
defendant. It does not lessen the turpitude of the offense that the party whom he sought to defraud was made in part his
voluntary [*55] agent in effecting his purpose. If he had employed any other hand, he would have been responsible for
the act. In truth the signature to that false instrument, in a moral and legal point of view, is as much imputable to him as
[***31] if he had done it with his own hand. The art and management has no tendency to mitigate the charge, and the
opinion of the court is, that the crime of forgery has been committed. When the false making, with an evil design, is
proved artful subterfuges in defense have been disregarded, of which many of the cases cited for the government are
illustrations."
It must be admitted that the case from which this quotation is taken was not nearly so rank in its general features as
the case at bar. The grantor in that case intended to execute a deed, and it was executed and delivered, and, moreover, it
was not infected, as the instrument in this case is, with the vice of a false certificate of acknowledgment. So that when
the instrument under which the defendants now claim was placed among the [**731] public records, it was nothing but
a forgery. It was not only a forgery at common law, but a forgery by statute. [HN8] The term "forgery" includes now,
as it always did, the false making of a written instrument (Penal Code, 520), and under section 521 it is forgery to
utter or put off as true, with intent to defraud, a forged deed, knowing it to be forged. Placing the so-called deed in
[***32] this case upon record, with intent to defraud, was an "uttering or putting off as true," within the meaning of the
statute. ( Paige v. People, 3 Abb. Ct. App. Dec. 439.) Moreover, a false certificate of an acknowledging officer to an
instrument purporting to be a deed, that the same was acknowledged by a party thereto, is forgery under section 510 of
the Penal Code, and while the absence of knowledge or a criminal intent on the part of the officer would absolve him
from liability, yet that circumstance cannot, of course, change the character of the instrument of which the certificate is
an essential part, or make it any the less a forgery.
That the certificate attached to the paper in question was false, is not, and cannot be, denied. It is found that the
Page 44
160 N.Y. 39, *53; 54 N.E. 726, **730;
1899 N.Y. LEXIS 1136, ***27
party [*56] to whom the defendants loaned money upon fictitious mortgages procured the officer to make the false
certificate by some trick or artifice, and [HN9] by section 29 of the Penal Code one who directly or indirectly induces or
procures another to commit a crime is a principal. ( People v. Fitzgerald, 156 N. Y. 253; People v. McKane, 143 N. Y.
455.)
The fact that a false and fabricated writing of [***33] this character is deposited in a public office for record, and
is actually recorded, can add nothing to its legal efficacy. [HN10] The Recording Act applies to genuine instruments
and not to forged ones. ( Albany Co. Savings Bank v. McCarty, 149 N. Y. 71.) It may be that the actual record of such a
paper may deceive the unwary, but that circumstance does not change the legal rights of any one. A bank may loan
money upon the security of a pledge or mortgage of personal property in the possession of the thief who has stolen it,
and the loan may be made in good faith on the honest belief that the thief who has the possession has the title; but this
would not prevent the real owner from pursuing his property and taking it wherever he could find it. ( Knox v. Eden
Musee Co., 148 N. Y. 441.) It would not help the bank in that case to allege, as the defendants in this case allege, that it
was a bona fide purchaser. It is legally impossible for any one to become a bona fide purchaser of real estate, or a
purchaser at all, from one who never had any title, and that is this case. It is equally impossible to construct an estoppel
against the real owner upon a forged instrument, [***34] placed upon record without the authority of any one, and, of
course, the paper in question was no more entitled to record upon the false certificate than if it contained no certificate
whatever. Void things are as no things.
This fabricated writing and false record, it is said, has invested the defendants, holding fictitious mortgages, with
the character of bona fide purchasers of real estate, and so has the effect in law of divesting the plaintiff of the title to
her house and transferring it to the defendants; or if this proposition should seem to be too drastic, then we are asked to
hold that the plaintiff is estopped from raising any question with [*57] respect to the validity of the paper, since she
was the involuntary victim of crime. It is said that since some one must suffer it is better that the plaintiff should lose
her house than that the bank should lose its money. I have stated at, perhaps, undue length some of the reasons that
constrain me to reject the argument. It has always been supposed that real property could not be the subject of larceny,
but this is evidently a mistake, if it be true, as the defendants' counsel claims, that the false papers which [***35] the
judgment in this case has declared void and set aside, are to be given such legal effect as to divest the plaintiff of her
property and convey it to the defendants. In that case the process of stealing real estate, if I may be permitted to use that
expression, will be very simple and comparatively safe. All that will be necessary for the criminal to do in order to
feloniously appropriate to his own use the real property of another, is to fabricate a deed that shall contain the signature
of the true owner, genuine if possible, by any trick or artifice, but if not, then simulated, since that will be just as good.
The next step will be to procure a notary to attach to it a false certificate that the owner acknowledged it before him, and
then file it in the clerk's office. It will not be necessary that the true owner should ever see the paper or deliver it to any
one. If the grantee named in this false paper should be able to find a bank or an individual willing to loan money on the
faith of such a record as Dorthy did in this case, the theft will be complete, since the title of the true owner will be
extinguished by the bona fide intentions of the deluded money lender, or [***36] the owner will be estopped by reason
of the confidence which it is said may have been reposed in the record of a crime.
The proposition that a person, or a bank, engaged in loaning money, may, if ignorant of the real facts, rely upon a
falsehood placed upon record by criminal means, to the prejudice of the rights of the true owner of real estate, must
open the door for the destruction of all titles, and make it much easier for the criminal to purloin real than personal
[*58] property. It is said that the false deed in this case was duly recorded, but surely this must be an inadvertence,
since it is impossible to conceive that a writing, purporting to be a deed, but never executed, acknowledged or delivered,
could be duly recorded. The act of the registrar in copying on his books a forged instrument, deposited with him as part
of a criminal scheme, cannot very well be called duly recording a conveyance of land.
[**732] So it is said that the presence of the plaintiff's genuine signature on the paper rendered the fraud possible,
but this assertion is manifestly without foundation. Even if it could be held that a woman who happens to own a house
is bound by her signature [***37] to such a paper, by whatever trick or artifice procured, still, since she never delivered
the paper, or in any way authorized it to be put in circulation, and as she never acknowledged it so as to entitle it to be
Page 45
160 N.Y. 39, *55; 54 N.E. 726, **731;
1899 N.Y. LEXIS 1136, ***32
recorded, it is very difficult to see what connection her signature has with the acts of the defendants in taking the
mortgages from Dorthy. The record found in the clerk's office, upon which the defendants say they relied, was simply
the result of a crime, and, if they were deceived by it, there is no principle of law or equity that will permit them to
make their loss good from the plaintiff's property. They are the victims of a criminal contrivance in which they put
faith, and they must seek redress from the criminal who conceived and executed the fraud.
The judgment of the courts below is right and should be affirmed, with costs.
Haight, J. It appears to me there are three fundamental propositions upon which the law is well settled that stand in
the way of a reversal.
This case was tried before the court, who makes specific findings of facts and conclusions of law. The judgment of
the Special Term was unanimously affirmed in the Appellate Division. Under the Constitution [***38] this settles the
facts to be as found. The trial court found that the plaintiff's signature to the deed was procured by John F. Dorthy "by
some trick [*59] or artifice perpetrated by him in some way or manner which does not appear and is unknown to the
plaintiff." There is no finding that she was negligent, and I do not understand that we now have the power to find
negligence on her part. If negligence is to be inferred from the facts here found, it must of necessity be inferred as a
matter of law in every case where the signature of one person is procured through trick or artifice, no matter what the
condition, whether aged or blind.
In the second place, I do not understand the facts as found to constitute an estoppel. The plaintiff's signature to the
deed was procured through some trick or artifice, she not knowing that she was signing a deed. In order to constitute an
estoppel the act must be voluntary or intended. If a highwayman should point a loaded revolver at the head of a person
and compel the signing of an instrument through fear, such person would not be estopped from afterwards alleging the
fact that his signature was procured through duress, and I see no reason [***39] why the same principle should not
apply where the signature is procured through fraud, trick and artifice. In Trustees v. Smith (118 N. Y. 634-640) it is
said, that it is a voluntary act calculated to mislead and which actually did mislead that constitutes an estoppel. In
Barnard v. Campbell (58 N. Y. 73) Allen, J., in speaking upon the subject of an estoppel says: "He must have parted
with possession of his property with intent to pass the title to the wrongdoer, thus giving him the apparent right of
disposal." In Wilcox v. Howell (44 N. Y. 398-402), in speaking of the doctrine of estoppel, Earl, C., says: "It would be
carrying this doctrine to a preposterous extent to hold that a party is estopped from claiming that the very instrument
claimed to estop him was obtained from him by fraud." In Henry v. Carson (96 Indiana, 412) it was held that a deed
never delivered, but obtained without the knowledge or consent of the grantor, does not divest the grantor's title, and a
subsequent purchase from the grantee without notice for value will not be protected. (See, also, Ford v. James, 4
Keyes, 300; Rapps [*60] v. Gottlieb, 142 [***40] N. Y. 164; People v. Bank of North America, 75 N. Y. 547;
McCaskill v. Conn. Savings Bank, 60 Conn. 300; Tisher v. Beckwith, 30 Wisconsin, 55; Ogden v. Ogden, 4 Ohio St. 183;
Brant v. Virginia Coal and Iron Co., 93 U.S. 326; Article by Thomas N. Cooley, 4 American Bar Association Reports,
199.)
Finally, I do not understand that an innocent purchaser or mortgagee under the Recording Act gets a better title
than he otherwise would have acquired had it not been for the provisions of the act, except in one instance, and that is, a
failure to comply with the statute in having a deed or mortgage recorded so as to operate as a protection to innocent
purchasers and mortgagees. The Recording Act, as I understand the authorities, never was intended to be a protection
to innocent purchasers against theft, forgery, fraud or duress. (Code C. P. section 936; Ritter v. Worth, 58 N. Y. 627;
Lawrence v. Conklin, 17 Hun, 228; Taylor v. Davis, 72 Missouri, 291; Gould v. Wise, 97 California, 532; 2 Jones on
Real Property, section 1256, and authorities above cited.)
DISSENT BY: GRAY; BARTLETT
DISSENT
Page 46
160 N.Y. 39, *58; 54 N.E. 726, **732;
1899 N.Y. LEXIS 1136, ***37
Gray, J. (dissenting). This judgment [***41] should be reversed. Under the facts, as we must take them, it is a
hard case of fraud practiced upon the plaintiff, whereby she was dispossessed of the title to her property, and, as
between her and her grantee, doubtless the grant should be set aside. But a different principle operates, where it is
sought to attack the rights of the mortgagees. Having in good faith loaned their moneys upon the faith of the record
title of the mortgagors, they are entitled, in my opinion, to be protected. The plaintiff should be deemed to be bound by
her act and to be estopped from denying it, as to them. Her signature to the deed is genuine and the notarial certificate
of her acknowledgment is, also, genuine. The deed was, therefore, entitled to be recorded as a conveyance of real estate
and, however open to attack as between [**733] the parties, surely the Recording Act may be relied upon to some
extent by the bona fide mortgagee. Of course, we are bound by the facts, as found by [*61] the trial court and
affirmed by the Appellate Division, and we must assume that the plaintiff's signature was procured by trickery and that
she never intended to convey her property, and, also, [***42] that she did not acknowledge the deed before the notary;
but those facts, as applied to the case of bona fide mortgagees, do not compel the legal conclusion that their mortgages
should be set aside. They show that the plaintiff by her own act, however procured, enabled the Dorthys to offer the
security of a record title for the loans of the appellants' moneys. The deed to them was not void. It was only voidable
by force of the facts proved with respect to its making; but its avoidance could only be decreed, under generally settled
rules, subject to the intervening equities of mortgagees in good faith. To hold otherwise, is to introduce the element of
doubt and insecurity into transactions of enormous magnitude. It seems to me to be just such a case as is contemplated
by the equitable rule, that, where one of two innocent parties must suffer from the perpetration of a fraudulent act, he
who enabled the act to be done must suffer the loss. The facts, as found in favor of the plaintiff, serve only to make a
case for the application of this rule.
I cannot think that it would be a safe precedent to set, to hold that a grantor of property may come into court and
nullify the claim [***43] of a bona fide mortgagee, who has loaned his moneys upon the faith of a record title in the
mortgagor, which is rendered vulnerable by reason of the deceit of the grantee in obtaining his deed. The sentimental
view is as little just as it is legal.
From the fraud practiced upon her by her trusted son-in-law, the plaintiff and not the mortgagees should suffer, and,
therefore, so far as the latter are concerned, this judgment should be reversed.
Bartlett, J. (dissenting). This action was brought to set aside a deed purporting to have been made by the plaintiff to
the defendant Ella M. Dorthy, of certain real estate in the city of Rochester, also to set aside two mortgages upon the
[*62] same real estate, executed by Ella M. Dorthy and her husband, John F. Dorthy, one to the Monroe County
Savings Bank and the other to Hiram L. Barker.
Ella M. Dorthy is the daughter of the plaintiff, and the wife of the defendant John F. Dorthy.
The Special Term set aside the deed and mortgages as prayed in the complaint and the Appellate Division have
affirmed the judgment.
The findings of the Special Term are in part as follows: The plaintiff became a widow in 1891 and received title
[***44] from her husband of the real estate in question; her family at that time consisted of herself and daughter Ida;
the latter married on the 27th day of October, 1892, and removed to Massachusetts. Prior to this, and in contemplation
of the marriage, the plaintiff invited her married daughter Ella and her husband, John F. Dorthy, and their two children,
to remove to the home of the plaintiff, if Dorthy would pay the taxes, keep things in repair and furnish the plaintiff with
board.
In pursuance of this arrangement, and in the month of March, 1892, Dorthy and his family removed to the house of
the plaintiff and continued to reside there until June, 1895.
On the 12th of December, 1892, the defendant John F. Dorthy, an attorney and counselor at law, caused to be
recorded in the Monroe county clerk's office a deed purporting to have been executed and acknowledged by the plaintiff
Page 47
160 N.Y. 39, *60; 54 N.E. 726, **732;
1899 N.Y. LEXIS 1136, ***40
on the 31st of October, 1892, in consideration of a dollar and other valuable consideration, conveying to the defendant
Ella M. Dorthy the premises in question.
On the 6th of May, 1893, the defendant John F. Dorthy delivered to the defendant The Monroe County Savings
Bank a mortgage, purporting to have been executed [***45] by defendant Ella M. Dorthy and himself, to secure the
payment of five thousand dollars, covering the premises.
On or about the 19th of November, 1894, the defendant John F. Dorthy and his wife, Ella M. Dorthy, appear to
have executed and delivered a mortgage to the defendant Hiram L. Barker, covering the premises, as a collateral and
continuing [*63] security in an amount not exceeding thirteen hundred dollars at any one time.
On the 2nd day of April, 1895, the savings bank began an action to foreclose its mortgage, and shortly thereafter
this suit was instituted.
As the decision of the Appellate Division was unanimous, I approach the consideration of this case assuming the
facts as found by the Special Term.
The additional and controlling facts are, in substance, as follows: The trial court found that, although the signature
affixed to the deed is genuine, the plaintiff signed her name to the paper upon which it was written without any
knowledge or information that the paper was a deed of her premises.
That the plaintiff never at any time had any intention of selling the property, and her signature was "procured by the
defendant John F. Dorthy by some trick or artifice [***46] perpetrated by him in some way or manner which does not
appear and is unknown to plaintiff."
That the plaintiff never acknowledged the deed before the commissioner whose certificate of acknowledgment is
affixed thereto; that the signature of the commissioner to the certificate of acknowledgment is genuine, "but the same
was in some manner obtained by the said defendant John F. Dorthy, in what way does not appear, but without any
acknowledgment by the plaintiff to said officer, and without her authority given in any manner whatever."
That there was no delivery of the deed; that there was no consideration passing from mother to daughter; that the
daughter [**734] had no knowledge of the deed until April, 1895; that the daughter, Ella M. Dorthy, executed and
acknowledged the two mortgages referred to "without any knowledge or information on her part as to what the said
instruments were, or that the said mortgages conveyed any interest in her mother's said premises"; that the deed and the
two mortgages were duly recorded in the Monroe county clerk's office at a date prior to the loans made by the two
mortgagees, respectively.
[*64] We have, in brief, this state of facts: The [***47] plaintiff invites her son-in-law, Dorthy, a lawyer, and her
daughter, his wife, to reside with her; they came in March, 1892; by October, 1892, Dorthy had procured the deed of
plaintiff; the loan from the savings bank was made in May, 1893, and from Barker in November, 1894, Mrs. Dorthy
executing the respective mortgages; these three conveyances were duly recorded.
The mortgagees, when loaning, found a perfect record title in the defendant Ella M. Dorthy; the signature of
plaintiff to the deed is genuine; the signature of the acknowledging officer to the certificate of acknowledgment is
genuine; the record of the deed in the county clerk's office is genuine. The mortgagees, relying on this record title,
loaned their money, receiving from defendants Ella M. Dorthy and husband, a mortgage, in each loan, the execution and
acknowledgment of which is not questioned, except that Mrs. Dorthy did not know what the instruments were that she
executed.
The mortgagees insist that they are entitled to protection in a court of equity, because they are bona fide
mortgagees, without notice, relying on a perfect record title; that the loss must fall on the plaintiff, who is responsible
for this [***48] state of affairs, and not upon them.
Page 48
160 N.Y. 39, *62; 54 N.E. 726, **733;
1899 N.Y. LEXIS 1136, ***44
Giving to the plaintiff all the advantage she can claim by reason of the facts as found, upon what does she rest her
cause of action demanding the cancellation of the deed, the mortgages, the certificates of record, upon which loans have
been made in the due course of business, and that these lenders go out of court losers to the extent of their respective
advances?
The plaintiff says, it is true my signature to the deed is genuine, but it was obtained by my son-in-law through some
trick or artifice, perpetrated by him in some way or manner unknown to me and which does not appear; the
acknowledging officer says, when confronted with his signature, it is genuine, but it was obtained by defendant John F.
Dorthy in some manner unknown to me and without plaintiff's [*65] acknowledgment; the mortgagor avers that she
executed the mortgages "without any knowledge on her part as to what said instruments were."
These are the facts upon which plaintiff rests her cause of action against the mortgagees.
It is argued in her behalf that the issues in this case, while important, were issues of fact, and that the findings in her
favor are an end of the [***49] case as they have been unanimously affirmed.
The argument is that because plaintiff never knowingly executed and delivered the deed it is nothing but a spurious
paper, a forgery; that in order to hold her to the deed she must have consciously executed it; that if the mortgagees acted
on a fictitious record, it was one in which the plaintiff had no hand or part in making; that during the time of these
transactions the plaintiff was in possession of the property; that the mortgagees omitted a plain duty in not calling upon
the parties to this transaction and testing the verity of the record.
This argument closes with the suggestion that the rule to the effect where one of two innocent parties must suffer
from a wrong, he must bear the loss who enabled the wrong to be done, has no application to this case.
I am of opinion that the facts referred to as found are no answer to the claim of the mortgagees, and that the
plaintiff is estopped from denying the execution, acknowledgment, delivery and due record of the deed, for the reason
that the present situation is due to her negligent act. The plaintiff being the victim of a fraud by reason of signing a
paper, the nature of which she [***50] did not take the precaution or trouble to ascertain, cannot claim protection as
against bona fide mortgagees without notice. The plaintiff's counsel argues that it does not appear how the fraud was
perpetrated, and that in the absence of proof it cannot be assumed that plaintiff was careless.
The facts as found show gross negligence on their face. If every one who has carelessly and negligently signed a
paper [*66] can take refuge in the statement that he does not know how it happened, there will be little safety in
dealing with instruments under seal, duly acknowledged and recorded.
It is argued that plaintiff at the time of these transactions was in possession of the property, and that consequently
the mortgagees had notice of her title. The finding as to possession is that the plaintiff "continued in the possession and
occupancy of said premises and of the whole thereof except as hereinafter stated."
The findings that follow show the defendants Dorthy and wife in joint occupancy of the premises with plaintiff
during the period in question. This joint occupation was not inconsistent with Ella M. Dorthy's title, but rather tended to
confirm it.
It was entirely consistent [***51] with the title of the apparent owner by the record. ( Pope v. Allen, 90 N. Y. 298,
303; Brown v. Volkening, 64 N. Y. 76.)
The Appellate Division, referring to this argument in favor of the mortgagee appellants, said: "The proposition
stated by the appellants appears to be sound, but it is immaterial in view of our assumption that the defendants are bona
fide mortgagees without notice."
The suggestion that the mortgagees omitted a plain duty in not calling upon the parties to this transaction and
Page 49
160 N.Y. 39, *64; 54 N.E. 726, **734;
1899 N.Y. LEXIS 1136, ***48
ascertaining whether the record title was to be relied upon is without force, as the Recording Act is designed to do away
with [**735] the necessity of an inquiry that would not only make the loaning of money on real estate a work of great
difficulty, often involving impossibilities, but would create risks that life insurance companies, savings banks and
individuals would hesitate to assume.
The public records are necessarily relied upon; they are the foundation to-day of loans representing vast sums of
money. (Webb on Record of Title, 4, 89, 90, 154, and cases cited.)
It was such a public record that this plaintiff by her negligent act created.
The plaintiff [***52] may set this deed aside as between herself and [*67] the grantee, but the intervening rights
of bona fide mortgagees without notice she must respect.
In Page v. Krekey (137 N. Y. at page 312) Judge O'Brien states this rule with great clearness, although not writing
in a real estate case: "If he actually signed the paper, though procured to do it by fraud, and is chargeable with
negligence, he is liable to an innocent party who acted to his prejudice upon the faith of the instrument. Such cases are
not governed by the rules applicable to the bona fide holder of negotiable paper procured by fraud, but by the equitable
rule that where one of two innocent parties must suffer, he who has put it in the power of a third person to commit the
fraud must sustain the loss. * * * If this instrument had been a negotiable promissory note the defendant's liability to
the plaintiff would depend upon the question of negligence and there does not appear to be any sound reason for a
different rule in this case ( Chapman v. Rose, 56 N. Y. 137 * * *)."
Chapman v. Rose (56 N. Y. 137). This case involves the legality of a negotiable instrument. The court held that
[***53] any one having the opportunity and the power to ascertain, with certainty, the exact obligation he is assuming,
yet chooses to rely upon the statements of the person with whom he is dealing, and executes a negotiable instrument
without reading or examination, is bound as a bona fide holder for value. The theory is that he is guilty of laches or
negligence in signing the instrument without reading it. He had power to know with certainty its contents, but saw fit to
trust the statements of another. He thereby placed in circulation what appeared to be, on its face, a valid promise to pay.
The purchaser of this promise in the open market, for value, was entitled to rely upon these facts which were disclosed
upon the face of the instrument.
This case rests upon a double principle: that the maker of the instrument is liable for the acts of the person he saw
fit to trust, and that the transaction may be regarded as an estoppel. This court held that to decide otherwise would be to
deal a serious blow to commercial paper. There is no [*68] sound reason why instruments involving title to real estate
should not be equally protected as to the bona fide mortgagee without [***54] notice.
In Simpson v. Del Hoyo (94 N. Y. 189) it was held that as against a purchaser in good faith and for value of a
mortgage upon land, executed by one in possession of, and holding the legal title to, the land, the grantor of the
mortgagor is estopped from claiming that the conveyance was induced by fraud on the part of the latter.
The rule that a purchaser of a non-negotiable chose in action takes it subject to all the equities existing between the
original parties, and to all the latent equities of third persons, does not apply in such case. While the rule is well
established in this court, it has a number of exceptions and this is one of them. A mortgage is never purchased on the
faith of the assignor, but always in reliance upon the mortgagor's title. ( McNeil v. Tenth National Bank, 46 N. Y. 335;
Moore v. Metropolitan National Bank, 55 N. Y. 41; Green v. Warnick, 64 N. Y. 220; Hill v. Hoole, 116 N. Y., at page
303.)
In Valentine v. Lunt (115 N. Y. 496) it is held that a grantee or mortgagee, for a valuable consideration and without
notice, from one who obtained title by fraud and undue influence, acquires a good title or [***55] lien and will be
protected against the claims of the defrauded vendor.
The court suggests that it would be contrary to natural justice and reason and opposed to the rules and principles of
Page 50
160 N.Y. 39, *66; 54 N.E. 726, **734;
1899 N.Y. LEXIS 1136, ***51
established equity by which courts are governed in cases of this nature to hold otherwise. The court here applied the
doctrine of estoppel.
The principle announced in the foregoing cases is fully recognized in England.
In Briggs v. Jones (L. R. [10 Equity Cas.] 92) Briggs was the mortgagee of leasehold property and he loaned his
lease to the mortgagor, for the purpose of raising money upon it, but at the same time told the mortgagor to inform the
person from whom he proposed to borrow the money that he (Briggs) had a prior charge thereon. The mortgagor
borrowed money from [*69] his bankers upon the security by a deposit of the lease without giving them notice of
Briggs' mortgage thereon.
The court held, Lord Romilly, master of the rolls, delivering the opinion, that Briggs' lien on the lease must be
postponed to that of the bankers, for the reason that by placing the lease in the mortgagor's hands Briggs had enabled
him to mislead the bankers.
In Hunter v. Walters, and [***56] two other causes heard at the same time (L. R. [11 Equity Cas.] 291), the facts
were as follows: Walters was a solicitor of two mortgagees, Hunter and Darnell, and put up for sale by auction, without
authority, the mortgaged estate. Walters professed to have bought the estate and prepared a conveyance which
purported to have been made by the second mortgagee under his power of sale. The mortgagees both executed the
conveyance to Walters and also signed indorsed receipts for money paid to them, although no money was in fact paid to
them. Walters took possession of the estate and continued to pay interest to the mortgagees [**736] and afterwards
made an equitable mortgage of the estate, representing it to be his own and unincumbered. As to the first mortgagee
there was evidence that he was deceived by the solicitor, and as to the second mortgagee there was evidence that he had
trusted the solicitor implicitly.
It was held by the vice-chancellor that Hunter and Darnell, though they executed the conveyance in ignorance of its
contents, had passed the estate to Walters; that they had, by signing receipts for the purchase money, armed Walters
with power dealing with the estate [***57] as the absolute owner and had thereby given priority to the lien of the
subsequent mortgagee. This decision was affirmed. (L. R. [7 Chancery App.] 75.)
Lord Hatherly, lord chancellor, wrote the main opinion, and two of the lord justices also writing.
Lord Justice Sir W. M. James said, in the course of his opinion: "To my mind it is almost ludicrous to contend, and
it would be most injurious to hold, that a man executing a deed and signing a receipt, as a matter of form, should be able
[*70] to say that it is a nullity." * * * "I am of opinion that the rule of equity is the rule of common sense; that the
principal must suffer for the fraud of his agent and not the stranger who is dealing with the agent; that the man who has
made the representations, under whatever circumstances, must bear the consequences of those representations, and not
the man who has trusted to the representations so made."
The general principle under discussion has also been recognized in the courts of several of the states.
A very well-considered case, involving these principles, but under a different state of facts, is Heyder v. Excelsior
Building Loan Association (42 N. J. Equity, 403). [***58] It was held there that the lien of a mortgage duly registered
will not be lost by a cancellation of record effected through accident, or the mistake or fraud of third persons. If the
cancellation be the result of the negligence of the owner, he will not be permitted to establish his lien against
subsequent bona fide purchasers or mortgagees acting upon the faith of such cancellation of record. In this case the
mortgagor was the attorney of the association and had given it a mortgage to secure a loan. The mortgagor
subsequently obtained possession of the mortgage and indorsed upon it the name of the association without authority
and a certificate of cancellation which was recorded. He then sold the property to a bona fide purchaser as free from
incumbrance.
The trial court held that the purchaser, not the mortgagee, should bear the loss incident to the fraudulent
Page 51
160 N.Y. 39, *68; 54 N.E. 726, **735;
1899 N.Y. LEXIS 1136, ***55
cancellation of the mortgage, but the Court of Chancery on appeal reversed this judgment and held that the mortgagee
should suffer the loss, as it was directly chargeable to their negligence or fault that the mortgagor was placed in
possession of the unpaid mortgage.
Judge Story, in his Equity Jurisprudence (Vol. [***59] I, 434), in commenting upon the position of a bona fide
purchaser for a valuable consideration, without notice, under the circumstances that we have been considering, said:
"Such a person is a favorite in the eyes of a court of equity and is always protected, [*71] as has been already intimated
against claims of this sort."
In Gavagan v. Bryant (83 Ill. 376) the grantor was deceived and told he was signing a five years' lease, when, in
fact, it was a deed. He was held negligent and bona fide purchaser protected. (See, also, Lawrence v. Guaranty
Investment Co., 51 Kansas, 222.)
It is urged that in some of the foregoing cases the party sought to be charged consciously and voluntarily executed a
conveyance or other instrument by fraudulent inducement, and that the principle of equity therein invoked has no
application to the case of one whose signature was obtained by trick or device to a paper, the character of which was
unknown by reason of the carelessness or negligence of the person so signing. There is no distinction between the cases
in sound reason or on authority. If A., by reason of fraudulent representations, knowingly executes a deed, he [***60]
is estopped from urging the fraud against the subsequent bona fide mortgagee without notice; he trusted to the person
who deceived him, and must take the consequences. If B., with utter disregard of results, signs a paper at the
solicitation of one occupying a confidential relation to him, the contents of which he does not ascertain, but which was
in fact a deed, can it be said that his position in a court of equity is more favorable than that of A.? He stands clearly
within the rule that where one of two innocent parties must suffer from a wrongful act, he must bear the loss who
enabled the wrong to be done; his position is less favorable than A.'s, for he has been guilty of negligence, while the
former trusted a person he believed honest.
This plaintiff, as matter of law, on the conceded facts, is estopped from denying the acknowledgment and delivery
of the deed. She is, by the findings, ignorant of the trick or artifice perpetrated upon her. The deception, so far as this
record goes, is a mere figment of her imagination -- a suspicion. She admits her signature and stops there; as to how it
was obtained, this case is absolutely silent.
The plaintiff is found to have sigued [***61] a paper, of whose [*72] contents she was wholly ignorant, which,
unexplained, is gross negligence, and, in the absence of evidence to the contrary, it must be presumed that she parted
with the instrument by voluntary delivery. (Holbrook v. N. J. Zinc Co., 57 N. Y. at top page 624.)
This case was decided below, ignoring the doctrine of negligence and estoppel, and apparently assuming that the
mortgagees' rights depended upon the validity of the deed between the parties.
With all respect, I think to affirm the judgment before us is to disregard well-settled principles which have long
been recognized by courts [**737] of equity, to cast discredit upon record titles, and to deter capitalists from loaning
money on real estate security.
The judgment appealed from should be reversed and a new trial ordered.
Page 52
160 N.Y. 39, *70; 54 N.E. 726, **736;
1899 N.Y. LEXIS 1136, ***58
32 of 314 DOCUMENTS
Caution
As of: May 27, 2014
Ludlow W. Valentine, an Infant by Guardian, Appellant, v. Susan A. Austin et al.,
Impleaded, etc., Respondents
124 N.Y. 400; 26 N.E. 973; 1891 N.Y. LEXIS 1378
February 23, 1891, Argued
March 10, 1891, Decided
PRIOR HISTORY: [***1] Appeal from judgment of the General Term of the Supreme Court in the second judicial
department, entered upon an order made December 8, 1890, which affirmed a judgment in favor of defendants entered
upon a decision of the court on trial at Special Term.
Reported below, 58 Hun, 398.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff sought review of a judgment of the General Term of the Supreme Court in the
Second Judicial Department (New York), which affirmed a judgment of the trial court, which dismissed a complaint
against defendants, purchaser and mortgagee. Plaintiff had sought to set aside two deeds, one from the original owner to
defendant transferee, and one from the transferee to the purchaser and mortgagee.
OVERVIEW: Plaintiff had a deed set aside from the original owner to the transferee; however, the deed from the
transferee to the purchaser and mortgagee was not set aside because they had no notice that the deed had originally been
obtained without consideration and by undue influence. The purchaser obtained the property from the transferee in good
faith, relying upon his possession and record title, without notice of any infirmity therein. Plaintiff did not dispute that
the purchase was made in good faith, but argued that the purchaser had notice of infirmity of the transferee's title. The
court disagreed, stating that before the purchase was completed, the purchaser noted that a lis pendens was listed,
however, the official search also noted that the lis pendens had been cancelled. The court held that when the action in
Page 53
which the lis pendens was filed had been dismissed and the notice canceled, it ceased to be a statutory notice to
purchasers of the premises described in it. In addition, when a party found that a lis pendens was canceled, it was not
negligent or evidence of bad faith on their part not to search for the papers which had been filed in an action which had
been dismissed.
OUTCOME: The court affirmed the judgment.
CORE TERMS: notice, deed, undue influence, lis pendens, good faith, fraudulent, canceled, conveyance, statutory
notice, infirmity, conclusions of law, mortgage, pendency, inquire
Civil Procedure > Remedies > Lis Pendens > Notices
Civil Procedure > Remedies > Lis Pendens > Terminations
Real Property Law > Priorities & Recording > Lis Pendens
[HN1] When the action in which the lis pendens was filed has been dismissed and the notice canceled, it ceases to be a
statutory notice to purchasers of the premises described in it. N.Y. Code Civ. Proc. 1670-1674.
Civil Procedure > Remedies > Lis Pendens > Terminations
[HN2] When a party finds that a lis pendens has been canceled, it is not negligent or evidence of bad faith on their part
not to search for the papers which have been filed in an action which has been dismissed.
SYLLABUS
Where an action in which a lis pendens was filed has been dismissed and the notice canceled, it ceases to be a
statutory notice to bona fide purchasers of the premises described in it. (Code Civ. Pro. 1670, 1674.)
In an action to set aside a deed from B., plaintiff's ancester, to defendant R., also a deed from R. to defendant A.,
and a mortgage from the latter to defendant L., it was found that R. obtained his deed by fraud and undue influence, but
that A. purchased in good faith relying on R.'s record title and possession. It appeared that a prior action was brought
against R. to set aside a former deed of the premises from B. to him, on the same ground, in which action a notice of
pendency was filed; a final judgment was entered therein dismissing the complaint, and said lis pendens was canceled
by order of the court. It did not appear that A. [***2] knew of the former judgment. It was claimed that A. was
chargeable with either statutory or implied notice of the infirmity of his title. Held, untenable; that the lis pendens,
when canceled, ceased to be a statutory notice; and that the omission of A. or L. to search for the papers filed in that
action was not negligence or evidence of bad faith on their part.
The nature of the action and the facts, so far as material, are stated in the opinion.
COUNSEL: Horace Secor, Jr., for appellant. Neither Mrs. Austin nor Mrs. Lunt needs equitable protection against
plaintiff, because Richardt is responsible to Austin on his covenants, and Austin to Lunt on her bond. (Gardner v.
Schwab, 110 N. Y. 650; Armstrong v. Dubois, 90 id. 95.) If this court hold that the facts found by the trial judge show
constructive notice to the defendants Austin and Lunt, the finding that Mrs. Austin acted "without any notice of any
infirmity," is unavailing to her. (Green v. Rowerth, 113 N. Y. 462; Waser v. First Nat. Bank, 116 id. 492.) If the
defendants Austin and Lunt are chargeable with constructive notice of the infirmity of Richardt's title, the fact that they
[***3] acted in good faith and paid value, is no protection to them. (Green v. Rowerth, 113 N. Y. 462; Waser v. First
Page 54
124 N.Y. 400, *; 26 N.E. 973, **;
1891 N.Y. LEXIS 1378, ***1
Nat. Bank, 116 id. 492; 1 Perry on Trusts, 217, 223; Valentine v. Lunt, 115 N. Y. 501; Weaver v. Barden, 49 id. 286;
Miller v. McGuckin, 15 Abb. [N. C.] 227; Parker v. Conner, 93 N. Y. 124; Baker v. Bliss, 39 id. 70; Claflin v. Lenheim,
66 id. 301; Bennett v. Buchan, 76 id. 386; Griffith v. Griffith, Hoff. Ch. 153; Westervelt v. Hoff, 2 Sandf. Ch. 98.) The
defendants, through their attorneys who examined the title, are chargeable with notice of such suspicious, unusual and
extraordinary circumstances, as would have caused a person of ordinary prudence to make further inquiries, which
would have disclosed the true state of affairs. (Parker v. Conner, 93 N. Y. 124; Tantum v. Green, 6 C. E. Green, 364,
369; Converse v. Blumrich, 14 Mich. 109, 120; 4 Kent's Comm. 179; Wait's Fraud. Conv. [2d ed.] 373, 374; Griffith
v. Griffith, Hoff. Ch. 153; Baker v. Bliss, 39 N. Y. 70.) But even if these defendants can be held not chargeable with
constructive [***4] notice, they are only entitled to the protection to the extent of the price paid. (Valentine v. Lunt,
115 N. Y. 502; Weaver v. Barden, 49 id. 286, 290, 300; Cary v. White, 52 id. 138, 141; Spicer v. Waters, 65 Barb. 227,
231; Erskine v. Decker, 39 Me. 467; Partridge v. Chapman, 81 Ill. 137; Dunn v. Chambers, 4 Barb. 381, 382.)
James D. Bell for respondent Austin. This court cannot review any question of fact arising herein because the evidence
is not contained in the appeal book. (Porter v. Smith, 107 N. Y. 531; Spence v. Chambers, 39 Hun, 193; Howland v.
Howland, 20 id. 472.) Mrs. Austin was protected as a purchaser in good faith without notice for value from a
fraudulent vendee. (Simpson v. Del Hoyo, 94 N. Y. 189.) After a lis pendens is canceled a purchaser in good faith need
not examine the pleadings, and is not bound by their allegation. (Taylor v. Boyd, 3 Ohio, 352; Bennett's Lis Pen. 204;
Code Civ. Pro. 1674; Miller v. McGucken, 15 Abb. [N. C] 204.) The defendant Austin is fully protected, and plaintiff
has no right to redeem, she being a purchaser in [***5] good faith for value. (Simpson v. Del Hoyo, 94 N. Y. 189;
Bumpus v. Platner, 1 Johns. Ch. 213; Demarest v. Wynkoop, 3 id. 129; Griffith v. Griffith, 9 Paige, 315; Smart v.
Bement, 4 Abb. Ct. App. Dec. 253; Paddon v. Taylor, 44 N. Y. 371; Valentine v. Lunt, 115 id. 496, 505.)
W. C. Beecher for respondent Lunt. We must assume, for the purposes of this appeal, that the deed from Mrs. Valentine
to Richardt was obtained by fraud. In that case plaintiff had his election, to ratify the sale and recover the money value
of the property from Richardt, or disaffirm the sale and seek to set aside the deed and subsequent conveyances;
obviously he cannot do both. (Maller v. Tuska, 87 N. Y. 168; Rodemunde v. Clarke, 46 id. 354; Kinney v. Kiernan, 49
id. 164). Where an appeal is taken on the judgment-roll alone without a case no question of law or of fact raised on the
trial can be considered. (Chubbuck v. Veinaen, 42 N. Y. 432; Ferguson v. Hamilton, 35 Barb. 427; Schwartz v. Webber,
103 N. Y. 638; Health Dept. v. Pardon, 99 id. 237.) The court having found that Mrs. Valentine [***6] was sane, and
remained so up to the time of her death, and that Mrs. Austin was a purchaser for value and without notice, and that
Mrs. Lunt was a good faith mortgagee for value, these facts must be taken as conclusively established, and are not
open for discussion. The conclusion necessarily follows that as to them this action must fail. (Valentine v. Lunt, 115 N.
Y. 496.) It is contended that, notwithstanding Mrs. Austin and Lunt took in good faith and for value, yet they were
chargeable with notice of the nature of the action brought in 1884, in which the complaint had been dismissed and the
les pendens canceled by order of the court long before they or either of them took title. This is untenable. (Miller v.
McGucken, 15 Abb. [N. C.] 204; Parker v. Conner, 93 id. 118; Straus v. Gage, 79 id. 102; Lamont v. Chesire, 65 id. 30;
Ayrault v. Murphy, 54 id. 203; Hayes v. Nourse, 114 id. 595; Simpson v. Del Hoyo, 94 id. 189; Jackson v. Henry, 10
Johns. 184; Magee v. Badger, 34 N. Y. 247, 249; Cupper v. Baumes, 15 Hun, 136; 1 R. S. 756; Pickert v. Canal Boat,
55 How. Pr. 205; Morgan [***7] v. Chamberlain, 26 Barb. 163; Ring v. Steel, 3 Keyes, 450.)
JUDGES: Follett, Ch. J. All concur.
OPINION BY: FOLLETT
OPINION
[*403] [**973] This action was begun January 20, 1888, to set aside a deed of June 7, 1886, from Catharine A.
Valentine to defendant Hermann T. Richardt, on the grounds: (1) That at its date the grantor was of unsound mind. (2)
That it was obtained from her without consideration, by fraud and undue influence; and also to set aside a deed of
October 27, 1886, from Richardt to defendant Susan A. Austin and a mortgage of October 1, 1887, given by her to
defendant Elisabeth H. Lunt, on the grounds: (1) That each of them had actual or statutory notice that Richardt acquired
Page 55
124 N.Y. 400, *; 26 N.E. 973, **;
1891 N.Y. LEXIS 1378, ***3
his title by fraud; or (2) That each of them had sufficient information of the circumstances under which he acquired his
title to put them on inquiry, and having failed to inquire, notice to them of the fraudulent character of his title should
be implied.
The court found that Mrs. Valentine was of sound mind on the 7th of June, 1886, and so remained until her death.
But it was found that Richardt obtained his conveyance by undue influence and without consideration, and that the
[***8] premises were then and ever since have been reasonably worth fifteen thousand dollars, and a judgment was
ordered and entered against him for that sum with interest from the date of his deed, with costs. Richardt did not appeal
from the judgment. The complaint against Mrs. Austin and Mrs. Lunt was dismissed on the merits and a judgment of
dismissal entered with costs in favor of each of them against the plaintiff, from which he appealed to the General Term
where it was affirmed with two bills of costs, from which affirmance he appealed to this court. Austin and Lunt in
compliance with the rule of pleading in such cases (Seymour v. McKinstry, 106 N. Y. 230), alleged in [*404] their
answers that the conveyance to each was for vaiue, in good faith and without notice of any kind that Richardt's title was
fraudulent.
A case not being annexed to the judgment-roll the only questions which are presented for discussion are those
which arise on the plaintiff's exceptions to the conclusions of law of the trial court.
Upon the issues joined between the [**974] plaintiff and the respondents the court found that Mrs. Austin
purchased the property from Richardt in good faith, [***9] relying upon his possession and record title, without
notice of any infirmity therein. The plaintiff conceded that this purchase was made in good faith, and went so far as to
request the court to find: "That the defendant Austin purchased said property from said Richardt in good faith, for $
12,000, relying upon his record title and possession." But he excepted to the sentence "without notice of any infirmity
therein," which is the only finding to which an exception was filed, though exceptions were taken to all of the
conclusions of law. As before stated, the evidence not being before the court, this finding so far as it is one of fact is
conclusive, unless as the plaintiff asserts it is inconsistent with and overthrown by the other facts found. It is not found
nor is it asserted that either of the respondents had actual notice that Richardt obtained his title by undue influence and
without consideration, but it is asserted that both of them had either statutory or at least implied notice of the infirmity
of his title.
It is found that November 22, 1883, Richardt obtained without consideration, by fraud and undue influence, a
previous deed of this property from Mrs. Valentine, [***10] which was duly recorded the next day, and that in May,
1884, an action was begun in the City Court of Brooklyn, in the name of Catharine A. Valentine by Charles H. Joy, her
next friend, against Richardt to set aside the deed as fraudulent, and as obtained by undue influence and without
consideration. It is also found that on the 7th of May, 1884, there was filed in the office of the clerk of the county of
Kings a notice of the [*405] pendency of that action, which was in the usual form, the title being given, and stating in
substance that its object was to set aside the conveyance of November 22, 1883. It is further found that by a deed dated
May 22, 1884, Richardt conveyed the premises to Mrs. Valentine, and December 20, 1884, a final judgment was
entered dismissing the complaint in the last-mentioned action, and September 6, 1886, the lis pendens was canceled by
an order of the court in which the action was brought. Before Mrs. Austin completed her purchase, she received an
official search which disclosed the fact that the lis pendens referred to was filed May 7, 1884, and canceled September
6, 1886. A like search disclosing the same facts was furnished Mrs. Lunt [***11] when she took her mortgage. The
learned counsel for the plaintiff insists that the lis pendens was constructive notice, by force of the statutes relating to lis
pendens, to the respondents that the first deed from Mrs. Valentine to Richardt was obtained by fraud. [HN1] When the
action in which the lis pendens was filed had been dismissed and the notice canceled, it ceased to be a statutory notice
to purchasers of the premises described in it. (Code Civ. Pro. 1670-1674.) It is difficult to conceive of an effective
notice of the pendency of an action when no action is pending.
It is further insisted that if the lis pendens was not a statutory notice, that the facts found were sufficient to put the
respondents upon inquiry, and that they having failed to inquire, were negligent and notice should be implied.
Page 56
124 N.Y. 400, *403; 26 N.E. 973, **973;
1891 N.Y. LEXIS 1378, ***7
It is not found that the respondents or their attorneys knew of the existence of the judgment which was entered in
the action, or had any knowledge of the relations which are now found to have existed between Mrs. Valentine and
Richardt. [HN2] When the respondents found that the lis pendens had been canceled, it was not negligent or evidence
of bad faith on their part [***12] not to search for the papers which had been filed in an action which had been
dismissed. It is not affirmatively found that a complaint was ever filed in that action, but if one was and had been
examined, it would have shown that the defendant Richardt was charged with having obtained a previous deed [*406]
by fraud and undue influence, which, taken in connection with the dismissal of the action and the reconveyance of the
property, would not be sufficient to authorize this court to hold, as a matter of law, despite the findings of fact referred
to, that the grantee or mortgagee believed or had cause to suspect that Richardt's title was fraudulent, or that they were
negligent in not making further inquiry.
The judgment should be affirmed with costs in favor of each respondent.
Page 57
124 N.Y. 400, *405; 26 N.E. 973, **974;
1891 N.Y. LEXIS 1378, ***11
35 of 314 DOCUMENTS
Caution
As of: May 27, 2014
James J. Phelan, Appellant, v. Margaret Brady, Impleaded, etc., Respondent
119 N.Y. 587; 23 N.E. 1109; 1890 N.Y. LEXIS 1127
March 3, 1890, Argued
PRIOR HISTORY: [***1] Appeal of the General Term of the Supreme Court in the first judicial department,
entered upon an order made June 19, 1888, which affirmed a judgment in favor of defendant, dismissing plaintiff's
complaint on the merits, upon a decision of the court on trial at Special Term.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff mortgagee appealed the judgment of the General Term of the Supreme Court in
the First Judicial Department (New York), which affirmed the trial court's judgment in favor of defendants, mortgagor
and occupant, dismissing the mortgagee's action to foreclose on the mortgage.
OVERVIEW: The mortgagee sought to foreclose on a mortgage of a tenement building. He subsequently learned that
prior to the execution and delivery of his mortgage, the building had been sold to one of its occupants. The trial court
held that the occupant's title and possession was sufficient to defeat any claim under the mortgagee's mortgage, and
dismissed the complaint. At the time of the execution and delivery of the mortgage to the mortgagee, the occupant was
in the actual possession of the premises under a perfectly valid but unrecorded deed. Her title, therefore, prevailed as
against the mortgagee. It mattered not, so far as the occupant was concerned, that the mortgagee in good faith
advanced his money upon an apparently perfect record title of the mortgagor. Nor was it of any consequence whether
the mortgagee was in fact ignorant of any right or claim of the occupant to the premises. It was enough that she was in
possession under her deed and the contract of purchase, as that fact operated in law as notice to the mortgagee of all her
rights.
Page 58
OUTCOME: The court affirmed the judgment of the trial court, which dismissed the mortgagee's action to foreclose on
the mortgage.
CORE TERMS: mortgage, occupied, tenants, deed, notice, apartment, delivery, rents, real estate, contract of purchase,
purchase-money, purchase-price, housekeeper, fee-simple, recorded, default, rented
Real Property Law > Deeds > General Overview
Real Property Law > Financing > Mortgages & Other Security Instruments > General Overview
[HN1] Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and
to all the world of the existence of any right which the person in possession is able to establish.
SYLLABUS
Actual possession of real estate is sufficient notice to all the world of the existence of any right which the person in
possession is able to establish.
In an action brought to foreclose a mortgage upon certain premises given by M., who held an apparently perfect
record title to the same, it appeared that before the execution of the mortgage, M. had conveyed the premises to B. who
was in possession, and, with her husband, occupied two rooms in the buildings on the premises; he also kept a liquor
store in a part thereof; the other rooms she leased to various tenants, claiming to be the owner, and she collected the
rents. Her deed was not recorded until after the giving of the mortgage. Held, that B.'s actual possession under her
deed, although unrecorded, and its existence unknown to the plaintiff, was sufficient notice to him of her rights to
defeat any claim under [***2] the mortgage.
Also, held, that the fact B. and her husband occupied the store and a living apartment in the building prior to the
time she went into possession under her contract of purchase could not aid the plaintiff.
The nature of the action and the facts, so far as material, are set forth in the opinion.
COUNSEL: N. B. Hoxie for appellant. The plaintiff had not constructive notice of defendant's claim. ( Williamson v.
Brown, 15 N. Y. 362, 364; Pope v. Allen, 90 id. 298, 303; Cooke v. Travis, 20 id. 400; Staples v. Fenton, 5 Hun, 172; 3
Wash. on Real Prop. 317; Claiborne v. Holmes, 51 Miss. 146; Billington v. Welch, 5 Binney, 129; Page v. Waring, 76 N.
Y. 463, 471; Chesterman v. Gardener, 5 Johns. Ch. 29; Grinstone v. Carter, 3 Paige, 421; Webster v. Van Steenbergh,
46 Barb. 212.)
William E. Wyatt for respondent. The defendant Margaret Brady's possession and occupation under a deed, though
unrecorded, was notice as to her ownership of the property. (Gerard on Real Estate, 593, 594; Goveneur v. Lynch, 2
Paige, 300; Bank of Orleans v. Flagg, 3 Barb. 318; Tuttle v. [***3] Jackson, 6 Wend. 213; Moyer v. Hinman, 13 N. Y.
184; Trustees, etc., v. Wheeler, 61 id. 88-98; Cavalli v. Allen, 57 id. 517; Chesterman v. Gardner, 5 Johns. Ch. 39;
Territt v. Cowenhoven, 11 Hun, 320; Troup v. Hurlbut, 10 Barb. 354; Smith v. Jackson, 76 Ill. 254; Greer v. Higgins, 20
Kan. 420; Brown v. Volkening, 64 N. Y. 76-83; Page v. Waring, 76 id. 463-470; Seymour v. McKinstry, 106 id.
230-238; Robinson v. Wheeler, 25 N. Y. 260; People v. Snyder, 41 id. 402; Seymour v. Van Slyck, 8 Wend. 403, 404;
Sharder v. Bunker, 65 Barb. 608; Brown v. Austin, 30 id. 358; Ernest v. Reed, 49 id. 367; Tracy v. Snowden, 23 Wkly.
Dig. 41; Moyer v. Hinman, 13 N. Y. 184; Merithew v. Andrews, 44 Barb. 200; 2 Pomeroy's Eq. Juris. 665.) The fact that
the property in question is a tenement-house, has no proper bearing on the question, and cannot change the rule. ( Page
v. Waring, 76 N. Y. 470; Crosland v. M. S. F. Assn., 121 Penn. St. 82, 83; Brown v. Volkening, 64 N. Y. 84; De Ruyter v.
Trustees, etc., 2 Barb. [***4] Ch. 556; 2 Pomeroy's Eq. Juris. 665.) The defendant was guilty of no negligence. (
Page 59
119 N.Y. 587, *; 23 N.E. 1109, **;
1890 N.Y. LEXIS 1127, ***1
Seymour v. McKinstry, 106 N. Y. 230.) The defendant being in actual possession under a deed covering the premises,
and claiming under a specific title adversely to John E. Murphy, plaintiff's mortgagor, the mortgage under the Revised
Statutes is void. ( Fish v. Fish, 39 Barb. 13; Cary v. Goodman, 22 N. Y. 174; Bradstreet v. Clarke, 12 Wend. 675;
Christie v. Gage, 71 N. Y. 189.)
JUDGES: O'Brien, J. All concur.
OPINION BY: O'BRIEN
OPINION
[*589] [**1110] On the 23d day of July, 1886, the plaintiff loaned to the defendant John E. Murphy the sum of $
2,000, and took from him his bond, whereby he promised to pay the same with interest semi-annually in two years
thereafter. On the same day, and as collateral security for the payment of the bond, Murphy and his wife executed,
acknowledged and delivered to the plaintiff a mortgage upon certain real estate in the city of New York. The premises
thus mortgaged consisted of a tenement building, or block, containing forty-three rooms or apartments, then occupied
by twenty different occupants or families, as tenants from month [***5] to month, except that three of these apartments
were occupied by the defendant Margaret Brady and her husband, who kept a liquor store in part of the building, and
they occupied two living rooms in the rear of the store, the wife claiming to be the owner of the premises and collecting
rents from the other tenants.
The plaintiff, at the time he made the loan, had no actual notice or knowledge of any title to the premises in Mrs.
Brady, or any claim on her part to be the owner. When the first installment of interest became due upon the mortgage,
default was made, and the plaintiff brought this action to foreclose under a provision in the mortgage making the whole
sum due upon default in the payment of the interest when due. Margaret Brady being in possession was made a party to
the action, [*590] and she answered, setting up the defense that prior to the execution and delivery of the plaintiff's
mortgage, and on or about the 5th of May, 1886, she became the absolute owner in fee-simple of the premises described
in the complaint and in the mortgage and of the whole thereof, and that upon becoming such owner, she took possession
of the same, and that she has ever since continued [***6] in actual, open and notorious occupation and possession of
the premises as such owner, and has ever since and still owns the same in fee-simple.
The trial court found that in March, 1886, Margaret Brady employed one Michael J. Murphy, an attorney, to
examine the title to the premises in question and purchase the same for her, and before May 7, 1886, she gave said
Murphy, as her attorney, the sum of $ 6,700 to be used as part of the purchase-money; that Murphy procured a contract
for the sale of the premises to be made between Mary S. Trimble, who then owned the same, and his son John E.
Murphy the defendant, in which contract the said John E. Murphy appeared to be the purchaser of the premises; that
upon the execution of this contract, about March 19, 1886, Michael J. Murphy paid to Mrs. Trimble part of the sum of $
6,700, which he had received for that purpose from Mrs. Brady, and the rest of that sum was paid to her on the 7th of
May, 1886; that the balance of the purchase-price, namely $ 16,000, was secured to be paid to Mrs. Trimble by a
purchase-money mortgage; that on the same day the purchase-price was thus paid, Mrs. Brady's lawyer took from Mrs.
Trimble a deed of the premises [***7] to his son John E. Murphy, and the deed was duly recorded on that day; that on
the 1st of May, 1886, Mrs. Brady took possession of the premises under the contract claiming to own the same, and has
ever since remained in possession and occupied the same herself and by her tenants; that she rented certain rooms in the
building to tenants immediately thereafter; that she discharged the housekeeper who had before that date rented the
premises and collected the rents for Mrs. Trimble, and moved herself into the rooms formerly occupied by the
housekeeper, and that she has received the rents ever since the 1st [*591] of May, 1886; that on the fifth of May of that
year a deed conveying the premises to Mrs. Brady was executed and duly acknowledged by the defendant John E.
Murphy and his wife, and by him delivered to his son Michael J. Murphy as agent and attorney for Mrs. Brady; that
Murphy never had any interest in the premises, never paid any part of the consideration money and never had
possession of the same or any part thereof; that the said Michael J. Murphy retained the deed to Mrs. Brady in his
possession until not later than the 25th of August, 1886, when he delivered the same [***8] to her and the same was
Page 60
119 N.Y. 587, *; 23 N.E. 1109, **;
1890 N.Y. LEXIS 1127, ***4
recorded by her on the 26th of August, 1886, subsequent to the execution, delivery and record of the plaintiff's
mortgage.
The trial court held that Mrs. Brady's title and possession was sufficient to defeat any claim under the plaintiff's
mortgage, and dismissed the complaint, and this judgment has been affirmed by the General Term.
At the time of the execution and delivery of the mortgage to the plaintiff, the defendant Mrs. Brady was in the
actual possession of the premises under a perfectly valid but unrecorded deed. Her title must, therefore, prevail as
against the plaintiff. It matters not, so far as Mrs. Brady is concerned, that the plaintiff in good faith advanced his
money upon an apparently perfect record title of the defendant John E. Murphy. Nor is it of any consequence, so far as
this question is concerned, whether the plaintiff was in fact ignorant of any right or claim of Mrs. Brady to the premises.
It is enough that she was in possession under her deed and the contract of purchase, as that fact operated in law as notice
to the plaintiff of all her rights.
It may be true, as has been argued by the plaintiff's counsel, that when a party [***9] takes a conveyance of
property situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain
the rights or interests that are claimed by all or any of them. But this circumstance cannot change the rule. [HN1]
Actual possession of real estate is sufficient notice to a person proposing to take a mortgage [*592] on the property,
and to all the world of the existence of any right which the person in possession is able to establish. ( Governeur v.
Lynch, 2 Paige, 300; Bank of Orleans v. Flagg, 3 Barb. 318; Moyer v. Hinman, 14 N. Y. 184; Tuttle v. [**1111]
Jackson, 6 Wend. 213; Trustees of Union College v. Wheeler, 61 N. Y. 88, 98; Cavalli v. Allen, 57 id. 517.)
The circumstance that Mrs. Brady and her husband occupied the store and a living apartment in the building prior
to the time that she went into possession under her contract of purchase as tenants under Mrs. Trimble, the then owner,
cannot aid the plaintiff. It does not appear that he ever heard of that fact till after the commencement of this suit, and
we cannot perceive how it would affect the result if he had. The trial [***10] court found that prior to making the loan
the plaintiff was upon the premises for other purposes, and that then, by making inquiry, he could have ascertained the
rights of Mrs. Brady in the property, and while the absence of such a finding would not change the result, it shows that
the plaintiff's loss is to be attributed to his confidence in Murphy, who probably deceived him, and to his failure to take
notice of Mrs. Brady's possession.
The judgment should be affirmed, with costs.
Page 61
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1890 N.Y. LEXIS 1127, ***8
44 of 314 DOCUMENTS
Positive
As of: May 27, 2014
Ira Seymour, Respondent, v. Alexander McKinstry, Jr., et al., Appellants
106 N.Y. 230; 12 N.E. 348; 1887 N.Y. LEXIS 878
May 6, 1887, Argued
PRIOR HISTORY: [***1] Appeal from judgment of the General Term of the Supreme Court in the fourth judicial
department, entered upon an order made January 13, 1885, which affirmed a judgment in favor of plaintiff, entered
upon a decision of the court on trial at Special Term.
Simpson v. Del Hoyo (94 N. Y. 189) distinguished.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant assignee challenged the decision of the Supreme Court, Fourth Judicial
Department (New York), which found in favor of plaintiff seller in his action to establish that his lien on property sold
to a buyer was superior to the assignee's lien, which was purchased from defendant mortgagee.
OVERVIEW: The seller entered into a contract wherein he sold property to the buyer, who was the seller's son. The
seller maintained a vendor's lien against the property. The buyer then executed a mortgage to the mortgagee without the
seller's knowledge. The mortgagee then assigned the note to the assignee. The seller filed an action against the
mortgagee and assignee to establish the priority of his lien. The trial court found that the seller's lien was superior. On
review, the court found that the mortgagee had notice of the seller's equity in the property as an unpaid vendor.
Furthermore, the assignee failed to show that he took the note without notice of plaintiff's equitable rights as an unpaid
vendor. The court also found that the seller had possession of the property and that if the assignee had inquired, he
would have discovered the seller's interest in the property. The court concluded that the assignee had a duty to ascertain
whether the seller had any interest in the property. Therefore, the seller's lien remained superior.
Page 62
OUTCOME: The trial court's decision was affirmed.
CORE TERMS: mortgage, notice, purchaser, vendee, bona fide, unpaid, vendor, equitable lien, purchase-money,
asserting, mortgagor, holder, conversation, deed, equitable rights, better rights, good faith, indorsed, estopped, waived,
purchase-price, assignee, recorded, assigned
Real Property Law > Nonmortgage Liens > Lien Priorities
[HN1] The lien of an unpaid vendor is good against the vendee and against the whole world, unless waived by the
vendor or defeated by an alienation of the property by the vendee to a purchaser without notice.
Contracts Law > Sales of Goods > Damages & Remedies > Buyer's Damages & Remedies > General Overview
[HN2] When there is fraud the presumption is that he who is guilty will part with the instrument for the purpose of
enabling some third person to recover upon it, and such presumption operates against the holder and it devolves upon
him to show affirmatively the facts essential to overcome that presumption and relieve himself from its effect. So where
the true owner sues to recover goods against a person claiming from the fraudulent vendee, the burden is upon the
claimant to prove good faith and value. If a claim can be sustained only upon the ground that the person asserting it is
an innocent bona fide purchaser, he must positively deny notice even though it be not charged.
SYLLABUS
Plaintiff conveyed to his son I., certain premises by deed with warranty, pursuant to and in reliance upon an
agreement that I. should execute to a third party a first mortgage upon the premises for $ 5,000, the amount of
purchase-money unpaid, which sum was to be paid directly by the mortgagee to plaintiff. The proposed mortgagee
declined to make the loan. I., however, recorded his deed, and without the knowledge or consent of plaintiff, executed
to defendant McK. a mortgage for $ 5,000, the consideration therefor being partly certain claims held by McK. against
I. and the balance a check payable to the order of I., which he transferred on the same day to plaintiff. McK. had
knowledge at the time, and before he advanced any of the consideration, that plaintiff claimed to be entitled to $ 5,000
as part of the purchase-price. The mortgage [***2] was recorded, and shortly thereafter McK. sold and assigned the
same to defendant S. for the sum of $ 5,000. Plaintiff had remained and was at the time of such assignment in
possession of the premises. In an action to have an equitable lien declared in plaintiff's favor prior to the lien of the
mortgage, for the balance of purchase-money unpaid, S. failed to show that he had no notice of plaintiff's equitable
rights. Held, that McK. was not a bona fide purchaser save for the amount paid by check; that plaintiff was not
estopped from asserting his lien as against S. by reason of his conveyance to I.; that the fact that the premises were in
the actual possession of plaintiff was sufficient to put S. upon inquiry, and the burden of proving good faith in the
transaction was upon him, and in the absence of such proof, plaintiff was entitled to the relief sought.
The lien of a vendor of real estate for unpaid purchase-money is good against the vendee and the whole world,
unless waived or defeated by an alienation of the property by the vendee to a purchaser without notice.
In an action by the vendor to enforce his lien, as against a mortgage executed by the vendee, it [***3] is not
necessary for the plaintiff to allege in his complaint that he has not waived his lien or that the defendant took with
notice; waiver or want of notice must be set up in the answer and proved as a defense.
Where a claim can be sustained only upon the ground that the person asserting it is an innocent purchaser, he
Page 63
106 N.Y. 230, *; 12 N.E. 348, **;
1887 N.Y. LEXIS 878, ***1
must positively deny notice of the equitable rights of another, although it be not charged.
This action was brought by plaintiff, as vendor of real estate, to have an equitable prior lien declared in his favor as
vendor for unpaid purchase-money.
The facts are sufficiently stated in the opinion.
COUNSEL: Louis Marshall for appellant. The taking of any benefit under a deed, will or contract, or from the act of
another after knowledge of its true character, whether it might have been avoided by reason of a fraud or other vitiating
cause, is a ratification thereof, and estops the person receiving the benefit from denying the validity of the act. (Allen v.
Roosevelt, 14 Wend. 100; Masson v. Bovet, 1 Denio, 69; 2 Sandf. Ch. 341; Cobb v. Hatfield, 46 N. Y. 533; Brewer v.
Sparrow, 7 B. & C. 31; Lythgoe v. Vernon, 5 H. & N. [***4] 180; Garret v. Goater, 42 Penn. St. 143; Mills v.
Hoffman, 92 N. Y. 181; Rapalee v. Stewart, 27 id. 310; Patterson v. Pierronet, 7 Watts, 337; Fitzgerald v. School
Com'rs, 7 Humph. 224; Wroten v. Armat, 31 Gratt. [Va.] 228; Baird v. Mayor, etc., 96 id. 589; Schiffer v. Deitz, 83 id.
300; Vernol v. Vernol, 63 id. 45; Chipman v. Montgomery, 63 id. 221; Met. Life Ins. Co. v. Meeker, 85 id. 614; Mills v.
Hoffman, 92 N. Y. 181; Rodermund v. Clark, 46 id. 354; Morris v. Rexford, 18 id. 552; 2 Herman on Estoppel, 1157,
1164.) The plaintiff having voluntarily conferred upon Ira B. Seymour the apparent absolute ownership of the premises
in question, and the apparent authority to mortgage the same, is estopped from asserting his lien as against Sabey, who
is the bona fide purchaser of the mortgage of September 23, 1872. (Moore v. Met. Nat. Bk., 55 N. Y. 41; Bush v.
Lathrop, 22 id. 532; Com. Bk. of Buffalo v. Kortright, 22 Wend. 348; McNeil v. Tenth Nat. Bk., 46 N. Y. 325; Fairbanks
v. Sargent, 9 N. E. Rep. 875, 876; Greene v. Warnick [***5] , 64 N. Y. 220; Trustees Union College v. Wheeler, 61 id.
86; Weyh v. Boylan, 85 id. 394; First Nat. Bk. of Corry v. Stiles, 22 Hun, 246, 247; Dillaye v. Com. Bk. of Whitehall, 51
id. 445; Newton v. McLean, 41 Barb. 285; Simpson v. Del Hoyo, 94 N. Y. 189.) Irrespective of an estoppel, a purchaser
in good faith for value is entitled to priority over a grantor's lien. (Fisk v. Potter, 2 Keyes, 64.) A mortgagee and the
assignee of a mortgage are purchasers within the meaning of the recording act. (Van Keuren v. Corkins, 66 N. Y. 77;
Westbrook v. Gleason, 79 id. 23; Decker v. Boice, 83 id. 215; Brewster v. Carnes, 103 N. Y. 556.) The plaintiff is also
estopped from asserting his lien against the defendant Sabey by reason of his silence when questioned by Sabey with
reference to the genuineness and bona fides of the mortgage in question, and by his subsequent conduct. (Watson's
Ex'rs v. McLaren, 19 Wend. 557; Weyh v. Boylan, 85 N. Y. 391; Dezell v. Odell, 3 Hill, 218; Plumb v. Cattaraugus Ins.
Co., 18 id. 393; Brown v. Bowen, 30 id. 519; Finnegan v. [***6] Carreher, 47 id. 493; Voorhis v. Olmstead, 66 id.
113; 6 Barb. 613; 18 id. 334; Lee v. Kirkpatrick, 1 McCarter Ch. [N. J.] 264; Knight v. Wiffen, L. R. 5 Q. B. 660; Cont.
Nat. Bk. v. Nat. Bk. of Commonwealth, 50 N. Y. 575; Voorhis v. Olmstead, 66 id. 113.) By accepting the check for $
2,100.37, and the transfer of Ira B. Seymour's interest in the premises situated on the rear of 83 and 85 Genesee street,
by going on and completing his bargain with Ira B. Seymour, by accepting a mortgage for $ 3,000 agreed to be given to
Lucy Seymour, and by omitting to take any action to enforce the alleged lien before Ira B. Seymour absconded or until
more than three years after the right accrued, the plaintiff waived his pretended grantor's lien. (Fisk v. Potter, 2 Keyes,
64; Cort v. Fougera, 36 Barb. 195; Shirley v. Congress Sugar Refinery, 2 Edw. Ch. 505; Vail v. Foster, 4 Comst. 312;
Fish v. Howland, 1 Paige, 20; Hare v. Van Deusen, 32 Barb. 92.) The defendant Sabey being the purchaser in good
faith of the mortgage of September 23, 1872, and for a valuable consideration, without notice of the plaintiff's [***7]
pretended lien, is entitled to priority over such lien. (Fisk v. Potter, 2 Keyes, 64; Bayley v. Greenleaf, 7 Wheaton, 46;
Fish v. Howland, 1 Paige, 20; Shirley v. Congress Sugar Refinery, 2 Edw. Ch. 505; Sperry v. Short, 90 N. Y. 542 543;
Howlett v. Whiffle, 58 Barb. 224.)
M. M. Waters for respondent. The lien of the plaintiff for the purchase money, as between him and Ira B. Seymour,
attached as matter of law under the rule that "in the absence of an agreement, express or implied to the contrary, the
vendor of lands has a lien on them for the unpaid purchase-money. (Boone's Law of Real Property, 393.) The
mortgage to Alexander McKinstry attached only to that interest which rested in Ira B., under the conditional sale which
was only in part performed. (Dusenbury v. Hulbert, 59 N. Y. 451; Boone's Law of Real Property, 393.) The plaintiff,
under the arrangement or contract of which his deed was merely a part performance, never parted with that interest in
his land which is represented by his claim for purchase-money. (Dusenbury v. Hulbert, 59 N. Y. 541.) As the deed
Page 64
106 N.Y. 230, *; 12 N.E. 348, **;
1887 N.Y. LEXIS 878, ***3
made by plaintiff was only a partial execution [***8] of the conditional sale, and as plaintiff did not surrender
possession of the premises to the vendee, the plaintiff's possession was ample notice to Sabey of the plaintiff's equity.
(Spafford v. Manning, 6 Paige, 383; Trustees of Union College v. Wheeler, 61 N. Y. 88.) The purchaser of a
non-negotiable chose in action, secured by mortgage, takes it subject to the latent equities not only of the mortgagor, but
of third persons. (Trustees of Union College v. Wheeler, 61 N. Y. 88, 114, 115; Shaffer v. Reilley, 50 N. Y. 61.) As the
mortgagor had neither property nor possession of the real estate, and the mortgagee took the mortgage with notice, the
mortgage attached only to the interest which the mortgagor had, and as defendant is only the purchaser of the chose in
action he must abide by the title of his assignor, even though he should be deemed a bona fide purchaser for value
without notice. (Patten v. McLean, 15 B. Monroe, 555; Coggill v. Hartford & New Haven R. R. Co., 3 Gray, 545;
Sargent v. Metcalf, 5 id. 306; Deshen v. Bigelow, 8 Gray, 159; Copeland v. Basquet, 4 Washington C. C. R. 558;
Herring [***9] v. Willard, 2 Sandf. 418; Rawles v. Deshler, 29 How. 66, 73.) The recording act does not apply, for the
reason that defendants seek to make title upon the basis of plaintiff's prior title, and only through a subsequent title,
which depends solely upon estoppel as a conveyance. (Dusenbury v. Hulbert, 55 N. Y. 541.) A receipt of part of the
purchase-price of the land is no waiver of the vendor's lien for the balance. (Boone's Law of Real Property, 394.) As
between the plaintiff in the action and his son, the defendant, Ira B. Seymour, the plaintiff had an equitable lien for that
part of the purchase-money remaining unpaid. (Willard's Eq. Juris. 443, 124; 2 Story's Eq. Juris. 789, 1217, 1218,
1219, 1224; Fish v. Howland, 1 Paige, 20, 24; Garson v. Green, 1 Johns. Ch. 308; Hare v. Van Deusen, 32 Barb. 92;
Mills v. Bliss, 55 N. Y. 139; Auburn v. Settle, 3 N. Y. S. C. R. [T. & C.] 261; Warren v. Fenn, 28 Barb. 333; Dubois v.
Hull, 43 Barb. 26.) The defendant McKinstry acquired under his mortgage no greater right in the premises than was
possessed by Ira B. Seymour, and this was subject to the equitable [***10] lien of his vendor (the plaintiff) for the
unpaid purchase-money. (Hallock v. Smith, 3 Barb. 267, 272; Jewett v. Palmer, 7 Johns. Ch. 65; Perry on Trusts,
221; Lewin on Trusts, 198, 615, 616; Seymour v. Wilson, 19 N. Y. 417; Bush v. Lathrop, 22 id. 535, 538, 539; 2 Story's
Eq. Juris., 1502; 1 id. 416; 10 Pet. 210, 211; 3 Sug. on Vendors, 488-496; Deming v. Smith, 3 Johns. Ch. 345; Jewett
v. Palmer, 7 id. 65; Gallatin v. Cunningham, 8 Cow. 361; Story Eq. Plead., 805; Hill on Trustees, 512; 1 Daniels Ch.
Pr. [4 Am. ed.] 677; 1 Vernon, 246; 16 Vesey, Jr., 249; 3 Madd. Ch. Rep., 488; 4 Sandf. Ch., 97, 122; 9 Bosw., 583,
588; McKyring v. Bull, 16 N. Y. 399, 407, etc.; Dennis v. Snell, 54 Barb. 411.) The defendant Sabey, as the assignee of
the mortgage from McKinstry, took no other or different rights in or to the mortgaged premises, or to the mortgage, than
was possessed by his assignor. (Greene v. Deal, 64 N. Y. 320; Schafer v. Reilly, 50 id. 61; Trustees of Union College v.
Wheeler, 61 id. 88; Decker v. Boice, 83 id. 215; Dubois v. Hull, 43 Barb. 26, 32; Boyd [***11] v. Schlesinger, 59 N. Y.
301; Dusenbury v. Hulburt, 58 id. 541; Gallatin v. Cunningham, 8 Cow. 361.) The rule that an assignee of a mortgage
takes subject to the equities of third persons against the mortgagor, extends to the lien of a vendor for unpaid
purchase-money. (Willard's Eq. Juris., 443, 124; 2 Keyes, 64, 74; Shirley v. Congress Steam Heating Refinery, 2 Edw.
Ch. 505; Willard's Real Estate and Conveyances, 114; Auburn v. Settle, 3 N. Y. S. C. R. [T. & C.] 261; In the Matter of
Howe, 1 Paige, 125; Lewin on Trusts, 615; 4 Kent's Comm. 154, (n.) 1; Hallock v. Smity, 3 Barb. 267, 272; Dickerson
v. Tillinghast, 4 Paige Ch. 215; Packard v. Arnold, 6 Paige Ch. 310, 316.)
JUDGES: Danforth, J. All concur, except Ruger, Ch. J., not sitting.
OPINION BY: DANFORTH
OPINION
[*235] [**348] The questions in this case are between the plaintiff, as an unpaid vendor of real estate, and the
defendants, one as mortgagee and the other as assignee of the mortgage given by the vendee of the land. The
controversy relates to the priority of their claims in those capacities. The court below decided in favor of the vendor's
lien, [***12] and both defendants appeal.
It appeared that on and prior to the 7th of August, 1872, the title to and the possession of the premises in question
were in the plaintiff, and he on that day conveyed them to his son, one Ira B. Seymour, by a deed, with warranty, for the
price of $ 9,100, of which all but $ 5,000 was paid or satisfactorily arranged for; that, to enable Ira B. to raise that
Page 65
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1887 N.Y. LEXIS 878, ***7
[*236] sum, it was agreed between the plaintiff and Ira B. and the Equitable Life Insurance Society that Ira B. should
execute to that company a first mortgage upon the premises, the amount of which should be paid by it directly to the
plaintiff, and in reliance upon this arrangement he delivered the deed to Ira B. Seymour; that the company declined to
make the loan, but, notwithstanding this, Ira B. caused the deed to be recorded, and on the twenty-third of September,
without the knowledge or consent of the plaintiff, executed to the defendant McKinstry a mortgage of $ 5,000, which
was recorded on the same day; at the same time, and before he advanced any of the consideration of the mortgage,
McKinstry, as the court and jury find, "had knowledge that the plaintiff claimed to be entitled to $ 5,000 [***13] as
part of the purchase-price of the premises therein described." The consideration for this mortgage was composed of a
prior account of $ 2,400 due from Ira B. Seymour to McKinstry, two judgments of [**349] $ 300 against him, and $
2,100.37 in a check payable to the order of Ira B., which he on the same day indorsed and gave to the plaintiff. On the
twenty-eighth of September McKinstry sold the mortgage to the defendant Sabey for the sum of $ 5,000, and
covenanted that there was unpaid and owing thereon the sum of $ 5,000.
The court finds that "McKinstry before he assigned said mortgage, and before he advanced any part of its
consideration, had notice of the equity of plaintiff arising from the non-payment of said purchase-money, and the
defendant Sabey has not shown that he, when he took the assignment, did not have notice of plaintiff's equitable rights,
or of the facts from which they arise," and, as matter of law "(1), the plaintiff has an equitable lien upon the premises for
the balance due him for the purchase-price of the same; (2) that such equitable lien is superior to the lien of the $ 5,000
mortmortgage given to said McKinstry, and assigned by him to said Sabey; (3) [***14] that the said Sabey, as
assignee, has no better rights than his assignor McKinstry; (4) that the plaintiff is entitled to a decree establishing his
equitable lien and declaring [*237] its priority, and that it is a first lien upon said premises, and directing a sale and
foreclosure to enforce it." The judgment entered upon these findings has been affirmed by the General Term. We find
no error in its conclusion.
So far as McKinstry is concerned it is entirely plain that he was not a bona fide incumbrancer, nor a purchaser for
value beyond the sum of $ 2,100.27 (Ins. Co. v. Church, 81 N. Y. 221), which he included in the check, and which was
in fact indorsed by Ira B. to his father and paid to him. We may turn to Sabey's Case as presenting the only question
which requires discussion. He is not found to have had notice of the plaintiff's equities, and is charged because (1) he
did not show that he took without notice, and (2) because he could, in the nature of the transaction, have no better right
than McKinstry. On the other hand, the contention made on his behalf on this appeal is that the plaintiff is estopped
from asserting a lien as against Sabey because [***15] he voluntarily conferred upon Ira B. Seymour the apparent
absolute ownership of the premises and the apparent authority to mortgage the same. The learned counsel for the
appellant says there is no finding nor evidence that he was not a purchaser in good faith. As we have seen, the finding
is that Sabey has not shown that he took without notice of the plaintiff's equitable rights as an unpaid vendor. If this will
not sustain the judgment the appellant must succeed. His contention is that the precise question came up in Simpson v.
Del Hoyo (94 N. Y. 189), and was answered in his favor by this court. There is this important difference: In the Simpson
Case the party giving the mortgage was clothed not only with the record title to the land mortgaged, but was in
possession of it under that title. Here possession was in the plaintiff, and an inquiry of him would have led to a true
statement of the situation. It does not appear that he made such inquiry, nor is there the slightest evidence that he
informed the plaintiff he was about to purchase the mortgage, or had been asked to do so. He himself says that he did
not call upon the plaintiff directly, but on the twenty-eighth [***16] of [*238] September went by the plaintiff's place
of business on his way to dinner, "passed the time of day with him," and says: "I asked where 93 East Genesee street"
(the property in question) "was; he said just below, and I walked down towards it; he sort of followed me down; as we
arrived there, I think I asked him what the property was worth; he said it had been appraised at $ 10,000; he didn't
consider it worth as much as that, between $ 8,000 and $ 9,000; I asked him if the mortgage in the hands of McKinstry,
which his son had been to see me about, was a genuine bona fide mortgage; he said it was; I think that was all that was
said; I don't know as I said anything that I was about to buy it; I don't know whether I did or not." Upon this testimony
the counsel for Sabey asked the court to find that "the plaintiff is estopped from asserting his lien against the defendant,
Sabey, by reason of his silence when questioned by Sabey with reference to the genuineness [**350] and bona fides of
the mortgage of September, 23, 1872," and on his refusing to do so, excepted.
Page 66
106 N.Y. 230, *236; 12 N.E. 348, **348;
1887 N.Y. LEXIS 878, ***12
There are many circumstances in the case which would have warranted this refusal, but it is enough [***17] that
the plaintiff flatly contradicted the statement of the defendant Sabey in every respect and particular, saying not only "I
never saw him at the time the conversation is alleged to have taken place," but also, "I never had any conversation with
him on the subject in any manner or form; I should certainly have remembered it if I had; I never had any conversation
with him until this suit was commenced." The general testimony creates no surprise that the trial court did not credit the
defendant in face of this contradiction. But as it was a question clearly within its province, and not within that of this
court, the case must stand on its conclusion, and we have only to see whether the burden of alleging and proving
innocence and good faith in the transaction was upon Sabey.
In the first place it was sufficient to put Sabey on inquiry that the property was in the actual possession of the
plaintiff (Cook v. Travis, 20 N. Y. 400), and it was his duty to ascertain [*239] whether the plaintiff had any interest in
it, and if so, to what extent, and for this purpose to have some communication with or from him (Spofford v. Manning, 6
Paige, 383). In the Simpson [***18] case (supra), attention is called to the fact that the mortgagor had possession as
well as the apparent title, and that "she was in possession thereof at the time of the execution of the mortgage and of its
assignment to the pliantiff," and in that case it was held sufficient if inquiry was made of the mortgagor. The reason of
this limitation does not apply here. The plaintiff and not the mortgagor was in possession, and an inquiry of him would
have led to a disclosure of the equities of the plaintiff.
There is a like or greater difference between the present case and the others cited by the appellant. Fisk v. Potter (2
Keyes, 64), was an action to enforce an equitable lien for the purchase-money against a subsequent purchaser under a
mortgage executed by the vendee while in possession, and failed for that and other reasons which have no place in the
record before us.
To meet the question of pleading and proof the appellant relies upon an averment in the answer that "he took the
assignment of the mortgage upon the faith of plaintiff's admission that the mortgage was a valid mortgage, accompanied
by a denial of knowledge or information of the alleged facts upon which [***19] the allegations of fraud or conspiracy
are based." So far as reliance is placed upon the admission, it is the finding that none was made, and as a pleading the
allegations are far short of the affirmative allegation which the law requires of one who is bound to allege that he took
his security without notice. Moreover, he must both allege and prove it.
It is a defense founded upon new matter. [HN1] The plaintiff's lien, as an unpaid vendor, is good against the
vendee and against the whole world, unless waived by the vendor or defeated by an alienation of the property by the
vendee to a purchaser without notice. (Dusenbury v. Hulbert, 59 N. Y. 541.) It was not necessary for the plaintiff in this
case to allege that he had not waived his lien. The defendant might and did [*240] rely upon the plaintiff's waiver as a
defense, and so pleaded and sought to prove it. He failed. That issue has been found against him. It was not necessary
for the plaintiff to allege that the defendant Sabey took with notice, for his case was made out when his lien was
established against his vendee and against McKinstry, unless Sabey was a bona fide purchaser from McKinstry, and if
Sabey [***20] relied upon the fact that he took without notice, it should have been set up in the answer. (Weaver v.
Barden, 49 N. Y. 286.)
The reason for this rule may be the same ascribed to the doctrine which requires the holder of a note, shown to have
been fraudulently obtained, to prove under what circumstances and for what value he became the holder, viz.: That
[HN2] when there is fraud the presumption is that he who is guilty will part with the instrument for the purpose of
enabling some third person to recover [**351] upon it, and such presumption operates against the holder and it
devolves upon him to show affirmatively the facts essential to overcome that presumption and relieve himself from its
effect. (First Nat. Bk. v. Green, 43 N. Y. 298, Ocean Bk. v. Carll, 55 id. 441; Farmers' Bk. v. Noxon, 45 id. 762.) So
where the true owner sues to recover goods against a person claiming from the fraudulent vendee, the burden is upon
the claimant to prove good faith and value. (Stevens v. Brennan, 79 N. Y. 258.) Indeed, the rule is entirely well settled
that if a claim can be sustained only upon the ground that the person asserting it is an innocent [***21] bona fide
purchaser, he must positively deny notice even though it be not charged. (Denning v. Smith, 3 John. Ch. 332.)
Page 67
106 N.Y. 230, *238; 12 N.E. 348, **350;
1887 N.Y. LEXIS 878, ***16
No error was committed therefore by the trial court in giving force to Sabey's omission to deny notice of plaintiff's
rights and making it, in connection with other circumstances, a ground for postponing his mortgage to the plaintiff's lien
for the unpaid purchase-money.
The other questions raised by the appellant relate to facts depending on evidence and have been found against him
by the trial court and the General Term. They require no other [*241] discussion. Upon those findings the judgment is
without error and should be affirmed.
Page 68
106 N.Y. 230, *240; 12 N.E. 348, **351;
1887 N.Y. LEXIS 878, ***21
49 of 314 DOCUMENTS
Cited
As of: May 27, 2014
Amaziah Ellis, Respondent, v. August Horrman, Impleaded, etc., Appellant.
COURT OF APPEALS OF NEW YORK
90 N.Y. 466; 1882 N.Y. LEXIS 409
October 12, 1882, Argued
PRIOR HISTORY: [**1] Appeal from judgment of the General Term of the Supreme Court, in the fourth judicial
department, entered upon an order made April 14, 1882, which affirmed a judgment in favor of plaintiff, entered upon a
decision of the court on trial at Special Term.
This was an action to foreclose a mortgage executed by defendant Salome Kleepfel to plaintiff.
On the 23d of June, 1874, the plaintiff sold and conveyed to said defendant between one and two acres of land with
the buildings thereon, constituting a tavern stand situate at Plessis, in the township of Alexandria, in the county of
Jefferson, for $ 2,750, and conveyed the same to her by deed dated on that day. Mrs. Kleepfel paid the plaintiff $ 1,000,
part of the purchasemoney, and to secure the balance, $ 1,750, gave him her bond for that amount, secured by a
mortgage upon the premises conveyed. By the conditions of the bond and mortgage she was to pay $ 500 on the 1st day
of September, 1874, and the remainder in three years from the date of the bond, with interest annually. The deed was
recorded in the Jefferson county clerk's office on July 14, 1874, but the mortgage was not recorded until the 4th of
December, 1874. The defendant [**2] Horrman and Mrs. Kleepfel and her husband were Germans, and friends and
acquaintances of many years' standing. Horrman resided at Stapleton, on Staten Island, where he carried on the business
of a brewer. Mrs. Kleepfel and her husband had for several years resided in Jefferson county. In April or May, 1874,
Horrman, when on a visit to Mrs. Kleepfel and her husband at their home in Jefferson county, was told by Mrs. Kleepfel
that she had no property "any more," and would like to do something to make a living. She was then looking at a hotel
property at DePainville, and Horrman told her if she should buy any thing he would assist her in paying for it; she
agreeing to secure the advances made by him by a mortgage on the property purchased. Shortly afterward, and in May,
she went to Plessis and saw the property in question and made a bargain for its purchase. On the 3d of June Horrman
advanced her $ 200, and on the 13th of June $ 1,000 more. The $ 1,000 advanced to her on the 13th of June was used by
Mrs. Kleepfel to make the first payment upon the property purchased. In August, 1874, Horrman again visited Mrs.
Kleepfel and stopped at the hotel in question, which was then being kept by [**3] her. He was informed that she
needed $ 500 more to pay on the property, which he promised to advance her, she promising to go to Watertown and
Page 69
execute a mortgage to him upon the property in question for $ 1,700, being the amount of his advances, to have the
same recorded in the county clerk's office of Jefferson county, and forward to him at his home at Stapleton. He returned
to New York and on the 31st of August, 1874, forwarded her his check for $ 500. On its receipt she paid the same to the
plaintiff, went to Watertown, executed a mortgage to Horrman for $ 1,700, payable in ten years from date, and left the
same with the county clerk for record, with instructions to forward the same to the defendant Horrman. The plaintiff
asked among other things, that his mortgage be adjudged to be a lien upon the premises prior and superior to the lien of
the defendant Horrman's mortgage. To sustain his claim of priority the plaintiff alleged that the mortgage from the
defendant Kleepfel to the defendant Horrman was made and recorded without consideration at the time, and with full
knowledge by both parties thereto of the existence of the debt for which the plaintiff's mortgage was executed, and
[**4] with full knowledge of the existence of said mortgage to the plaintiff upon the said premises and of the terms
thereof. Mrs. Kleepfel did not answer, but the defendant Horrman appeared and answered, setting up his mortgage and
the loan to secure which it was given, and averring that the mortgage to him was received without any notice,
knowledge or belief on his part that said Kleepfel had executed and delivered the mortgage in the complaint set forth;
and he claimed that his mortgage has priority over that of the plaintiff. The court before whom the action was tried
found and determined that the plaintiff's mortgage had priority over that of the defendant, and gave judgment for the
plaintiff.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant mortgagee sought review of a judgment from the General Term of the
Supreme Court (New York), which affirmed a judgment for plaintiff mortgagee in plaintiff's action to have his
mortgage adjudged superior to defendant's mortgage. In seeking review, defendant claimed that his mortgage was
received without any notice, knowledge, or belief on his part that the mortgagee had executed and delivered a mortgage
to plaintiff.
OVERVIEW: Defendant told the mortgagor that if she bought any property he would assist her in paying for it.
Thereafter, defendant purchased plaintiff's hotel and executed a mortgage to plaintiff. After defendant advanced money
to the mortgagor, the mortgagor made partial payments on the hotel and executed a mortgage to defendant. Thereafter,
plaintiff filed an action to have his mortgage adjudged superior to defendant's mortgage. Following a judgment for
plaintiff, defendant sought review. In affirming, the court held that defendant was not a bona fide purchaser because
defendant had knowledge of facts that were sufficient to put him on inquiry as to the existence of plaintiff's prior
right. Consequently, the court held that defendant was presumed either to have made the inquiry and ascertained the
extent of plaintiff's prior right or to have been guilty of a degree of negligence equally fatal to his claim to be
considered as a bona fide purchaser.
CORE TERMS: notice, mortgage, purchase-money, unpaid, inquire, brewer, deed, sufficient to put, publican, deposit,
vendor, express notice, duty to inquire, actual notice, bona fide purchaser, party in possession, equitable mortgage,
incumbrances, accessible, chargeable, purchaser, deposited, presumed, inquired, supplied, recorded, custom, fatal, beer,
sufficient to pay
Page 70
90 N.Y. 466, *; 1882 N.Y. LEXIS 409, **3
[HN1] Notice sufficient to make it the duty of a purchaser to inquire, and failure so to do when information is easily
accessible, is equivalent to actual notice within the rule of the authorities. Where a purchaser has knowledge of any fact
sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase,
he is presumed either to have made the inquiry and ascertained the extent of such prior right, or to have been guilty of
a degree of negligence equally fatal to his claim to be considered as a bona fide purchaser. A party in possession of
certain information will be chargeable with a knowledge of all facts which an inquiry suggested by such information,
prosecuted with due diligence, would have disclosed to him. He who is bound to inquire before the performance of an
act, by which he has reason to believe that the rights of others may be affected, is chargeable with a knowledge of all the
facts that an inquiry properly made would have disclosed to him. If he does not inquire he is bound in the same manner
as if he had inquired and had positive notice of the title of the party in possession.
[HN2] Whatever is sufficient to make it his duty to inquire as to the rights of others is considered legal notice to him
of those rights. To deprive a party of the character of a bona fide purchaser it is not necessary to show express notice
of a particular instrument. Notice of any fact calculated to put the party on inquiry is, in the absence of explanation by
him, sufficient to charge him with notice of all instruments which an inquiry would have disclosed.
SYLLABUS
A junior mortgagee, whose mortgage was first recorded, cannot claim a preference under the Recording Act, as
bona fide purchaser over a mortgage given by his mortgagor to secure part of the purchase-price of the premises,
where, at the time of the delivery of his mortgage, he had knowledge that the whole purchase-money was not paid, and
that the vendor had a lien therefor, and where information as to the nature and extent of such lien was easily accessible;
he is [**5] chargeable with knowledge of all the facts which an inquiry properly made would have disclosed to him.
Some leading authorities on the subject of constructive notice collated.
COUNSEL: John Lansing for appellant. The defendant Horrman, as mortgagee, was a purchaser under the statute. (2
R. S. [6th ed.] 1151, 71; Willard on Real Estate, 122; Van Keurin v. Corkins, 6 T. & C. 355-357.) The mortgage to
Horrman, having been first recorded, is presumptively the first lien. The burden was upon the plaintiff to show that the
defendant Horrman did not act in good faith. (1 R. S. [6th ed.] 1138, 1; Freeman v. Shroeder, 43 Barb. 618; Peabody
v. Roberts, 47 id. 91-94.) The plaintiff could only overcome this presumption of law by proof that the defendant
Horrman had notice of the plaintiff's mortgage. This notice must be direct and positive, or implied. (4 Kent's Com. 171,
172; 1 Story's Eq., 398; Willard's Eq. 252, 253; Willard's Real Estate, 121; Dey v. Dunham, 2 Johns. Ch. 182-190; S.
C., 15 Johns. 555; Jackson v. Given, 8 id. 137-141; Jackson v. Elston, 12 id. 452-453; Jackson v. Van Valkenburgh, 8
Cow. 260-264; Tuttle v. Jackson, 6 Wend. 213-226; Fort v. Burch, 6 Barb. 60-78; [**6] McMechan v. Griffing, 3
Pick. 149; Curtis v. Leavitt, 15 N.Y. 1-192; Peck v. Mallams, 10 id. 509-518; Brown v. Volkening, 64 id. 76-83.) The
defendant Horrman was a purchaser for a valuable consideration. ( Matter of Howe, 1 Paige, 125-129; Chase v. Peck,
21 N.Y. 581-584; Burdick v. Jackson, 7 Hun, 488-490; Nat. Bk. of Norwalk v. Lanier, 7 id. 623; Willard's Eq. 284; 4
Kent, 351; Story's Eq., 761, 762, 764; Lowery v. Leav, 3 Barb. Ch. 407; Freeman v. Freeman, 43 N.Y. 34; Burdick v.
Jackson, 7 Hun, 488-490; Pohalski v. Mut. L. Ins. Co., 4 J. & S. 234; affirmed, 56 N.Y. 640; Carey v. White, 7 Lans.
1-4; S. C., 52 N.Y. 128-142; Traders' Bk. of Rochester v. Bodman, 43 Barb. 379; Pratt v. Coman, 37 N.Y. 440; 2 R. S.
[6th ed.] 1119, 169; Coleman v. Van Rensselaer, 44 How. 368; Severance v. Griffith, 2 Lans. 38; Howe v. Fisher, 2
Barb. Ch. 559; White v. Carey, 52 N.Y. 138-142; Ware v. Westfall, 21 Barb. 177-180.)
D. Bearup for respondent. A recorded mortgage given for an antecedent debt is not entitled to priority over a prior
unrecorded mortgage whether the second mortgagee had notice of the prior mortgage or not. Such mortgagee is not a
bona fide purchaser for a valuable [**7] consideration paid, within the meaning of the Recording Act. ( Dusenbury v.
Hulbert, 59 N.Y. 541-545; Cary v. White, 52 id. 138, 143; Delancy v. Stearns, 66 id. 157, 161-2; Weaver v. Barden, 49
Page 71
90 N.Y. 466, *; 1882 N.Y. LEXIS 409, **4
id. 286, 290, 295; Dickerson v. Tillinghast, 4 Paige's Ch. 215; Evertson v. Evertson, 5 Paige, 644, 648; Peck v. Mallams,
10 N.Y. 509, 545; Wood v. Robinson, 22 id. 564, 567; Jones v. Graham, 77 id. 628; Coddington v. Bay, 20 Johns. 637;
Thompson v. Van Vetchen, 27 N.Y. 581; Van Husen v. Radcliff, 17 id. 553-4.) The taking and recording of a mortgage
for a precedent debt, without any agreement between the parties to it changing the situation of the debt, will not give it
priority over a prior mortgage subsequently recorded, whether the latter mortgagee had notice of the prior mortgage or
not. ( Cary v. White, 52 N.Y. 138-9; Delaney v. Stearns, 66 id. 157.) In order to protect a subsequent purchaser under
the Recording Act, there must be a conveyance to him in writing. ( Westbrook v. Gleason, 79 N.Y. 30; Dusenbury v.
Hulbert, 59 id. 545-6.) Horrman got no lien in law or equity by the promise of a mortgage to secure money advanced to
buy property of a third party. ( Marquet v. Marquet, 7 How. [**8] Pr. 417; Herrington v. Robertson, 71 N.Y. 280.) An
agreement otherwise valid to give a mortgage, must specifically relate to well identified property. ( Seymour v. C. &
N.Y. C. R. R. Co., 25 Barb. 284.) Plaintiff's possession and his recorded deed of the premises were complete notice to
Horrman at the time of the first two loans, and the suggestion of a mortgage for them by Mrs. Kleepfel. ( Dusenbury v.
Hulbert, 59 N.Y. 546; Campbell v. Veeder, 3 Keyes, 177; Williamson v. Brown, 15 N.Y. 354; Stearns v. Gage, 79 id.
106-7; Kellogg v. Smith, 26 id. 23-24; Brumfield v. Boutal, 24 Hun, 451; Merritt v. N. R. R., 12 Barb. 609-610; Brown
v. Blydenburg, 7 N.Y. 141-5-6; Brown v. Volkening, 64 id. 82; Reed v. Gannon, 50 id. 345; Jackson v. Cadwell, 1 Cow.
623, 641-2.) The burden is on Horrman to aver and prove facts entitling his mortgage to priority. ( Jewett v. Palmer, 7
Johns. Ch. 64; Harris v. Norton, 16 Barb. 264-5; Westbrook v. Gleason, 79 N.Y. 23-33; Abbott's Trial Ev. 715, 716;
Frost v. Beekman, 1 Johns. Ch. 288, 301; Gallatian v. Cunningham, 8 Cow. 361, 374; Balcom v. N.Y., L. I. & F. Co.,
11 Paige, 454; Peck v. Mallams, 10 N.Y. 509, 529.) Mrs. Kleepfel, having acted as the agent [**9] of Horrman in
making and recording his mortgage, knew all the facts and intended it as subject to plaintiff's mortgage, and Horrman is
chargeable with all the knowledge his agent possessed. ( Green v. Warnick, 64 N.Y. 220; Westbrook v. Gleason, 79 id.
39-41; Delancy v. Stearns, 66 id. 161; Jackson v. Van Valkenburgh, 8 Cow. 260; Decker v. Boice, 83 N.Y. 218; Freeman
v. Schroder, 43 Barb. 618, 621; 79 N.Y. 23, 33; Jones v. Phelps, 2 Barb. Ch. 440, 446; Adams v. Mill, 60 N.Y. 539; Nat.
Life Ins. Co. v. Minch, 53 id. 149; Bk. of U. S. v. Davis, 2 Hill, 452, 461; Dillon v. Anderson, 43 N.Y. 238; Sutton v.
Dillaye, 3 Barb. 529; Fulton Bk. v. N.Y. & S. Co., 4 Paige, 137; Davis v. Lamar Ins. Co., 18 Hun, 230; Master v.
Madison Co. M. Ins. Co., 11 Barb. 625, 632; Hodgkins v. M. Co. Ins. Co., 34 Barb. 215; Ames v. N.Y. U. I. Co., 14 N.Y.
253, 263; Schoick v. N. F. Ins. Co., 68 id. 434, 438; Ingalls v. Morgan, 10 id. 178, 184, 185; Boyd v. Vanderkemp, 1
Barb. Ch. 274, 287; Partridge v. Com. Ins. Co., 17 Hun, 95; Story on Agency [4th ed.], 140, p. 170.)
JUDGES: Tracy, J. All concur, except Andrews, Ch. J., and Earl, J., not voting.
OPINION BY: TRACY
OPINION
[*471] Tracy, J. The defendant was [**10] beaten in the court below upon two grounds, either of which, if
sustained, is fatal to his defense. First. That at the time of the execution of the mortgage by Mrs. Kleepfel to the
defendant, "facts and circumstances had been brought to his (defendant's) knowledge relating to said Mrs. Kleepfel's
purchase of the mortgaged premises of the plaintiff and of the unpaid balance by her of the purchase-price, and the
plaintiff's lien on the premises therefor, and the existence of his mortgage thereon, sufficient to put him, a man of
ordinary prudence and discretion, upon inquiry, and upon his guard as to the plaintiff's lien for the purchase-money
and the terms of his mortgage. That the means of full and complete information as to the aforesaid rights of the plaintiff
were immediately and conveniently accessible to said Horrman, and were sufficiently suggested to him by the facts and
circumstances within his knowledge, and that he was not put off from his guard, or from inquiry, by any
misrepresentations or otherwise." Second. That the mortgage executed by Mrs. Kleepfel to Horrman was given to secure
a pre-existing debt, and nothing was parted with by said Horrman on the faith of [**11] the mortgage at the time the
same was executed.
As we have reached the conclusion that this judgment must be affirmed on the first ground stated by the court
below, it is unnecessary to examine or pass upon the second ground.
Page 72
90 N.Y. 466, *; 1882 N.Y. LEXIS 409, **7
[*472] The court does not find, and we think there is no evidence in the case which would have justified a finding
that the defendant Horrman had express notice of the existence of the plaintiff's mortgage. But the court does find that
the defendant knew that Mrs. Kleepfel had no means of her own, either to pay or to secure the payment of the
purchase-money. He also knew that she was in possession of the premises, a portion of the purchase-money remaining
unpaid. As he is presumed to know the law, he must be deemed to have known that the vendor had a lien upon the
premises conveyed for such part of the purchase-money as remained unpaid or unsecured. We think the defendant,
under the circumstances of this case, was bound to show that at the time he made the last advance to Mrs. Kleepfel he
acted under the belief that the advances made by him were sufficient to pay in full the purchase-price of the property.
We have carefully read the evidence and fail to [**12] find any thing therein which would warrant the inference that
the defendant acted under such a belief. He did not agree to advance to Mrs. Kleepfel money sufficient to pay for any
property which she might purchase and then take a mortgage on the property that he had paid for. The language of Mrs.
Kleepfel is: "I asked him if he would let me have some money; he said yes, if I should buy any thing he would let me
have some money." And at the time the last advance of $ 500 was made, in August, she testifies: "I asked him for $ 500
before he went away. I told him I couldn't pay any thing in a short time, because I had to pay $ 500 to the other man in
September; I told him I hadn't got any money, and that I must have $ 500 more, and if he would I would give him a
mortgage." He said: "If you will give me a mortgage I'll give you the $ 500."
"Q. Did you tell him what you were going to do with that $ 500? A. That I wanted to pay it on the place. Q. Then
he did know that you owed something on the place? A. I told him I had to pay $ 500 on the place now." This evidence is
not contradicted by the defendant, and we find in it no statement or suggestion by Mrs. Kleepfel that the $ 500 would
pay [**13] all that was due upon the place. On the contrary, it conveys [*473] to the defendant a distinct notice that
the purchase-money was then unpaid; and the language, "I told him I had to pay $ 500 on the place now," is suggestive
that more was to follow; at all events, knowing, as the defendant did, that nothing had been paid upon the place except
the money advanced by him, and being informed of facts which amounted to a notice that the vendor still had a lien
upon the property for unpaid purchase-money, we think he was bound to inquire as to the extent of that lien. [HN1]
Notice sufficient to make it the duty of a purchaser to inquire, and failure so to do when information is easily
accessible, is equivalent to actual notice within the rule of the authorities. In Williamson v. Brown (15 N.Y. 354) the rule
is stated by Selden, J., at page 362, as follows: "The true doctrine on this subject is that where a purchaser has
knowledge of any fact sufficient to put him on inquiry as to the existence of some right or title in conflict with that he
is about to purchase, he is presumed either to have made the inquiry and ascertained the extent of such prior right, or
to have been guilty [**14] of a degree of negligence equally fatal to his claim to be considered as a bona fide
purchaser." And Paige, J., in the same case states the rule as follows: "A party in possession of certain information will
be chargeable with a knowledge of all facts which an inquiry suggested by such information, prosecuted with due
diligence, would have disclosed to him." (Citing as authority Howard Ins. Co. v. Halsey, 4 Sandf. 565; Kennedy v.
Green, 3 Mylne & K. 699.) In 4 Sandf., supra, Duer, J., states the rule as follows: "The rule of law that must govern our
decision is as inflexible as it is just, that he who is bound to inquire before the performance of an act, by which he has
reason to believe that the rights of others may be affected, is chargeable with a knowledge of all the facts that an inquiry
properly made would have disclosed to him." In Flagg v. Mann et al, (2 Sumn. 486), Story, J., states the rule as follows:
"If he does not inquire he is bound in the same manner as if he had inquired and had positive notice of the title of the
party in possession." In White-bread v. Jordan (1 You. & Coll. Exch. 303) the plaintiff was [*474] [**15] a London
brewer, and supplied Jordan, who was a publican, with beer. It was the common practice with brewers in London to
loan money to publicans whom they supplied with beer, upon a deposit of their title deeds. Jordan had deposited certain
deeds with the plaintiff, pursuant to this custom. He afterward gave to one Boulnois, a wine merchant, a mortgage upon
the property covered by the deeds deposited, which was duly recorded. Boulnois had notice of Jordan's debt to the
plaintiff and of the existing custom between brewers and publicans, yet he made no inquiry of the brewer. Suit was
brought to enforce the equitable mortgage arising from the deposit. Baron Alderson held that the notice to Boulnois was
sufficient to make it his duty to inquire as to the existence of the deposit; that his not doing so was evidence of bad
faith, and the plaintiff's right under his equitable mortgage was sustained.
In Kellogg v. Smith (26 N.Y. 18 at 18-21), Allen, J., in a dissenting opinion, admits the correctness of the rule as
Page 73
90 N.Y. 466, *471; 1882 N.Y. LEXIS 409, **11
stated by Judge Selden in Williamson v. Brown. In Tuttle v. Jackson (6 Wend. 213-226), cited by the counsel for the
appellant, the rule is stated by the chancellor [**16] as follows: [HN2] "Whatever is sufficient to make it his duty to
inquire as to the rights of others is considered legal notice to him of those rights." ( Grimstone v. Carter, 3 Paige Ch.
421; Jackson v. Post, 15 Wend. 588.) The case of Reed et al. v. Gannon (50 N.Y. 345) would seem to be directly in point
as a controlling authority in this case. The parties dealt upon the assumption that there were liens or incumbrances upon
the property, but the number or extent, or character of the liens was not stated or referred to. Rapallo, J., says "the
insertion of these clauses in the instrument was sufficient to put the plaintiff on inquiry as to the extent and description
of the existing incumbrances referred to. It was such notice as, in the language of the authorities, would lead any honest
man using ordinary caution to make further inquiries. (1 Younge & Coll. Exch. 328.) To deprive a party of the
character of a bona fide purchaser it is not necessary in such a case to show express notice of the particular instrument.
(Taylor v. Baker, 5 Price 306.) [*475] Notice of any fact calculated to put the party on inquiry is, in the absence of
explanation by him, [**17] sufficient to charge him with notice of all instruments which an inquiry would have
disclosed. As we have seen, the defendant Horrman had information, which amounted to notice that the vendor had a
lien upon the property for unpaid purchase-money. Having notice of the lien he was bound to inquire as to its extent
and the manner by which payment of it was secured. The most obvious and natural inquiry to be made in this case
would have been of Mrs. Kleepfel, and it would have been her plain duty to have answered any inquiry which
Horrman might make as to the particulars and extent of the lien referred to. Had he inquired, there is no doubt that he
would have been truly informed as to the plaintiff's mortgage, for Mrs. Kleepfel testifies that she supposed that the
plaintiff's mortgage was at the time on record, and intended the defendant's lien upon the property to be subsequent to
that of the plaintiff's. In failing to make such inquiry, we think the defendant must be held to have had notice of the facts
which it would have disclosed had it been made. It cannot, therefore, be said of the defendant that he took his mortgage
in ignorance of the plaintiff's lien upon the property in question. [**18] We have carefully examined the numerous
authorities cited by the learned counsel for the appellant, and while there are expressions by judges to be found in many
cases which would seem to hold that actual notice of the particular lien was necessary in order to defeat a subsequent
deed first recorded, we do not think there is any case which, in decision, is in conflict with the rule as stated by Selden,
J., in Williamson v. Brown (supra). But, however that may be, there can be no doubt that the great current of authority is
in harmony with the rule as there stated, and it has been too frequently approved by this court to be overruled or
disregarded now.
We think the defendant must be deemed to have had notice of the plaintiff's lien, and the judgment should,
therefore, be affirmed, with costs.
All concur, except Andrews, Ch. J., and Earl, J., not voting.
Judgment affirmed.
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50 of 314 DOCUMENTS
Caution
As of: May 27, 2014
The Trenton Banking Company, Appellant, v. Alexander Duncan, Respondent.
86 N.Y. 221; 1881 N.Y. LEXIS 201
June 7, 1881, Argued
October 4, 1881, Decided
PRIOR HISTORY: [**1] Appeal from judgment of the General Term of the Supreme Court, in the first judicial
department, entered upon an order made April 7, 1881, which affirmed a judgment in favor of defendant, entered upon a
decision of the court on trial at Special Term.
This action was brought to set aside certain conveyances of real estate made to defendant by certain members of the
firm of Duncan, Sherman & Co., and that the lands be adjudged subject to the lien of a judgment obtained by plaintiff
against the members of a firm for a firm indebtedness, execution whereon had been returned unsatisfied.
The lands in question were the bank building and premises lately occupied by said firm, situate on Nassau street,
New York city, and another lot situate on Pine street in that city.
The material facts are stated in the opinion.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff creditors appealed the judgment of the General Term of the Supreme Court, in
the First Judicial Department (New York), which affirmed a judgment in favor of defendant debtor in the creditors'
action to set aside certain conveyances of real estate to the debtor and to have land to be adjudged subject to the lien of a
judgment obtained by the creditors.
OVERVIEW: The creditors brought an action to set aside certain conveyances of real estate made to a debtor by
Page 75
certain members of a firm, and to have the lands adjudged subject to the lien of a judgment obtained by the creditors
against the members of the firm for a firm indebtedness. The creditors gave credit upon the apparent ownership of
property in possession of the debtor, against a secret unrecorded conveyance. The lower courts found in favor of the
debtor and on appeal, the court affirmed, finding that the creditors were guilty of laches in not examining the record or
making an inquiry to determine in whom the actual title to the properties was vested. The court also held that there was
no finding of fraud on the part of the debtor. There was no proof from which the inference necessarily arose that the
debtor's failure to record the deeds was with a fraudulent intent, and no clear evidence of knowledge of circumstances
that called upon the debtor to put the deeds on record. The court found that the law did not impose upon grantees the
duty of recording their titles for the protection of subsequent purchasers or encumbrancers.
OUTCOME: The court affirmed the judgment that was in favor of the debtor.
CORE TERMS: deed, conveyance, purchaser, recorded, estoppel, grantee, street, secret, banking-house, occupied,
unrecorded, disclosure, equitable, recording, asserting, afterward, concealed, ownership, grantor, judgment debtors,
subject to a mortgage, mortgage, lease, owner of land, bona fides, fraudulent intent, knowingly, ignorance, founded,
privy
Real Property Law > Nonmortgage Liens > Judgment Liens
[HN1] In New York, in the absence of fraud, a judgment takes effect only on the actual interest in land that the
judgment debtor has, at the time of the recovery of the judgment, and, consequently, the title of a grantee of the
judgment debtor, by deed executed before the entry of the judgment, although unrecorded, takes precedence of the
judgment. The fact that the grantee has not recorded his deed, creates no equity in favor of the judgment creditor. The
latter is not a purchaser within the recording acts, and purchasers alone are protected by those acts against unrecorded
conveyances.
Contracts Law > Defenses > Equitable Estoppel > General Overview
[HN2] The owner of real or personal property, may by his conduct, in inducing others to deal with it, without informing
them of his claim, debar himself from asserting his title, to their injury. If one man knowingly, though he does it
passively, by looking on, suffers another to purchase and expend money on land, under an erroneous opinion of title,
without making known his claim, he shall not afterward be permitted to exercise his legal right against such person. It
would be an act of fraud and injustice, and his conscience is bound by this equitable estoppel.
Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Affirmative Defenses > Laches
Torts > Business Torts > Fraud & Misrepresentation > Actual Fraud > General Overview
[HN3] If a person does an act upon the suggestion or request of another, the latter shall not be permitted to avoid the
act, when it turns out to the prejudice of an antecedent right or interest of his own, although the advice on which the
other party acted, was given innocently, and in ignorance of his claim. The authorities establish the doctrine, that the
owner of land may by an act in pais, preclude himself from asserting his legal title. But it is obvious, that the doctrine
should be carefully and sparingly applied, and only on the disclosure of clear and satisfactory grounds, of justice and
equity. It is opposed to the letter of the statute of frauds, and it would greatly tend to the insecurity of titles, if they were
allowed to be affected by parol evidence of light or doubtful character. To authorize the finding of an estoppel in pais,
against the legal owner of land, there must be shown, either actual fraud, or fault or negligence, equivalent to fraud on
Page 76
86 N.Y. 221, *; 1881 N.Y. LEXIS 201, **1
his part, in concealing his title; or that he was silent when the circumstances would impel an honest man to speak; or
such actual intervention on his part, as to render it just, that as between him and the party acting upon his suggestion, he
should bear the loss. Moreover, the party setting up the estoppel, must be free from the imputation of laches, in acting
upon the belief of ownership by one who has no right.
SYLLABUS
In the absence of fraud, a judgment takes effect only on the actual interest in land which the judgment debtor has at
the time of the recovery of the judgment.
The title therefore of a grantee of the judgment debtor, by deed executed before the entry of judgment, although
unrecorded, takes precedence of the judgment.
The fact that [**2] such grantee has not recorded his deed creates no equity in favor of the judgment debtor.
It seems, the principle that a party who has a title to real property may, by his conduct in inducing others to deal
with it without informing them of his claim, debar himself from asserting his title, applies to protect creditors who have
given credit upon the faith of the apparent ownership of lands in possession of the debtor against a secret unrecorded
conveyance, fraudulently concealed by the grantee, he having knowledge that the debtor is holding himself out as
owner and is gaining credit thereby.
To authorize, however, the finding of an estoppel in pais against the legal owner of land, there must be either actual
fraud, or fault or negligence equivalent to fraud on his part. The party setting up the estoppel must also be free from the
imputation of laches in acting upon the belief of ownership.
Defendant was formerly a member of the firm of D. S. & Co., bankers; the firm owned certain real estate, including
the banking-house occupied by it the title to which was in the three individual members of the firm. Defendant retired
from the firm in 1862; the fact was [**3] announced in a circular accompanied by a statement, signed by the defendant,
to the effect that he had withdrawn no part of his capital, but had made it over to his two sons, who were then members
of the firm. The business was thereafter continued in the same firm name, in 1868 defendant purchased said real estate
for a good and adequate consideration, receiving conveyances thereof, subject to certain mortgages thereon, and
subsequently the firm occupied the real estate under a written lease, which specified no term. Defendant's deed was not
put on record until July 26, 1875. During that month the firm incurred an indebtedness to plaintiff and soon after failed.
At that time but one of the three original partners remained a member of the firm. Plaintiff, after recovery of judgment
and return of execution unsatisfied, brought this action to have the real estate adjudged subject to the lien of plaintiff's
judgment; the court found that when plaintiff became a creditor of the firm it was generally supposed that the bank
building belonged to the firm; that plaintiff so believed and continued his dealings under that belief. The court refused
to find, and there was no proof from which an [**4] inference necessarily followed, that defendant withheld the deed
from the record for the purpose of avoiding a disclosure of the transfer, and there was no finding that the firm thereafter,
with the knowledge of defendant, held out to the public that the real estate was firm property. Plaintiff, when its
dealings with the firm commenced, made no inquiry as to the ownership of the property. Held, that plaintiff was not
entitled to recover; 1st. Because of its laches in not making inquiry and examining the record to ascertain in whom the
actual title was vested. 2d. Because of absence of fraud, or clear evidence of knowledge on the part of defendant of
circumstances which called upon him to put the deed on record; also, that assuming D. S. & Co. held themselves out as
owners, or were guilty of fraud, defendant could not be charged with the consequences in the absence of knowledge on
his part.
Wendell v. Van Rensselaer (1 Johns. Ch. 344), Storrs v. Barker (6 id. 168), Nicholson v. Hooper (4 Mylne & C.
186), distinguished.
COUNSEL: D. D. Lord for appellant. The continued occupation by Duncan, Sherman & Co., and the treatment of the
Page 77
86 N.Y. 221, *; 1881 N.Y. LEXIS 201, **1
banking house indicated [**5] that they owned it. ( Hildreth v. Sands, 2 Johns. Ch. 36, 54.) Real estate, when belonging
to a partnership, is always held by the partners as tenants in common. (Collyer on Partnership, 133; Hoxie v. Carr, 1
Sumner; Collyer on Partnership [3d Am. ed.], 119, note 3, 135; 1 Harper's [S. C.] Equity, 25.) The responsibility of
individual partners is as much a ground of credit as capital actually contributed. ( Kirby v. Schoon-maker, 3 Barb. Ch.
49; Pendleton v. Hughes, 65 Barb. 136.) Defendant is estopped from setting up his title as against plaintiffs, who have
been misled by his concealment of it. ( Demyer v. Souzer, 6 Wend. 436; Dezell v. Odell, 3 Hill, 215, 221; Otis v. Sill, 3
Barb. 103; Rigney v. Smith, 39 id. 388; Thomas v. Blanchard, 4 Comst. 303; Sammis v. McLaughlin, 35 N.Y. 647.) The
rule of estoppel makes no distinction between real and personal property. ( Corkhill v. Landers, 44 Barb. 214, 228;
Wendell v. Van Rensselaer, 1 Johns. Ch. 344; Higenbotam v. Burnet, 5 id. 184; Town, etc. v. Needham, 3 Paige, 545.)
Neither direct representations nor express or actual representations of any kind are required for estoppel; it is enough if
the party has concealed his rights, [**6] or if, by any sort of conduct, he has induced the erroneous belief upon which
the other has acted. (1 Greenl. on Ev., 207; Dezell v. Odell, 3 Hill, 215.) Although estoppel is on the ground of fraud
in the party estopped, such fraud is not necessarily a moral fraud or conduct instigated by bad motives. ( Wendell v. Van
Rensselaer, 1 Johns. Ch. 344; Storrs v. Barker, 6 id. 163; Dezell v. Odell, 3 Hill, 215; M. & T. Bk. v. Hazard, 30 N.Y.
226.) It was error to hold that the only ground on which a creditor by judgment could set aside a deed was as fraudulent
in its inception; and that defendant's title was indisputable, because he had paid a full equivalent for the property. (
Savage v. Murphy, 34 Wend. 508; Hildreth v. Sands, 2 Johns. Ch. 35, 48; Garlinghouse v. Whitwell, 51 Barb. 208.) An
owner of property gives another a prior right to it, by inducing him, directly or indirectly, and either by act or omission,
to misunderstand the existence or the character of his rights. ( Pendleton v. Hughes, 65 Barb. 136, 144; Rigney v. Smith,
39 Barb. 383; Savage v. Murphy, 34 N.Y. 508; Corkhill v. Landers, 44 Barb. 218, 228.) The effect of omitting to record
conveyances does not inure to the [**7] benefit of subsequent grantees alone, but is available by judgment creditors
also. ( Thomas v. Kelsey, 30 Barb. 275.) If, notwithstanding defendant's conduct in relation to the banking-house, the
plaintiffs are affected by the constructive notice of the record title, this notice does not affect their right to the one-third
of the banking-house, and to all the annex standing in the name of Wm. Butler Duncan. ( Pendleton v. Hughes, 65 Barb.
136; Beecher v. Clark, 12 Blatchf. 259.)
Francis Lynde Stetson for respondent. No charge of responsibility could be sustained upon the alleged omission to
record the conveyances and leases. (Hardin v. Osbourne, 9 Reporter, 740.) An owner of property need not notify his
tenant's creditors of his own title, if the tenant occupies, sublets and pays the taxes. ( Beecher v. Clark, 12 Blatchf. 259;
Thomas v. Kelsey, 30 Barb. 268; Tomlinson v. Matthews, Supreme Court of Illinois, March 21, 1881.) A judgment, in
the absence of fraud, takes effect only on the actual interest in land which the debtor has at the time of the recovery of
the judgment. If he has then no actual interest, having parted by deed with what he formerly had, the judgment is not a
lien [**8] on the land, whether the deed has been recorded or not. ( In re Howe, 1 Paige, 128; Ellis v. Tousley, id. 280;
White v. Carpenter, 2 id. 217; Dwight v. Newell, 3 N.Y. 185; Schroeder v. Gurney, 73 id. 430.)
JUDGES: Andrews, J. All concur.
OPINION BY: ANDREWS
OPINION
[*225] Andrews, J. It is not claimed that the plaintiff's judgment attached as a lien upon any interest, legal or
equitable, of the judgment debtors, in the premises sought to be charged in this action. They had no such interest, jointly
or separately, either at the time of the recovery of the judgment, or the accruing of the indebtedness upon which it was
rendered.
The title of record to the bank building and premises, had been from June 28, 1853, in Alexander Duncan, Watts
Sherman and William B. Duncan. The actual legal title was in Alexander Duncan, under a conveyance to the three
persons named, and a subsequent deed of the undivided two-third parts of the premises, executed to him May 28, 1868,
by Sarah M. G. Sherman, widow and sole devisee of Watts Sherman, and William B. Duncan and wife, subject to a
mortgage on the premises for $ 200,000, dated May 5, 1858, and recorded June 28, 1858. The record title of the Pine
Page 78
86 N.Y. 221, *; 1881 N.Y. LEXIS 201, **4
street lot [**9] was in William B. Duncan, under a deed dated January 31, 1873, and recorded the same day. This deed
was made subject to a mortgage of $ 40,000, which the purchaser assumed as part of the consideration of $ 85,000 paid
[*226] for the premises. The actual title to this lot was also in Alexander Duncan, under a deed from William B.
Duncan and wife, executed May 25, 1874, expressing the consideration of $ 85,000, subject to the mortgage of $
40,000, which the grantor had assumed in the conveyance to him. The firm of Duncan, Sherman & Co., was originally
constituted in 1852, and was then composed of Alexander Duncan, Watts Sherman, and William B. Duncan. The firm
purchased the bank lot and erected thereon the bank building known as Duncan, Sherman & Co's banking-house, and
occupied it for its business as bankers. The firm was changed from time to time, by the introduction of new partners,
and the death or withdrawal of others, but through all the successive changes, the firm name of Duncan, Sherman &
Co., was continued, and the successive firms, continued to occupy, for its business, the same banking-house. The
original partnership expired, by limitation, July 1, 1862. Alexander Duncan [**10] then withdrew from the business.
The fact was announced in a circular, issued by the firm, accompanied by a printed statement, signed by Alexander
Duncan, to the effect that he had withdrawn no part of the capital contributed by him to the firm, but had made it over to
his two sons, William B. and David Duncan, absolutely, to promote their interest, and that of the new firm. The new
firm was composed of Watts Sherman, William B. Duncan and David Duncan. Upon the death of Watts Sherman, in
1868, his son, William Watts Sherman, and Francis H. Grain, were admitted as partners with William B. Duncan, and
David Duncan; and, after the death of David Duncan, in 1872, the firm consisted of William B. Duncan, William Watts
Sherman and Francis H. Grain, and remained unchanged from that time, until its failure, July 27, 1875. Subsequent to
the conveyance of the banking-house and premises to Alexander Duncan, in 1868, the firm occupied the same as
tenants, under a written lease, executed by him which, however, was a lease at will, or from year to year, containing no
term, but providing for the payment of an annual rent of $ 30,000, and containing a covenant, by the lessees, to pay
taxes and repairs; [**11] and, in like manner, the firm occupied the Pine [*227] street lot, after the conveyance to
Alexander Duncan, in 1874, and sublet such parts of both premises, as were not required for the firm business. The
deeds to Alexander Duncan, were not recorded until July 26, 1875, and the leases to the firm were not recorded. The
dealing between the plaintiff, and Duncan, Sherman & Co., commenced in 1874, upon the appointment, by the plaintiff,
of the firm, as its collecting agents in the city of New York, and the indebtedness upon which the plaintiff's judgment
was recovered, accrued in July, 1875, shortly before the failure.
It is well settled, [HN1] in this State, that, in the absence of fraud, a judgment takes effect only on the actual interest
in land which the judgment debtor has, at the time of the recovery of the judgment, and, consequently, that the title of a
grantee of the judgment debtor, by deed executed before the entry of the judgment, although unrecorded, takes
precedence of the judgment. The fact that the grantee has not recorded his deed, creates no equity in favor of the
judgment creditor. The latter is not a purchaser within the recording acts, and purchasers alone are protected [**12] by
those acts against unrecorded conveyances. The general principle adverted to, is not assailed by the plaintiff, but its
claim to have the real estate of Alexander Duncan subjected to the lien of its judgment against Duncan, Sherman & Co.
is asserted upon the alleged ground that the defendant, withheld his deeds from record, and knowingly permitted the
firm to appear to be the owners of the property conveyed, whereby the plaintiff was deceived into giving the credit to
the firm, which resulted in the debt for which the judgment was rendered. In considering this claim, it is to be observed,
that the plaintiff does not here question the bona fides of the conveyances to Alexander Duncan, or deny that they were
founded upon a valuable, and adequate consideration. It is true that the complaint alleges that the consideration was
inadequate, but the allegation is sustained, neither by the proof, nor the finding. The consideration for the conveyance of
the Nassau street property was $ 500,000, and was paid by the purchaser assuming the mortgage for $ 200,000, by his
canceling a [*228] special loan of $ 200,000 made by him to the firm in 1862, and paying the balance of $ 100,000
[**13] in money. The consideration of the conveyance of the Pine street lot, beyond the mortgage of $ 40,000, was
paid at the time. The complaint alleges, that the defendant withheld the deeds from record, for the purpose of avoiding a
disclosure of the fact, that the property was not part of the assets of Duncan, Sherman & Co., or of any individual
member of the firm; but the court refused to find this fact as alleged, but found simply, that the deeds were not recorded
until the date before stated. The complaint also alleges that after the deeds were executed, Duncan, Sherman & Co. held
out to the public, that the firm, or some of its members, were owners of the property, and that this was done with the
knowledge of the defendant, and with his concurrence; but this allegation is not supported by any finding. The court,
Page 79
86 N.Y. 221, *225; 1881 N.Y. LEXIS 201, **8
however, found, that when the plaintiff became a creditor of the firm, it was generally supposed that the bank building
belonged to the firm, and that the plaintiff so believed, and continued its dealings under this belief, until Duncan,
Sherman & Co.'s failure.
It is undoubtedly true that [HN2] the owner of real or personal property, may by his conduct, in inducing others to
deal [**14] with it, without informing them of his claim, debar himself from asserting his title, to their injury. This
principle was asserted by Chancellor Kent in the leading case of Wendell v. Van Rensselaer (1 Johns. Ch. 344). "There
is," says the Chancellor, "no principle better established in this court, nor one founded on more solid considerations of
equity and public utility, than that which declares that if one man knowingly, though he does it passively, by looking on,
suffers another to purchase and expend money on land, under an erroneous opinion of title, without making known his
claim, he shall not afterward be permitted to exercise his legal right against such person. It would be an act of fraud and
injustice, and his conscience is bound by this equitable estoppel." The case in which this language was used, was one
where the defendant claimed under a secret deed, intentionally concealed [*229] for many years, the grantor in the
meantime remaining in possession, and dealing with the land as owner; and with the knowledge of the defendant,
making sales in fee of different parcels to third persons, who entered into possession, and made extensive
improvements, the defendant [**15] standing by and giving no notice of his claim. "After this," says the Chancellor,
"he cannot be permitted to start up with a secret deed, and take land from bona fide purchasers." The case was between
the owner of the legal title under the secret deed, and purchasers, and grantees, of the former owner. In this case, the
plaintiffs are creditors, but we see no reason why the same principle should not protect creditors, who have given credit
upon the faith of the apparent ownership of property in possession of the debtor, against a secret unrecorded
conveyance, fraudulently concealed by the grantee; as when, with knowledge that the debtor is holding himself out as
owner, and is gaining credit upon this ground, he keeps silence, giving no sign. Hungerford v. Earle (2 Vern. 261) was
the case of bondcreditors to the father for money lent twelve years after a voluntary settlement by him on trustees for his
sons, who did not enter and take possession according to the deed, but permitted the settler to live in the house, etc., and
it was said that a deed not at first fraudulent may afterward become so by being concealed and not produced, "by which
means creditors are drawn in to [**16] lend their money." The case of Storrs v. Barker (6 Johns. Ch. 166) presents
another application of the principle of estoppel as against the owner of the legal title, and decides, in accordance with
previous decisions, that if the true owner stands by, and advises and encourages a purchase from another, although in
ignorance of his own title, he cannot afterward assert it to the injury of the purchaser. It is not necessary now to consider
what are the limitations, if any, to this doctrine. But as a general rule, it would seem to be just, that [HN3] if a person
does an act upon the suggestion or request of another, the latter shall not be permitted to avoid the act, when it turns out
to the prejudice of an antecedent right or interest of his own, although the advice on which the other party acted, [*230]
was given innocently, and in ignorance of his claim. The authorities establish the doctrine, that the owner of land may
be an act in pais, preclude himself from asserting his legal title. But it is obvious, that the doctrine should be carefully
and sparingly applied, and only on the disclosure of clear and satisfactory grounds, of justice and equity. It is opposed to
the letter [**17] of the statute of frauds, and it would greatly tend to the insecurity of titles, if they were allowed to be
affected by parol evidence of light or doubtful character. To authorize the finding of an estoppel in pais, against the
legal owner of land, there must be shown, we think, either actual fraud, or fault or negligence, equivalent to fraud on his
part, in concealing his title; or that he was silent when the circumstances would impel an honest man to speak; or such
actual intervention on his part, as in Storrs v. Barker, as to render it just, that as between him and the party acting upon
his suggestion, he should bear the loss. Moreover, the party setting up the estoppel, must be free from the imputation of
laches, in acting upon the belief of ownership by one who has no right.
In this case, we are of opinion that the plaintiff must fail, for two reasons: first, for its laches, in not examining the
record, and in making no inquiry, to ascertain in whom the actual title was vested; and second, because there is no
finding of fraud on the part of the defendant, and no proof from which the inference necessarily arises that his failure to
record the deeds [**18] was with a fraudulent intent, and no clear evidence of knowledge of circumstances, which
called upon him to put them on record. The plaintiff, when the dealing with Duncan, Sherman & Co. commenced, did
not examine the record, and made no inquiry of them, or of the defendant, or other person, as to the ownership of the
property. Its officers assumed without inquiry, from the possession by the firm, that the title was in Duncan, Sherman
Page 80
86 N.Y. 221, *228; 1881 N.Y. LEXIS 201, **13
& Co. If the record had been consulted, it would have disclosed the fact, that only one of the parties had any record title
to the land, and that his interest in the banking-house was an undivided third, [*231] subject to a mortgage on the
whole lot for two-fifths of its value, and that the Pine street lot, was mortgaged for nearly half its value. The plaintiff, in
giving credit to Duncan, Sherman & Co., relied, doubtless, upon the general credit of the firm, to which the fact that
they occupied an expensive building, generally supposed to belong to them, contributed. The record showed that it was
largely incumbered, and even this fact, they took no pains to ascertain. The plaintiff, we think, cannot call upon the
court to apply the highly penal [**19] doctrine of equitable estoppel, when it omitted the most obvious and natural
means of ascertaining the true state of the title. We cannot assume, that if inquiry had been made, the true facts would
not have been disclosed.
In the next place, there is no finding of any fraudulent intent on the part of the defendant, or that he omitted to
record the deeds, to avoid disclosure, or to maintain the credit of the firm; nor is there any proof that he knew that the
firm was in failing circumstances; nor that, in fact, its resources were not ample, up to a short time before its failure.
There may be grounds for suspicion, of the bona fides of the defendant, in omitting to record the deeds. The recording
of deeds is a usual, and generally an important precaution against subsequent conveyances by the grantor. But the law
does not impose upon grantees, the duty of recording their titles for the protection of subsequent purchasers or
incumbrancers. We are not prepared to say, and we have no right to say, in the absence of any finding of fraud, or proof
of circumstances necessarily tending to the conclusion of fraud, that the omission by the defendant to record his deeds,
prevents him from [**20] asserting, as against the plaintiff, his legal title to the land. Assuming, as is claimed, that
Duncan, Sherman & Co. held themselves out as owners of the property, or were guilty of fraud (facts not found), the
defendant cannot be charged with the consequences, unless he was privy to the fraud. In the absence of such proof the
principle stated by Lord Cottenham in Nicholson v. Hooper (4 Mylne & C. 186), "that a party claiming a title in
himself, but privy to the fact of another [*232] dealing with the property as his own, will not be permitted to assert his
own title against a title created by such other person, although he derives no benefit from the transaction," has no
application.
The judgment should be affirmed.
All concur.
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52 of 314 DOCUMENTS
Caution
As of: May 27, 2014
David S. Page, Respondent, v. William E. Waring, Appellant.
76 N.Y. 463; 1879 N.Y. LEXIS 525
February 20, 1879, Argued
PRIOR HISTORY: [**1] Appeal from judgment of the General Term of the Supreme Court, affirming a judgment
in favor of plaintiff, entered upon the report of a referee.
The nature of the action and the facts are set forth sufficiently in the opinion.
DISPOSITION: Judgment reversed.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant owner sought review of a decision of the General Term of the Supreme Court
(New York), which affirmed a judgment in favor of respondent individual in the individual's action to recover the
money paid to the owner for land that the city took.
OVERVIEW: Awards were made to "unknown owners" for lands taken for the opening of a street. Those awards were
paid by the city to the owner. The individual claimed that he owned the lands. The individual filed an action to recover
the money paid to the owner. A grantor had sold the land to a predecessor of the individual, but the predecessor did not
record the deed. The grantor then became bankrupt and the land was sold. The owner eventually took control of the land
under this chain of title. The first deed was then recorded. The trial court found in favor of the individual. On appeal, the
court reversed and ordered a new trial. The court held that the predecessor of the owner was, as regards the premises
taken, a purchaser in good faith within the meaning of the recording act. On the strength of the predecessor of the
owner's purchase in good faith, the court noted that the record title became established under the recording act of 1813,
1813 N.Y. Laws ch. 2, 171. The court found that there was nothing in the bankruptcy proceedings which amounted to
notice to affect the predecessor of the owner's position as a purchaser in good faith.
Page 82
OUTCOME: The court reversed and granted a new trial.
CORE TERMS: deed, notice, recorded, assignee, constructive notice, bankruptcy proceedings, conveyance, chain,
bankrupt, unrecorded deed, chargeable, real estate, good faith, valuable consideration, subsequent purchaser, recited,
grantee, imputed, decree, recording act, operation of law, purchaser, defeat, vested, warranty deed, appointed, bankrupt
act, common law, bankrupt proceedings, prior deed
[HN1] See 1813 N.Y. Laws ch. 2, 171.
[HN2] See N.Y. Rev. Stat. ch. I, 756.
Contracts Law > Consideration > Adequate Consideration
Real Property Law > Deeds > Construction & Interpretation
[HN3] A consideration that is recited and is acknowledged to have been received is sufficient prima facie evidence of a
valuable consideration, under the recording act, 1813 N.Y. Laws ch. 2, 171.
Real Property Law > Adverse Possession > General Overview
[HN4] Possession, under an unrecorded deed, as will amount to notice to a subsequent purchaser, must be under the
unrecorded deed, and must be actual, open, and visible, so that the subsequent grantee could go upon the lands, and
obtain, by inquiry there information of the unrecorded deed.
[HN5] The rights of a purchaser are not to be affected by constructive notice, unless it clearly appear that the inquiry
suggested by the facts disclosed at the time of the purchase would, if fairly pursued, result in the discovery of the defect
existing but hidden at the time. There must appear to be, in the nature of the case, such a connection between the facts
discovered and the further facts to be discovered, that the former may be said to furnish a clue, a reasonable and natural
clue, to the latter.
Bankruptcy Law > Case Administration > Notice
Civil Procedure > Remedies > Lis Pendens > Notices
[HN6] The constructive notice which every one has at common law of proceedings in courts of record is a notice only
of pending proceedings. It is only a notice while there is a lis pendens. Such notice is implied or imputed, that the ends
of justice may not be defeated by transactions subsequent to the commencement of suit and before final judgment. After
judgment and the rights of the parties have become fixed thereby, there is no longer necessity to imply such notice. The
judgment may transfer property and determine rights, so that all persons thereafter dealing with the parties to the
judgment, or dealing with the subject matter thereof, may be affected thereby; but it is not because of any notice
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imputed to them, but because of the state of things established by the judgment. It is not true, that all persons are forever
charged with notice of all the records and public proceedings of courts. So of bankruptcy proceedings conducted in
courts of record. While they are pending, all persons are so far chargeable with notice of them that they cannot
embarrass or defeat them, or thwart the purpose of the bankrupt act, by dealing with the bankrupt or his estate. But this
notice, and the purpose of it, cease when the proceedings are concluded and the litigation has ended, and the rights of all
the parties thereto have become finally fixed and determined.
SYLLABUS
Where, in a controversy as to title to lands, both parties claim from a common source, the one claiming under a
deed to A., first executed but not recorded until after the record of a deed to B., under which the other party claims, the
fact that a conveyance from A. was recorded before the deed to B. is immaterial; if the deed to B. has the priority over
A.'s deed by reason of its earlier record, no title valid as against it could be derived from A.
So, also, it is immaterial that the deed to A. was recorded prior to a conveyance from B, or from his grantee, as, if
B. had good title under the recording act, those taking title under him are also protected.
The possession which will constitute constructive notice of an unrecorded deed to a subsequent purchaser must
be under the deed, and actual, open and visible, so that the subsequent purchaser could have gone upon the land and
obtained by inquiry information of such deed.
While [**2] every person is chargeable with notice of bankruptcy proceedings legally and properly conducted,
such notice is only for the protection and efficacy of the proceedings. A party to a controversy, who does not claim
under, and bases no right upon, said proceedings, cannot claim that the opposite party is charged thereby with any
notice whatsoever.
Such proceedings are in no case constructive notice of facts not needful or proper to be stated or to appear therein.
It is not necessary for the bankrupt to make any statement in his schedules or otherwise as to property formerly
owned by him, but which he did not then own, and in which he had for a long time ceased to have any interest.
There can therefore be no constructive notice of statements in the bankrupt's schedules as to such property.
The constructive notice which every one has, at common law, of proceedings in courts of record is only of pending
proceedings; after judgment fixing the rights of the parties, no such notice is implied.
In an action wherein the rights of the parties depended upon adverse claims as to title to certain premises, plaintiff
claimed under a deed from P. to H., executed in 1827, but [**3] not recorded until 1864. Defendant claimed under a
deed from P. to G., who was a purchaser in good faith and for a valuable consideration, executed and recorded in
1861, and under a deed of an assignee in bankruptcy, executed and recorded in 1863. P. was decreed a bankrupt in
1842; in his schedule of property it was stated, in substance, that certain lands, including the lands in question, formerly
belonged to petitioner, and were sold under foreclosures of mortgages, etc., or passed to a receiver appointed in a
creditor's suit. There was no notice or statement in any way, in the proceedings, of the deed from P. to H., or of any
claim of the latter, or any one claiming under him, to the lands. No debts were proved against P., and he was discharged
from his debts by decree entered in 1842. Held, that there was nothing in the bankruptcy proceedings giving actual or
constructive notice to defendant or those under whom he claimed of the deed to H., or that they could not, as against H.
or those claiming under him, become purchasers in good faith; also, that, as the bankruptcy proceedings had been
fully closed prior to the deed to G., no notice of them could be imputed to him.
Also, [**4] held, that, as no debts were proved, in the bankruptcy proceedings, consequently, no creditors were to
be paid, any real estate which passed to the assignee reverted to and vested again in the bankrupt upon his discharge.
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Also held, that the lands in question did not pass to the assignee of P., as his deed to H. was good as against the
assignee.
Also held, that G., by his deed first recorded, got a good title as against P., H., the assignee, and all persons
claiming under them; and that defendant, claiming under G., took his title and was equally protected.
COUNSEL: Henry H. Anderson, for appellant. Upon the facts found by the referee, when the awards were made,
Morton was, as regards the premises taken, a purchaser in good faith within the meaning of the recording act. ( Varick
v. Briggs, 6 Paige, 323; 22 Wend., 543; Webster v. Van Steenburgh, 46 Barb., 211; Hetzel v. Barbee, 69 N. Y., 1.) The
burden of showing a consideration, actual notice, notice by record and notice by possession, was upon plaintiff. ( Reed
v. Gannon, 50 N. Y., 345; Ring v. Steele, 4 Abb. Ct. App. Dec., 68; Brown v. Volkenning, 64 N. Y., 76; Webster v. Van
Steenburg, 46 Barb., 211; Trustees v. Wheeler, [**5] 5 Lans., 160; Holmes v. Stout, 2 Stock. [N. J.], 419; Wood v.
Chapin, 13 N. Y., 509.) Whatever title, if any, remained in the assignee under the bankrupt act was in good faith
acquired by Morton. ( Charman v. Charman, 14 Ves., 586; Re Hoyt, 3 B. R., 55; Perry on Trusts, 351, 352, 353, 920;
1 Edm. R. S., 680, 67; Bankrupt Act of August, 1841, 3.) On the strength of his purchase in good faith, the record
title became established in Morton under the recording act of 1813. (Act of April 9, 1813; 2 R. S., 1813, p. 406, 171;
Jackson v. Given, 8 J. R., 137; Varick v. Briggs, 6 Paige, 323; 22 Wend., 543; Hooker v. Pierce, 2 Hill, 650; Wood v.
Chapin, 13 N. Y., 509; Cook v. Travis, 20 id., 401; Webster v. Van Steenburgh, 46 Barb., 211.) There was nothing in the
bankruptcy proceedings which amounts to notice to affect Morton's position as a purchaser in good faith. ( Cambridge
Val. Bk. v. Delano, 48 N. Y., 326; Dexter v. Harris, 3 Mas. C. C. R., 536; Ware v. Egmont, 4 De Gex., M. & G., 473;
Acer v. Westcott, 46 N. Y., 384; Wilson v. Wall, 6 Wall., 83; Williamson v. Brown, 15 N. Y., 363; Reed v. Gannon, 50 id.,
349; Whitebread v. Boulnoir, 1 You. & Coll Ex., 303; Birdsall v. Russell, [**6] 29 N. Y., 220; Pentland v. Keep, 41
Wis., 490.)
N. A. Chedsey, for respondent. The recording of the deed from Poillon and wife to Hart, being prior in time to the
making and recording of the deed from Morton to Fox and from Fox to Waring, neither Fox nor Waring was a
purchaser in good faith. (Ring v. Steele, 4 Abb. Ct. Apps. Dec., 68.) This constructive notice was as effectual as actual
notice. ( Schutt v. Large, 6 Barb., 373; Jackson v. Post, 15 Wend., 588; Van Rensselaer v. Clark, 17 id., 25.) The onus
was upon Goldsmith and Marks, or any one relying on their title to show that value was actually paid. (Jewett v. Palmer,
7 J. Ch., 65; Ring v. Steele, 4 Abb. Ct. App. Dec., 68; 1 R. S. [5th ed.], 30, 144, 164; Carver v. Jackson, 7 Pet., 83,
86; Crane v. Lessee, 6 Pet., 611; 2 Cow. H. & Edvo., notes 476, 574; McGinty v. Reeves, 10 Ala., 137; Nolen v. Heirs of
Gwyn, 16 id., 725; 2 Wharton's Ev., 1043, note 1; Shotwell v. Harrison, 22 Mich., 418; Kelson v. Kelson, 10 Hare Ch.,
385; Kipp v. Deniston, 4 J. R., 26; Shephard v. Little, 14 id., 210; Thallhimer v. Brinkerhoff, 6 Cow., 102; 2 Phil. Ev.,
62, note b; 7 J. Ch., 68; 1 Atk., 538; 2 id., 630; 3 id., 304; Wright v. Decklyne, [**7] Pet., 196; 1 Phil. Ev., 322; 2 id.,
574, note 476; Hardenburgh v. Larkin, 47 N. Y., 109; 1 Wharton, 1043, note 1; Wood v. Chapin, 13 N. Y., 509, 517;
Jackson v. McChesney, 7 Cow., 360.) The filing of the petition in bankruptcy of Poillon, and the order adjudging him a
bankrupt, was notice that he had no title, and was notice of plaintiff's title. (Bankrupt Act, 1841, 3; Mays v. Manu.
Nat. Bk. Phil., 4 Nat. B. R., 447, 448, 660; Re Lake, 6 N. B. R., 542, 544; Hitchcock v. Sedgwick, 2 Vern., 156, 161; 14
Stat. at Large, 535; Rev. Stat., 992, 4; Turnbull v. Payson, 16 Nat. B. R., 440.) The deed from Waddell to Marks,
reciting the order in bankruptcy, was actual notice that Poillon had no interest when he conveyed to Goldsmith, and that
Waddell, the assignee, had none when he conveyed to Marks. ( How. Ins. Co. v. Halsey, 4 Seld., 274; Com. Valley Bk.
v. Delano, 48 N. Y., 336.) The omission of a purchaser of real estate to make proper inquiries is gross negligence,
which prevents him from being regarded as a bona fide purchaser. ( Reed v. Gannon, 50 N. Y., 345-350; Williamson
v. Brown, 15 id., 358; Hamlin v. Pettibone, 10 N. B. R., 172, 177; Baker v. Bliss, 39 N. Y., 70, 74, 75, [**8] 78, 79.)
No possession, adverse to that acquired by Greenly in 1830, was shown. (Code, 81.) The sums awarded by the
commissioners belong, of right, to defendant. (Valentine's Laws, 1202-1203.)
JUDGES: Earl, J. All concur.
OPINION BY: EARL
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OPINION
[*467] Earl, J. On the 18th day of March, 1869, awards were made to "unknown owners" for lands taken for the
opening of a street, in the city of New York. Those awards were paid by the city to the defendant, who claimed to be
entitled thereto. The plaintiff, claiming that he owned the lands at the time they were taken, and that he was therefore
entitled to the awards, brought this action against the defendant to recover the money thus paid to him.
This controversy involves an inquiry into the title to the lands for which the awards were made. It is conceded that
Peter Poillon owned the lands in 1827; and in June of that year, he executed a warranty deed of them to one Hart. That
deed was acknowledged July 18, 1827, but it was not recorded until August 15, 1864. On the 20th day of June, 1830,
Hart executed a warranty deed of the lands to one Greenly, which deed was acknowledged July twenty-first, and
recorded August 31, 1830. Greenly died in March, [**9] 1860, leaving a will, in which he empowered his executors to
sell his real estate; and on the 5th of March, 1863, they executed a deed of these lands to the plaintiff, which deed was
recorded on the twelfth day of the same month. This is the chain of plaintiff's title, upon which he bases his right to
recover in this action, and if there were nothing to break this chain, his right would be plain enough.
The following is the chain of defendant's title: On the 29th day of January, 1861, Peter Poillon executed a deed
[*468] of these and other lands, without covenants, for a consideration, as recited in the deed, of $ 200 to one
Goldsmith, which deed was acknowledged on the same day and recorded the next day. On the 22d day of July, 1862,
Goldsmith executed a deed, without covenants, of an undivided half of these and other lands, for a consideration, as
expressed in the deed, of $ 4,000 to one Marks, which deed was acknowledged July 29, 1862, and recorded September
seventeen of the same year. Poillon was decreed a bankrupt April 6, 1842, under the general bankrupt law then in force,
and an assignee of his estate was appointed. Such assignee, in pursuance of an order of the bankrupt [**10] court made
January 13, 1863, executed a deed, dated the same day, of the same lands described in the prior deed, for the recited
consideration of five dollars, to Marks, which deed was acknowledged January fifteen, and recorded February 2, 1863.
On the 17th day of March, 1863, Goldsmith and Marks executed a warranty deed of the same lands to one Morton, for a
consideration, recited and paid, of $ 9,000, which deed was acknowledged on the same day, and recorded on the 20th
day of March thereafter. On the 19th day of March, 1869, the next day after the awards were made, Morton sold and
assigned them to one Fox; and on the 20th day of April thereafter, Fox sold and assigned them to the defendant. It will
be seen that the defendant has a regular chain of title from Poillon, and that all the deeds in his chain, down to and
including the deed to Morton, were recorded before the deed from Poillon to Hart was recorded; and this priority upon
the records presents the question to be considered, in determining the rights of these parties.
It matters not that the deed from Hart to Greenly was recorded before the deeds in the defendant's chain of title;
because, if the defendant, by reason of [**11] the record of the deeds under which he holds, has priority over the deed
to Hart, and a title good as against that deed, then there is a break in plaintiff's chain of title, and no title could be
derived from Hart that would be good as against the defendant. [*469] ( Cook v. Travis, 20 N.Y. 400.) And it matters
not that all the deeds in the plaintiff's chain were recorded before the conveyance by Morton to Fox, and by Fox to the
defendant; because, if Morton was protected by the recording act, and had good title under such act, then the persons
taking title under him were also protected. ( Webster v. Van Steenburgh, 46 Barb. 211; Hooker v. Pierce, 2 Hill 650;
Wood v. Chapin, 13 N.Y. 509.) Besides, the conveyance of the awards was not a conveyance of real estate; it was a mere
conveyance of choses in action, and had nothing whatever to do with the recording act.
The act of 1813 (2 R. L. of 1813, p. 406, 171), in reference to recording deeds of real estate in the city of New
York, provides that [HN1] "every such deed or conveyance, which shall hereafter be made or executed, in order to be
good and effectual in the law, as against any subsequent [**12] purchaser or mortgagee bona fide, and for valuable
consideration, and without notice of such prior deed or conveyance, shall be recorded at length in the office of the
register in and for the city of New York, in the book now used or hereafter to be provided by him for that purpose." And
in the Revised Statutes (1 R. S., 756) it is provided that [HN2] "every such conveyance not so recorded, shall be void as
against any subsequent purchaser in good faith and for a valuable consideration, of the same real estate, or any
portion thereof, whose conveyance shall be first duly recorded." Under these acts, the unrecorded deed, although prior
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in date, has no effect as to the subsequent deed first recorded, and the subsequent deed conveys the title as if the first
deed had not been executed. ( Hetzel v. Barber, 69 N.Y. 1.)
To give the subsequent deed such effect, it must have been taken in good faith and for a valuable consideration.
Here, there can be no question that all the deeds in the defendant's chain of title were based upon a valuable
consideration. [HN3] A consideration was recited and acknowledged to have been received, in all the deeds, and that is
sufficient prima facie evidence [**13] of a valuable consideration, under the recording act. [*470] ( Jackson v.
McChesney, 7 Cow. 360; Wood v. Chapin, 13 N.Y. 509; Ring v. Steele, 4 Abb. Ct. App. Decs. 68.) Besides, there was
other proof of the actual payment of the consideration mentioned in the deed to Morton.
The only remaining inquiry is whether the grantees in the deeds, under which the defendant holds, took their
respective deeds in good faith. There is no evidence or claim of actual bad faith, or of actual notice of the unrecorded
deed to Hart. The claim is that there was constructive notice of such deed. The plaintiff gave some evidence of some
sort of possession of the lands, at and prior to the times the deeds were given, under which the defendant holds, and he
claims that such possession was constructive notice. But the referee found against him, on this point. He found that the
occupation was by mere squatters, who held possession on their own account; and that at the time Morton obtained and
recorded his deed, he had no notice of the plaintiff's title, derived from any occupation of them, or public claim of title
to them by any of plaintiff's grantors. This finding is conclusive [**14] upon the plaintiff upon this appeal. Such
[HN4] possession, under an unrecorded deed, as will amount to notice to a subsequent purchaser, must be under the
unrecorded deed, and must be actual, open, and visible, so that the subsequent grantee could go upon the lands, and
obtain, by inquiry there information of the unrecorded deed. ( Brown v. Volkening, 64 N.Y. 76.)
It is further claimed, that the grantees in the deeds, under which the defendant claims, got such constructive notice,
that they could not be held to be bona fide purchasers, from the bankrupt proceedings against Poillon; and this claim
was sustained by the referee and by the General Term, and, by reason of such constructive notice, judgment was given
for plaintiff.
These facts appear from the bankruptcy proceedings: On the 7th day of March, 1842, Poillon filed his petition in
the United States District Court, applying for the benefit of the bankrupt act of 1841. Annexed to this petition was a
[*471] schedule containing an inventory of his property; and in such schedule it was stated that "all the lands in the
twelfth ward of the city of New York, formerly belonging to petitioner, have been sold, under foreclosure [**15] of
mortgages and decrees had for deficiencies;" and that "all remaining interest in said lands passed, as well as in all other
property, to an assignee appointed under a creditor's bill, filed in the Court of Chancery of the State of New York, about
July, 1840, by the Atlantic Bank, against the petitioner and Robert J. Cromerline, in which Daniel Trembly of the city of
Brooklyn was appointed receiver, and to whom petitioner executed a general assignment, according to the practice of
said court." The lands involved in this controversy were situated in the twelfth ward of the city of New York. Upon this
petition, a decree of bankruptcy was entered against Poillon, and one Waddell became his assignee by operation of law.
No debts were proved against Poillon; and on the 5th day of August, 1842, a decree was entered discharging him from
his debts.
There was no notice or hint in any way, in any of the bankruptcy proceedings, of the deed from Poillon to Hart, or
of Hart's claim to the land, or of the claims of any of the persons taking title under Hart, and there is nothing in those
proceedings to put any one upon inquiry for Hart's deed; and hence, they did not give such actual or constructive
[**16] notice to those under whom defendant claims that they could not become purchasers in good faith of these
lands as against Hart and those claiming under him. To defeat defendant's title under the deeds first recorded, there must
have been actual or constructive notice of the prior unrecorded deed. As said by Judge Wright, in Birdsall v. Russell, 29
N.Y. 220: [HN5] "The rights of a purchaser are not to be affected by constructive notice, unless it clearly appear that the
inquiry suggested by the facts disclosed at the time of the purchase would, if fairly pursued, result in the discovery of
the defect existing but hidden at the time. There must appear to be, in the nature of the case, such a connection between
the facts [*472] discovered and the further facts to be discovered, that the former may be said to furnish a clue--a
reasonable and natural clue--to the latter."
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It is true, as claimed by the plaintiff, that every person is chargeable with notice of bankruptcy proceedings legally
and properly conducted. But it is not a notice for every conceivable purpose. It is a notice only for the protection and
efficacy of such proceedings. After bankruptcy proceedings are instituted, [**17] every person is so far affected with
notice, that he cannot deal with the bankrupt or his estate to the prejudice or embarrassment of such proceedings, while
they are pending, and it goes no further. So, at common law, all persons were chargeable with notice of the pendency of
an action in the courts of record, not for every purpose, but simply so far that they could not deal with the parties or the
subject matter in litigation so as to embarrass the action, or defeat the judgment to be rendered therein. So the plaintiff,
who does not claim under the bankruptcy proceedings, and bases no right upon them, cannot claim that the defendant,
or those under whom he claims, were charged by them with any notice whatever.
But suppose it can be claimed, in this case, that the defendant, and those under whom he holds subsequent to
Poillon, were chargeable with some kind of notice by the bankruptcy proceedings, what was the notice? Certainly not of
everything that was said and done in such proceedings--not of everything witnesses might swear to, or the bankrupt
might choose to state in any of the proceedings. The most that could be claimed, is that there was constructive notice of
the essential [**18] steps, and of the necessary facts, and of the final adjudication. They would not be such notice of
any facts not needful or proper to be stated. It was required that the bankrupt should give a schedule of the property he
owned, but it was not necessary for him to make any statement in such schedule, or in any other paper, in reference to
property which he did not own, and in which he had for some considerable time ceased to have any interest; [*473]
and hence, there was no constructive notice of the statements in the schedule annexed to Poillon's petition that he had
been deprived of his property in the twelfth ward by mortgage foreclosures and creditors' bill. Such statements were
unnecessary and not required to be made, and served no legitimate purpose in the proceedings. But even if any one was
chargeable with notice of those statements, it was simply notice that Poillon at that time made such statements, not that
such statements were true; and there is no proof, in this case, that they were true. There are no facts showing that if
Morton, or any other grantee under Poillon, had read those statements, he could have learned anything more by any
inquiry which he could have made. [**19] To have made those statements of any account whatever, there should have
been proof that the title to the lands in the twelfth ward passed out of Poillon in the manner stated.
Suppose it be true, that everybody was chargeable with notice that in 1842 Poillon's title to all the real estate he
then owned became vested in his assignee in bankruptcy, I am unable to perceive how that helps the plaintiff's case.
Whatever passed to and remained in such assignee became vested in those under whom defendant holds, by a deed from
the assignee, recorded before the deed to Hart was recorded; and thus the title of such assignee, if any, became
extinguished. But the assignee probably had no title when he executed the deed. Poillon's estate became vested in him
by operation of law, without any conveyance, as trustee for Poillon's creditors, and after the payment of the debts, as
trustee for Poillon himself, as to any balance. Here, no debts were proven, and hence, there were no creditors to be paid;
and therefore any real estate which passed to the assignee would thereafter revert and vest again, by operation of law, in
Poillon, the whole purpose of the assignment having been fully accomplished: [**20] ( Charman v. Charman, 14 Ves.
580; In re Hoyt, 3 B.R. 55; 1 Edm. R. S., 680, 67; Perry on Trusts, 351, 352, 353, 920.)
But there is another and, if possible, a more complete [*474] answer to this claim of constructive notice. [HN6]
The constructive notice which every one has at common law of proceedings in courts of record is a notice only of
pending proceedings. It is only a notice while there is a lis pendens: ( Leitch v. Wells, 48 N.Y. 585, and cases there
cited.) Such notice is implied or imputed, that the ends of justice may not be defeated by transactions subsequent to the
commencement of suit and before final judgment. After judgment and the rights of the parties have become fixed
thereby, there is no longer necessity to imply such notice. The judgment may transfer property and determine rights, so
that all persons thereafter dealing with the parties to the judgment, or dealing with the subject matter thereof, may be
affected thereby; but it is not because of any notice imputed to them, but because of the state of things established by
the judgment. It is not true, that all persons are forever charged with notice of all the records and public proceedings
[**21] of courts. So of bankruptcy proceedings conducted in courts of record. While they are pending, all persons are
so far chargeable with notice of them that they cannot embarrass or defeat them, or thwart the purpose of the bankrupt
act, by dealing with the bankrupt or his estate. But this notice, and the purpose of it, cease when the proceedings are
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concluded and the litigation has ended, and the rights of all the parties thereto have become finally fixed and
determined. At the time Poillon deeded these lands to Goldsmith, those proceedings had been finally closed, and a final
decree discharging Poillon from his debts had been entered for nineteen years. At that time, the bankrupt proceedings
were in no sense pending, and hence, no notice of them could be imputed to Goldsmith. If Goldsmith had attempted to
purchase of Poillon any property which had passed out of him by the bankruptcy proceedings, he would have failed to
get any title; not because of any notice imputed to him, but because Poillon had no title to convey. But here, Goldsmith
did not purchase or attempt to purchase any land affected by the bankruptcy proceedings. These lands did not pass to
Poillon's [*475] assignee, [**22] because his deed to Hart was good as against such assignee. That deed was invalid
only as against a subsequent purchaser in good faith and for value: ( Hetzel v. Barber, supra.) Hence Goldsmith, by
his deed first recorded, got a good title as against Poillon, Hart, and the assignee, and all persons who could claim under
them; and the persons claiming under him took his title, and are equally protected.
For all these reasons, it is clear that there was nothing in the bankruptcy proceedings in any way affecting or
impairing defendant's title; and the judgment of the General Term must be reversed and a new trial granted, with costs
to abide event.
All concur.
Judgment reversed.
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56 of 314 DOCUMENTS
Caution
As of: May 27, 2014
Elias G. Brown, Appellant, v. Henry L. Volkening, impleaded, etc., Respondent.
64 N.Y. 76; 1876 N.Y. LEXIS 34
January 20, 1876, Argued
PRIOR HISTORY: [**1] Appeal from judgment of the General Term of the Court of Common Pleas for the city
and county of New York, affirming a judgment in favor of defendant Volkening, entered upon a decision of the court.
This action was brought for the foreclosure of a mortgage given by Decker to plaintiff upon a house and lot in the
city of New York. The answer of defendant Volkening, who alone defended, alleged, among other things, that at the
time plaintiff's mortgage was executed he was the equitable owner of the premises, and that before the commencement
of this action the same were conveyed to him by Decker.
He further alleged and proved that, prior to the execution of the mortgage in January, 1872, Decker, who was then
building, upon the premises in question and upon adjoining lots owned by him, nineteen dwelling-houses, agreed with
Volkening to sell him the premises, the consideration to be paid in mantels, mirrors and hall tiling to be furnished by
Volkening for the nineteen houses, Decker agreeing to complete the house and deed it to Volkening on the first day of
May, then next; that Volkening fully performed the agreement on his part. Said defendant also alleged that prior to the
execution [**2] of the mortgage he had taken possession of the premises under said agreement, and that, at the time of
taking his mortgage, plaintiff had full notice of all the facts and of defendant's rights and equities. Upon the subject of
possession the court found as follows:
"That prior to the execution of the mortgage in said complaint mentioned, and on or about the 15th day of June,
1872, said Decker had surrendered the keys of the house to said Volkening and said Volkening had entered into and had
the actual and exclusive possession of the premises in said mortgage mentioned and described as purchaser thereof,
under and in pursuance of an agreement made and entered into by and between him and said Peter P. Decker, in
January, 1872, for the sale and conveyance thereof by said Decker to him, and had made various alterations and
improvements in the dwelling-house thereon exceeding, $ 2,000 in value, and had, prior to July, 1872, so far performed
said agreement on his part and paid the full consideration in said agreement mentioned, that he had become entitled to a
Page 90
specific performance thereof by said Peter P. Decker, and to a conveyance to him by said Decker and wife, free from
any such [**3] incumbrances thereon as that subsequently attempted to be created by the said mortgage to the plaintiff.
That such possession of said Volkening so continued, and at the time of the execution of said mortgage was actual
and exclusive and could have been easily ascertained by the plaintiff by inquiry on said premises."
And, as matters of law:
"That such possession of said premises by said Volkening, as such equitable owner, was notice to the plaintiff of
his rights; that the plaintiff was not a purchaser or incumbrancer of the said premises in good faith, and that the
mortgage was not a valid lien, as against Volkening, and thereupon directed a dismissal of the complaint as to him."
Judgment was entered accordingly. Further facts appear in the opinion.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant mortgagee sought review of a decision of the Court of Common Pleas for the
City and County of New York (New York), which affirmed a judgment in favor of respondent alleged equitable owner
and dismissed the mortgagee's complaint as to the alleged equitable owner. The mortgagee had filed a foreclosure action
against the mortgagor and the alleged equitable owner.
OVERVIEW: The mortgagee commenced a foreclosure action against the mortgagor and the alleged equitable owner.
Only the alleged equitable owner defended the lawsuit. The alleged equitable owner contended that the mortgagor had
conveyed the premises to him prior to the commencement of the action. The court of common pleas affirmed the
judgment in favor of the alleged equitable owner. The court of common pleas also dismissed the mortgagee's complaint
as to the alleged equitable owner. The court reversed the court of common pleas' judgment and granted a new trial. The
court held that the court of common pleas erred in entering judgment in favor of the alleged equitable owner as the
evidence failed to show that the alleged equitable owner was the open, actual occupant of the house or that there were
any open, visible acts of ownership by the alleged equitable owner of the mortgaged premises that the public or third
persons were likely to have noticed or that suggested an inquiry to his claim.
OUTCOME: With respect to the mortgagee's foreclosure action, the court reversed the court of common pleas'
affirmance of the judgment in favor of the alleged equitable owner and the court of common pleas' dismissal of the
mortgagee's complaint as to the alleged equitable owner. The court also granted a new trial.
CORE TERMS: occupation, notice, visible, mortgage, purchaser, constructive notice, constructive possession, actual
notice, actual possession, unfinished, occupant, deed, good faith, subsequent purchaser, conveyance, delivery, doubtful,
acts of ownership, constructive, occupancy, equitable, tenant, mortgaged premises, prudent man, equivocal, cautious,
registry, mechanics, laborers, impeaches
[HN1] Possession means simply the owning or having a thing in one's own power; it may be actual, or it may be
constructive. Actual possession exists where the thing is in the immediate occupancy of the party; constructive is that
which exists in contemplation of law, without actual personal occupation.
Page 91
64 N.Y. 76, *; 1876 N.Y. LEXIS 34, **2
Real Property Law > Priorities & Recording > Title Registration
[HN2] The protection which the registry law gives to those taking titles or security upon land upon the faith of the
records should not be destroyed or lost except upon clear evidence showing a want of good faith in the party claiming
their protection and a clear equity in him who seeks to establish a right in hostility to him. Slight circumstances, or mere
conjecture, should not suffice to overthrow the title of one whose deed is first on record. The statute makes void a
conveyance not recorded only as against a subsequent purchaser in good faith and for a valuable consideration. 1
N.Y. Rev. Stat. ch. 756, 1. Actual notice of a prior unrecorded conveyance, or of any title, legal or equitable, to the
premises, or knowledge and notice of any facts which should put a prudent man upon inquiry, impeaches the good
faith of the subsequent purchaser.
[HN3] There should be proof of actual notice of prior title, or prior equities, or circumstances tending to prove such
prior rights, which affect the conscience of the subsequent purchaser. Actual notice, of itself, impeaches the
subsequent conveyance. Proof of circumstances, short of actual notice, which should put a prudent man upon inquiry,
authorizes the trial court or jury to infer and find actual notice. The character of the possession which is sufficient to
put a person upon inquiry, and which will be equivalent to actual notice of rights or equities in persons other than
those who have a title upon record, is very well established by an unbroken current of authority. The possession and
occupation must be actual, open and visible; it must not be equivocal, occasional, or for a special or temporary purpose;
neither must it be consistent with the title of the apparent owner by the record.
SYLLABUS
One who seeks to establish a right in hostility to a recorded title to or security upon land, under and by virtue of a
prior unrecorded conveyance or prior equities, must show actual notice to the subsequent purchaser of his rights, or
prove circumstances such as would put a prudent man upon his guard and from which actual notice may be inferred and
found.
The possession which will be equivalent [**4] to actual notice to a subsequent purchaser must be an actual,
open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional,
or for a special or temporary purpose. Constructive possession will not suffice.
The principle of constructive notice will not apply to an uninhabited and unfinished dwelling-house. (Folger, J.,
dissents.)
One asserting a right under a mortgagor prior to the mortgage, is a proper party to an action for foreclosure of the
mortgage and the question of priority is proper to be determined in the action.
COUNSEL: Amasa J. Parker for the appellant. There was no possession on the part of Volkening that was equivalent
to actual notice to plaintiff. (3 Wash. on R. P. [3d ed.], 123; 4 Kent, 2 id., 203; Cook v. Travis, 20 N.Y. 400, 402;
Chesterfield v. Gardner, 5 J. Ch., 29; Gouverneur v. Lynch, 2 Paige, 300; Freeman v. Freeman, 43 N.Y. 34; Grimstone
v. Carter, 3 Paige, 421-424; Tuttle v. Jackson, 6 Wend., 213; Norcross v. Widgery, 2 Mass., 508; De Ruyter v. Trustees,
etc., 2 Barb. Ch., 555; Brice v. Brice, 5 Barb., 533; Buck v. Holloway's Devisees, 2 J. J. Marsh., 180; Troup v. Hurlbut,
10 Barb., 354; Moyer [**5] v. Hinman, 3 Kern., 180; Webster v. Van Steenbergh, 46 Barb., 211; Merithrew v.
Andrews, 43 N.Y. 34; Trustees, etc., v. Wheeler, 59 Barb., 85; Rupert v. Mack, 15 Ill., 540; Colby v. Kenniston, 4 N. H.,
262; Patten v. Moore, 32 id., 382; Campbell v. Brackenbridge, 8 Blackf., 471; Coleman v. Barklew, 3 Dutch., 357;
Holmes v. Stout, 2 Stoct., 419; McMeehan v. Griffing, 3 Pick., 149; Fassett v. Smith, 23 N.Y. 252; Emmons v. Murray,
16 N. H., 385; Smith v. Yule, 31 Cal., 180; Bell v. Twilight, 32 N. H., 500; Wygatt v. Elam, 23 Geo., 201; Truesdale v.
Ford, 37 Ill., 210; Billington v. Welsh, 5 Bin., 129; White v. Wakefield, 7 Sim., 401.) The onus was on defendant to
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64 N.Y. 76, *; 1876 N.Y. LEXIS 34, **3
show that plaintiff was a purchaser with notice, and such proof must be clear and satisfactory beyond doubt. (Ware v.
Egmont, 4 De G., M. & G., 460; 1 Phil. Ev., 501; Broom's Leg. Max. [6th Am. ed.], 699; Jackson v. Burger, 10 J. R.,
426; Williamson v. Brown, 15 N.Y. 354; Fort v. Burch, 6 Barb., 60; Newton v. McLean, 41 id., 288; Wilson v.
McCullock, 23 Penn. St., 440; Dey v. Dunham, 2 J. Ch., 182; Jackson v. Van Valkenbergh, 8 Cow., 260; Cambridge
Val. Bk. v. Delano, 48 N.Y. 326; 2 Sugd. V. and P. [8th Am. ed., 1873], 484, [**6] 485; Butler v. Stevens, 26 Me., 484;
Mara v. Pierce, 9 Gray, 306.) Defendant was bound to show that plaintiff knew of possession by Volkening.
(Chesterman v. Gardner, 5 J. Ch., 29; Grimstone v. Carter, 3 Paige, 421; Stuyvesant v. Hall, 2 Barb. Ch., 151; Troup v.
Hurlbut, 10 Barb., 354; Gouverneur v. Lynch, 2 Paige, 300; Tuttle v. Jackson, 6 Wend., 213-226; De Ruyter v.
Trustees, etc., 2 Barb. Ch., 555-558; Brice v. Brice, 5 Barb., 533; Williamson v. Brown, 15 N.Y. 354; Cook v. Travis, 20
id., 400; Fassett v. Smith, 23 id., 255; Williamson v. Brown, 15 id., 361; Newton v. McLean, 41 Barb., 288; Merithrew
v. Andrews, 44 id., 200; Baker v. Bliss, 39 N.Y. 70; Jones v. Smith, 1 Hare, 55; Le Neve v. Le Neve, Amb., 436; Miles
v. Langley, 1 R. & Myl., 39; Rogers v. Jones, 8 N. H., 264; Nutting v. Herbert, 37 id., 346.) If no actual knowledge of
facts is shown, it must appear that the party willfully neglected inquiry to avoid information to an extent to show fraud.
( Kellogg v. Smith, 20 N.Y. 18; Baker v. Bliss, 39 id., 70; Curtis v. Munday, 3 Metc., 405; Doyle v. Tras, 4 Seam., 202;
Holmes v. Stout, 2 Stockt., 419; Dey v. Dunham, 2 J. Ch., 182; Jackson v. Burgot, 10 J. R., 462; 1 Story Eq., [**7]
397.)
Samuel Hand for the respondent. The actual possession of the premises by defendant, under the contract with Decker,
was notice to all of all his equitable rights in and title to the premises. (Moyer v. Hinman, 3 Kern., 180; Bk. of Orleans
v. Flagg, 3 Barb. Ch., 316; Tuttle v. Jackson, 6 Wend., 213-226; Gouverneur v. Lynch, 2 Paige, 300; De Ruyter v.
Trustees, etc., 2 Barb. Ch., 555; Trustees, etc. v. Wheeler, 59 Barb., 585; 4 Kent's Com. [2d ed.], 203; Laverty v. Moore,
33 N.Y. 658.) It was not necessary that there should be a living in and dwelling upon the premises. ( French v. Carhart, 1
Comst., 107; Harsha v. Reid, 45 N.Y. 418.) It was not necessary that the possession of the equitable owner must be
known by the purchaser. (6 Wend., 226; 2 Paige, 300; 2 Barb. Ch., 558; 5 Barb., 533-548; 59 id., 616, 617.)
JUDGES: Allen, J. Church, Ch. J., Rapallo and Miller, JJ., concur. Andrews and Earl, JJ., concur in result. Folger, J.,
dissents.
OPINION BY: Allen
OPINION
[*80] Allen, J. The findings of fact by the learned judge by whom the action was tried are equivocal. Read as a
whole, they only imply of necessity a constructive possession of the premises, a mere power over them by [**8] the
respondent. They come far short of showing an actual use and occupation by him. The delivery of the possession to him
by Decker was symbolical, by a surrender of the keys of the house, and the actual and exclusive possession, and the
expenditure of moneys in making alterations and improvements in the house as stated in the findings, must be regarded
in the connection in which the statements are found, as but the continuance of that constructive possession commenced
and evidenced by the delivery of the keys. The cautious finding or statement of the judge that such possession, so
continued, could have been easily ascertained by the appellant by inquiry on said premises, without indicating that there
was an actual occupant of whom such inquiry could have been made, tends strongly to show that the learned judge used
the word possession, as distinct from that of actual occupation, and in its strictly technical sense. [HN1] Possession
means simply the owning or having a thing in one's own power; it may be actual, or it may be constructive. Actual
possession exists where the thing is in the immediate occupancy of the party; constructive is that which exists in
contemplation of law, without [**9] actual personal occupation.
Had the judge intended to find an actual, visible occupation of the premises by the respondent, he would, with his
[*81] usual accuracy, have so found, in terms, and not by argument found a possession merely, which from the
circumstances stated as establishing such possession, show a constructive possession, as that term is understood in the
law. If the evidence is referred to, to give effect to the findings and judgment, it entirely fails to establish any thing more
than the merest constructive possession in the respondent, and that of a very doubtful character. So that, while in cases
Page 93
64 N.Y. 76, *; 1876 N.Y. LEXIS 34, **5
where the findings of fact are doubtful and may be insufficient unexplained, to sustain the judgment, the evidence may
be resorted to in aid of the interpretation and in support of the judgment; a reference to the testimony in this case shows
that a finding of actual and visible occupation, such an occupation as is required (as well in law as in equity) to break in
upon the registry laws, would have been without evidence and erroneous.
The testimony, viewed in its most favorable light for the respondent, shows that he did not at any time accept the
house from Decker, [**10] his grantor, as finished and completed until long after the mortgage to the plaintiff; that
until late in the fall he was urging Decker to complete the house as he had agreed, and complaining that it was not done,
and did not accept the deed thereof until November. The work which he did upon the house after the delivery of the
keys in June, was performed by mechanics and laborers, and substantially in the execution of his agreement with
Decker, for work upon the nineteen houses which Decker was building, including the one upon the mortgaged premises.
The fact that the work put upon the house in question by the respondent, was of a better character and more expensive
than was put upon the other houses, or than he was bound to put upon this, did not vary the character of the act, or give
any particular significance to it as affecting the plaintiff, or third persons. Whether Decker had or had not men at work
upon the house during the same time may be doubtful upon the evidence, and the fact is not found. The only possession
of the respondent was by having laborers and mechanics at work [*82] upon an unfinished house, one of a block of
nineteen houses, the record title to which was [**11] in Decker, and to which the respondent had no paper title, with
nothing to indicate any difference in the proprietorship or the direction of the work between this house and any of the
other eighteen houses. There was no one remaining or staying permanently in the house until long after the giving of the
mortgage to the plaintiff. It was an unfinished and unoccupied house.
In view of the undisputed evidence, and of the peculiar language of the findings of fact, we are constrained to hold
that an actual, visible occupation of the premises by the respondent, was neither proved or found, and had the fact been
so found by the judge it would have been error for which the judgment would have been reversed. [HN2] The protection
which the registry law gives to those taking titles or security upon land upon the faith of the records, should not be
destroyed or lost, except upon clear evidence showing a want of good faith in the party claiming their protection, and a
clear equity in him who seeks to establish a right in hostility to him. Slight circumstances, or mere conjecture, should
not suffice to overthrow the title of one whose deed is first on record. The statute makes void a conveyance not recorded
[**12] only as against a subsequent purchaser in good faith and for a valuable consideration. (1 R. S., 756, 1.)
Actual notice of a prior unrecorded conveyance, or of any title, legal or equitable, to the premises, or knowledge and
notice of any facts which should put a prudent man upon inquiry, impeaches the good faith of the subsequent
purchaser.
[HN3] There should be proof of actual notice of prior title, or prior equities, or circumstances tending to prove such
prior rights, which affect the conscience of the subsequent purchaser. Actual notice, of itself, impeaches the
subsequent conveyance. Proof of circumstances, short of actual notice, which should put a prudent man upon inquiry,
authorizes the court or jury to infer and find actual notice. The character of the possession which is sufficient to put a
person upon inquiry, and which will be equivalent to actual notice of [*83] rights or equities in persons other than
those who have a title upon record, is very well established by an unbroken current of authority. The possession and
occupation must be actual, open and visible; it must not be equivocal, occasional, or for a special or temporary purpose;
neither must it be consistent [**13] with the title of the apparent owner by the record.
In Moyer v. Hinman (3 Kern., 180) the plaintiff was in actual possession of farming lands, under a contract of
purchase, and that circumstance was held notice to all persons who had subsequently become interested in the premises,
of all the plaintiff's rights under his contract. De Ruyter v. The Trustees of St. Peter's Church (2 Barb. Ch., 555) was a
case of actual possession and use of the premises, and such possession was held constructive notice of the rights of the
occupant. Gouverneur v. Lynch (2 Paige, 300) was like Moyer v. Hinman (supra). Chief Justice Parsons, in Norcross v.
Widgery (2 Mass. 506), says: "This notice may be express, or it may be implied from the first purchaser being in the
open and exclusive possession of the estate under his deed." The same doctrine is held in Colby v. Kenniston (4 N.H.
262), and both cases are cited with approval by the chancellor in Tuttle v. Jackson (6 Wend., 213). In The Bank of
Orleans v. Flagg (3 Barb. Ch., 316) it was held that the actual possession of the premises by the tenant of a purchaser
Page 94
64 N.Y. 76, *81; 1876 N.Y. LEXIS 34, **9
was constructive notice [**14] to subsequent mortgagees of the equitable rights of such purchaser. I have met with no
case in which any thing short of actual, visible, and as is said in some cases, notorious possession of premises, has been
held constructive notice of title in a claimant. (See Chesterman v. Gardner, 5 J. Ch., 29; Grinstone v. Carter, 3 Paige,
421; Cook v. Travis, 20 N.Y. 400; Webster v. Van Steenbergh, 46 Barb., 212.) All the cases agree that notice will not be
imputed to a purchaser except where it is a reasonable and just inference from the visible facts. Neither will the
principles of constructive notice apply to unimproved lands, nor to cases where the possession is ambiguous or liable to
be misunderstood. ( Patten v. Moore, 32 N.H. 382.) It should [*84] not apply within the same principle to an
uninhabited and unfinished dwelling-house; there must be a possession actual and distinct, and manifested by such acts
of ownership as would naturally be observed and known by others.
The using of lands for pasturage or for cutting of timber is not such an occupancy as will charge a purchaser or
incumbrancer with notice. ( Coleman v. Barklew, 3 Dutch., [**15] 357; McMechan v. Griffing, 3 Pick., 149; Holmes v.
Stout, 10 N.J. Eq. 419; see also, Fassett v. Smith, 23 N.Y. 252.)
It cannot be said, either upon the cautious findings of the learned judge or upon the evidence, that the respondent
was the open, actual occupant of the houses, either by himself or by tenants, or that there were any open, visible acts of
ownership, by the respondent, of the mortgaged premises, which the public or third persons would be likely to notice,
or which would suggest an inquiry into his claim, or which would evince bad faith or gross neglect should a party
dealing in respect to the premises neglect to make inquiry.
The judgment should be reversed and a new trial granted.
To obviate an objection suggested by the learned counsel for the appellant, and which may be made upon a second
trial, although not made before, it is proper to state that Volkening was a proper party defendant, and his rights can
properly be determined in this action. Whether his equities are prior and superior to the rights of the plaintiff under his
mortgage, or junior and subordinate thereto, must necessarily be determined in the judgment for a foreclosure of [**16]
the plaintiff's mortgage. ( Bank of Orleans v. Flagg, supra.) Volkening is not contesting the title of the mortgagor, but
simply asserts a right under him prior in point of time to the mortgage. The question of priority between the two is
necessarily involved in the action, and proper to be determined in it.
Church, Ch. J., Rapallo and Miller, JJ., concur. Andrews and Earl, JJ., concur in result, on the ground that the
evidence does not warrant a finding of actual and exclusive occupation by Volkening prior to or at the time plaintiff's
mortgage was executed. Folger, J., dissents.
Judgment reversed.
Page 95
64 N.Y. 76, *83; 1876 N.Y. LEXIS 34, **13
58 of 314 DOCUMENTS
Caution
As of: May 27, 2014
George D. Lamont, Appellant, v. Richard Y. Cheshire et al., Respondents.
65 N.Y. 30; 1875 N.Y. LEXIS 320
September 29, 1874, Argued
January Term, 1875, Decided
PRIOR HISTORY: [**1] Appeal from an order of the General Term of the Supreme Court, in the fourth judicial
department, setting aside a verdict in favor of plaintiff, and directing a new trial.
The action was in ejectment for the recovery of certain real estate, situate in Niagara county. (Reported below, 6
Lans., 234.)
The plaintiff proved, on the trial, that in June, 1859, John S. Harp became the owner of the premises, and he was a
non-resident. David Harp, on October 19, 1859, commenced an action in the Supreme Court against said John S. Harp,
and procured an attachment against his property, and on the same day the premises in litigation were attached by the
sheriff, and a notice of pendency of action was filed as prescribed by section 132 of the Code. The action was
prosecuted to judgment, which was perfected and docketed January 31, 1860. On October 26, 1859, Hiram Dennison
commenced an action against said John S. Harp in the same court, and procured a like attachment; notice of pendency
of the action was filed on the same day, and judgment was perfected and docketed January 31, 1860. On November 16,
1859, George W. Smith also commenced an action against said John S. Harp in the same court, [**2] and procured a
like attachment; notice of the pendency of the action was filed November 17, 1859, and judgment was perfected and
docketed on the same day (January 31, 1860) with the Harp and Dennison judgments, and at the same hour. On
February 10, 1860, executions on these three judgments were issued to the sheriff of Niagara county, whereby he was
commanded, in want of personal property, to satisfy the respective judgments from the real property belonging to John
S. Harp, on January 31, 1860, or at any time thereafter. Under these executions the sheriff sold the premises in question,
with other lands, to David Harp, Hiram Dennison and George W. Smith, for $ 100, issuing to them the usual certificate
of sale. The sale took place on March 27, 1860. The defendant Cheshire, as grantee of the judgment debtor, redeemed
the premises thus sold within a year, viz., on March 26, 1861, paying the purchase-price and the interest prescribed by
law. On August 21, 1861, the sheriff sold the same lands, under the same executions, to the plaintiff for $ 1,000, and
issued to him a certificate of sale. In this certificate the executions are recited, and the fact that he was thereby required
Page 96
to satisfy [**3] the judgments out of the debtor's lands, which he had on January 31, 1860, or thereafter. He then
proceeds to state that he had previously taken and attached the lands, and, until the sale, held them by virtue of the
attachments. He then certifies that he sold by virtue of the executions, and that the purchaser would be entitled to a
conveyance unless redemption took place in the manner prescribed by law. On August 27, 1863, the sheriff, pursuant to
his sale, executed his deed to the plaintiff, whereby he conveyed to him all the right, title and interest which John S.
Harp had in the premises on January 31, 1860, or at any time afterwards. The deed recites that the sale had been made in
obedience to the executions, and also that the land had been levied upon and attached, and was, at the time of the sale,
held under and by virtue of three several warrants of attachments issued in favor of the plaintiffs in the several actions.
The granting clause in this deed states that the sheriff grants all the estate of which John S. Harp was seized or
possessed on the 31st day of January, 1860.
It was further shown by plaintiff that, before the action was commenced, the defendant Cheshire [**4] was in
possession of the premises, claiming to own them in fee, and also that, before the action was commenced, Cheshire put
the defendant Marshall Martin in possession, who has continued in possession ever since, holding under Cheshire.
The defendants proved that, on September 17, 1859 (more than one month before either attachment was issued),
John S. Harp, by his deed, dated, delivered and duly acknowledged on that day, conveyed to Cheshire the premises in
question (with other lands sold by the sheriff) for the consideration of $ 3,500. This sum was actually paid by Cheshire.
The deed was duly recorded in the office of the clerk of Niagara county on November 14, 1869; this record thus being
made after the first two and before the last notices of the pendency of the action were filed. Said Cheshire took
possession of the premises so conveyed, and has ever since claimed to hold the same by virtue of his deed.
The defendants then moved, first, that the plaintiffs be nonsuited; second, that the court direct a verdict for the
defendants. These motions were denied, and defendants' counsel duly excepted.
The court then held, in substance--under exception--that, conceding [**5] that the deed to Cheshire was made,
delivered, and the consideration paid in good faith, on the day that the same bears date, yet that, as to the plaintiffs,
David Harp and Hiram Dennison, in the first two actions against John S. Harp, in which the notices of lis pendens were
filed and the actions commenced, and the attachments levied before the recording of the deed from John S. Harp to
Cheshire, and consequently as to the present plaintiff, the said Cheshire is to be deemed a "subsequent purchaser or
incumbrancer" under section 132, Code. The plaintiffs' title is, by reason of that section, paramount to that of Cheshire
on the ground that, after the making and delivery of the deed, and before its record, J. S. Harp and Dennison, by their
actions and proceedings, acquired a lien superior to Cheshire's title, and that the sheriff's deed to the plaintiff cut off
Cheshire's title. To which defendants' counsel duly excepted. The judge then directed the jury to find a verdict for the
plaintiffs, to which direction due exception was taken.
Exceptions were ordered to be heard in the first instance at General Term.
DISPOSITION: Order affirmed, and judgment absolute ordered against plaintiff.
CORE TERMS: conveyance, notice, mortgage, deed, unrecorded, purchaser, unregistered, subsequent purchaser,
recorded, holder, lis pendens, equitable, attachment, registered, pendency, constructive notice, incumbrancer,
mortgagee, void, attachment proceedings, equitable rights, pendente lite, fraudulent, commence, enrolled, binding,
decree, sheriff's deed, subordinate, ascertain
SYLLABUS
The [**6] filing of a notice of suit pending, and the levy, by virtue of an attachment upon real estate formerly
owned by the defendant but sold and conveyed, to the knowledge of the plaintiff, prior to the filing and levy, does not
defeat the title of the purchaser, if regular in all respects, save that his conveyance is not recorded; nor is such title
subordinated to the lien of the attachment.
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65 N.Y. 30, *; 1875 N.Y. LEXIS 320, **2
The provision of the Code ( 132), providing for the filing of lis pendens, making it constructive notice to a
purchaser, and declaring that a purchaser whose conveyance is subsequently executed or recorded shall be a subsequent
purchaser and shall be bound by the proceedings, simply affects such purchaser "to the same extent as if he were made
a party" to the action; and the title of a purchaser so holding under a prior unrecorded conveyance, if made a party,
could not, under such circumstances, be affected when plaintiff, at the time of filing notice, had actual or constructive
notice of his rights.
Stern v. O'Connell (35 N.Y. 104) distinguished and limited; Hovey v. Hill (3 Lans., 167) distinguished.
Under an execution, issued in an action wherein notice had been [**7] filed and attachment issued and levied as
aforesaid, the sheriff sold and subsequently conveyed all the estate in the premises of which the judgment debtor was
seized and possessed on the day judgment was perfected. In an action of ejectment by one claiming under the sheriff's
deed, held, that as prior to that day the judgment debtor had conveyed and then had no estate, nothing was conveyed by
the sheriff's deed.
COUNSEL: A.K. Potter for the appellant. Defendant was, as to plaintiff, a subsequent incumbrancer or purchaser.
(Code, 132; Hovey v. Hill, 3 Lans., 167, 171; Stern v. O' Connell, 35 N.Y., 104.) The second sale on same executions
was proper. (Wood v. Colvin, 5 Hill, 228; Titus v. Lewis, 3 Barb., 70; Bodine v. Moore, 18 N.Y., 347; Phyfe v. Riley, 15
Wend., 248.)
L. F. Bowen for the respondents. The sheriff's deed did not convey any interest the debtor had in the land prior to
January 31, 1860. (Sanford v. Roosa, 12 J. R., 162; Lansing v. Montgomery, 2 id., 382; Wel. C. Co. v. Hathaway, 8
Wend., 480; Jackson v. Roberts, 7 id., 83; 11 id., 422.) The lis pendens did not divest Cheshire of any title he had in the
land. (Stuyvesant v. Hall, 2 Barb. Ch., 151.) His title was [**8] not affected by the judgments against Harp. (Hopkins v.
McLaren, 4 Cow., 667; Parks v. Jackson, 11 Wend., 422; People v. Connolly, 2 Abb. Pr., 128; Chapman v. West, 17
N.Y., 127.) A lis pendens does not confer new rights or interests in property, or divest any one of such rights and
interests, but preserves those already acquired. (2 Laws 1857, p. 553; Laws 1858, p. 491.)
JUDGES: Dwight, C.
OPINION BY: Dwight
OPINION
[*34] Dwight, C. The question to be decided in this cause concerns the true construction of the one hundred and
thirty-second section of the Code, as it stood in the year 1859. This section then provided that, "in an action affecting
the title to real property, the plaintiff, at the time of filing the complaint, or at any time afterward, or whenever a warrant
of attachment under chapter 4 of title 7, part second of this Code, shall be issued, or at any time afterward, the plaintiff,
if the same be intended to affect real estate, may file with the clerk of each county in which the property is situated, a
notice of the pendency of the action, [*35] containing the names of the parties, the object of the action and the
description of the property in that county affected thereby. [**9] * * * From the time of filing only shall the pendency
of the action be constructive notice to a purchaser or incumbrancer of the property affected thereby, and every person
whose conveyance or incumbrance is subsequently executed or subsequently recorded shall be deemed a subsequent
purchaser or incumbrancer, and shall be bound by all proceedings taken after filing of such notice, to the same extent
as if he were made a party to the action."
The attachments under which the plaintiff claims title were levied and the lis pendens filed before the deed
executed by John S. Harp to Cheshire, one of the defendants, and under whom Martin, the other defendant, claims, was
recorded. The question is thus directly presented as to the meaning of the provision in the section of the Code above
cited, that a person whose conveyance is recorded subsequent to the filing of a lis pendens shall be deemed a
"subsequent purchaser or incumbrancer."
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The plaintiff contends that the effect of this clause is, that if a purchaser has acquired a title regular in all respects
except that his conveyance is not recorded, a creditor with full knowledge of his title may commence an action by
attachment, [**10] file a notice of lis pendens, and thus obtain a lien superior to the title of such purchaser, and that
accordingly a sale to effectuate the attachment proceedings would destroy and cut off the unrecorded conveyance.
This is certainly an extraordinary proposition in the law of real property, and contrary to the analogies of that law.
Our law has hitherto been careful to preserve equitable liens against legal owners, having knowledge of the equities; to
prefer an unrecorded deed or mortgage to a subsequently docketed judgment, and generally to uphold every existing
lien or title in good faith, though irregular in point of form, against a mere creditor of one holding subject to the
equitable lien or other imperfect title. The plaintiff should plainly be held to establish his position, so different in its
character from [*36] the usual legal theories, by clear and manifest proof of the legislative will.
For a clear and comprehensive view of this highly important question, it is necessary to consider the nature of a
notice of the pendency of an action, and the office which it is designed to fulfill. Its function is to carry out the well
known legal maxim, pendente lite, [**11] nihil innovetur. It was found to be necessary to the administration of justice
that the decision of a court of equity in a suit should be binding not only on the litigant parties, but on those who derive
title from them pendente lite, whether with notice of the suit or not. It is simply a rule of law to give effect to the rights
ultimately established by the decree. (Bishop of Winchester v. Paine, 11 Ves., 194.) The theory of a lis pendens was
much discussed in the recent case of Bellamy v. Sabine (1 De Gex & Jones, 566). It is there said that the correct doctrine
is, that the law does not allow to litigant parties to give to others, pending the litigation, rights to the property in dispute,
so as to prejudice the opposite party. Another form of statement is, that where a litigation is pending between a plaintiff
and a defendant as to the right to a particular estate, the necessities of mankind require that the decision of the court
shall be binding not only on the litigating parties, but also on those who derive titles under them by alienations made
pending the suit. If this were not so, there could be no certainty that the litigation would ever come [**12] to an end.
The rule largely has its roots in public policy, and does not rest, as is sometimes supposed, on the equitable doctrines of
notice binding on the conscience. The doctrine is not peculiar to courts of equity. In the old real actions, the judgment
bound the lands, notwithstanding any alienation by the defendant pendente lite, and it cannot be claimed that this is on
any other ground than that which has been already stated. Were it not for the doctrine in question, the plaintiff would be
liable in every case to be defeated by the defendant's alienating before the judgment or decree, and would be driven to
commence his proceedings de novo, subject again to be defeated by a similar [*37] course of proceeding. (Story on Eq.
Jur., 405-908, and note 5 to last section; Murray v. Lylburn, 2 Johns. Ch., 441; Gaskell v. Durdin, 2 Ball. & Beatty,
167; Hayden v. Bucklin, 9 Paige, 513.)
The rules of the English equity courts on this point are fully recognized in the jurisprudence of this State. (Murray
v. Lylburn, supra; Hayden v. Bucklin, supra).
The Laws of 1823 (p.213, 11) recognized this doctrine and simply regulated it by [**13] providing that the filing
of a bill should not be constructive notice unless the complainant should file a notice with the clerk of the county in
which the land is situated. The same provision was found, in substance, in the Revised Statutes.
There are no expressions in the Code which can be supposed to have changed the rules of equity on this subject,
except in mere matters of form, until we reach the clause now under consideration.
It has been seen, in the course of this discussion, that the theory of a lis pendens is that there must be no innovation
in the proceedings so as to prejudice the rights of the plaintiff. It is simply a rule to give effect to the rights ultimately
established by the decree. Applying this doctrine to the present case, it would be impossible to claim that a lis pendens
could give a creditor under an attachment a lien superior to the title of a purchaser under an unrecorded conveyance.
The statute distinctly provides that a person whose conveyance is executed or recorded subsequent to the filing of a
notice shall be deemed a subsequent purchaser, and bound by the proceedings to the same extent as if he were a party
to the action. It [**14] is necessary to ascertain, therefore, what would have been the effect if the defendants had been
made parties to the action. Had the plaintiff made the defendants parties to the action, his attachment proceedings
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would, of course, have been nugatory. As soon as the whole case had been disclosed it would have appeared that he was
making a claim against a person who was in no respect liable to him, and his complaint would have been dismissed.
How can he, under the statute, have [*38] any greater claims by omitting him? The words "to the same extent as if he
were a party to the action" cannot be omitted in construction.
The scope of the clause is quite apparent. The case of conveyances executed after the filing of the notice comes
within the ordinary rules of equity. What is new in the one hundred and thirty-second section of the Code is the
provision in respect to a conveyance executed prior to and recorded subsequent to the filing of the notice. The clause as
to this matter was introduced mainly to provide for a class of controversies where a title inferior in right and subordinate
to that of the plaintiff had not been put on record, but had accrued prior to the commencement [**15] of the action or of
the filing of the notice. Under the former rules, it would be necessary to make the owner of such a title a party, as his
right did not come to him during the pendency of the action. It might frequently be difficult for the plaintiff to ascertain
the fact that such a sale had taken place. The section of the Code, as modified, makes all such inquiry unnecessary.
While it also applies to cases of rights superior to those of the plaintiff, it only affects them in such a way as they would
be influenced if the owners were parties to the action. Thus, if a second mortgagee should desire to foreclose, his
omission to make the holder of a prior unrecorded mortgage a party, would not enable him, with full knowledge of the
facts, to gain a superior title. On the other hand, if there should be a purchaser in good faith, he would, in all
probability, acquire a perfect title, and the holder of the prior unrecorded mortgage would be remitted to an equitable
claim upon the purchase-money as against any person holding a position subordinate to his own. Each case would thus
be governed by its own peculiar circumstances. There is but a single underlying principle. This is, that the [**16]
holder of the unrecorded instrument is affected to the same extent "as if he were a party to the action," and had not
appeared or made any defence.
A single instance, showing the correctness of this rule, will suffice. Suppose that a second mortgage is unrecorded,
and [*39] the holder of the first and recorded mortgage commences to foreclose, after the execution of such second
mortgage, at the same time filing a regular notice of the pendency of the action. The second mortgagee is accidentally or
purposely omitted as a party. Has he no rights, whatever, or may he appear before a referee appointed to ascertain the
rights of parties to surplus moneys and make his claim? It would be absurd to say that he cannot. If he can, he is
precisely in the position that he would have been in, had he been made a party to the action and had not answered or
taken other steps in the cause.
These views are not opposed to the case of Stern v. O'Connell (35 N.Y. 104). In that case, the lis pendens was filed
before the mortgage in controversy was given. The present case was therefore not under consideration. The remarks of
Hunt, J., on pages 109 and 110, must be confined to the case then [**17] before the court.
In Hovey v. Hill (3 Lans., 167) it was held that an assignee of a mortgage is an incumbrancer within the Code (
132) and taking by an assignment executed after, or recorded after, the filing of a lis pendens, in an action to set aside
the conveyance of the mortgaged premises to the mortgagor as fraudulent against the creditors of his grantor, was bound
by the judgment therein recovered. This decision was put upon the ground that the assignee takes, subject to the equities
affecting the mortgagee, and the evidence showed that the mortgage was fraudulent. This case can be sustained on the
ground that the holder of the unrecorded assignment was placed by the court exactly in the position that he would have
been in had he been a party to the action, and had the case gone against him, or had he made no defence to a prima facie
case made by the plaintiff.
The result is, in the case at bar, that the plaintiffs in the D. Harp and Dennison judgments could gain no title as
against Cheshire, and their attachments were no lien.
The plaintiff Lamont stood in their position. The evidence shows that he was aware of Cheshire's rights, as it
appears by undisputed [**18] testimony that Cheshire was all the time in possession, [*40] claiming as owner. The
judge was bound to take this testimony into account when he was asked by the defendants to direct a verdict in their
favor, as well as when he was called on by the plaintiff either to grant a nonsuit to him, or to direct a verdict in his
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favor.
But, even supposing that the present plaintiff took the legal title under the sheriff's deed, there is another fatal
objection to his recovery in the present action. His title was subordinate in equity to the claim of the defendants. Having
constructive notice of the defendant's equitable rights by his possession under claim of title, as has been already shown,
if he chose to purchase the land, he took it subject to whatever rights it might turn out that the defendants were entitled
to in equity. It is scarcely necessary to cite authorities for a proposition so consonant with justice. The rule of
construction, that a statute is not to be interpreted so as to work a fraud, has been regularly followed in the chancery
courts. A few references will be sufficient.
Under the English enrollment act (27 Henry VIII, c. 26), it is provided that no lands or hereditaments [**19] shall
pass from one person to another whereby any estate of inheritance or freehold shall be made or take effect in any person
or persons by reason of any bargain or sale, except it be enrolled as provided in the act. It was held by Lord Chancellor
Hardwicke, in Le Neve v. Le Neve (cited in 4 Cruise's Dig., 456), that, notwithstanding the words that the bargain "shall
not be made or take effect," that if there be a prior bargainee whose deed is not enrolled, and a second whose deed is
properly enrolled, if this last had notice of the prior deed, the prior shall prevail in equity. So under the registration acts.
(2 and 3 Anne, c. 4; 6 id., c., 35; 7 id., c. 20; 8 George II, c. 6.) These provide a system of registration for the counties of
York and Middlesex, and enact that no unregistered deed shall be adjudged fraudulent and void against any subsequent
purchaser for a valuable consideration, unless the deed be registered, etc. The English courts have uniformly held,
notwithstanding the generality of [*41] the words of these acts, that an unregistered deed is to be preferred, in equity,
to a subsequent registered deed taken by a subsequent purchaser with notice. [**20] (Forbes v. Deniston, 4 Bro.
Parl. Cas., 189; Blades v. Blades, 1 Eq. Ab., 358; 3 Atkyns, 654; Cheval v. Nichols, 1 Strange, 664; Le Neve v. Le Neve,
Ambler, 436; Whitbread v. Boulnois, 1 You. & Coll. [Exch.], 303.)
Under these acts, the view taken has been, that though the legal estate passed to the subsequent purchaser, yet he
took it charged with an equity in favor of the holder of the prior unregistered conveyance.
It is not intended in this discussion to concede that the correct view is that in such cases the legal title passes to the
subsequent purchaser under the registered conveyance, but only to maintain that, if that be so, he must take it charged
with the equitable rights of the holder of the prior unregistered conveyance. The better view undoubtedly is, that the
holder of the registered conveyance, with notice, obtains no title whatever as against the purchaser under the
unregistered conveyance. The whole subject is well summed up by Mr Hare, in his notes to Le Neve v. Le Neve (2 Lead.
Cas. in Eq., 183, 184 [3d Am. ed.]. He says: "It is held, in general, in this country that a conveyance, duly registered,
passes no [**21] title whatever when taken with a knowledge of the existence of a prior unregistered conveyance."
(Citing cases.) This construction is sustained by the wording of some of these acts, which declare unregistered
conveyances void as against subsequent bona fide purchasers, or purchasers without actual notice, and thus sanction
the inference that they will be good when notice or mala fides is shown to have existed. * * * But it seems well settled
that the construction is the same where no such qualifying words are introduced, and where it is declared that
unregistered conveyances shall be void as against purchasers generally, or against all persons who are not parties to the
conveyance. (Gilbert v. Burgott, 10 J. R., 457; VanRensselaer v. Clark, 17 Wend., 25.) Thus, under the recording acts of
Pennsylvania, an unrecorded mortgage is deprived [*42] of all operation as a lien on the premises mortgaged, without
any saving of the rights of the mortgagee as against parties acting mala fide or with notice. But it has, notwithstanding,
been decided that notice of such a mortgage will supply the want of registry, and bind a subsequent purchaser. (Stroud
v. [**22] Lockart, 4 Dallas, 153; Jaques v. Weeks, 7 Watts 261; The Manufac. and Mechanics' Bank v. The Bank of
Penn., 7 W. & S. 335; Solmes v. McCullough, 5 Barr, 473.) And in some of the cases this principle of construction has
been held to be one of such general application that notice of an unregistered deed to a creditor, before judgment, will
prevent the lien of the judgment from attaching, even where such deeds are made absolutely void as against creditors."
In whatever light the act of the plaintiff in the present action be regarded, whether it be considered that he obtained
no title at all as against the defendant Cheshire, or whether he obtained the legal title by force of the attachment
proceedings, the practical result will be the same. If the defendant has the equitable estate, he can set it up as a defence
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to an action of ejectment brought under the provisions of the Code. (Crary v. Goodman, 12 N.Y. 266; Thurman v.
Anderson, 30 Barb., 621; Dodge v. Wellman, 1 Abb. Ct. App. Dec., 512; S. C., 43 How. Pr. 427; Carpenter v. Ottley, 2
Lans., 451; Phillips v. Gorham, 17 N.Y. 270.)
As the defendant Cheshire entered upon [**23] the premises in litigation under his unrecorded conveyance, his
possession, and that of his tenant, Martin, was sufficient notice to the plaintiff of his equitable rights. If the plaintiff
acquired the legal title, he was, by reason of the constructive notice derived from possession, converted into a trustee
for the equitable owner. (Whitbread v. Boulnois, supra; Tuttle v. Jackson, 6 Wend., 213; De Ruyter v. Trustees of St.
Peters, 2 Barb. Ch., 556; Grimstone v. Carter, 3 Paige, 421; Williamson v. Brown, 15 N.Y. 354; Landes v. Brant, 51
U.S. 348, 10 HOW 348, 13 L. Ed. 449; 2 Lead. Cas. in Eq., 194, 195, and cases cited [3d Am. ed.]; Flagg v. Mann, 2
Summer, 554.) These cases show that the possession of the defendants was sufficient to put the [*43] plaintiff upon
inquiry as to the nature and extent of their rights. He is accordingly presumed to have made the inquiry and to have
ascertained the defendant's rights, or to have been guilty of a degree of negligence equally fatal to his claim to be
considered a bona fide purchaser. He is accordingly chargeable with knowledge of all that he could have learned by an
exact and [**24] diligent inquiry.
There is a more technical ground on which the disposition of this cause might be placed. It is an elementary rule
that a plaintiff in ejectment can only recover on the strength of his own title, and not upon the weakness of that of his
adversary. The source of the plaintiff's title in this action is the sheriff's deed. That is limited to a conveyance of the
estate of which John S. Harp was seized or possessed on the 31st day of January, 1869. There was no dispute upon the
point that John S. Harp had conveyed his estate to the defendant Cheshire before that day. Accordingly, he was seized
of no estate on that day, and the sheriff's deed conveyed nothing to the plaintiff. While recognizing this as a sufficient
ground for dismissing the complaint, I desire also to rest the decision of the cause upon the other grounds discussed in
this opinion, and principally considered on the argument.
There was no error in the disposition of this cause in the court below, and its judgment must be affirmed.
All concur.
Order affirmed, and judgment absolute ordered against plaintiff.
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61 of 314 DOCUMENTS
Caution
As of: May 27, 2014
The Trustees of Union College, Appellants, v. William H. Wheeler, Executor, etc., et
al., Respondents.
61 N.Y. 88; 1874 N.Y. LEXIS 622
May 21, 1874, Argued
September Term, 1874, Decided
PRIOR HISTORY: [**1] Appeal from so much of the judgment of the General Term of the Supreme Court, in the
forth judicial department, as affirms in part a judgment dismissing the plaintiff's complaint, entered on the report of the
referee. (Reported below 5 Lans, 160; 59 Barb., 385.)
This action was brought to foreclose a mortgage executed by Philo Stevens to Benjamin Nott, to secure the
payment of $ 2,800. It bears date July 18th, 1833, and was recorded August 8th, 1833. It covered, when given, for
pieces of land, viz.: Three in the then village of Oswego and a large tract in the town Scriba. The mortgage was assigned
by Nott to the plaintiff by an assignment, bearing date the 1st day of July, 1834, which was recorded on the 25th day of
December, 1852.
The complaint, after stating the above facts, further states that a portion of the mortgaged premises, being two of
the parcels of land in Oswego, had been released from the lien of the mortgage, and as to them the plaintiff made no
claim, but alleged that the residue remained subject thereto.
Several of the defendants answered and set up that they were owners of different portions of the lands lying in
Scriba, which they claimed were not subject [**2] to the lien of the plaintiff's mortgage, having been discharged by the
transactions referred to in the opinions.
The issues were referred to a referee, who dismissed the plaintiff's complaint.
The General Term on appeal reversed the judgment, so far as it related to most of the mortgaged premises, but
affirmed it as to the residue. The further facts are set forth at length in the opinions.
Page 103
DISPOSITION: Motion denied.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiffs sought review of an order from the General Term of the Supreme Court (New
York), which affirmed part of a referee's judgment dismissing their foreclosure action against defendants.
OVERVIEW: Plaintiffs filed an action against defendants to foreclose a mortgage. The referee dismissed plaintiffs'
complaint. The trial court reversed the referee's judgment insofar as it related to most of the mortgaged premises, but
affirmed it as to the residue. On appeal by plaintiffs, the court found that the trial court did not err in declaring that
plaintiffs' liens on defendants' lands were discharged. The court further found that the trial court did not err in holding
that plaintiffs took the same position with respect to the mortgage as its assignor, the mortgagee. The court also denied
plaintiffs' motion for reargument.
OUTCOME: The order upholding the part of the referee's judgment which dismissed plaintiffs' foreclosure action
against defendants was affirmed. The court also denied plaintiffs' motion for reargument.
CORE TERMS: mortgage, purchaser, assignee, notice, mortgagee, mortgagor, conveyed, vendor, chose in action,
purchase-money, deed, conveyance, assignor, unpaid, equitable, village lots, recording, referee, constructive notice,
good faith, vendee, legal estate, contractee, mortgaged, holder, reargument, assigned, latent, recorded, cestui que trust
[HN1] An assignee of a mortgage must take it subject to the equities attending the original transaction. If the mortgagee
cannot himself enforce it, the assignee has no greater rights. The true test is to inquire as to what the mortgagee can do
by way of enforcement of it against the property mortgaged; what he can do the assignee can do, and no more.
Contracts Law > Types of Contracts > Choses in Action
[HN2] A mortgage is liable to the same equity in the hands of an assignee that existed against it in the hands of the
obligee. The rule is not simply that the assignee takes subject to the equities between the original parties, though that is
sound law. It goes further than that, and declares that the purchaser of a chose in action must always abide the case of
the person from whom he buys. The reason of the rule is, that the holder of a chose in action cannot alienate anything
but the beneficial interest he possesses. It is a question of power or capacity to transfer to another, and that capacity is to
be exactly measured by his own rights.
[HN3] Every assignment of a chose in action is considered in equity as in its nature amounting to a declaration of trust
and to an agreement to permit the assignee to make use of the name of the assignor in order to recover the debt or to
reduce the property into possession. This theory leads to the conclusion that an action by an assignee must be precisely
commensurate with that of the assignor, as it must be in his name and on the supposition that, for the purposes of the
action, he is still owner.
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61 N.Y. 88, *; 1874 N.Y. LEXIS 622, **2
Contracts Law > Debtor & Creditor Relations
[HN4] It is a plain rule of equity law that as soon as an assignment is made, the vendor becomes a trustee of the vendee
as to the land. A subsequent purchaser or mortgagee, with notice of the contract, stands in the position of the vendor
and must fulfill the trust. A judgment creditor acquiring his lien subsequent to the contract gains no lien on the
payments merely by docketing his judgment. There must also be notice to bind the party holding under the contract.
Contracts Law > Types of Contracts > Executory Contracts
[HN5] Payments by a vendee, pursuant to an executory contract, are not to be considered as a fresh dealing with the
vendor respecting the land, but are to be referred to the original contract.
[HN6] An assignee acquires all the rights of the purchaser, not as new rights, but as a transferee of those already
existing. For both purchasers and their assignees there is but one rule: they can be bound only by notice, and record of a
transfer is not notice.
[HN7] Payments made to a mortgage, without notice of an assignment, are to be credited on the mortgage.
[HN8] One who takes an assignment of a mortgage takes it subject not only to any latent equities that exist in favor of
the mortgagor, but also subject to the like equities in favor of third persons.
[HN9] The purchaser of a non-negotiable chose in action, secured by a mortgage, takes it subject to the latent equities
not only of the mortgagor but also of third persons.
Civil Procedure > Judicial Officers > Referees > Appointments
[HN10] Under the rules of equity jurisprudence, it is essential that one who claims to exclude an earlier equity must
show that he is not only a purchaser, but has acquired the legal estate.
Real Property Law > Financing > Mortgages & Other Security Instruments > Transfers > Assignments by
Mortgagors
Real Property Law > Financing > Mortgages & Other Security Instruments > Transfers > Transfers by Mortgagees
[HN11] A mortgage is but a lien upon the land. The mortgagor, both in law and equity, is regarded as the owner of the
fee, and the mortgage is a mere chose in action, a security of a personal nature. An assignment of a mortgage, in this
view, cannot pass the title.
SYLLABUS
In 1828, A., S. and N. paid in equal portions the purchase-price for certain real estate which was conveyed to A.,
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61 N.Y. 88, *; 1874 N.Y. LEXIS 622, **2
who, thereafter, conveyed an undivided two-thirds to S. N. quit-claimed to S., and for the consideration received back
the bond of S, secured by mortgage on the premises. While A. held he executed contracts of sale to various purchasers
of portions of the mortgaged premises; after the conveyance to S., and before N. quit-claimed, A. and S. jointly
executed other like contracts. N., with knowledge that sales had been made, received his share of the purchase-money.
All the parcels so contracted were included in the mortgage. Held, that as the common law of trusts was then in
operation, A. and S. took the estate charged with a valid existing trust in [**3] favor of N., with legal power to sell, and
their acts having been acquiesced in by N., he was bound thereby, and took his mortgage subject to all the rights and
equities of the purchasers under the contracts, although he was not advised as to what particular parcels were covered by
the contracts.
It seems, also, that an assignee of the bond and mortgage, in good faith and without notice, occupied simply the
position of N., and took subject to the same rights and equities.
Trustees of Union College v. Wheeler (5 Lans., 160; 59 Barb., 585) disapproved in this particular.
A mortgage is a mere chose in action. It gives no legal estate in the land, but is simply a lien thereon, the mortgagor
remaining both the legal and equitable owner of the fee.
An assignee of a bond and mortgage takes subject not only to the latent equities of the obligor and mortgagor, but
of third persons having an interest in the mortgaged premises who are represented by the mortgagor.
Moore v. Met. Nat. Bk. (55 N.Y. 41); Dillaye v. Com. Bk. of W. (51 id., 345) distinguished.
The authorities as to the rights of assignees of non-negotiable choses in action collated [**4] and discussed. (See
opinions of Dwight, C.)
Where contracts of sale are so executed, a subsequent mortgagee having notice of the contracts cannot release
other portions of the mortgaged premises and impose the burden of the mortgage upon the parcels contracted to be sold;
and if he does release portions of sufficient value to pay the mortgage, its lien upon said parcels is thereby discharged.
Actual occupancy by the purchasers under the contracts of sale is constructive notice to the mortgagee of their
rights.
It seems that a release, executed by the mortgagee after assignment, to one acting in good faith and without notice
of the assignment is valid, and as effective to work such discharge as if executed by the assignee.
Gillig v. Maass (28 N.Y. 191) distinguished.
Neither the mortgagee nor his assignee acquires a lien upon the purchase-money unpaid upon the contracts without
notice to the purchasers that such a lien is claimed.
Governeur v. Lynch (2 Paige, 300) overruled upon this point.
Ten Eyck v. Sampson (1 Sand. Ch., 244) and F. L. and T. Co. v. Maltby (8 Paige, 362) distinguished.
The recording of the [**5] mortgage does not affect the purchaser's rights in this respect, as it is only notice to
subsequent purchasers or encumbrancers, and a payment pursuant to a prior executory contract is not a purchase of a
new or further interest in the land.
So, also, an assignee of one of the contracts of sale, who takes subsequent to the recording of the assignment of the
mortgage, is not affected thereby, but stands in the place of his assignor, and may pay to the original creditor until the
assignee of the mortgage gives notice that he claims a lien on the purchase-money.
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61 N.Y. 88, *; 1874 N.Y. LEXIS 622, **2
In an action to foreclose the mortgage given by S. to N., as aforesaid, brought by an assignee, the complaint set
forth and recognized releases executed by N. after the assignment. Held, that it was immaterial whether or not they were
executed with plaintiff's knowledge and assent, they having ratified them; but if the releases were invalid the premises
covered by them were still subject to the mortgage, and should be sold before the parcels covered by the contracts, and
it being found that they were of more value than the amount of the mortgage, a judgment declaring the lands embraced
in the contracts to be discharged [**6] from the mortgage was not error.
COUNSEL: B. B. Burt for the appellants. Plaintiffs cannot enforce the alleged lien of the mortgage as against
defendants, not having deducted the value of the released premises. ( Guion v. Knapp, 6 Paige, 35; Stuyvesant v. Hall, 2
Barb. Ch., 151.) Assignees of contracts subsequent to the record of the mortgage are not chargeable with notice of the
mortgage as subsequent purchasers. (2 Story's Eq., 1503 a; Fish v. Potter, 2 Keyes, 64, 80, 81; Shell v. Tillford, 4
N. Y. Leg. Obs., 307.) Benjamin Nott was and is estopped from claiming any interest in the lands hostile to the
contracts. ( Tillman v. Nelson, 27 Barb., 595, 598; Mason v. Lord, 40 N. Y., 476, 486, 487.) Plaintiffs took no greater
title than their assignor had, and subject to every defence as against him. ( Ingraham v. Disbrough, 47 N. Y., 421, 423.)
The possession of the contract purchasers and their assignees under the contracts was notice to all the world of their
rights and equities. (Moyer v. Hinman, 3 Kern., 180, 184; Cook v. Travers, 20 N. Y., 400; 2 Story's Eq. Jur., 790; Will.
Eq. Jur., p. 298; 2 Wash. on R. P. [2d. ed.], 506, 507; Matthew v. Andrews, 44 Barb., 200, 206, 207; Parsell [**7] v.
Stryker, 41 N. Y., 480; Brice v. Brice, 5 Barb, 533.) Plaintiffs had no lien upon the purchase-money paid upon the
contracts. ( Moyer v. Hinman, 13 N. Y., 180, 186.) The payment of the purchase-price to the trustee was good, and the
purchaser cannot be called upon to pay a second time to a party claiming under the trustee. ( Patten v. Gardner, 12
Wheat., 498; Hadley v. Chafee, 11 Paige, 245.)
E. W. Paige for the respondents. The defendants' possession was not sufficient to be notice to plaintiffs. ( Miles v.
Langley, 1 R. & M., 40; 2 id., 626; Boggs v. Warner, 6 W. & S., 469; Campbell v. Breckenridge, 8 Blackf., 471; Stevens
v. Wiswall, 8 Greenl., 94; Webster v. Van Steenburgh, 46 Barb., 215; Troup v. Hurlbut, 10 id., 358; Tuttle v. Jackson, 6
Wend., 226; McMechan v. Griffing, 3 Pick., 155, 156; Mechan v. Williams, 48 Penn. St., 238; Cook v. Travis, 22 Barb.,
338, 359; 20 N. Y., 402; Buck v. Hollowway, 2 J. J. Marsh., 180; Bellington v. Welsh, 5 Bing., 129; Merritt v. N. R. R.
Co., 12 Barb., 608; Bambart v. Greenshields, 9 Moore P. C., 18; 28 E. L. and Eq., 82; Flagg v. Mann, 2 Sumn., 557;
Hanbury v. Litchfield, 2 M. & K., 629; Cook v. Travis, 20 N. Y., 402; Scott v. Gallagher, [**8] 14 S. & R., 333; Smith
v. Gibson, 15 Minn., 89; Bogue v. Williams, 48 III., 371; Fassett v. Smith, 23 N. Y., 258, 260; Gt. Falls Co. v. Winter,
15 N. H., 412; Bell v. Twilight, 2 Foster, 519; Harris v. Arnold, 1 R. I., 25; Hanreck v. Thompson, 9 Ala., 409; Siter v.
McClanachan, 2 Grat., 280, 313.) If plaintiffs be so affected with notice that any contract shall take precedence of the
mortgage, they still have a lien upon the land for the unpaid purchase-money from the date of the record of the
mortgage. ( Parks v. Jackson, 11 Wend., 442; Moyer v. Hinman, 17 Barb., 137; 3 Kern., 180; Smith v. Gage, 41 Barb.,
190; In re Howe, 1 Paige, 128; 1 Edw. Ch., 553; 8 Wend., 620; 4 J. R., 216; Ten Eyck v. Simpson, 1 Sand. Ch., 244;
Gouverneur v. Lynch, 2 Paige, 300; F. L. and T. Co. v. Maltby, 8 id., 362; Finch v. Winchelsea, 1 P. Wms., 278, 379; 1
Atk. on Convey., 512; Hampson v. Edelen, 2 H. & J., 64; Fasholt v. Reed, 16 S. & R., 267; Bush v. Lathrop, 22 N. Y.,
549; Lefferson v. Dallas, 20 Ohio St., 68.) Where the contracts were assigned, the record of the mortgage was notice to
the assignee. ( Warner v. Blackman, 36 Barb., 519; 4 Keyes, 509; Warner v. Winslow, 1 Sand. Ch., 438; 1 R. S., 762,
[**9] 37, pt. 2, chap. 3; Hunter v. Walters, L. R. [11 Eq.], 292, 301; Colyer v. Finch, 5 H. L. C., 905; Brinckerhoff v.
Lansing, 4 J. Ch., 69; Williams v. Birbeck, 1 Hoff. Ch., 368; 11 Paige, 27; Belden v. Meeker, 2 Lans., 475; 47 N. Y.,
312; Campbell v. Veeder, 1 Abb. Ct. App., 302; 4 Kent's Com., 174; 1 R. S., 762, 37, 38.) Proof of the connection
between Stevens and Aspinwall was inadmissible under section 399 of the Code. ( Buck v. Stanton, 51 N. Y., 624;
Mattoon v. Young, 45 id., 697; Lyon v. Snyder, 61 Barb., 172.) The proof of loss was not sufficient to let in parol proof
of the contract. ( Jackson v. Hasbrouck, 12 J. R., 192; Dan v. Brown, 4 Cow., 491; Metcalf v. Van Benthuysen, 3
Comst., 427; McBurney v. Butler, 18 Barb., 208.) To enforce the contracts against the mortgagee, notice to plaintiffs
must be proved; notice to Nott alone was insufficient. ( Matthews v. Wallwyn, 4 Ves., 125; Phillips v. Bank of
Lewiston, 18 Penn. St., 394; 1 Wash. R. P., 520; Graxdon v. Church, 7 Mich., 58-62; Pierce v. Faunce, 47 Me., 514;
Bush v. Lathrop, 22 N. Y., 535; Hartley v. Latham, 1 Keyes, 222; Ingraham v. Disborough, 47 N. Y., 421; Clute v.
Robinson, 2 J. R., 612; 2 Vern., 692, 765; 1 [**10] Ves., 122; Carpenter v. Lougan, 16 Wall., 274; Kennicutt v. Suprs.,
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61 N.Y. 88, *; 1874 N.Y. LEXIS 622, **5
id., 452; Fisher v. Otis, 3 Chand., 83; Reeves v. Scully, Walk. Ch., 248; Martineau v. McCollum, 4 Chand., 154; Croft
v. Bunster, 9 Wis., 510; Taylor v. Page, 6 Al., 86; Howard v. Gresham, 27 Geo., 349; Dillaye v. Com. Bank, 51 N. Y.,
353; Jackson v. Van Valkenburgh, 8 Cow., 260; Bloomer v. Henderson, 8 Mich., 402; Moore's Appeal, 7 W. & S., 298;
Mott v. Clarke, 9 Barr, 404; Pryor v. Wood, 31 Penn. St., 147; Glidden v. Hunt, 24 Pick., 225; Pierce v. Faunce, 47
Me., 514; Richardson v. Brackett, 101 Mass., 500; Willis v. Valette, 4 Met. [Ky.], 186; Corning v. Murray, 3 Barb.,
654; Cicotte v. Gagnier, 2 Gibbs [Mich.], 389; Beebe v. Bank of N. Y., 1 J. R., 573; James v. Morey, 2 Cow., 298;
Borough v. Moss, 10 B. & C., 558.) The releases by Nott cannot prejudice plaintiffs' lien. ( Stuyvesant v. Hall, 2 Barb.
Ch., 155; Cheesebrough v. Millard, 1 J. Ch., 409; Guion v. Knapp, 6 Paige, 42, 43; Wright v. Simpson, 6 Ves., 734;
McLemore v. Powell, 12 Wheat., 554; Dawson v. Lawes, 23 L. J. Ch. [N. S.], 434; 23 Eng. L. and Eq., 365, 374; Page v.
Webster, 15 Me., 249; Humphrey v. Hitt, 6 Gratt., 509; Freaner v. Zingling, 37 [**11] Md., 496, 497; Schroeppel v.
Shaw, 3 Comst., 462; Hampton v. Levy, 1 McC. Ch., 107; Pickers v. Finney, 12 S. & M., 468; McGee v. Metcalf, id.,
535; Coombs v. Parker, 17 Ohio, 289; Lang v. Brevard, 3 Strobh., 59; Philbrook v. McEwen, 29 Ind., 347; Gillig v.
Maas, 28 N. Y., 191; Ely v. Scofield, 35 Barb., 330; Purdy v. Huntingdon, 42 N. Y., 335; Patty v. Pease, 8 Paige, 277;
How. Ins. Co. v. Halsey, 4 Seld., 273; Stuyvesant v. Hall, 2 Barb. Ch., 155; Van Order v. Johnson, 1 McC. [N. J.], 376;
George v. Wood, 9 Al., 80; Williamson v. Brown, 15 N. Y., 364, 365; Wyatt v. Barwell, 19 Ves., 436; Bloomer v.
Henderson, 8 Mich., 402.)
JUDGES: Lott, Ch. C., Dwight, C.
OPINION BY: Lott; Duright
OPINION
[*93] Lott, Ch. C. The following facts are shown by the findings of the referee: James Mellen, prior to the 1st of
October, 1828, was the owner in fee of all the lots and real estate described in the mortgage, except the lots situated in
the village of Oswego, and he, by a deed of that date, conveyed all of the premises so owned by him to Chauncey B.
Aspinwall, who had negotiated for the purchase thereof, but the purchase was, in fact, made for the joint benefit of
himself and Philo Stevens and Benjamin [**12] Nott; each of them paid an equal amount of the purchase-price thereof,
and they were each equally interested in the property. Aspinwall, by deed bearing date January 26, 1830, conveyed an
undivided two-thirds part of said land to the said Philo Stevens. This deed was recorded in the proper county, March 1,
1830. The consideration expressed therein was $ 2,000.
[*94] During the time the title of this property was in Aspinwall, portions of it were sold, and the portions so sold
were held by the different purchasers under contracts executed on the part of the owners and vendors by Aspinwall
alone. Sales were also made of other portions of the land after the conveyance by Aspinwall to Stevens, as above stated,
and before the giving of the mortgage in question. Upon such sales, contracts were given to the purchasers respectively,
executed by Aspinwall and Stevens, except in one instance, in which Aspinwall executed it alone on the part of the
sellers. Some payments had been made on the contracts when the mortgage was given, and others were, also,
subsequently made thereon.
Benjamin Nott, by a quit-claim deed, dated July 18, 1833, in consideration of one dollar, as expressed in the [**13]
deed, conveyed to the said Stevens all the lands and premises described in the deed from Mellen to Aspinwall, and also
certain village lots in Oswego, of the value of $ 6,000, covered by the mortgage in question, and particularly described
in the complaint. The village lots, at the time of the conveyance, belonged one-third to Stevens, and two-thirds to Nott.
Stevens, upon receiving the said deed, executed the said mortgage to Nott, without making any exception therefrom of
the lots under contracts, as before stated. The mortgage was assigned by Nott to the plaintiff on the 1st of July, 1834, by
an assignment of that date, for the consideration of $ 2,790.87, paid at the time, but not recorded until the 20th of
December, 1852. The plaintiff, at the time of taking the assignment, had no actual knowledge or notice of the existence
of these contracts, or that any part of the lands covered by the mortgage was occupied. Some of the property described
in the mortgage had, before its execution, been sold, and actually conveyed to different purchasers; and no claim
thereon, by virtue of the mortgage, was made at the trial. Subsequent to the assignment of the mortgage to the
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plaintiff, but [**14] before it was recorded, Nott, without the knowledge of the plaintiff, "so far as appeared" to the
referee, released [*95] certain portions of the mortgaged premises from the lien of the mortgage by releases given to
Stevens, bearing date March 26, 1836; and he conveyed those portions, about the same time, to other parties. The
property so released was of more than sufficient value to satisfy the amount due on the mortgage at the time of the
release thereof, and also at the time of the trial. The validity of those releases, it may be here remarked, is acknowledged
by the plaintiff in its complaint. It is therein stated that the parcels of land included therein had "been released from the
lien of the said mortgage, and as to them the plaintiff makes no claim." Several of the parties holding the contracts to
which I have referred, and other claiming under them, were in actual possession of the premises agreed to be sold, as
above stated, at the time of the conveyance by Nott, and the execution of the mortgage to him by Stevens, and others of
them, although not in actual occupation, had exercised acts of ownership thereon.
The referee also found that the evidence did not show that [**15] Nott had notice of any particular contract given
by Aspinwall and Stevens for the lands therein referred to, or specific notice of any particular sale to any particular
person, or, perhaps, of any sale in particular; or that he had "actual notice of the actual occupation of any of the lots or
particular pieces."
He also found the following facts:
First. That Aspinwall did the principal part of the business of selling and contracting the land sold, as hereinbefore
stated, and collected most of the payments made toward the land by the purchasers; and kept the account of money
received and paid out on account of the lands; that Stevens occasionally collected money, but the evidence did not show
that Nott ever collected or received any direct from the purchasers.
Second. That Nott was informed, from time to time, of sales of said lands being made, and contracts of sale being
given therefor; and knew of sales being made, and contracts [*96] given from time to time; and knew that Aspinwall
and Stevens were making sales thereof, and giving contracts therefor during the time said sales were being made.
That settlements were made between Aspinwall, Stevens and Nott during the time [**16] they were equally
interested in said lands, and Nott received his one-third part of the money paid on account of the sale of said lands, the
same being paid to him in different sums and at different times by said Aspinwall; and said Nott knew that such moneys
were derived from the sale of these lands, though it did not appear that he knew from whom in particular, or on what
specific lot, the same were received or paid.
Third. That there was due, or to become due, on the respective contracts outstanding, from different parties, at the
date of the mortgage in question, sums amounting in the aggregate to about $ 735; at the time of the recording thereof a
little over $ 600, and at the time of the assignment thereof, about $ 135.
Upon those facts the referee found as conclusions of law:
1st. That the releases of the two village lots in Oswego were effectual to discharge them from the lien of the
mortgage.
2d. That Nott's knowledge of the fact that sales were being made and contracts given, and the receipt of money by
him from time to time, knowing that it was derived from the sale of those lands, was sufficient at least to put him on
inquiry; that the actual possession of parties, [**17] in some instances, bound him to constructive notice thereof, and
that the plaintiff had no greater or better equity than Nott himself; that, although the notice was or might be held to be in
a different transaction than that of securing the mortgage, yet the mortgage was, nevertheless, affected thereby, and that
the defendants claiming through or under the contracts given prior to the mortgage, who appeared and defended, were
entitled to have the property so released first credited and applied thereon before recourse could be had to their land;
and as the property so released was, both at the time the [*97] release was given and at the time of the trial, of more
value than the amount due on the mortgage and the costs of the action, the plaintiff was not entitled to a judgment for a
sale of their lots, but that the residue thereof, except the part released, might be sold. He thereupon ordered judgment,
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which was subsequently entered, dismissing the complaint as to the defendants and declaring that the mortgage as to the
lands owned by them was not a lien, charge or incumbrance thereon, or any part or parcel thereof, but directing a sale of
the residue of the mortgaged premises.
[**18] The General Term, on an appeal by the plaintiff from so much of the judgment as was adverse to it,
affirmed that portion thereof which related to the lands of such of the purchasers from Aspinwall and Stevens as had
before the mortgage was given entered into the possession of the lands purchased by them severally, improved the same
and erected dwellings thereon, but reversed it and ordered a new trial as to those who had merely cut timber and sold it
or had only cleared some part of it, but who had not entered into actual occupancy by residing on the lands purchased
by them or receiving rents or profits thereof, except by the sale of timber, or made any other improvement than cutting
and selling timber or clearing some portion of it.
There has been no appeal from the portion of the judgment of the General Term adjudging such reversal. The only
question for our consideration, therefore, is whether it was erroneous, so far as it affirmed the judgment of the Special
Term. We think not. Assuming that the mortgage was a valid lien on the whole of the mortgaged premises owned by the
mortgagor at the time it was given, and that the rights of the several persons then holding contracts were [**19]
subordinate thereto, they were entitled, on well settled principles of equity, to have the lands unsold, held by the
mortgagor, applied to the payment of the mortgage, before a recourse was had to their lands. In violation of that
principle Nott, the mortgagee, with notice of their rights, released two village lots in Oswego, of more than sufficient
value to [*98] satisfy the mortgage, from its lien, and thereby, instead of subjecting the land primarily liable and
relieving the remainder from the burden of the mortgage, he claimed to impose the whole of it thereon. That he could
not do. The effect of the release was to discharge the land of those holding contracts of purchase at the time the
mortgage was given. The actual occupancy of the parties as to whose lands the judgment of the Special Term was
affirmed, by a residence in dwellings erected thereon and making improvements, was constructive notice to Nott of
their rights, and he was chargeable with the consequence thereof, and could not do any thing in derogation of those
rights or to their prejudice. If there were any doubt or question as to the application to this case of the principle above
referred to, by reason of such [**20] constructive notice, arising from such occupancy as above stated, there is another
and conclusive reason why the mortgage, after the execution of the releases, should not be enforced against the lands of
the respondents. Nott was part owner, in equity, of the lands contracted to be sold by Aspinwall and Stevens, and was
cognizant of the fact that sales were made by them; and he in fact received his share and proportion of the money paid
on the contracts. He therefore stands in the relation of a contracting party, or at least is chargeable with notice of those
contracts, and bound thereby. He consequently must be considered as having knowledge or notice of them when he
conveyed his interest to Stevens and took back the mortgage in question; and Stevens, from the facts found by the
referee, was equally chargeable with such knowledge and notice. Therefore, he took his deed and Nott took his
mortgage subject to the right of the purchasers under their contracts, and Nott could not do any thing to defeat, impair or
prejudice those rights while the mortgage was owned by him; and he, certainly, could not, either before or after the
release, have enforced it against their lands. The plaintiff, [**21] as his assignee, acquired no other or greater rights. It
took an assignment of the mortgage, and not a conveyance of or interest in the lands that were mortgaged. [*99] What
it acquired was a chose in action, and the interest or right of Nott therein, and the General Term, Mullin, J., giving the
opinion of the court, properly held that "if the mortgage ever became a lien on the lands under contract, it was a lien
subordinate to the rights of the purchasers;" and the learned judge said that if Nott was fore closing, he entertained no
doubt but that the purchasers prior to the mortgage would have had a perfect defence to the action; but he considered
that the plaintiff, being a bona fide purchaser thereof, was not chargeable with the notice that Nott had of the rights
and equities of the purchasers--a proposition to which I do not assent, but which I do not deem it necessary to examine,
having herein before shown that the mortgage was, in fact, taken subject to their rights, and the plaintiff took no greater
or other title. (See Ingraham v. Disborough, 47 N.Y. 421.) He, however, held that the plaintiff was chargeable with
constructive notice of the interest which the [**22] purchasers in actual occupancy of the lands purchased by them had
therein, and on that ground he held that their lands were not subject to the lien of the mortgage. This was clearly right,
but was not, in my opinion, necessary to sustain the portion of the judgment appealed from. As before stated, a portion
of the mortgaged premises, more than sufficient in value, was released from the lien of the mortgage. That portion was
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at the time owned by the mortgagor, and liable to be first sold, and its release discharged the lands of the respondents
from all liability. It is no answer to this to say that the releases were given by Nott after the assignment to the plaintiff,
and without its knowledge or consent at the time. It, in its complaint, in express terms, as already stated, alleges and
admits that the parcels described in the releases "have been released from the lien of the said mortgage, and as to them
the plaintiff makes no claim," and does not therein allege or in any manner claim that those releases, or either of them,
were executed and given without its knowledge, authority or consent. The allegation of such releases is followed by the
statement "that [*100] at the time [**23] the said release was made as aforesaid, the plaintiff had no notice, actual or
constructive, that the said Philo Stevens had conveyed or parted with his interest in any of the other parcels of real estate
subject to the lien of the said mortgage." This allegation, construed in connection with that of the release by Nott of the
premises released, raises a pretty strong implication that it was, in fact, made with its approbation and consent. The
referee does not find that it was given without its knowledge. He qualifies his finding by saying that after the
assignment, but before the recording thereof, "Nott, without the knowledge of the officers of the college, as far as
appears before me," released the premises, and he subsequently, after finding "that none of the parties holding contracts
for these lands had any knowledge of the existence of the mortgage in question at the time payments were made on said
contracts by any of the parties," and that the plaintiff, or its officers, at the time the mortgage was assigned, did not have
knowledge of the said contracts, etc., added as follows: "And it does not appear that the officers of the college had any
knowledge of the execution [**24] of the two releases of the village lots, above referred to, at the time the same were
executed, or that the plaintiff, or any of its officers, authorized Nott to give said releases, or either of them." It is,
however, immaterial, in my view of the question, whether they were or not given with the authority of the plaintiff--the
act of Nott has been ratified and adopted by it. The referee and the General Term both have held the releases to be
effectual to discharge the lots embraced therein from the lien of the mortgage.
The appellant's counsel, however, claims that the releases by Nott cannot prejudice plaintiff's lien. Assuming, but
not conceding, that to be so, it does not aid the plaintiff, and affords no ground for the reversal of the judgment appealed
from. If the release was invalid and ineffectual as against the plaintiff, then the premises intended to be released are still
subject to the lien of the mortgage, and were primarily liable to be sold; and as the referee found that they were, at
[*101] the time he made his decision, of greater value than the amount then due on the mortgage and the costs of this
action, there was no error in declaring that its lien on the [**25] lands of the respondents was discharged.
The plaintiff's counsel further claims that if the land itself could not be sold it had a lien upon the purchase-money
unpaid on the contracts, from the date of the record of the mortgage. Without expressing any opinion on that question, it
is sufficient to say that the complaint was not based on such claim, and relief founded on such a lien, if it existed, could
not be granted on the allegations or facts stated therein.
It follows, from the views above expressed, that the portion of the judgment appealed from by the plaintiff must be
affirmed, with costs.
Dwight, C. The facts of this case show that on October 1st, 1828, one Mellen conveyed a large tract of land,
including the premises in question, to Chauncey B. Aspinwall. The consideration for the land was paid by Aspinwall,
Philo Stevens and Benjamin Nott, in equal portions, and each were equally interested in the property.
Aspinwall, by deed bearing date January 26, 1830, conveyed an undivided two-thirds part of the property to
Stevens, for the consideration of $ 2,000.
While Aspinwall held the property he executed contracts of sale of portions of the land to a number of distinct
purchasers [**26] in his own name, for the benefit of himself and Stevens and Nott, to whom he accounted from time
to time for the proceeds of sales. After the conveyance to Stevens sales were made of other portions, the contracts being
executed by Aspinwall and Stevens, and the proceeds being accounted for to Nott, as before.
While matters stood in this condition Nott, by a quit-claim deed, dated July 18, 1833, in consideration of one dollar,
conveyed to Stevens all the lands described in the deed from Mellen to Aspinwall, and also village lots in Oswego, of
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which two-thirds belonged to Nott and one-third to Stevens.
[*102] Stevens, by mortgage bearing date the same day with the last mentioned deed, mortgaged to Nott the
property conveyed to Aspinwall by Mellen, whether under contract or not, and also the village property above referred
to, to secure the payment of $ 2,800, with interest, semi-annually. The mortgage was payable in five years from date,
was accompanied by Stevens' bond, and duly recorded August 8, 1833.
The bond and mortgage were assigned to the plaintiff July 1, 1834, for the sum of $ 2,790.87, which was then paid
to Nott. The execution of the assignment was proved, by a subscribing [**27] witness, December 17, 1853, and the
assignment recorded on the twentieth of the same month and year.
While the mortgage, in form, covered the entire property sold to Aspinwall, yet it was conceded, on the trial, that
some portions of it had been actually conveyed before the execution of the mortgage, and to this no claim was made by
the plaintiff.
It will be observed, from the facts already detailed, that upward of nineteen years elapsed between the execution of
the assignment and its record. Within this period, on March 28, 1836, Nott, still assuming to be the owner of the
mortgage, released to Stevens some of the village lots embraced in the mortgage, who conveyed them to purchasers
about the time that the releases were executed. It appeared that the lots so released were more than sufficient in value, at
that time, to pay the mortgage. The purchasers under Stevens had no notice of the assignment to the plaintiff.
There is still due and unpaid on the mortgage the principal sum of $ 2,800, with interest from January 1st, 1864,
amounting on December 3d, 1870, to $ 4,157.28.
The questions raised on the present appeal, under this state of facts are: First. Whether the lien of the [**28]
mortgage is superior to the claims of the purchasers under the contracts. Second. If the plaintiff is bound by the
contracts, whether it is not entitled to the purchase-money unpaid upon them. Third. Whether the release of the village
lots by Nott does [*103] not, as between the purchasers and the plaintiff, discharge their lots from the lien of the
mortgage?
1. In considering the first question it will be necessary, at the outset, to examine the relations between Aspinwall
and Nott, as well as between the latter and Stevens. When Aspinwall took the title the common law of trusts was in full
operation; he undoubtedly held the property as a trustee, both for Nott and Stevens. In other words, the payment of a
portion of the consideration by each of these parties, caused a trust pro tanto to result in their favor. This could be
proved by parol evidence. (2 Washburn on Real Property, 176, par. 17, and cases cited.) When Aspinwall conveyed to
Stevens he transferred an estate to him charged with a valid existing trust, of which Stevens had full knowledge.
Stevens, according to elementary rules, became himself a trustee for Nott to the extent of the interest conveyed to him.
[**29] (1 Spence's Eq. Jur., 512; Willis on Trustees, 64; 2 Washb. 178, par. 21.)
During the whole period from October 1, 1828, to the time of the execution of the mortgage, the relation of trustee
and cestui que trust existed between Aspinwall and Nott, or Stevens and Nott. These trustees were accountable to Nott
in a court of equity. They had the management of the estate, had the legal power to sell, and their acts were acquiesced
in by the cestui que trust and ratified by the accounting held from time to time. Under these circumstances the
purchasers under the contracts had an equity superior to that of Nott. At the moment when he conveyed to Stevens, they
could have enforced the agreements against him, on payment of the residue of the purchase-money, and against Stevens,
his successor in interest. Nott and Stevens held the legal title, as trustees for the purchasers under the contracts.
The sale by Nott to Stevens and the execution of the mortgage to the former worked no change in this state of
things. At the moment of sale he was a trustee for the purchasers under the contract. By a familiar rule in the law of
trusts, he could not buy or sell to the prejudice of the cestui [**30] que [*104] trusts. His sale to Stevens, and taking
back a mortgage for the purchase-money, left him precisely where he was before the transaction was entered into--still
charged with the execution of the trust in favor of the purchasers under the contracts. It was, therefore, quite immaterial,
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as far as Nott was concerned, to show that he had constructive notice of the contracts by the possession of the
purchasers. His duty toward them did not depend upon notice, but upon the inherent equities of the case. Suppose that
after he had sold to Stevens he had immediately repurchased from him; would he not have been subject to the same
equities as he was liable to before the sale? The authorities are distinct that he would.
A mortgage could give him no more rights than an absolute purchase. It is thus clear that if Nott had remained
owner of the mortgage of July 18, 1833, and had sought to foreclose it, he would have been bound by the same equities
as before his sale of that date, and would have been required to allow the claims of the purchasers under the contract.
Does the plaintiff occupy the position of Nott, or can it urge that it is a purchaser in good faith, and for value,
[**31] and thus shut out the equities between the contractees and Nott, or is it governed by the rule that the assignee of
a mortgage takes subject to the equities between the original parties? According to the reasoning thus far, this is a case
of an inherent equity as between a person having an interest in the equity of redemption and the mortgage. The
mortgage, in form, covers the property claimed by the contractees; if they do not fulfill the contract, it certainly
embraces it in full. What they say to the mortgagee is this: "Owing to certain equities between us and you, it is
inequitable to enforce the mortgage against property which, as a matter of law, is actually covered by it, except you
respect our rights."
Is, then, the plaintiff in any better position than Nott, the mortgagee? It is well settled that [HN1] an assignee of a
mortgage must take it subject to the equities attending the original transaction. If the mortgagee cannot himself enforce
it, the assignee has no greater rights. The true test is to inquire [*105] what can the mortgagee do by way of
enforcement of it against the property mortgaged; what he can do the assignee can do, and no more. In Clute v.
Robinson [**32] (2 J. R., 612), the rule, as stated by Kent, Ch. J., is, that [HN2] a mortgage is liable to the same equity
in the hands of the assignee that existed against it in the hands of the obligee. (2 Vern., 692, 765; 1 Vesey, 122.) The
rule is not simply that the assignee takes subject to the equities between the original parties, though that is sound law. (
Ingraham v. Disborough, 47 N.Y. 421.) It goes further than this, and declares that the purchaser of a chose in action
must always abide the case of the person from whom he buys. (Per Lord Thurlow, in Davies v. Austen, 1 Vesey, Jr.,
247.) The reason of the rule is, that the holder of a chose in action cannot alienate any thing but the beneficial interest he
possesses. It is a question of power or capacity to transfer to another, and that capacity is to be exactly measured by his
own rights. ( Bebee v. Bank of New York, 1 J. R., 552. per Spencer, J., and 549, per Tompkins, J.) Kent, Ch. J., in a
dissenting opinion in the same case, would have confined the rule to the equities between the original parties to the
contract. ( Id., 573.) The opinions of Spencer and Tompkins, JJ., were, however, recognized as the correct exposition
[**33] of the law in Bush v. Lathrop (22 N.Y. 535). A considerable number of authorities are cited by the plaintiff as
tending to show that the assignee of a chose in action is only subject to the equities between the contractor (assignor)
and the debtor, and not to the so called latent equities of third persons. Such cases as James v. Morey (2 Cowen, 298,
opinion of Sutherland, J.); Bloomer v. Henderson (8 Mich. 395); Mott v. Clarke (9 Barr, 404), and others of the same
class, were reviewed as to their principle or specifically in Bush v. Lathrop (22 N.Y. 535), and repudiated. The doctrine
of Lord Thurlow, in England, and of Spencer and Tompkins, JJ., already considered, was thus adopted rather than that
of Kent, Ch. J. The law of some of the other States undoubtedly coincides with [*106] the views of Kent, but since the
decision in Bush v. Lathrop must be regarded as without authority here.
The correct theory is well stated in 2 Story on Equity Jurisprudence, section 1040: [HN3] "Every assignment of a
chose in action is considered in equity as in its nature amounting to a declaration of trust and to an agreement to permit
the assignee to make [**34] use of the name of the assignor in order to recover the debt or to reduce the property into
possession." This theory would lead to the conclusion that the action by the assignee must be precisely commensurate
with that of the assignor, as it must be in his name and on the supposition that, for the purposes of the action, he is still
owner. The case of Dillaye v. Commercial Bank of Whitehall (51 N.Y. 345), is not opposed to this view, as the question
in that case was not one of the enforcement of a mortgage, but concerned the title of the two claimants to the ownership
of the mortgage itself. The point was, whether one who held a mortgage in trust with an apparently unrestricted power
of disposition could transfer it free from the claims of the cestui que trust to a purchaser in good faith. It was held that
he could. This case has no tendency to establish any right on the part of the assignee in enforcing the mortgage beyond
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that possessed by his assignor.
The plaintiff cites, to support his view, authorities to the effect that an assignee is a purchaser, and to the effect
"that a mortgage is in form a conveyance of the land, and an assignment of it is another conveyance [**35] of the same
land." These cases, which are very numerous in the law books, refer only to the position of a mortgagee or assignee in a
court of law, and were decided in England and in States of the Union where more technical views of the rights of a
mortgagee in a court of law prevail than in this State. They are of no force in a court of equity, in which the case at bar
is assumed to be pending, for in such a tribunal a mortgage is but a chose in action and security for a debt. Reference is
also made to a class of cases appearing in the law reports of a number of the States, holding, in substance, that when a
[*107] mortgage is given to secure a negotiable note, which is itself transferred before maturity for value, it is taken by
the assignee free from all equities. It is argued that these authorities tend to show that the mortgage partakes of the
nature of the debt, in such a sense that only the direct equities between the debtor and the creditor can be set up as
against the assignee. These cases have not yet become established law in this State. ( Carpenter v. Longan, 16 Wall. [U.
S.], 271; Kenicott v. Supervisors, id., 452; Taylor v. Page, 6 Allen, [**36] 86; Croft v. Bunster, 9 Wis. 503.) If sound,
they must be made to rest on rules of law attending the transfer of negotiable paper, and cannot be held by indirection to
overthrow a rule concerning the ordinary bond and mortgage which has become fixed in our jurisprudence.
The result is that the plaintiff in the present case takes subject to the rights of the purchasers under the contracts, by
reason of the equities between them and Nott and without reference to any actual or even constructive notice of such
equities as between such purchasers and the mortgagee.
2. The next question is, whether the plaintiff is entitled to the purchase-money unpaid upon the contract from the
time of the execution of the mortgage, or if not from that time, from any assignment of a contract subsequent to the
execution of the mortgage. [HN4] It is a plain rule of equity law that as soon as a contract of this kind is made, the
vendor becomes a trustee of the vendee as to the land. A subsequent purchaser or mortgagee, with notice of the
contract, stands in the position of the vendor and must fulfill the trust. It is equally clear that such a person can become
entitled to all future payments, if a purchaser, [**37] or to so many as to satisfy his lien, if an incumbrancer, by giving
notice to the contractee. It is now well settled in this State that a judgment creditor acquiring his lien subsequent to the
contract gains no lien on the payments merely by docketing his judgment. There must also be notice to bind the party
holding under the contract. (Moyer v. Hinman, 3 Kern., 180.)
[*108] It is, however, claimed by the plaintiff that the rule applied to a judgment creditor in Moyer v. Hinman
does not extend to a mortgagee, and that there is a distinction to be taken between the general lien of a judgment
creditor and the specific lien of a mortgagee. To establish this point are cited Gouverneur v. Lynch (2 Paige, 300); Ten
Eick v. Simpson (1 Sandf. Ch., 244); Farmers' Loan and Trust Company v. Maltby (8 Paige, 362). The plaintiff would
deduce from these cases the proposition that a regular mortgage as distinguished from an equitable one binds the unpaid
purchase-money on a contract of sale without notice to the purchaser. Only the first of these cases lends any support to
this doctrine. In Ten Eick v. Simpson the purchaser under the contract [**38] had notice. In Farmers' Loan and Trust
Company v. Maltby the principle could not be applied, as the mortgage was equitable. Gouverneur v. Lynch is briefly
reported, and no reasons are given for a somewhat obscure opinion that the unpaid purchase-money would be bound
from the registry of the mortgage. The chancellor appears to have been at that time influenced by the notion, which he
subsequently wholly renounced, that the registry of the mortgage was constructive notice to the holder of the contract.
He appears to have had a like idea in Guion v. Knapp (6 Paige, 42, 43), which seemed so strange to Vice Chancellor
Sandford, who, when at the bar, had argued the cause, that he attempted to explain it away in Stuyvesant v. Hone (1
Sandf. Ch., 426). Whatever his theory may have been, so far as it holds that the unpaid purchase-money is bound by the
registry of a subsequent mortgage without notice, it is radically unsound in principle and should be overruled. The rule
as there laid down would make it necessary, on each payment made by a person holding under a contract, to examine
the records, to see whether any transfers had in the meantime taken place. Such [**39] a rule would be to the last
degree inconvenient. It is unsound in principle. The correct doctrine is that stated by Denio, J., in Moyer v. Hinman,
already cited. [HN5] Payments by [*109] the vendee, pursuant to an executory contract, are not to be considered as a
fresh dealing with the vendor respecting the land, but are to be referred to the original contract. (P. 186.) That case did
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not call for a decision of the question whether, if a purchaser from the vendor had obtained a conveyance before a
payment was made, he would have a lien upon such payment by mere force of the conveyance, and without any notice.
Denio, J., expressed a clear and distinct individual opinion upon the point in the following terms: "Individually, I am of
opinion that a vendee in possession under such a contract may safely continue to pay to the vendor until he has notice
that some other person has acquired an interest in the land, or in the contract. If this is not so the vendor may, in any
case, make a secret conveyance of the land, and continue to receive the purchase-money from the vendee; and the latter
will be without remedy if the vendor be insolvent. The recording of the conveyance would make [**40] no difference
in the principle, for this is only constructive notice to subsequent purchasers and encumbrancers, and as we have
seen, a payment pursuant to a prior executory contract is not to be regarded as a purchase of a new or further interest in
the land." (Pp. 187, 188.) He adds that the solution of the whole subject is to be sought in the doctrine of equitable
conversion, whereby the vendor becomes a trustee for the vendee, and the vendee the trustee of the vendor for the
unpaid purchase-money. The vendee continues to hold that position until he is notified that the trust relation between
him and the vendor is at an end by the substitution of another in his place.
This is deemed to be a correct exposition of the law, and is adopted in the present case. The same rule must be
applied to assignees of the purchasers under a contract as to the purchasers themselves. The argument in the two cases is
precisely the same. [HN6] An assignee acquires all the rights of the purchaser, not as new rights, but as transferee of
those already existing. The arguments, from inconvenience growing out of the necessity of repeated searches as to
changes in the vendor's title, are equally cogent. For [*110] [**41] both purchasers and their assignees there is but
one rule: they can be bound only by notice, and record of a transfer is not notice.
3. The final inquiry is as to the effect of the releases. As this question is actually in the case, it is proper to decide
it, although the views already expressed, if sound, would dispose of the cause in favor of the defendants.
The plaintiff took an assignment of his mortgage July 1st, 1834. It was not recorded until 1853.
In March, 1835, Nott, his assignor, released from the lien of the mortgage certain village lots, which were primarily
liable to pay this mortgage, thus casting the burden of it on those which were secondarily liable. This was done by the
releaser with knowledge of the equities of the defendants, and the lots were of more than sufficient value to pay the
mortgage. It needs no reference to authorities to prove that if Nott had been owner of the mortgage at the time of the
release, the defendants would have had a right to insist that the value of the lots should be applied to the reduction of the
mortgage, and this, of course, would have extinguished it as to them. It is said, however, on the part of the plaintiff, that
it is not liable [**42] for the act of Nott, as he was not, at the time, owner. It is argued that this subject is governed by
the law of principal and surety, and that the surety will not be discharged by the mere omission on the part of the
creditor to do an act such as recording the assignment, unless he is both bound by law to do it and is required by the
surety to perform it. ( Schroeppell v. Shaw, 3 Comst., 462, and other cases cited.)
These cases are, undoubtedly, good law, but they do not govern the present case. The plaintiff, until he records his
assignment or gives notice of it, does not occupy the position of a creditor toward a principal debtor and a surety.
This transaction, occurring in 1835, is governed by the law of equitable assignments. The assignee was a mere
cestui que trust, and the assignor held the apparent title to the mortgage; he had a complete right to deal with it toward
all persons except the assignee, unless they had notice. This whole [*111] matter must be regarded as though the
plaintiff had no participation in it, or rather, as though it was identified with the acts of its trustee. It is well settled that
[HN7] payments made to the mortgage without notice of the [**43] assignment, are to be credited on the mortgage. (
Mitchell v. Burnham, 44 Me. 286; Bank v. Anderson, 14 Iowa 544; Johnson v. Carpenter, 7 Minn. 176; James v.
Johnson, 6 J. Ch., 427: S. C., 2 Cowen, 246; Williams v. Sorrell, 4 Vesey, 389; N. Y.Life Ins. and Trust Co. v. Smith, 2
Barb. Ch., 82.) A discharge from him under such circumstances would also be valid, when granted to one acting in good
faith and for value, for that is no more than saying that complete payment will be recognized. The case is that of an
apparent owner being allowed by the real owner to deal with third persons on the faith that he had the title. Notice to
him of the equities between the parties must be deemed to be notice to the assignee, as he represents him. If one of two
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innocent persons must suffer, that one must sustain the loss who has put it in the power of an apparent owner to commit
the wrong. It would be extremely severe on innocent parties, holding under these contracts, to maintain that a mortgagee
suffered by an assignee to act as owner, might, knowingly violate all equities in their favor with entire impunity to the
assignee, who might, by a slight act [**44] of diligence on his part, have prevented the commission of the wrongful act.
(1 Story's Eq. Jur., 390; James v. Johnson, 6 J. Ch., 417; N. Y.Life Ins. and Trust Co. v. Smith, 2 Barb. Ch., 82.) Gillig v.
Maass (28 N.Y. 191), is not applicable to this case. There the question was as to the effect of a failure to record the
assignment of a first mortgage upon the rights of a second mortgagee. It was held that such failure was no fraud upon
him, nor did it estop the assignee from asserting his claim against the second mortgage, although the holder of the latter
had taken it under an agreement with the first mortgagee that his mortgage should be postponed. Here the transactions
were between holders of distinct mortgages. The owner of the first was under no duty to a second, and could [*112]
not assume that by leaving the title in the original mortgagee he would commit a fraud toward a person who then had no
lien. The law of recording assignments did not protect the second mortgagee, as that refers to successive assignments of
the same mortgage. But in the case at bar the question was as to the dealing by the mortgagee with the debt which
belonged to him and [**45] to the security appertaining to it. Before the assignment he had complete power to
discharge the debt, as well as the mortgage, either in part or absolutely. That power must be presumed to continue until
notice to the contrary. By means of it he may violate the equities of third parties, and his conduct may so react on his
own interests as to destroy his lien. If an assignee sees fit to leave him this apparent authority he cannot, as has been
already shown, complain of its exercise as to persons acting in good faith, but must be regarded as represented by and
identified with the mortgagee. (Bank, etc., v. Anderson, 14 Iowa 544.)
The judgment of the court below should be affirmed.
All concur.
Judgment affirmed.
A motion having been made for reargument, the following opinion was given, on denying the motion.
Dwight, C. The plaintiff in this cause moves for a reargument on three grounds:
First. That this court erred in holding that the plaintiff took the same position in respect to the mortgage which was
the subject of foreclosure in the present action as its assignor, Nott, the mortgagee. Second. That the court should have
held, that where the contracts owned by the respondents [**46] were assigned, subsequent to the record of the
mortgage, the plaintiff has a lien for the purchase-money unpaid at the time of such assignment. Third. That the court
committed another error in holding that after Nott had made the assignment, and continued the apparent owner, the
assignment being unrecorded, [*113] and the respondents having no notice of such assignment, his release from the
lien of the mortgage of certain portions of the premises which were primarily liable to pay the debt, was binding on the
plaintiff and so discharged the respondents.
Before considering the first proposition, it will be well to recall the exact relations of the parties. Nott held a
mortgage upon certain lands to which the mortgagor held the legal title, but which in part had been sold by a valid
contract to some of the defendants. The validity of the contract is undisputed, as is also the fact that Nott, the
mortgagee, had full notice of the equities of those defendants, and was bound in equity to recognize them.
Starting with this proposition, the counsel for the plaintiff maintains that the plaintiff, if considered as a purchaser
of a chose in action without notice, is not bound to recognize [**47] the equities to which Nott would have been
subject, and again, that it is a purchaser of the legal title to the land, and that it can invoke the rule that the honest
purchaser of land for a valuable consideration can shut out any equities which might have existed between the
mortgagor as well those whom he represented and the mortgagee.
In urging the first branch of this proposition, he calls our attention to the supposed fact that the case of Bush v.
Lathrop (22 N.Y. 535), and cited as authority in one of the opinions disposing of this cause, has been overruled, and
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with it, that the doctrine on which we relied has fallen. This, however, is an incorrect assumption, for that case has not
been overruled as a whole, but only as to one proposition maintained in it. (See Moore v. Metropolitan Bk., 55 N.Y. 41.)
It is there stated that several propositions in Bush v. Lathrop were decided "with perfect accuracy." The special point in
respect to which there is a conflict between the two cases is, whether an assignor of a chose in action can set up any
equities affecting the title between himself and his assignee, in an action brought by a second assignee. There [**48]
was no question whatever as to the equities growing out of the chose in action itself, [*114] as between the original
parties to it or an assignee of the creditor. On that point the court was careful to avoid all misconstruction in using the
following language: "The counsel" (for the defendant) further insists that to apply the same rule (of estoppel) "to
non-negotiable choses in action will in effect make them negotiable. Not at all. No one pretends but that the purchaser
will take the former, subject to all defences, valid as to the original parties, nor that the mere possession is any more
evidence of title in the possessor than is that of a horse. In both respects, the difference between these and negotiable
instruments is vital." (P. 48.) The court is also careful, on pages 49, 50 of the report, to preserve the force of the cases,
decided by the present Court of Appeals, which have followed Bush v. Lathrop in the respect referred to--cases of
which Schafer v. Reilly (50 N.Y. 61), is one, and bears closely upon the present discussion. The point in Moore v.
Metropolitan Bank is simply whether the law of estoppel is applicable on the question of title [**49] as between a first
assignee and a remote purchaser of a non-negotiable chose in action. It is held that it is. The rule that the chose in action
itself is open to all defences growing out of the original transaction, in the hands of any assignee no matter how remote,
remains unshaken, and must continue so until elementary rules of law are overthrown.
The rule laid down by us in the case at bar is distinctly stated and affirmed in Schafer v. Reilly (50 N.Y. 61). It is
there said that [HN8] one who takes an assignment of a mortgage, takes it subject not only to any latent equities that
exist in favor of the mortgagor, but also subject to the like equities in favor of third persons. This case emphatically
approves of Bush v. Lathrop, so far as it holds this point, and declares its doctrine to be settled law. None of the cases,
we repeat, in which the present Court of Appeals have followed that case, are to be regarded as overruled by Moore v.
Metropolitan Bank (Supra).
It must accordingly be held to be still the law of this [*115] State, that [HN9] the purchaser of a non-negotiable
chose in action, secured by a mortgage, takes it subject to the latent equities not [**50] only of the mortgagor but of
third persons.
The counsel of the plaintiff, however, maintains that if it be conceded that this doctrine applies to the debt, it does
not apply to the mortgage. His argument is, that the mortgage itself creates a legal estate in the land, and that so far as
the land is concerned, an assignee of a mortgage is a purchaser of the legal estate for a valuable consideration, and
entitled to exclude the equities. There is thus, according to this proposition, one rule for the land and another for the
debt. If the debt were collected by action for its amount the equities would be let in; if it were collected by foreclosure
of the mortgage they would be shut out. This, if true, is certainly an extraordinary proposition. It is very comprehensive
in its nature, for it would exclude the equities of the mortgagor as well as the latent equities of third persons. Under our
compound system of foreclosure and of obtaining a personal judgment for the deficiency, there would be one rule for
the first branch of the case and an entirely different one for the last.
None of the cases cited by the counsel, on this motion for reargument, sustain his proposition as [**51] being part
of our law. They have all been examined, and it is unnecessary to consider them in detail. The point is really decided
against him in Schafer v. Reilly (supra). The contest in that case concerned the right to surplus moneys after a
foreclosure, and was in substance a question as to the title to land, the money standing, under the doctrine of equitable
conversion, in the place of land. It appeared that there was a second mortgage, of a fictitious nature, made by one John
Reilly to Peter Reilly, on which nothing had been advanced, and which was of course incapable of enforcement by
Peter. This was assigned to one Catherine M. Burchard, who paid a valuable consideration, acting in good faith, and
upon an affidavit by the mortgagor, that Peter Reilly had advanced to him the whole amount of the principal without
abatement, [*116] that the whole sum remained unpaid, and that there was no off-set, defence or counter-claim to the
mortgage. The mortgage was dated and executed anterior to the claim of one Griffin, who had acquired, subsequently, a
mechanic's lien upon the land, but before Mrs. Burchard became assignee. Of his rights at that time she was ignorant.
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The [**52] question was, who had, under these circumstances, the better right to the surplus moneys, considered as
land. The court held that, notwithstanding the mortgage was, on its face, executed prior to the mechanic's lien, it might
be shown by Griffin that his lien was in existence when Mrs. Burchard advanced her money, and that his right could not
be affected by the mortgage. The court there broadly applied the rule, that if Griffin's claim was an equitable one and
latent, it could still be set up by him against the assignee. The estoppel against John Reilly, caused by his affidavit, had
no effect upon the rights of Griffin. The court rested this decision on the ground that though Griffin's right might be a
latent equity, yet the assignee must take the mortgage considered as an interest in the land, and not merely the debt,
subject to the equity. The same class of cases that were relied upon by the plaintiff's counsel in the argument of the
present motion were cited to the court, as showing that the assignee of the mortgage was a purchaser for value. Their
application to the subject in hand was denied, and the rule of Lord Thurlow, in Davies v. Austen (1 Ves., 247), was
pronounced [**53] to be the principle governing the case. "A purchaser of a chose in action must always abide by the
case of the person from whom he buys." ( Schafer v. Reilly, 50 N.Y. 61.) This was the precise ground on which the case
at bar was rested.
The plaintiff is mistaken in the supposition that the present case is one merely of notice of equitable rights on the
part of third parties to Nott, the mortgagee, and, accordingly, that it is not bound by the notice under the ordinary
doctrines applied to the purchaser in good faith, and for a valuable consideration, acquiring title to lands. On the
[*117] contrary, the difficulty is that Nott took his mortgage, subject to the older and better title of the contractees. To
their estate his mortgage never attached in equity. The land belonged to them in equity, and the most that Nott could
acquire under any circumstances, as against them, was a lien for the unpaid purchase-money. This is not an interest in
the land but only in the money, and to be obtained by an assignee of Nott in no manner, except by due notice of the
mortgage and assignment given to the contractees. The plaintiff simply acquired Nott's rights, and stood in his [**54]
place according to Schafer v. Reilly (supra). (See, also, Andrews v. Torrey, 1 McCarter [N. J.], 355.) The cases of
Jackson v. Van Valkenburgh (8 Cow., 260); Jackson v. Henry (10 J. R., 185); Varick v. Briggs (6 Paige, 323); Fort v.
Burch (5 Den., 187), and others cited by the appellant, have no application to the case at bar. Those and others of the
same nature are either cases of title obtained by fraud, or involve the effect of notice under the recording acts, or are
instances of mortgages accompanying negotiable notes, and declared to partake of the character of the note. They are
noticed and distinguished in Schafer v. Reilly (supra), and it is unnecessary to spend time upon them. It should be added
that, [HN10] under the rules of equity jurisprudence, it is essential that one who claims to exclude an earlier equity must
show that he is not only a purchaser, but has acquired the legal estate. What evidence was there, in the case at bar, that
the plaintiff had acquired the legal estate? The complaint merely alleges an assignment of the debt and mortgage in
writing. The referee only finds an assignment in writing. There is not [**55] a word anywhere concerning the
acquisition of the mortgage by a deed or other instrument under seal. If the mortgage had the "legal" estate, he did not
transfer it by such an instrument as the law requires to transfer a freehold estate in land. The plaintiff was, undoubtedly,
the equitable owner, by force of the assignment of the bond and the mortgage accompanying it, but that was not enough.
The legal title must pass. ( Pea-body [*118] v. Fenton, 3 Barb. Ch., 451.) The authorities, to the effect that a deed or
other mode of conveyance is necessary to pass the legal estate, strongly preponderate. ( Den v. Dimon, 5 Halst. [N. J.],
156; Warden v. Adams, 15 Mass. 233; Jackson v. Myers, 11 Wend., 533, 539; Morrison v. Mendenhall, 18 Minn. 232;
Cottrell v. Adams, 2 Biss. 351; Olds v. Cummings, 31 Ill. 188; Partridge v. Partridge, 38 Pa. 78; Graham v. Newman,
21 Ala. 497; Lyford v. Ross, 33 Me. 197, Smith v. Kelley, 27 id., 237; Givan v. Tout, 7 Blackf. 210; 2 Washburn on Real
Property [3d ed.], page 113, paragraphs 12 and 16, and cases cited.) Such cases as Green v. Hart [**56] (1 J. R., 590);
Jackson v. Blodget (5 Cow., 202), and Jackson v. Willard (4 J. R., 43), do not affect this question, as the matter of
passing the legal title to the mortgage was not in controversy. Johnson v. Hart (3 J. Cas., 322), only decides that by the
transfer of the debt an equitable title to the mortgage passes.
It is, however, not our intention to hold that the legal estate, under the present law of this State, ever does or can
pass from the mortgagee to the assignee. On the other hand, it is now settled law that [HN11] the mortgage is but a lien
upon the land. The mortgagor, both in law and equity, is regarded as the owner of the fee, and the mortgage is a mere
chose in action, a security of a personal nature. An assignment of a mortgage, in this view, cannot pass the title. (
Jackson v. Myers, 11 Wend., 533, 539; Kortright v. Cady, 21 N.Y. 343; Trimm v. Marsh, 54 id., 599, 604; Stoddard v.
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61 N.Y. 88, *116; 1874 N.Y. LEXIS 622, **51
Hart, 23 id., 559, 560; Power v. Lester, id., 527.) Rules, owing their existence to a contrast between law and equity, and
giving the later holder of a legal title a preference over an earlier holder of an equitable title, are [**57] not to be
applied to a state of the law so entirely different from that which prevailed when the law of mortgages first originated.
In other words, the power of a vendee of land to convey to a second purchaser, so as to shut out the equities between
himself and the original vendor, is not to be referred to for the purpose [*119] of ascertaining the capacity of a
mortgagee when he makes an assignment of the mortgage to shut out the equities between himself and the mortgagor,
and those whom the mortgagor represents. If that rule were ever a part of the law of mortgages, the development of that
branch of jurisprudence in this State demands that it should be discarded.
Second. There is no good reason why the second point raised by the plaintiff's counsel should be again argued
before us. He has shown no good reason for the proposition that conceding, as we now must, that the plaintiff simply
acquired Nott's rights, the assignees of the purchasers under the contracts were bound to take notice of the assignment of
the mortgage to the plaintiff after its record. His sole argument is by way of analogy to the case of a conveyance of land
and a mortgage back for the purchase-money. The [**58] rule that, when a mortgagor subsequently conveys, the record
of the assignment of the mortgage is notice to the purchaser from the mortgagor, is claimed, by this asserted analogy, to
be applicable to this case.
This is but a new instance of the wisdom of Lord Mansfield's aphorism, that "nothing is so apt to confound as a
simile." There is no real analogy between the two cases. In the case of the mortgage for the purchase-money, the
mortgagor has the legal title, conferring upon him all the rights of owner, subject to the lien of the mortgage. He may
bring ejectment, maintain trespass, and generally appear to the world in the character of proprietor. When a purchaser
takes such a title, good policy dictates that he should be required to examine the record, and if he fail to do so, he should
sustain the consequences of his neglect. There is no such policy in the case of a mere assignment of a contract. The
interest of the contractee is but temporary and provisional, and preparatory to the acquisition of the formal title. There is
no good reason why the policy of the recording act should be extended by judicial construction to such cases. It would
be an intolerable burden if on every [**59] assignment of a contract [*120] it should be necessary to search the title. It
might as well be said that the assignee of the vendor should inquire whether the contractor had made an assignment, as
the lien of the respective parties is mutual. We shall not be the first to announce a rule so inconvenient in practice, so
burden some in its effects, and so contrary, as we think, to the general understanding of the profession.
The sole question which such a contractee has to ask is, to whom shall I pay my debt? When he assigns his
contract, the assignee has to settle the same proposition. He should be placed, accordingly, in the same position as any
other debtor whose indebtedness has been assigned. Let the purchaser of the vendor's rights give notice of his claim.
Until that is done, the debtor or his assignee may assume that the former state of things continues, and may pay the
original creditor (vendor). It is unnecessary to pursue this subject further, as we should but again go over ground that
has been sufficiently reviewed in our former opinions.
Third. If the views already stated are sound, they are fatal to the plaintiff's case; and it would be of no value to grant
a reargument, [**60] if the judgment should be necessarily affirmed for these reasons, even though we may have
committed an error as to the effect of the releases. It is, however, proper to say that nothing has been urged by the
plaintiff tending to raise any question as to the soundness of the opinions already given upon this branch of the case.
The counsel for the plaintiff is mistaken in the supposition that our opinion on this question had any thing to do
with the recording acts. It was rested solely on the general doctrines of law, as modified by equity, and would have been
equally applicable in England, where no general recording act prevails. The point of our decision was, that when the
plaintiff took its assignment it stood in the exact position of Nott, and was bound by his acts toward the property
embraced within the mortgage.
The counsel admits that if an assignment is made, and no notice is given to the mortgagor, any payments that he
may [*121] make to the mortgagee must be credited to his account; and, by parity of reasoning, he must concede that
any dealings transacted between them in good faith must be upheld. He, however, insists that this does not apply to any
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dealings by the mortgagee [**61] after the assignment with third persons, and that the purchasers are third persons.
With due deference, this is begging the whole question. These purchasers under the contracts are, in a broad sense, the
mortgagors. The mortgage, by a rule of law, was made to include them, because it was executed by one who held the
legal title, in trust, for them. It was a mortgage by a trustee of a formal trust, binding on them because he was their
representative, as the holder of the legal title, and, in all good sense and logic, so far as it binds them, they are the
mortgagors. When Nott prejudiced their interests, by releasing a portion of the land, which ought primarily to pay the
debt, from the lien of the mortgage, he did an act injurious to them as mortgagors. The plaintiff, by not giving notice to
the purchasers of its rights, left it in the power of Nott to deal with them as though he were still owner; and it must
accordingly be bound by his release, in the same way as it would be bound to credit payments to the purchasers which
they had made, in good faith, to Nott. This same point was distinctly presented in Stocks v. Dobson (4 De G., M. &. G.,
11). In this case, an assignee [**62] of a judgment gave no notice of the assignment to the debtor, and it did not appear
that he had the means of ascertaining his residence. The assignor then, by reason of some arrangements with the debtor,
released to him all claims, including this judgment. The release was held to be binding upon the assignor. The court,
after stating the rule that payments made to the assignor, under such circumstances, are binding upon the assignee, said:
"Thus the case stands considered as a question of payment. * * * I see no substantial ground of distinction between
actual payment and a release to the debtor, founded upon a fair and bona fide arrangement." (P. 13; see, also, Loomis v.
Loomis, supra; Jones v. Smith, 22 Mich. 360; Huntington v. Potter, 32 Barb., 300; [*122] Hodgdon v. Naglee, 5 Watts
& Serg. 217; Ryal v. Rowles, 1 Ves. Sen., 267.) The principle of this rule must necessarily extend to all dealings and
acts, on the part of the assignor, toward those persons whose rights and interest are embraced within the mortgage. It is
not contended here that the doctrine will extend to third persons in the correct sense of that expression; that is, to [**63]
persons whose rights are external to the mortgage; but its scope is extensive enough to include all those persons who
either executed the mortgage directly, by their own act, or indirectly, through trustees holding the legal title. The
interests of such persons are within the purview of the mortgage; they are not junior encumbrancers, like younger
mortgagees or judgment creditors. They are, in the broad sense of the term, mortgagors, and fall within the principle
that, until notice of the assignment, the rights and interests of the mortgagor are in no wise affected by it. ( Loomis v.
Loomis, 26 Vt. 198; Comstock v. Farnum, 2 Mass. 96; Martin v. Sedgwick, 9 Beav., 333; Thompson v. Speirs, 13 Sim.,
469; Waldron v. Sloper, 1 Drew., 193; Ex parte Boulton, 1 De G. & J., 163; Foster v. Cockerell, 3 C. & F., 456.)
Some explanation should be made of our reasons for so extended a discussion of the grounds for denying a motion
for reargument. The whole subject was discussed at length by the appellant's counsel, in making his motion; and, though
that discussion may not have been, in all respects, regular, in view of the earnestness with which [**64] our former
opinions were combated, and the importance of the questions involved, we have thought it proper to restate our
conclusions in the form of a specific consideration of his argument.
The motion for reargument is denied.
All concur.
Motion denied.
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81 of 314 DOCUMENTS
Caution
As of: May 27, 2014
Williamson against Brown.
15 N.Y. 354; 1857 N.Y. LEXIS 11
June, 1857, Decided
PRIOR HISTORY: [**1] The defendant, Brown, was the owner of fifty acres of land in Hannibal, Oswego county,
which, on the 4th of April, 1851, he sold and conveyed to one Jackson Earl, taking back from Earl a mortgage for $ 800
of the purchase money, but omitting at that time to put his mortgage upon record.
On the 29th of October, 1851, Earl conveyed the land to the plaintiff by deed, which was duly recorded on the same
day; and on the 28th of January, 1852, the mortgage from Earl to the defendant was put upon record. In May following
the defendant commenced proceedings for the foreclosure of the mortgage by advertisement. This suit was commenced
to restrain the defendant from proceeding with this foreclosure, on the ground that the plaintiff was protected by the
recording act against the defendant's prior but unrecorded mortgage.
The cause was tried before a referee, who reported that he found as matter of fact "that the plaintiff did not at the
time he purchased the premises have actual notice of the existence of the mortgage mentioned in the pleadings, given by
Jackson Earl to the defendant," but also found that he had "sufficient information, or belief of the existence of said
mortgage to [**2] put him upon inquiry, before he purchased and received his conveyance of the premises in
question; and that he pursued such inquiry to the extent of his information and belief, as to the existence of the said
mortgage, and did not find that such mortgage existed, or had been given."
Upon these facts the referee held that the plaintiff was chargeable with notice of the mortgage, and dismissed the
complaint, and the plaintiff excepted to the decision. Judgment was entered for the defendant upon the referee's report
which, upon appeal to the general term of the fifth district, was affirmed.
DISPOSITION: New trial ordered.
CASE SUMMARY:
Page 121
PROCEDURAL POSTURE: Plaintiff purchaser brought a suit to restrain defendant seller from foreclosing on an
unrecorded mortgage, on the ground that the purchaser was protected by the recording act against the unrecorded
mortgage. A referee determined that the purchaser did not have actual notice of the existence of the mortgage, but had
inquiry notice. The trial court (New York) entered judgment for the seller, and the purchaser appealed.
OVERVIEW: The referee found that the purchaser had been put on inquiry notice that the mortgage existed, but had
then made inquiry, and was not able to ascertain the existence of the unrecorded mortgage. The purchaser contended
that knowledge sufficient to put the purchaser upon inquiry was only presumptive evidence of actual notice, and
could be repelled by showing that he did inquire with reasonable diligence, but failed to ascertain the existence of the
unregistered conveyance. The court agreed: inquiry notice merely raised a presumption which could be rebutted by
proof that the purchaser failed to discover the prior right, notwithstanding the exercise of proper diligence on his part.
The court held that the purchaser was entitled to a new trial to attempt to prove that he exercised sufficient diligence to
take the property as a bona fide purchaser.
OUTCOME: The court reversed the judgment of the lower court in favor of the seller, and ordered a new trial.
CORE TERMS: notice, purchaser, mortgage, conveyance, deed, sufficient to put, registry, diligence, implied notice,
referee, inquire, actual notice, constructive notice, conclusive, chargeable, discover, chancellor, fraudulent intent,
unrecorded, discovery, unregistered, constructive, settlement, brewer, ascertained, mortgagee, pursuing, tenant, species,
admit
[HN1] Notice is of two kinds: actual and constructive. Actual notice embraces all degrees and grades of evidence, from
the most direct and positive proof to the slightest circumstance from which a jury would be warranted in inferring
notice. It is a mere question of fact, and is open to every species of legitimate evidence which may tend to strengthen or
impair the conclusion. Constructive notice, on the other hand, is a legal inference from established facts; and like other
legal presumptions, does not admit of dispute. Constructive notice is in its nature no more than evidence of notice, the
presumption of which is so violent that the court will not even allow of its being controverted.
Business & Corporate Law > Agency Relationships > Authority to Act > Actual Authority > Implied Authority >
General Overview
Business & Corporate Law > Agency Relationships > Duties & Liabilities > Knowledge & Notice > Exceptions
[HN2] A recorded deed is an instance of constructive notice. It is of no consequence whether the second purchaser has
actual notice of the prior deed or not. He is bound to take, and is presumed to have, the requisite notice. So, too, notice
to an agent is constructive notice to the principal; and it would not in the least avail the latter to show that the agent had
neglected to communicate the fact. In such cases, the law imputes notice to the party whether he has it or not. Legal or
implied notice, therefore, is the same as constructive notice, and cannot be controverted by proof.
[HN3] Possession of real property by a third person, under some previous title, has frequently but inaccurately been said
to amount to constructive notice to a purchaser, of the nature and extent of such prior right. Such a possession puts the
purchaser upon inquiry, and makes it his duty to pursue his inquiries with diligence, but is not absolutely conclusive
upon him.
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15 N.Y. 354, *; 1857 N.Y. LEXIS 11, **2
[HN4] Where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right
or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained
the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be
considered as a bona fide purchaser. This presumption, however, is a mere inference of fact, and may be repelled by
proof that the purchaser failed to discover the prior right, notwithstanding the exercise of proper diligence on his part.
Real Property Law > Financing > Secondary Financing > Lien Priorities
[HN5] To say that a purchaser of real property was put upon inquiry of another interest in the property, and that
having made all due investigation without obtaining any knowledge of title, he was still chargeable with notice of a
deed, if one did really exist, would be absurd. Information sufficient to put a party upon inquiry is equivalent to
evidence of actual notice, or to direct and positive notice. The principle of this rule is that such information will, if
followed by an inquiry prosecuted with due diligence, lead to a knowledge of the fact with notice of which the party is
sought to be charged. Hence, in all cases where the question of implied notice of a prior unrecorded mortgage or
conveyance arises as a question of fact to be determined, the court must decide whether the information possessed by
the party would, if it had been followed up by proper examination, have led to a discovery of such mortgage or
conveyance. If the determination is that such an examination would have resulted in a discovery of the mortgage or
conveyance, the conclusion of law necessarily results that the information possessed by the party amounted to implied
notice of such instrument. But if the determination is the converse of the one stated, the information of the party cannot
be held to be an implied notice of the deed or mortgage.
SYLLABUS
Where a purchaser has knowledge of any fact sufficient to put him upon inquiry as to the existence of some right
or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry and ascertained
the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered
a bona fide purchaser. This presumption, however, is a mere inference of fact, and may be repelled by proof that the
purchaser failed to discover the prior right, notwithstanding the exercise of due diligence on his [**3] part.
COUNSEL: D. H. Marsh, for the appellant.
J. R. Lawrence, for the respondent.
JUDGES: Selden, J. Paige, J.
OPINION BY: Selden; Paige
OPINION
[*355] Selden, J. The referee's report is conclusive as to the facts. It states, in substance, that the plaintiff had
sufficient information to put him upon inquiry as to the defendant's mortgage; but that after making all the inquiry,
which upon such information it became his duty to make, he failed to discover that any such mortgage existed. This
being, as I think, what the referee intended to state, is to be assumed as the true interpretation of his report.
The question in the case, therefore is, as to the nature and effect of that kind of notice so frequently mentioned as
notice sufficient to put a party upon inquiry. The counsel for the plaintiff contends that while such a notice may be all
that is required in some cases of equitable cognizance, it is not sufficient in cases arising under the registry acts, to
charge the party claiming under a recorded title with knowledge of a prior unregistered conveyance. He cites several
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authorities in support of this position.
In the case of Dey v. Dunham (2 John. Ch. R., 182), Chancellor Kent [**4] says, in regard to notice under the
registry act: "If notice that is to put a party upon inquiry be sufficient to break in upon the policy and the express
provisions of the act, then indeed, the conclusion would be different; [*356] but I do not apprehend that the decisions
go that length." Again, in his commentaries, speaking on the same subject, he says: "Implied notice may be equally
effectual with direct and positive notice; but then it must not be that notice which is barely sufficient to put a party
upon inquiry."
So in Jackson v. Van Valkenburg (8 Cow., 260), Woodworth, J., says: "If these rules be applied to the present case,
the notice was defective. It may have answered to put a person on inquiry, in a case where that species of notice is
sufficient; but we have seen that to supply the place of registry, the law proceeds a step further."
A reference to some of the earlier decisions under the registry acts of England, will tend, I think, to explain these
remarks, which were probably suggested by those decisions. One of the earliest, if not the first of the English recording
acts was that of 7 Anne, ch. 20. That act differed from our general registry [**5] act in one important respect. It did not,
in terms require that the party to be protected by the act should be a bona fide purchaser. Its language was: "And that
every such deed or conveyance, that shall at any time after, &c., be made and executed, shall be adjudged fraudulent
and void, against any subsequent purchaser or mortgagee for valuable consideration, unless," &c.
The English judges found some difficulty at first in allowing any equity, however strong, to control the explicit
terms of the statute. It was soon seen, however, that adhering to the strict letter of the act would open the door to the
grossest frauds. Courts of equity, therefore, began, but with great caution, to give relief when the fraud was palpable.
Hine v. Dodd (2 Atk., 275), was a case in which the complainant sought relief against a mortgage having a preference
under the registry act, on the ground that the mortgagee had notice. Lord Hardwicke dismissed the bill, but admitted that
"apparent fraud, or clear and undoubted notice would be a proper ground of relief." Again he said: "There [*357] may
possibly have been cases of relief upon notice, divested of fraud, but then the proof [**6] must be extremely clear."
Jolland v. Stainbridge (3 Ves., 478), is another case in which relief was denied. The master of the rolls, however,
there says: "I must admit now that the registry is not conclusive evidence, but it is equally clear that it must be
satisfactorily proved, that the person who registers the subsequent deed must have known exactly the situation of the
persons having the prior deed, and knowing that, registered in order to defraud them of that title."
Chancellor Kent refers to these cases in Dey v. Dunham (supra) and his remarks in that case, as to the effect, under
the registry acts, of notice sufficient to put a party upon inquiry, were evidently made under the influence of the
language of Lord Hardwicke and the master of the rolls above quoted.
But the English courts have since seen, that if they recognized any equity founded upon notice to the subsequent
purchaser of the prior unregistered conveyance, it became necessarily a mere question of good faith on the part of such
purchaser. They now apply, therefore, the same rules in regard to notice, to cases arising under the registry acts, as to
all other cases.
It will [**7] be sufficient to refer to one only among the modern English cases on this subject, viz., Whitbread v.
Boulnois (1 You. & Coll. Ex. R., 303.) The plaintiff was a London brewer, and supplied Jordan, who was a publican,
with beer. It was the common practice with brewers in London to lend money to publicans whom they supplied with
beer, upon a deposit of their title deeds. Jordan had deposited certain deeds with the plaintiff, pursuant to this custom.
He afterwards gave to one Boulnois, a wine merchant, a mortgage upon the property covered by the deeds deposited,
which was duly recorded. Boulnois had notice of Jordan's debt to the plaintiff, and of the existing custom between
brewers and publicans, but he made no inquiry of the brewers. The [*358] suit was brought to enforce the equitable
mortgage arising from the deposit. Baron Alderson held that the notice to Boulnois was sufficient to make it his duty to
inquire as to the existence of the deposit; that his not doing so was evidence of bad faith; and the plaintiff's right, under
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15 N.Y. 354, *355; 1857 N.Y. LEXIS 11, **3
his equitable mortgage, was sustained. No case could show more strongly that notice which puts the party upon
inquiry is sufficient even under [**8] the registry act.
The cases in our own courts, since Dey v. Dunham and Jackson v. Van Valkenburgh (supra), hold substantially the
same doctrine. ( Tuttle v. Jackson, 6 Wend., 213; Jackson v. Post, 15 Wend., 588; Grimstone v. Carter, 3 Paige, 421.)
I can see no foundation in reason for a distinction between the evidence requisite to establish a want of good faith,
in a case arising under the recording act, and in any other case; and the authorities here referred to are sufficient to show
that no such distinction is recognized, at the present day, by the courts. The question, however, remains, whether this
species of notice is absolutely conclusive upon the rights of the parties. The plaintiff's counsel contends, that knowledge
sufficient to put the purchaser upon inquiry is only presumptive evidence of actual notice, and may be repelled by
showing that the party did inquire with reasonable diligence, but failed to ascertain the existence of the unregistered
conveyance; while, on the other hand, it is insisted that notice which makes it the duty of the party to inquire, amounts
to constructive notice of the prior conveyance, the [**9] law presuming that due inquiry will necessarily lead to its
discovery.
The counsel for the defendant cites several authorities in support of his position, and among others the cases of
Tuttle v. Jackson and Grimstone v. Carter (supra). In the first of these cases, Walworth, Chancellor, says: "If the
subsequent purchaser knows of the unregistered conveyance, at the time of his purchase, he cannot protect himself
against that conveyance; and whatever is sufficient to make it his duty to inquire as to the rights of others, is
considered legal [*359] notice to him of those rights;" and in Grimstone v. Carter, the same judge says: "And if the
person claiming the prior equity is in the actual possession of the estate, and the purchaser has notice of that fact, it is
sufficient to put him on inquiry as to the actual rights of such possessor, and is good constructive notice of those
rights."
It must be conceded that the language used by the learned Chancellor in these cases, if strictly accurate, would go to
sustain the doctrine contended for by the defendant's counsel. [HN1] Notice is of two kinds: actual and constructive.
Actual notice embraces all degrees and [**10] grades of evidence, from the most direct and positive proof to the
slightest circumstance from which a jury would be warranted in inferring notice. It is a mere question of fact, and is
open to every species of legitimate evidence which may tend to strengthen or impair the conclusion. Constructive
notice, on the other hand, is a legal inference from established facts; and like other legal presumptions, does not admit
of dispute. "Constructive notice," says Judge Story, "is in its nature no more than evidence of notice, the presumption of
which is so violent that the court will not even allow of its being controverted." (Story's Eq. Juris., 399.)
[HN2] A recorded deed is an instance of constructive notice. It is of no consequence whether the second purchaser
has actual notice of the prior deed or not. He is bound to take, and is presumed to have, the requisite notice. So, too,
notice to an agent is constructive notice to the principal; and it would not in the least avail the latter to show that the
agent had neglected to communicate the fact. In such cases, the law imputes notice to the party whether he has it or not.
Legal or implied notice, therefore, is the same as constructive [**11] notice, and cannot be controverted by proof.
But it will be found, on looking into the cases, that there is much want of precision in the use of these terms. They
have been not unfrequently applied to degrees of evidence barely sufficient to warrant a jury in inferring actual notice,
[*360] and which the slightest opposing proof would repel, instead of being confined to those legal presumptions of
notice which no proof can overthrow. The use of these terms by the chancellor, therefore, in Tuttle v. Jackson and
Grimstone v. Carter, is by no means conclusive.
The phraseology uniformly used, as descriptive of the kind of notice in question, "sufficient to put the party upon
inquiry," would seem to imply that if the party is faithful in making inquiries, but fails to discover the conveyance, he
will be protected. The import of the terms is, that it becomes the duty of the party to inquire. If, then, he performs that
duty is he still to be bound, without any actual notice? The presumption of notice which arises from proof of that degree
of knowledge which will put a party upon inquiry is, I apprehend, not a presumption of law, but of fact, and may,
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15 N.Y. 354, *358; 1857 N.Y. LEXIS 11, **7
therefore, be controverted [**12] by evidence.
In Whitbread v. Boulnois (supra), Baron Alderson laid down the rule as follows: "When a party having knowledge
of such facts as would lead any honest man, using ordinary caution, to make further inquiries, does not make, but on
the contrary studiously avoids making, such obvious inquiries, he must be taken to have notice of those facts, which, if
he had used such ordinary diligence, he would readily have ascertained." This very plainly implies that proof that the
party has used due diligence, but without effect, would repel the presumption. In this case, it is true, the decision was
against the party having the notice. But in Jones v. Smith (1 Hare, 43), we have a case in which a party, who had
knowledge sufficient to put him on inquiry, was nevertheless held not bound by the notice.
The defendant had loaned money upon the security of the estate of David Jones, the father of the plaintiff. At the
time of the loan he was informed, by David Jones and his wife, that a settlement was made previous to the marriage, but
was at the same time assured that it only affected the property of the wife. He insisted upon seeing the settlement,
[*361] but [**13] was told that it was in the hands of a relative, and that it could not be seen without giving offence to
an aged aunt of the wife, from whom they had expectations. David Jones, however, after some further conversation,
promised that he would try to procure it for exhibition to the defendant. This promise he failed to perform. It turned out
that the settlement included the lands upon which the money was loaned. Here was certainly knowledge enough to put
the party upon inquiry; for he was apprised of the existence of the very document which was the foundation of the
complainant's claim. He did inquire, however, and made every reasonable effort to see the settlement itself, but was
baffled by the plausible pretences of David Smith. The vice-chancellor held the notice insufficient. He said: "The affairs
of mankind cannot be carried on with ordinary security, if a doctrine like that of constructive notice is to be refined
upon until it is extended to cases like the present."
[HN3] Possession by a third person, under some previous title, has frequently but inaccurately been said to amount
to constructive notice to a purchaser, of the nature and extent of such prior right. Such a possession puts [**14] the
purchaser upon inquiry, and makes it his duty to pursue his inquiries with diligence, but is not absolutely conclusive
upon him. In Hanbury v. Litchfield (2 Myl. & Keene, 629), when the question arose, the Master of the Rolls said: "It is
true that when a tenant is in possession of the premises, a purchaser has implied notice of the nature of his title; but if,
at the time of his purchase, the tenant in possession is not the original lessee, but merely holds under a derivative lease,
and has no knowledge of the covenants contained in the original lease, it has never been considered that it was want of
due diligence in the purchaser, which is to fix him with implied notice, if he does not pursue his inquiries through
every derivative lessee until he arrives at the person entitled to the original lease, which can alone convey to him
information of the covenants."
[*362] This doctrine is confirmed by the language of Judge Story, in Flagg v. Mann, et. al (2 Sumn. 486, 9 F. Cas.
202). He says: "I admit that the rule in equity seems to be, that where a tenant or other person is in possession of the
estate at the time of the purchase, the purchaser is put upon [**15] inquiry as to the title; and if he does not inquire,
he is bound in the same manner as if he had inquired, and had positive notice of the title of the party in possession."
It is still further confirmed by the case of Rogers v. Jones (8 N.H. 264). The language of Parker, J., in that case, is
very emphatic. He says: "To say that he (the purchaser) was put upon inquiry, and that having made all due
investigation, without obtaining any knowledge of title, he was still chargeable with notice of a deed, if one did really
exist, would be absurd."
If these authorities are to be relied upon, and I see no reason to doubt their correctness, the true doctrine on this
subject is, that [HN4] where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence
of some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and
ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to
be considered as a bona fide purchaser. This presumption, however, is a mere inference of fact, and may be repelled by
proof that the purchaser failed to discover [**16] the prior right, notwithstanding the exercise of proper diligence on his
part.
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The judgment should be reversed, and there should be a new trial, with costs, to abide the event.
Paige, J. The question to be decided is, whether under the finding of the referee, the plaintiff is to be deemed to
have had at the time of his purchase, legal notice of the prior unrecorded mortgage of the defendant. The referee finds
that the plaintiff had sufficient information or belief of the existence of such mortgage to put him upon inquiry; [*363]
but that upon pursuing such inquiry to the extent of such information and belief, he did not find that such mortgage
existed or had been given. It seems to me that the two findings are inconsistent with each other. If the plaintiff on
pursuing an inquiry to the full extent of his information and belief as to the existence of the defendant's mortgage, was
unable to find that it either then existed or had been given, the highest evidence is furnished that the information
received or belief entertained by the plaintiff was not sufficient to put him on inquiry as to the existence of such
mortgage. The last part of this finding effectually disproves the fact [**17] previously found of the sufficiency of
notice to put the plaintiff on inquiry. The two facts are utterly inconsistent with each other, and cannot possibly
coexist.
The remarks of Parker, Justice, in Rogers v. Jones (8 N.H. 264, 269,) are directly apposite to the facts found by the
referee. Judge Parker says: [HN5] "To say that he (demandant), was put upon inquiry, and that having made all due
investigation without obtaining any knowledge of title, he was still chargeable with notice of a deed, if one did really
exist, would be absurd." The sound sense of these observations is clearly shown by the principle of the rule that
information sufficient to put a party upon inquiry is equivalent to evidence of actual notice, or to direct and positive
notice. That principle is, that such information will, if followed by an inquiry prosecuted with due diligence, lead to a
knowledge of the fact with notice of which the party is sought to be charged. Hence, in all cases where the question of
implied notice of a prior unrecorded mortgage or conveyance arises as a question of fact to be determined, the court
must decide whether the information possessed by the party would, if it had been followed [**18] up by proper
examination, have led to a discovery of such mortgage or conveyance. If the determination is that such an examination
would have resulted in a discovery of the mortgage or conveyance, the conclusion of law necessarily results that the
information [*364] possessed by the party amounted to implied notice of such instrument. But if the determination is
the converse of the one stated, the information of the party cannot be held to be an implied notice of the deed or
mortgage. These propositions will be found to be fully sustained by authority. (Kennedy v. Green, 3 Myl. & Keene, 699;
2 Sugden on Vendors, &c., 552, Am. ed. of 1851, marg. page 1052; 4 Kent's Com.. 172; Howard Ins. Co. v. Halsey, 4
Sandf. S. C. R., 577, 578; same case, 4 Seld., 274, 275; 1 Story's Eq. Jur., 398-400, 400 a; Jackson v. Burgott, 10
John., 461; Dunham v. Dey, 15 John., 568, 569, in error; Jackson v. Given, 8 John., 137; Jolland v. Stainbridge, 3 Ves.,
478; Pendleton v. Fay, 2 Paige, 205.) Where the information is sufficient to lead a party to a knowledge of a prior
unrecorded conveyance, [**19] a neglect to make the necessary inquiry to acquire such knowledge, will not excuse
him, but he will be chargeable with a knowledge of its existence: the rule being that a party in possession of certain
information will be chargeable with a knowledge of all facts which an inquiry, suggested by such information,
prosecuted with due diligence, would have disclosed to him. (4 Sandf. S. C. R., 578; 3 Myl, & Keene, 699.) In this case
the fact being found by the referee, that the plaintiff after pursuing an inquiry to the extent of his information, failed to
discover the existence of the defendant's mortgage, it seems to me that neither law or justice will justify us in holding
the plaintiff chargeable with implied notice of such mortgage. The doctrine of notice and its operation in favor of a prior
unrecorded deed or mortgage rests upon a question of fraud, and on the evidence necessary to infer it. (4 Kent's Com.,
172.) Actual notice affects the conscience, and convicts the junior purchaser of a fraudulent intent to defeat the prior
conveyance. His knowledge of facts and circumstances at the time of the second purchase sufficient to enable him on
due inquiry to discover the [**20] existence of the prior conveyance, is evidence from which a fraudulent intent may
be inferred. (15 John., [*365] 569; 2 John. Ch. R., 190; Jackson v. Burgott, 10 John., 462.) Now if it is ascertained
and found as a fact, that the facts and circumstances within the knowledge of the second purchaser, at the time of his
purchase, were insufficient to lead him, on a diligent examination, to a discovery of the prior conveyance, how upon
this finding can a fraudulent intent be inferred, and if not, how can he be charged with notice, which implies a
fraudulent intent? It is not in the nature of things, that a knowledge of the same facts and circumstances, shall at one and
the same time, be held evidence of both innocence and guilt. I think the rule well established that an inference of a
fraudulent intent on the part of a junior purchaser or mortgagee, must in the absence of actual notice, be founded on
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clear and strong circumstances, and that such inference must be necessary and unquestionable. ( McMechan v. Griffing,
3 Pick., 149, 154, 155; Hine v. Dodd, 2 Atk., 275; Jackson v. Given, 8 John. 137; 2 Mass. 509; 2 John. Ch. R., 189;
[**21] 15 John. S. C., 569; 8 Cow. 264, 266.)
For the above reasons, both the judgment rendered on the report of the referee, and the judgment of the general
term affirming the same, should be reversed, and a new trial should be granted.
All the judges concurred in the result of the foregoing opinions except Comstock and Brown, who not having heard
the argument, took no part in the decision.
New trial ordered.
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15 N.Y. 354, *365; 1857 N.Y. LEXIS 11, **20
82 of 314 DOCUMENTS
Questioned
As of: May 27, 2014
Wood against Chapin.
13 N.Y. 509; 1856 N.Y. LEXIS 64
March, 1856, Decided
PRIOR HISTORY: [**1] This was an action of trespass, commenced in the supreme court prior to July, 1848, for
breaking the plaintiff's close, and cutting and carrying away trees and timber. Plea, not guilty. The premises were wild
and uncultivated lands, lying in Steuben county, and the question was as to the legal title. William Helm was the source
of title under whom both parties claimed the premises; and he, on the 11th August, 1826, conveyed the same, being a
tract of 470 acres, to George W. Fitzhugh, by a quit claim deed, expressed to be in consideration of $ 1; and the deed,
having been acknowledged, was recorded in Steuben county, on the 3d of November, 1827. Fitzhugh and his wife, on
the 15th of September, 1835, conveyed the premises to Priestly Thornton, by a deed expressed to be given in
consideration of $ 2000, the payment of which was acknowledged in the deed. This deed was given in evidence upon
proof of the signature of the grantor, it having no subscribing witness, and never having been acknowledged or
recorded. On the 15th of December, 1836, Thornton conveyed the land to Benjamin H. Smith. This deed was expressed
to be in consideration of $ 2000 paid, and was acknowledged; and it was recorded [**2] on the 30th of May, 1837. The
deed from Fitzhugh, to Thornton, after describing the premises, stated that they were the same conveyed by Helm to
Fitzhugh, by deed dated the 11th of August, 1826; and the deeds from Thornton to Smith and from the trustees to the
plaintiff, respectively, in describing the premises, referred to each of the deeds by date, forming the chain of title from
Helm to the respective grantors. The plaintiff claimed to have acquired Smith's title by virtue of proceedings under the
Revised Statutes respecting absent and absconding debtors. These proceedings were commenced before Judge Inglis, of
the New-York common pleas, on the 14th of January, 1840, by the plaintiff and two other persons, as joint creditors of
Smith, who it was alleged resided in Virginia. The application under oath and the affidavits of two disinterested
witnesses were given in evidence without objection. The notice to the debtor, with proof of publication and all the
papers contemplated by the statute, were produced, with the exception of the warrant of attachment. The return of the
sheriff of Steuben county was among the papers proved; but instead of being made upon or annexed to the warrant,
[**3] it was a separate paper, containing the title of the proceedings, and referring to an attachment issued by Judge
Inglis as the authority by which the sheriff acted and to which the return professed to be made. It set forth that the
sheriff had attached the tract of 470 acres of land in controversy, which was described; that it had been appraised by two
Page 129
freeholders, who were name, whose appraisement was annexed. No other property was seized upon the attachment. The
appointment of trustees recited all the proceedings, including the issuing of the attachment; it was dated 14th January,
1841, and was recorded on the 10th day of May, in that year. The report of the judge also recited the attachment and
proceedings, and bore date the 10th of February, 1841, and was filed the 4th of March in the same year. The defendant's
counsel objected to the proceedings, on account of the absence of the attachment, and because the appointment of
trustees and the judge's report were not recorded and filed within the time required by the statute; but the objections
were overruled, and the defendant excepted.
The plaintiff then gave in evidence a conveyance from the trustees to himself, as the purchaser [**4] of the land in
controversy, reciting that due notice of the sale had been given, according to the statute, and that the plaintiff was the
highest bidder at such sale, which was at public auction, pursuant to the notice, at the court-house, in Steuben county,
his bid being $ 305. The plaintiff also proved, independently of the deed, that the notice of sale required by the statute
had been published in a newspaper printed in Steuben county. This deed acknowledged the payment by the plaintiff to
the trustees of the $ 305, the amount of the bid. The defendant's counsel objected that the proof of notice of sale was
insufficient, and that it was incumbent upon the plaintiff to prove the fact of a sale in addition to the conveyance; but the
judge overruled the objection, and held that the plaintiff had made out title to the premises in himself, and the defendant
again excepted. The plaintiff also proved the cutting of timber by the defendant upon the premises, and rested.
After a motion for a nonsuit, grounded upon the position that the plaintiff had not established a title in himself, had
been overruled, the defendant, having excepted to the decision, introduced and proved the execution [**5] of a power
of attorney from William Helm to Ziba A. Leland and Daniel G. Skinner, dated November 30th 1825, authorizing them
to take possession of all of Helm's real estate and to sell and convey the same, and to take possession of his personal
estate, and to sue for the same. The defendant then gave in evidence another instrument of the same date with the power
of attorney, executed under the hand and seal of Helm, in the following words: "Whereas, I, William Helm, have, by an
instrument bearing even date herewith, constituted and appointed Ziba A. Leland and Daniel G. Skinner my agents and
attorneys, to take possession, sell and dispose of, sue for and recover all my estate, both real and personal, and all
obligations, claims, demands and causes of action whatever, either in law or equity, in the State of New-York: Now,
know all men that I hereby revoke all former powers or authority heretofore given, and I hereby covenant and agree that
the said Leland and Skinner shall have a lien on my said property for all expense and trouble incurred by them in my
said business, or any advances by them made or to be made to me; and I do hereby covenant and agree that they shall
have one-half [**6] of all my said property, and I do hereby convey the same to them, their heirs and assigns forever;
excepting, I am to have the property I now live on, and the property bid off for me in Hornellsville, containing five
hundred acres, situate on the turnpike by Dugald Cameron, and the property bid off for me by said Cameron, in
Canisteo, after all expenses and incumbrances are paid off as aforesaid; and if the same shall be sold, I am to have the
avails thereof, under the exceptions as aforesaid, and the residuary one-half of my property, after paying off all expenses
in obtaining possession and disposing of the same, or expenses otherwise incurred by me or advances to me, I am to
have. Signed and sealed," &c. The defendant then gave in evidence an instrument by which Skinner released to Leland
all his interest in and power under the foregoing instruments. These papers, except the last one, were proved and
recorded after the commencement of this suit. They were objected to by the plaintiff's counsel, as not tending to prove a
defence, and because they were not recorded until after the recording of the plaintiff's deed, and an exception was taken
to the ruling, receiving the same in evidence.
It [**7] was shown that Fitzhugh was a grandson of Helm and that when the above mentioned conveyance from
Helm to him was executed, he knew of the existence and contents of the two instruments executed by Helm to Leland
and Skinner. It appeared that Helm died in 1829.
Leland was examined as a witness for the defendant, and proved an executory contract, made in 1848 from himself
to the defendant, for the sale and conveyance of a portion of the lands embraced in the conveyances given in evidence
by the plaintiff, and it appeared that the timber was cut upon the land described in that contract. Leland proved that he
and Skinner advanced to Helm, after the execution of the papers above mentioned, from $ 1000 to $ 1500, and that they
had instituted several suits in his behalf.
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13 N.Y. 509, *; 1856 N.Y. LEXIS 64, **3
The defendant's counsel finally insisted that the evidence showed the title to the premises to be in Leland. He
contended that the plaintiff was not entitled to any advantage under the recording acts, for the reason that it was not
shown that he or those under whom he claimed title were bona fide purchasers for value. The judge held otherwise,
and the plaintiff had a verdict, and the defendant's counsel excepted.
Judgment [**8] was entered in favor of the plaintiff, which was affirmed at a general term of the supreme court in
the 7th district, upon which the defendant brought this appeal.
DISPOSITION: Judgment accordingly.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant possessor challenged the decision of the supreme court (New York), which
entered judgment in favor of plaintiff title holder in an action of trespass for breaking the holder's close and cutting and
carrying away trees and timber.
OVERVIEW: The question on review was strictly one of legal title. The court affirmed. The court held that the
appointment of trustees furnished conclusive, incontrovertible evidence that all of the proceedings were in accordance
with the applicable statute and that all the property of which the debtor was seized and possessed at the time of the first
publication of the notice was by operation of law vested in the trustees. The court determined that the holder made out a
prima facie case, showing title in himself. The court concluded that the possessor's deed was void for the want of a
consideration.
OUTCOME: The judgment in favor of the holder in an action for trespass was affirmed.
CORE TERMS: deed, conveyance, recorded, notice, purchaser, bona fide purchaser, recording acts, valuable
consideration, conveyed, grantee, subsequent purchaser, appointment of trustees, incumbrancer, attachment, good faith,
appointment, outstanding, grantor, void, subscribing witness, conclusive evidence, bargain and sale, prior deed, duly
recorded, non-resident, unrecorded, pretended, declares, recitals, prevail
Civil Procedure > Judgments > Entry of Judgments > Enforcement & Execution > Writs of Execution
[HN1] Where a levy is necessary, in order to give a sheriff authority to sell real estate, the court will presume it to have
been made where it is found that he has sold and conveyed the land.
Real Property Law > Deeds > Types > Bargain & Sale
Real Property Law > Purchase & Sale > Contracts of Sale > General Overview
[HN2] To constitute a good conveyance by way of bargain and sale, there must be a valuable consideration expressed in
the deed or proved independently of it. If one is expressed, no proof of its actual payment need be given, and it cannot
be controverted by evidence, and it is sufficient, though the amount be merely nominal.
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13 N.Y. 509, *; 1856 N.Y. LEXIS 64, **7
[HN3] If one affected with notice conveys to another without notice, the latter is as much protected as if no notice to
either had ever existed.
SYLLABUS
A deed, the execution of which is neither acknowledged or attested by a subscribing witness, is valid, as between
the parties, and takes effect, as to prior purchasers or incumbrancers, at the time of its execution.
The statute which declares that such a deed shall not take effect, as against purchasers or incumbrancers, until
acknowledged (1 R. S., 738, 137), refers to subsequent purchasers and incumbrancers.
A bona fide purchaser of land for a valuable consideration, whose deed is first recorded, is protected against a
prior unrecorded conveyance, although his grantor purchased with notice thereof.
And a purchaser from one who is protected by the recording act against a prior unrecorded conveyance is himself
entitled to such protection, notwithstanding he purchased with notice of the prior conveyance, or without parting with a
valuable consideration.
To protect a purchaser against a prior unrecorded conveyance of the same land executed by the original owner,
[**9] it is not requisite that all the intermediate conveyances forming his chain of title should be recorded.
The acknowledgment of the receipt of the purchase money in a deed is prima facie evidence that the grantor is a
purchaser for a valuable consideration, under the recording act.
A creditor who purchases land at a sale, by virtue of legal proceedings instituted to collect his debt, is a purchaser
for a valuable consideration, within the recording act, although the entire purchase price, except so much as is required
to satisfy the expenses of the proceedings, is applied in payment of the debt.
The statute requiring the officer, before whom proceedings are had against an absconding, concealed or
non-resident debtor, to make and file his report within twenty days after the appointment of trustees, and the latter to
cause their appointment to be recorded within thirty days (2 R. S., 12, 61, 68), is directory merely, and an omission to
comply with these requirements within the prescribed time will not vitiate the proceedings or invalidate a conveyance of
property made by the trustees.
The appointment of trustees and the report of the officer making the same [**10] in such proceeding are, by force
of the statute (2 R. S., 13, 62, 68), evidence in favor of a party deriving title from the trustees that the proceedings
stated therein were had.
To constitute a valid conveyance, by way of bargain and sale, there must be a valuable consideration expressed in
the deed, or proved independent of it, and where a sufficient consideration is expressed, it cannot be disproved to
invalidate the deed. Per Denio, J.
COUNSEL: Z. A. Leland, for the appellant.
S. Beardsley, for the respondent.
JUDGES: Denio, C. J., Comstock, J., Hubbard, J.
OPINION BY: Denio; Comstock; Hubbard
OPINION
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[*514] Denio, C. J. The question presented in this case is strictly one of legal title. The plaintiff deduced a good
paper title from William Helm, who is admitted to have been the owner in fee of the premises, unless one or more of the
objections interposed by the defendant to the evidence are well taken.First. The deed from Fitzhugh was not
acknowledged, and there was no subscribing witness to it, and consequently it had never been recorded. It is urged that
this defect rendered it void. (1 R. S., 738, 137.) It was, however, effectual to transfer title as between [**11] the
parties to it. It would be invalid, as against a subsequent purchaser from or an incumbrancer under Helm. But the
defendant does not occupy such a position.Second. The plaintiff claims to have acquired the title of Smith, by means of
a proceeding under the statute, respecting non-resident debtors, and the regularity of that proceeding is questioned. The
plaintiff proved the application and oath of witnesses required by the statute, the order for the publication of notice to
creditors, and the fact of such publication. (2 R. S., 2, 2 to 6.) He also gave in evidence the appointment of trustees,
and proved that they took the oath prescribed by the statute. The first mentioned papers were sufficient to show
jurisdiction in the officer, and the [*515] act declares that the trustees taking such oath shall be deemed vested with all
the estate, real and personal, of the debtor, from the first publication of the notice to him. (1 R. S., 41, 6.) It is also
declared that the appointment of trustees shall be conclusive evidence that the debtor therein named was a concealed,
absconding or non-resident debtor, and that the said appointment and all the proceedings previous [**12] thereto were
regular. (Id., 13, 62.) It has been held that this language must be qualified by a condition that the case is one in which
the officer had acquired jurisdiction. (Van Alstyne v. Erwine, 1 Kern., 331, and cases cited.) Jurisdiction being shown in
this case, we are bound to hold that the appointment of trustees furnishes conclusive, that is, incontrovertible evidence,
that all the other proceedings were in accordance with the statute, and that all the property of which the debtor was
seized and possessed at the time of the first publication of the notice, was by operation of law vested in the trustees. It
was the duty of the trustees to have caused their appointment to be recorded within one month after it was made, and
this duty they neglected to perform until nearly three months after the time it should have been done. But the object of
this provision was simply to perpetuate the evidence of the transaction, and it cannot be pretended that an omission in
this respect would divest the title which had thus been acquired, and render the whole proceeding nugatory. The original
appointment of trustees was given in evidence; and should it be held that [**13] a record made out of time would not
be evidence, it would not affect the validity of the original document. The same remark may be made respecting the
report of the judge. If the officer had failed altogether in performing this duty, it would not divest the title of the
trustees. ( Chautauque Bank v. Risley, 4 Denio, 484.)Third. The defendant's counsel insists that it was incumbent upon
the plaintiff to prove the fact of a sale by the trustees to himself. The trustees being clothed with the [*516] title to the
land, any conveyance by them which would, by the common law, pass the title, would be effectual wherever the
question of title should arise collaterally. The rule would be different, if they had possessed only a power to sell and
convey the premises, for in such cases all the formalities required by law must, in general, be observed, or nothing is
effected. In this case the premises were shown to have been advertised for sale for the period required by the statute, and
the conveyance set forth that due notice of the sale had been given, and that the plaintiff became the purchaser upon a
sale at auction. We do not say that the recitals are evidence; but if [**14] it were essential to the validity of the
conveyance that the purchase should have been made at auction, we are of opinion that the presumption of the due
performance of official duty would be prima facie sufficient to show that it had been done. [HN1] Where a levy is
necessary, in order to give a sheriff authority to sell real estate, the court will presume it to have been made where it is
found that he has sold and conveyed the land. ( Jackson v. Shaffer, 11 John., 513.) I am of opinion that the plaintiff
made out a prima facie case, showing title in himself.
The defendant attempted to show title out of the plaintiff and in Z. A. Leland, under whom he entered and cut the
timber. The most favorable view for the defendant which can be taken of the instrument given in evidence by him, is to
consider it a conveyance of an undivided half of all Helm's property, and an equitable mortgage of the other half, to
secure any future advances which Leland and Skinner might see fit to make. It would clearly be a conveyance of an
undivided moiety of Helm's property, but for the want of a consideration. But no consideration was expressed in the
paper, and none was proved outside of [**15] it. Leland and Skinner did not undertake to advance anything. They did
not execute the deed, and there are no expressions in it by which they were bound to do anything in consequence
[*517] of their acceptance of it, or which would have amounted to a covenant on their part if they had executed it; and
there was no collateral agreement, verbal or written, by which they undertook to advance anything to Helm, or to do
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anything for him. If the deed had any operation, it was by way of bargain and sale, under the statute of uses. No livery
of seizin is pretended to have been given, and there was no such relationship between the parties as is necessary to
support a covenant to stand seized. A bargain and sale, before the statute of uses, rested on the goodness of the
consideration, and hence it was that a consideration became the great point upon which deeds of conveyance turned,
which were invented after the statute in order to raise and convey uses. (Reeves' His. of the Eng. Law, pp. 162, 163, 353,
355; The Rector of Cheddington's case, 1 Rep., 154; Wiseman's case, 2 id., 15; Sheppard's Touchstone, ch. 10. p. 5.) It
is perfectly well settled in this state [**16] that, [HN2] to constitute a good conveyance by way of bargain and sale,
there must be a valuable consideration expressed in the deed or proved independently of it. If one is expressed, no proof
of its actual payment need be given, and it cannot be controverted by evidence, and it is sufficient, though the amount
be merely nominal. ( Jackson v. Alexander, 3 John., 484; Jackson v. Fish, 10 id., 456; Jackson v. Florence, 16 id., 47;
Jackson v. Sebring, id., 515; Jackson v. Cadwell, 1 Cow., 622.) It is no doubt true that the insertion of a consideration
has become a mere ceremonial observance. It is, however, a form required by law, where there is no evidence of an
actual consideration, and we have no more right to dispense with it than with any other legal requirement. I am of
opinion, therefore, that the deed was void for the want of a consideration. It was executed before the enactment of the
Revised Statutes, and we are not therefore called upon to consider the effect of the provision which the legislature has
made respecting grants of freehold estates. (1 R. S., 738, 136, 137.)
[*518] But whatever might have been the effect [**17] of the deed to Leland and Skinner at the common law, I
am of opinion that it has become invalid, as against the plaintiff, by the operation of the recording acts. Helm, the
source of title, conveyed to Fitzhugh, and he conveyed to Thornton. Neither of these grantees could hold the land
against the prior grantees of Helm, for the former had knowledge of the prior deed and the latter did not cause his deed
to be recorded. But Thornton conveyed to Smith for a pecuniary consideration expressed in the deed, and acknowledged
to have been paid, and Smith put his deed on record. Smith was not prejudiced by the knowledge which Fitzhugh had of
the conveyance to Leland and Skinner. [HN3] If one affected with notice conveys to another without notice, the latter is
as much protected as if no notice to either had ever existed. ( Jackson v. Given, 8 John., 137; Varick v. Briggs, 6 Paige,
322, 329.) Smith acquired Fitzhugh's title, by means of the conveyance of the latter to Thornton and of Thornton's
conveyance to him, as effectually as though Fitzhugh had conveyed directly to Smith. It was unnecessary for the
plaintiff to prove that Smith paid a consideration. The acknowledgment [**18] in the deed of the payment of a
consideration is, uncontradicted, sufficient evidence of the fact of such payment. ( Jackson v. McChesney, 7 Cow., 360.)
If Smith acquired a good title against Leland and Skinner by virtue of the recording acts, as I have shown he did, the
plaintiff would be entitled to protection, though he had purchased with full notice of the prior deed. It is not material,
therefore, to consider whether the plaintiff's purchase, under the attachment proceedings instituted by himself,
constituted him a bona fide purchaser within the construction which has been given to the recording acts. It is enough
that the purchase from the trustees gave him the title which Smith had. Smith's title being perfect against Leland and
Skinner, the plaintiff, being clothed with that title, can hold the land against them. ( Varick v. Briggs, [*519] supra;
Jackson v. McChesney, supra.) I am, moreover, of opinion that a purchaser, under judicial proceedings instituted by
himself, though the purchase be made on account of the debt for the recovery of which the proceedings were had, is a
bona fide purchaser within the statute. The legal expenses necessarily [**19] incurred, which have to be advanced by
the party promoting the proceeding, are something in addition to the existing debt which the purchaser has parted with
as a consideration for the conveyance which he receives.
If these views are correct, the case was properly disposed of in the supreme court, and the judgment appealed from
should be affirmed.
Comstock, J. The defendant committed the trespasses complained of, claiming under a contract for the purchase of
the land from Leland, dated March 4, 1848. Assuming that the instruments executed by Helm to Leland and Skinner on
the 30th of November, 1825, conveyed to them a title or an interest (Leland having afterwards purchased of Skinner),
then the question arises whether the plaintiff is protected in his title under the recording act as a bona fide purchaser.
Fitzhugh, the immediate subsequent grantee of Helm, would not be protected against the prior unrecorded grant to
Leland and Skinner, for the reason that he had actual notice of their title. Neither would Thornton, the grantee of
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Fitzhugh, be protected, because his conveyance was never duly recorded. A subsequent purchaser takes no benefit
under the recording act, unless his [**20] deed is first recorded. The deeds, however, from Thornton to Smith, and
from the trustees of Smith, as a non-resident debtor, to the plaintiff, were duly recorded before the instruments above
mentioned from Helm to Leland and Skinner. The plaintiff has, therefore, complied with that condition of the [*520]
statute, and his title must prevail against Leland's, unless there is some other difficulty in the way.
There is no difficulty arising out of any actual notice of the adverse title. The notice which Fitzhugh, the immediate
grantee of Helm, had, does not affect any one purchasing under him without notice ( Jackson v. Elstin, 12 John., 452;
Varick v. Briggs, 6 Paige, 323; 8 Cow., 260); and it is not pretended that the plaintiff, or Smith, whose title he has
acquired, were not bona fide purchasers, so far as this point is concerned.
It is said that all the conveyances, from Helm down to the plaintiff, must be recorded before the prior one to Leland
and Skinner, in order to bring the case within the recording act; and inasmuch as the deed from Fitzhugh to Thornton,
constituting one link in the chain, does not appear on the records, it is insisted [**21] that Leland's title must prevail. It
is true, I believe, that under the statute a prior recorded deed is notice only to a subsequent purchaser from or under
the same grantor, and consequently that such a purchaser only is within the protection of the statute, if the prior deed is
not recorded (6 Hill, 469; 1 John. Ch. R., 566; 2 Barb. Ch. R., 151); but I do not find any authority for saying that all the
conveyances in the chain of the junior title must be recorded, when the last grantee asserting such title is himself a
purchaser in good faith and has his own deed recorded in due time. In the present case, the plaintiff not only traces his
title in fact back to Helm, the common source, but the record shows Helm to have been the source, although one of the
conveyances in the series is not recorded. The deeds from the trustees of Smith to the plaintiff, and from Thornton to
Smith, which were duly recorded, both describe the premises as conveyed by Helm to Fitzhugh, and by Fitzhugh to
Thornton on the 15th of September, 1835; the deed to Thornton being the one not on record. If, therefore, the plaintiff
examined the title when he purchased, the record would carry him back to [**22] Helm, as the [*521] origin. The
plaintiff, therefore, I have no doubt, must be regarded as a subsequent purchaser under the same grantor as Leland,
and having first recorded his own deed, he is protected both by the letter and policy of the act.
But a subsequent grantee, to entitle himself to the benefit of the statute, must not only buy without notice, and put
his deed first on record, but he must also purchase for a valuable consideration. I think the plaintiff must be regarded as
such a purchaser. He and two others were jointly the attaching creditors of Smith, and on the sale of the premises by the
trustees, he alone was the bidder and buyer. There was no other property attached and sold, and consequently all the
expenses of the proceeding were payable out of this bid. Beyond that, the plaintiff either paid the money over to the
trustees, or applied his bid in extinguishment of so much of the debt, and in that case he was of course accountable to
his associates for two-thirds of the amount. His relations were, therefore, changed by the transaction, and he must be
deemed a purchaser for a valuable consideration.
Some objections were made on the trial to the validity of the [**23] proceedings on the attachment against Smith,
under which the plaintiff claims title. One of these was that the appointment of the trustees was not recorded within one
month from the time it was made, as the statute requires. (2 R. S., 12, 61.) Another was that the report of the judge
before whom the proceedings were had was not made and filed within the time directed. (Id., 13, 68.) These statutes
are directory merely, and the omission to comply with them strictly does not vitiate the proceedings. Another objection
was that the attachment itself was not shown. But the judge's report of the proceedings recited the process as issued by
him in due form, and the statute declares that such report "shall be conclusive evidence that the proceedings stated
therein were had" before the officer. Such being the effect given by statute to the report of the judge, [*522] it was
unnecessary to go behind it for proof of any matter therein set forth. Some other objections were mentioned, but they do
not require a special consideration. On examination of the proceedings, and comparing them with the statutes under
which they were had, there appears to be no doubt of their validity.
[**24] The point was made on the trial that the deed from Fitzhugh to Thornton, constituting one of the links in
the plaintiff's title, was void, as against the title of Leland, on the ground that it was not duly acknowledged and had no
attesting witness. The statute (1 R. S., 738, 137) declares that a deed "not so attested shall not take effect, as against a
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purchaser or incumbrancer, until so acknowledged." Such a deed is, however, good between the parties to it, and we
think it is only a subsequent purchaser or incumbrancer who can take the objection. If the formalities of attestation or
acknowledgment had been duly attended to, still the prior conveyance (if such we call it) to Leland and Skinner would
prevail, but for the operation of the recording statute. The section referred to clearly implies that the deed would take
effect against a purchaser or incumbrancer, if acknowledged or attested; but as such could not be the effect, as against a
prior conveyance or incumbrance, the inference would seem to be plain that the statute has no application to such a
case.
Some other questions were presented on the argument, but if they were all determined in the defendant's favor it
would [**25] not change the result. Under the views which have been stated the plaintiff made out a title to the
premises, and the finding and judgment in his favor were therefore right.
The judgment should be affirmed.
Hubbard, J. The plaintiff is entitled to recover in this action, provided he or any one through whom he derived title
can be regarded as a purchaser of the premises on which [*523] the trespass was committed, in good faith and for a
valuable consideration. Whatever estate Leland may have had, whether an absolute title to one-half, and a power
coupled with an interest as to the other half, or whether the power extended to the entire premises, it was equally subject
to the operation of the registry act.
The question then is, was the plaintiff or his predecessors in title, or any of them, a bona fide purchaser for a
valuable consideration? The plaintiff can stand upon his own purchase or that of any one through whom he traces title
back to the common source. If any one of them stands in the attitude of a bona fide purchaser, and is entitled to the
protection of the registry act, then the plaintiff should recover, as the conveyance to Leland and Skinner was not
recorded [**26] until after those under which plaintiff derives title, with the exception of the one to Thornton.
Fitzhugh was not a bona fide purchaser; he had actual knowledge of the outstanding conveyance to Leland and
Skinner. The conveyance to Thornton was never recorded, and he, therefore, would not be protected against the prior
conveyance. But Thornton conveyed to Smith, from whom the plaintiff immediately derives title. This conveyance,
which is in the ordinary form, expresses a consideration of $ 2000, and was properly acknowledged and recorded. There
is no pretence that Smith knew of any outstanding title or equity in Leland and Skinner. He purchased in good faith,
and the receipt of the consideration in the deed of his grantor is prima facie evidence of payment of the sum expressed. (
Jackson v. McChesney, 7 Cow., 360.) Under the recording act, therefore, Smith was presumptively a bona fide
purchaser for a valuable consideration, and the plaintiff succeeded to all his rights. The premises being wild and
unoccupied land until after the time the plaintiff acquired his title, there is no ground for any constructive notice of an
outstanding title.
[*524] It was [**27] insisted upon the argument that the plaintiff's title must fail because of the want of a link in
the chain; because the deed from Fitzhugh to Thornton was not acknowledged and had no subscribing witness, as
required by the statute. (1 R. S., 738, 137.) The delivery of the deed signed by Fitzhugh was not disputed. It seems to
me that neither the defendant or Leland and Skinner stand in a position to raise any question under the statute. The
statute only applies to subsequent purchasers, and not to those deriving title from the main grantor prior in time.
A conveyance which has no subscribing witness, and which is not acknowledged at the time of its delivery, is not
rendered ipso facto void by the statute; it is simply declared to have no effect, as against a purchaser or incumbrancer,
until acknowledged. The deed operates to transfer the title, as between the parties, subject to rights subsequently
acquired by third persons.
In view of the right of the plaintiff under the title of Smith, it may not be essential to inquire whether he can
himself be regarded a bona fide purchaser for a valuable consideration. There is no suggestion that his purchase was
not in good faith; [**28] that he was not entirely ignorant of any claim or title outstanding. As to the consideration
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paid, I do not see any reason why the receipt of the payment of the consideration expressed in his deed from the trustees
in the insolvent proceedings against Smith, should not have the same force and effect as the receipt in a conveyance
directly inter parties.
But, aside from this, I think the plaintiff showed affirmatively that he did pay a valuable consideration. It is well
settled that, in order to constitute a bona fide purchase for a valuable consideration, within the meaning of the
recording act, the purchaser must, before being notified of the prior equity of the holder of an unrecorded deed, have
advanced some new consideration, or relinquished some security for a preexisting debt due to him. The mere [*525]
receiving a conveyance in payment of a preexisting debt is not enough. ( Dickerson v. Tillinghast, 4 Paige, 215; 4 Kent,
168.)
In this case no security for an existing debt was relinquished. The plaintiff obtained his deed under the statutory
proceeding against Smith, an absent debtor. I do not perceive how the case is distinguishable from that of [**29] a
conveyance obtained by virtue of a statutory sale by a sheriff, on execution. The validity of a sheriff's deed, against a
prior unrecorded conveyance by the judgment debtor, has been repeatedly recognized, and, I think, properly, ( Parks v.
Jackson, 11 Wend., 442; Tuttle v. Jackson, 6 id., 213.) The two methods of sale and conveyance are analogous; both are
judicial or statutory proceedings.
It is true, the plaintiff, who was the creditor of Smith, or one of the creditors, paid no new consideration at the sale,
except the expenses attending the proceedings. The real consideration was the debt; the costs were but an incident.
Under the recording act it should be held that, in effect or equitably, the creditor purchasing upon a judicial sale, on his
own judgment or in an insolvent proceeding to collect his debt, pays the amount of his bid to the officer, and in theory
receives it back again. In other words, it should be held in equity that the land is converted into money, and the
conveyance made in consideration of the money thus advanced.
None of the objections made at the trial, as to the validity of the attachment proceedings, are well taken. The statute
[**30] which requires the officer, before whom the proceedings against an absent debtor are pending, to report to the
supreme court within twenty days after the appointment of trustees, and to file the same, is merely directory. The report,
when made, is rendered by statute conclusive evidence of all the facts which it contains. (2 R. S., 13, 68.) Its recitals
therefore proved all the proceedings, including the issuing of the original attachment, and all formal matters [*526] of
regularity up to the appointment of trustees. There was no claim that the report of the judge was defective in any
respect, at least no objection was made that its recitals were not full and complete.
The requirement of the statute, that the trustees shall cause their appointment to be recorded within one month, is
simply directory. (2 R. S., 12, 61.) An entire failure to record would not affect the validity of the sale made by them of
the debtor's property.
The judgment of the supreme court must be affirmed.
All the judges, except Mitchell, J., who did not hear the argument, and took no part in the decision, were in favor of
affirmance.
Judgment accordingly.
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83 of 314 DOCUMENTS
Positive
As of: May 27, 2014
Moyer against Hinman.
13 N.Y. 180; 1855 N.Y. LEXIS 71
December, 1855, Decided
PRIOR HISTORY: [**1] In October, 1835, H. W. Schroeppel being the owner of two hundred and fifty acres of
land, situate in Oswego county, contracted with the plaintiff to sell and convey to him a part of it containing sixty acres,
at the price of $ 465; fifty dollars of the purchase price to be paid down, and the residue at or before the expiration of
ten years with annual interest. By the contract it was agreed that the plaintiff should have immediate possession of the
premises, and on payment of the purchase money, the same should be conveyed to him in fee by Schroeppel. The
following spring the plaintiff entered into possession of the land mentioned in the contract, which was wild, and erected
a house and commenced making other improvements thereon. From that time till the commencement of this action, he
occupied and improved the premises.
In 1838, R. S. Corning recovered a judgment against Schroeppel in the supreme court, which then became a lien on
the real estate of the latter, situate in Oswego county; and in 1844, an execution upon the judgment was issued to the
sheriff of Oswego county, who, by virtue thereof, in August of that year, sold the premises contracted to the plaintiff,
together [**2] with the residue of the two hundred and fifty acres, and gave the usual sheriff's certificate of sale to
Corning, the plaintiff in the execution, who was the purchaser at the sale. A duplicate of this certificate was duly filed
by the sheriff in the clerk's office of Oswego county. In August, 1845, Corning sold and assigned to the defendant the
sheriff's certificate, and in the ensuing January the premises were conveyed to him by the sheriff, pursuant to the sale
and certificate. The sheriff's deed to the defendant was duly recorded in Oswego county, in February, 1846.
Intermediate the recovery of the judgment and the sale by virtue of the execution, the plaintiff made several
payments to Schroeppel upon the contract; and in October, 1845, after the sale and assignment of the sheriff's certificate
to the defendant, but before the execution of the sheriff's deed, he made a further payment to Schroeppel on the contract,
of $ 224. When the plaintiff made these payments, he had no actual notice of the judgment or of the sale made by the
sheriff.
Page 138
Soon after the defendant received his deed, he notified the plaintiff and forbid his making further payments to
Schroeppel, and offered [**3] to convey to him the premises on his paying to the defendant the amount unpaid upon
the contract at the time of the sheriff's sale. This the plaintiff declined to do, and the defendant, in 1851, brought an
action against him to recover possession of the premises. The plaintiff thereupon tendered to the defendant the amount
due upon the contract after crediting the $ 224 paid Schroeppel after the sheriff's sale, and before he conveyed to the
defendant and demanded a conveyance of the premises described in the contract; and the defendant declining to accept
the amount and execute the deed, this action was instituted to compel him to do so, and to stay the suit commenced to
recover possession of the premises. This action was tried before Mr. Justice Pratt without a jury, in 1852. He found the
facts above stated, and decided that the payment made to Schroeppel in October, 1845, was not valid as against the
defendant, and that the latter was entitled to demand and receive the amount owing on the contract at the time of the
sheriff's sale, and he ordered judgment that the defendant convey the premises to the plaintiff, on his paying this
amount. The plaintiff excepted, and the judgment having [**4] been affirmed by the supreme court at general term in
the 5th district, he appealed to this court. (For a report of the case in the supreme court, see 17 Barb., 137.)
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff vendee sought review of a judgment from the supreme court (New York),
which affirmed a judgment from the trial court that ordered defendant assignee to convey real property to the vendee
upon payment of the amount owed by the vendee on the contract for the sale of the property at the time of the sheriff's
sale.
OVERVIEW: The owner entered into a contract with the vendee for the purchase and sale of the real property. The
agreement provided for a down payment and payment of the residue at or before the expiration of 10 years with annual
interest. The vendee took immediate possession of the property, which was to be conveyed in fee upon payment of the
purchase money. A creditor subsequently recovered a judgment against the owner and the property was sold by the
sheriff. The creditor assigned the certificate of sale to the assignee and the sheriff conveyed the property to the assignee.
The vendee made payments upon the contract to the owner after the sheriff's sale. The vendee brought an action against
the assignee to compel him to convey the property for the balance of the purchase price. The trial court determined that
the payments made by the vendee after the sheriff's sale were not valid as against the assignee. The lower court affirmed
the trial court's judgment. On appeal, the court modified the lower court's judgment to allow the payments made by the
vendee after the sheriff's sale. The court found that the vendee was entitled to actual notice of subsequent judgments
and other encumbrances.
OUTCOME: The court modified the judgment of the lower court, which had affirmed the trial court's judgment that
ordered the assignee to convey the real property to the vendee upon payment of the amount that was owed by the
vendee on the contract for the sale of the property at the time of the sheriff's sale. The court modified the judgment to
allow the payments made by the vendee subsequent to the sheriff's sale.
CORE TERMS: notice, vendor, vendee, purchaser, judgment creditor, conveyance, equitable, purchase money,
recovered, actual notice, docketing, deed, mortgage, judgment debtor, docketed, conveyed, unpaid, sheriff's sale,
executory contracts, grantor, constructive notice, legal estate, general lien, incumbrancer, chancellor, mortgagee,
mortgagor, confessed, devisee, pendens
Page 139
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[HN1] The docketing of a judgment against a vendor affords no notice of its existence, either actual or constructive, to a
prior vendee of the judgment debtor. Parties who deal with the debtor respecting his lands subsequently to the docketing
of the judgment, are affected with notice.
Real Property Law > Priorities & Recording > Recording Acts
[HN2] The docketing of a judgment or the recording of a mortgage is no notice to a prior purchaser or mortgagee of the
premises whose conveyance is on record, or of which notice was had, the object of the recording acts, and of the law
requiring judgments to be docketed to protect subsequent purchasers and incumbrancers against previous deeds,
mortgages, etc., which are not recorded and of which they had no notice, and to deprive the holder of the prior
unregistered conveyance or mortgage of the right which his priority would have given him at the common law.
[HN3] Where a vendee, subsequently to the recovery of a judgment against the vendor, but without actual notice
thereof, has paid over a balance of the purchase money and taken a conveyance from the judgment debtor, such vendee
is, in equity, entitled to be protected against the claim of the judgment creditor.
[HN4] Judgments docketed against a vendor do not affect payments subsequently made by a vendee, having no actual
notice of the judgment.
[HN5] Payments made by a vendee pursuant to an executory contract are not to be considered as a fresh dealing with
the vendor respecting the land.
Civil Procedure > Parties > Interpleaders > General Overview
[HN6] A party shall suffer who, by his acts or omission, permits money to go into the hands of a party not entitled to it.
Real Property Law > Purchase & Sale > Contracts of Sale > Period Between Execution & Closing > Risk of Loss
[HN7] A payment pursuant to a prior executory contract is not to be regarded as the purchase of a new or further
interest in the land.
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13 N.Y. 180, *; 1855 N.Y. LEXIS 71, **4
Real Property Law > Purchase & Sale > Contracts of Sale > General Overview
[HN8] By a contract for the sale of land, the vendor becomes the trustee of the legal title for the vendee, and the vendee,
the trustee of the vendor, as to the unpaid purchase money.
Civil Procedure > Equity > General Overview
[HN9] When parties go into equity, the state of the legal title becomes immaterial and the question is whether the party
claiming the purchase money has the better equity.
[HN10] Notice is not required to be given to a judgment debtor or an occupant or encumbrancer and a sale to a bona
fide purchaser without any notice is valid. 2 N.Y. Rev. Stat. ch. 369, 40.
[HN11] The lien of a judgment is subject to all equities that existed at the time it was recovered. A judgment being a
general lien is bound by a particular equity.
Real Property Law > Financing > Mortgages & Other Security Instruments > Equitable Mortgages
[HN12] Registry of a deed or mortgage is constructive notice only to those subsequently acquiring some interest under
the grantor or mortgagor.
Real Property Law > Financing > State Regulation
[HN13] The lien of a judgment does not, in equity, attach upon the mere legal title to the land in a defendant, when the
equitable title is in a third person.
SYLLABUS
The lien of a judgment on land is subject to the equitable rights of a party in the occupation thereof, under a prior
contract to purchase the same from the judgment debtor.
The docketing of the judgment is not notice thereof to such purchaser; and payments subsequently made by him to
the judgment debtor pursuant to his contract, without actual notice of the judgment, are valid as against its lien upon the
land.
And where, while the purchaser of land by contract was in possession, a judgment was recovered against the
vendor, and the land sold on an execution issued thereon and bid off by the plaintiff in the judgment, who transferred
the sheriff's certificate to a third person, to whom the sheriff executed a deed; and the purchaser, after the sale on
execution and before the sheriff conveyed, without actual notice of the judgment or the proceedings thereon, made
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payments pursuant to his contract to the judgment debtor; Held, in an action by the purchaser against the grantee in
[**5] the sheriff's deed for a specific performance of the contract, that such payments were valid, and that the latter was
bound to convey the land on being paid the amount due on the contract after applying the payments made to the
judgment debtor.
Payments made by such a purchaser to the judgment debtor without notice after the execution of the sheriff's deed
would be valid against the grantee therein. Per Denio, J.
The recording of the sheriff's deed is not notice thereof to a party who contracted with the judgment debtor to
purchase the land and entered into possession prior to the recovery of the judgment. Per Denio, J.
COUNSEL: Geo. F. Comstock, for the appellant.
L. Morgan, for the respondent.
JUDGES: Denio, J., Hand, J.
OPINION BY: Denio; Hand
OPINION
[*183] Denio, J. The counsel for the parties in this case agree that the plaintiff, being in possession under his
contract at the time of docketing the judgment under which the defendant claims, is to be protected in equity as to his
rights which existed at that time; and the position is so well established by authority as to have become an elementary
doctrine in this branch of the law of real estate. I consider it equally [**6] well settled that [HN1] the docketing of a
judgment against the vendor affords no notice of its existence, either actual or constructive, to the prior vendee of the
judgment debtor. Parties who deal with the debtor respecting his lands subsequently to the docketing of the judgment,
are affected with notice. Such persons may make themselves perfectly safe in that particular, by searching the docket
book of judgments in the proper office; and they will, of course, abstain from purchasing if they find the land which
they are proposing to buy, encumbered by a judgment. So, it may be said, a party holding a contract upon which
payments remain to be made, may, before making such payments, examine for judgments against the vendor; but it
would be an intolerable inconvenience to require this, where the payments, as is usually the case, are to be made
annually or oftener; and should such examination ever be strict, the vendee would have to run the risk of an
incumbrance intervening, while he was going from the office where the search was made to the residence of the vendor,
to make the payment. It has been repeatedly decided that [HN2] the docketing of a judgment or the recording of a
mortgage is no notice [**7] to a prior purchaser or mortgagee of the premises [*184] whose conveyance is on record,
or of which notice was had, the object of the recording acts, and of the law requiring judgments to be docketed, being, it
is said, to protect subsequent purchasers and incumbrancers against previous deeds, mortgages, &c., which are not
recorded and of which they had no notice, and to deprive the holder of the prior unregistered conveyance or mortgage of
the right which his priority would have given him at the common law. ( Cheesebrough v. Millard, 1 Johns. Ch. R., 409;
Stuyvesant v. Hall, 2 Barb. Ch. R., 151.) The plaintiff in this case being in possession under his contract, that
circumstance was notice to all persons who might subsequently become interested in any way in the premises, not only
of such possession, but of the terms of the contract and of all his existing rights under it.
In the view of a court of equity, his condition was like that of a party having a prior conveyance or lien which was
duly recorded. When, therefore, Corning had recovered his judgment against Schroeppel, the situation of the respective
parties was this: The plaintiff was the equitable [**8] owner of the land, subject to future payments to be made by him,
and the judgment creditor had notice of his situation and of his rights; but the plaintiff had no notice and was not
chargeable with notice of the lien of his creditor. The creditor had at law the right to acquire the legal title to the land by
means of a sheriff's sale and a purchase by himself; but in equity his rights were limited to the future payments to be
made by the plaintiff. But as the vendee had no notice of the judgment creditor's lien, and the creditor had full notice of
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the vendee's situation, it would seem to be reasonable that in order to intercept those payments and divert them from the
vendor's hands into his own, the creditor ought at least, to inform the vendee of the existence of his lien and of his right
to the unpaid purchase money. In accordance with this view, it was held, in a case in Maryland, that [HN3] where the
vendee, subsequently to the recovery of a judgment against [*185] the vendor, but without actual notice thereof, had
paid over a balance of the purchase money and taken a conveyance from the judgment debtor, such vendee was, in
equity, entitled to be protected against the claim of the [**9] judgment creditor. (Hampson v. Edelen, 2 Har. and
Johns., 64.) And we have the deliberate judgment of the court of errors of this state upon the same point in an action at
law. In Parks v. Jackson (11 Wend., 442), Parks, the plaintiff in error, was in possession of a tract of land which had
been purchased by one of these executory contracts and possession had been taken by the vendee upon the contract
being executed, which was continued down to the time the controversy arose. Judgments were recovered against the
devisee of the vendor, and afterwards the party holding under the vendee, without actual notice of the judgments, paid
the whole purchase money, took a conveyance and conveyed to Parks. Then the judgment creditor sold the land on the
judgment, obtained a sheriff's deed, and brought ejectment against Parks. The court of errors held that the plaintiff could
not recover. The chancellor who alone dissented from the judgment, put his opinion on the ground that the remedy of
Parks was in equity. There were a variety of other facts in this case, but they tend to strengthen the decision as an
authority upon the point under consideration. The purchase money for [**10] the land was paid to, and the deed under
which Parks held was executed by one Henry Franklin, to whom the devisees of the original vendor had conveyed the
premises, and the judgments under which the plaintiff in the ejectment suit claimed, were against these devisees. The
judgment creditor claimed that the conveyance to Henry Franklin was void as against the creditors of the grantors, and
commenced a suit in chancery against the parties to that conveyance, and obtained a decree setting it aside for the
alleged fraud, having, at the time of filing the bill, filed a notice of lis pendens in the county clerk's office. The
payments were made and the deed under [*186] which Parks held, was given pending that suit. It was scarcely
contended that docketing the judgment against the grantors of Henry Franklin would alone enable the creditor to
question the payments subsequently made; but it was insisted that the lis pendens affected the parties holding under the
vendee in the executory contract, and that the payments were consequently made in their own wrong; and so the
supreme court had decided. That judgment was reversed, the court of errors holding that neither the judgments, [**11]
nor the lis pendens nor both of them, affected the vendees or impaired the effect of the payments or of the deed under
which Parks held. This case, therefore, proves something more than that [HN4] judgments docketed against the vendor
do not affect payments subsequently made by the vendee, having no actual notice of the judgment. It establishes, in
effect, that [HN5] payments made by the vendee pursuant to an executory contract, are not to be considered as a fresh
dealing with the vendor respecting the land; for if they were so, they would, when made, pendente lite be ineffectual
against a decree determining that the party to whom they were made had no right to receive them, it being an
established principle that the purchase of any interest in the subject in litigation, is subverted by the ultimate judgment,
if adverse to the right of the party selling. The true inference from the case is that such payments are referable to the
original contract, and are not the purchase of a further interest in the land.
If then, the payment made by the plaintiff to Schroeppel is not affected by the docketing of Corning's judgment, I
am not aware of any principle upon which the sale upon the execution [**12] and the purchase of the premises by
Corning, under which the defendant holds, can prejudice that payment. The sale converted the general lien into a
particular one upon these premises. It was still but a lien; for any judgment creditor of Schroeppel might,
notwithstanding, redeem the premises. But the consideration which, in my judgment, prevents its having the effect
claimed for it, of cutting off [*187] the plaintiff's right to pay Schroeppel, is, that the former had no notice of the
transaction, while Corning and the defendant must be considered as having full notice of the plaintiff's rights. Admitting
that Schroeppel had no right to the money, and that Corning or the defendant had, either the plaintiff or the defendant
must lose the money; and the rule in such cases is that [HN6] the party shall suffer who, by his acts or omission,
permitted the money to go into the hands of a party not entitled to it. The defendant could readily have informed the
plaintiff of the judgment and of the sheriff's sale; and then if the plaintiff had chosen to pay to Schroeppel instead of
refusing so to pay, or to take measures by bill of interpleader or otherwise, if threatened by a suit by Schroeppel, [**13]
perhaps the payment would have been in his own wrong. As the case stands, he paid the money to the party holding his
obligation for the payment without any notice that any other person had become interested in that contract, or had any
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13 N.Y. 180, *184; 1855 N.Y. LEXIS 71, **8
right to the money which he had engaged to pay to Schroeppel.
The case does not call upon the court for a decision upon the question, whether if the defendant had obtained a
conveyance from the sheriff before this payment was made, the plaintiff might not still have paid to Schroeppel until he
had notice of such conveyance. Individually, I am of opinion that a vendee in possession under such a contract, may
safely continue to pay to the vendor until he has notice that some other person has acquired an interest in the land or in
the contract. If this is not so, the vendor may, in any case, make a secret conveyance of the land and continue to receive
the purchase money from the vendee, and the latter will be without remedy if the vendor be insolvent. The recording of
the conveyance would make no difference in the principle, for this is only constructive notice to subsequent
purchasers and incumbrancers; and as we have seen, [HN7] a payment pursuant to a [**14] prior executory contract is
not to be regarded as the purchase of a new or further interest in [*188] the land. The application of the doctrine of
equitable conversion, in my opinion, furnishes a solution of the difficulty in this class of cases. [HN8] By a contract for
the sale of land, the vendor becomes the trustee of the legal title for the vendee, and the vendee, the trustee of the
vendor, as to the unpaid purchase money. (Story's Equity, 790 and seq.) This is the view of a court of equity. A court
of law looks only at the legal title. Hence it permits a judgment creditor to subject the land to a sale on execution,
though the judgment debtor had, before the docketing of the judgment, converted it into personalty by contracting to
convey it and receiving the obligation of the purchaser for the consideration. But [HN9] when the parties go into equity,
as they have done in this case, the state of the legal title becomes immaterial, and the question is whether the party
claiming the purchase money has the better equity. If it appear, as I think it does here, that he has stood by and
permitted it to be paid over to the person originally entitled, without giving notice of the transfer [**15] to himself of
the right to receive it, he cannot be heard to question the payment made under such circumstances.
The judgment of the supreme court should be modified, and a judgment should be given in accordance with this
opinion, to be settled by one of the judges of this court. The defendant should pay the costs in the supreme court.
Hand J. It was proved that the defendant knew that the plaintiff was in possession of the land in question; but I find
no proof that Corning, the judgment creditor and purchaser at the sheriff's sale, had such knowledge. But Corning was
the creditor and consequently paid nothing upon the sale (2 Stor. Eq., 1503 b.), and the defendant of course must have
been apprised of that fact by the certificate itself. But admitting that the defendant has the same protection as Corning,
the possession of the plaintiff was sufficient notice, or sufficient to put a purchaser upon inquiry. [*189] ( Tuttle v.
Jackson, 6 Wend., 213; Gouverneur v. Lynch, 2 Paige, 300; Chesterman v. Gardner, 5 John. C. R., 29; Jones v. Smith,
1 Hare, 43 and Am. Notes; 2 Barb. C. R., 555; 3 Id., 316; 3 Paige [**16] , 421; Dart on V. and P., 408; 2 Ves. Jr., 447.)
We must then presume that the judgment creditor and the defendant both knew of the rights and interests of the
plaintiff, or treat them as possessing that knowledge; and that the plaintiff had no knowledge of the judgment or of the
sale under it until after he had made the payment now in question, was found as a fact by the court. The supreme court
decided that the payment to the vendor after the sale by virtue of the judgment, could not be allowed to the plaintiff. I
am unable to draw any distinction between the payments after the judgment and before sale, and the payment in
question which was made after the sale. It is found that the plaintiff had no actual notice, and the sale by the sheriff was
no more notice to him than the judgment. The object of notice on a sale of real estate is not to give information to the
judgment debtor or those holding under him, but to make a fair sale of the property. The statute does [HN10] not require
notice to be given to the judgment debtor or an occupant or incumbrancer, and a sale to a bona fide purchaser without
any notice is valid. (2 R. S., 369, 40; 10 Barb., 467.) This case then, [**17] is narrowed down to the single question,
whether a purchaser of land who, by virtue of the contract of purchase, pays a part of the consideration and enters into
possession and makes improvements, is bound to take notice of a subsequent judgment against the vendor or a sale
under it, of which he has no actual notice? The defendant contends that the legal title being in the vendor by force of the
statute, the judgment became a charge upon the land from the time that it was docketed. (2 R. S., 359, 3.) And that in
law and in equity, it was a lien to the extent of the purchase money unpaid at the time it was docketed. As a general rule,
it is a lien upon the unpaid purchase money. (Dart on V. and P., 219, 238; [*190] Bogert v. Perry, 17 John. R., 351;
Gouverneur v. Lynch, 2 Paige, 300.) And if the purchaser in possession is bound to take notice of an after recovered
judgment, this case was correctly decided by the supreme court. If, however, that be the true rule in such cases, it is
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because of the positive terms of the statute, for I think it will be seen that a different doctrine prevails in analagous
cases.
I suppose it to be well settled here [**18] and in England, that [HN11] the lien of a judgment is subject to all
equities that existed at the time it was recovered. (In the matter of Howe, 1 Paige, 125; Ells v. Tousley, id., 280; White
v. Carpenter, 2 id., 217; Keirsted v. Avery, 4 id., 9; Buchan v. Sumner, 2 Barb. C. R., 165; Wilkes v. Harper, id., 338;
Parks v. Jackson, 11 Wend., 442; Burgh v. Francis, 1 Eq. Ca. Ab., 320; Finch v. E. Winchelsea, 1 P. Wms., 282; and
see Jones v. Smith, 1 Hare, 43, S. C., 1 Phill., 244.) A judgment being a general lien is bound by a particular equity.
This principle was admitted by the court below, and applied to a certain extent. But had the plaintiff no equity beyond
what he had paid at the time the judgment was docketed? This question, it seems to me, was answered by the case of
Parks v. Jackson (11 Wend., 442). In that case payments were made not only after the judgment, but pendente lite, and
yet the vendee prevailed. It is true these payments were made to (and the deeds given by) the fraudulent grantee of the
debtors who had the apparent title; but the case principally [**19] turned upon the point that no actual notice had been
given to the vendee in possession. It is said that the vendor is trustee of the land and the purchaser of the price. If the
contract made the vendor a mere trustee in the ordinary sense of that term, clearly, and upon familiar principles, a court
of equity would protect the trust fund against the judgment creditors of the trustee. But in truth, he is trustee only sub
modo; and if the purchaser is not entitled to notice, the judgment creditor has a right to work out his legal lien through
his judgment to the extent the [*191] interests of the vendee are not protected in equity, notwithstanding the contract of
sale; for the supposed use is not executed and the title remains in the vendor, and did so before our Revised Statutes.
(See Bogert v. Perry, 17 John. R., 351; Wall v. Bright, 1 Jacob & Walker's R., 474.) The unpaid vendor, as was said in
Wall v. Bright, is not a mere trustee, though he is in progress towards it. [HN12] Registry of a deed or mortgage is
constructive notice only to those subsequently acquiring some interest under the grantor or mortgagor. (Stuyvesant v.
Hall, 2 Barb. [**20] C. R., 151; Stuyvesant v. Hone, 1 Sandf. C. R., 419.) And this principle obtains more strongly
against a judgment which is only a general lien in this state, and had been applied to protect a prior equitable claim as an
unregistered or equitable mortgage, or even a contract for a mortgage. In Ells v. Tousley (1 Paige, 280), the chancellor
said [HN13] "the lien of a judgment does not, in equity, attach upon the mere legal title to the land in the defendant,
when the equitable title is in a third person." In the well considered case of Langton v. Horton, the equitable claim to the
fruits of a whaling voyage took precedence of the legal title. (1 Hare, 549.) And the vice-chancellor laid great stress
upon the fact, that the equitable claimant first obtained possession of the property. Lodge v. Lyseley is also a strong case
for the plaintiff. (4 Sim. 70.) G. C. M., tenant for life, and F. C. M., tenant in remainder in tail, joined in conveying the
estate to trustees to sell and pay a sum to G. C. M., and the residue to F. C. M. The trustees contracted to sell the estate
to the defendant, after which judgments were recovered against G. C. M.; and [**21] it was held that the existence of
the judgments was no objection to the title. It was admitted by the counsel for the vendors and trustees, Sir E. Sugden,
Mr. Preston and Mr. Wilbraham, that where an estate had been conveyed to trustees, it might be affected by a judgment
confessed by the grantor, so long as it remained vested in the trustees But they contended that where a binding contract
for the [*192] sale of the estate had been concluded, no judgment could be executed upon it. And the vice-chancellor,
in commenting upon the opinion of Sergeant Hill, in a case submitted to him (see note a, 4 Madd. R., 506), said he
should not have given the opinion that Sergeant Hill did, because it appeared to him that from the time H. A. S., entered
into binding contracts to sell his estates to purchasers, he not having judgments against him at the time, the purchaser
had a right to file a bill against him and have the legal estate conveyed; and if he had subsequently confessed a
judgment, that judgment never could have impeded the progress of the legal estate to them. Now, the case put to
Sergeant Hill was, that H. A. S. was seized in fee simple, subject to his mother's jointure [**22] and younger children's
portions; and he contracted to sell in parcels to different purchasers and then conveyed to trustees to sell and convey the
estate to the purchasers and invest part of the money in trust, to indemnify the latter against the jointure and the
portions, and pay the residue to H. A. S. After the trust deed was given, H. A. S. confessed a judgment. Part of the
purchase money had been paid and invested. He held that the trustees would be safe in paying the money as to
judgments of which they had had no notice, but would not be as to those of which they had. (And see Forth v. D.
Norfolk, 4 Madd. R., 502.) Some remarks which were dropped by the lord chancellor in Whitworth v. Gangain, on a
motion (1 Cr. and Ph., 330), might seem more favorable to the judgment creditor; but on the hearing of that cause
before Sir James Wigram (3 Hare, 416), he decided that an equitable mortgagee of lands was entitled, in equity, to
Page 145
13 N.Y. 180, *190; 1855 N.Y. LEXIS 71, **17
enforce his charge in priority to a creditor of the mortgagor, who, without notice of the equitable mortgage, had
subsequently thereto, recovered judgment against the mortgagor and obtained actual possession of the land. He held
[**23] that the equitable interest of a purchaser for value before conveyance, would [*193] be preferred in equity to
the claim of a judgment creditor of the vendor. (And in Burgh v. Francis, 1 Eq. Ca. Ab., 320.)
The argument on the part of the defendant seems to be that, as between the judgment creditor and a bona fide
purchaser without notice, as the title had not passed and the purchase money had not all been paid when the judgment
was recovered, equity will leave the law to take its course and that the statute gives and enforces the lien. It is true, that
in some of the English cases we have noticed, the mere legal title may be said to have passed out of the vendor into
trustees before the judgment; and it seems there it cannot be claimed, since Wall v. Bright, without disregarding that
case, that the vendor, who had not been wholly paid, is a mere trustee. And in some of the cases we have cited, his
interest would have been liable to the judgment if notice had been given in season; and although the effect of judgments
at that time in England was different from that of judgments here, still the adjudged cases show how rigidly equity has
required the subsequent [**24] creditor to give notice. And the cause now under consideration illustrates the justice
and propriety of the rule. The plaintiff made the contract for the land about three years before the judgment, and the
principal of the latter was not payable until 1847; and no sale was attempted until about six years after it was recovered.
And then, without giving notice to the vendee in possession who had been suffered to continue his payments to the
vendor and make improvements, and after the land had become double or treble the value of the contract price, the land
was sold on the execution for one dollar per acre, of which sale the vendee had no actual notice until it was too late for
the judgment debtor or his grantee to redeem. Even if he had known of the sale he could not have redeemed at law. (
Lathrop v. Ferguson, 22 Wend., 116.) This seems to be an argument that the purchaser at the sheriff's sale should be
considered as holding the legal estate in trust for him.
[*194] If the statute compels the plaintiff to take notice of judgments subsequently recovered, on the ground that
docketing them is constructive notice, the hardship of the case is no answer to that requirement. [**25] But I find
nothing in this statute changing the rule before existing as to the respective rights of the owner of the equitable title and
the judgment creditor. It seems to me that the condition of a vendee in possession, fulfilling his contract of purchase, is
certainly as favorable as that of an equitable mortgagee. And that upon principle and authority, we should hold that he is
entitled to actual notice of subsequent judgments and other incumbrances. If so, it follows that the plaintiff should have
been allowed the payment made by him to Schroeppel in October, 1845, and that the judgment of the supreme court
should be modified and judgment given as directed in the foregoing opinion of Denio, J.
Page 146
13 N.Y. 180, *192; 1855 N.Y. LEXIS 71, **22
97 of 314 DOCUMENTS
Caution
As of: May 27, 2014
JACKSON, ex dem. MERRICK, v. POST.
SUPREME COURT OF JUDICATURE OF NEW YORK
15 Wend. 588; 1836 N.Y. LEXIS 96
October, 1836, Decided
PRIOR HISTORY: [**1] THIS was an action of ejectment, tried at the Madison Circuit in Mar., 1829, before the
Hon. Nathan Williams, then one of the Circuit Judges.
The lessor of the plaintiff, Thomas Merrick, 2d, claimed to recover 20 acres of land, conveyed to him by his father,
Charles Merrick, by deed bearing date Apr. 25, 1807. The defendant held the premises by title derived under a sheriff's
sale, by virtue of a judgment against Charles Merrick, in favor of D. Hubbard and S. G. Willard, for $ 686.24, docketed
Aug. 9, 1808. The sale under the judgment took place Apr. 1, 1809, when 89 acres of land (of which the 20 acres
claimed by the plaintiff are a part) were struck off to one Jacob Ten Eyck for the sum of $ 705.07, and conveyed to him
by deed executed by the sheriff, as of Apr. 1, 1809, which deed was duly recorded Apr. 21, 1809. When this deed was
put upon record, the deed from Charles Merrick to the plaintiff was not recorded, nor was it put upon record until Apr.
25, 1812, Ten Eyck sold the 89 acres purchased by him at sheriff's sale, Sep. 25, 1813, for the consideration of $ 1,600,
to D. Elliot, from whom, after two intervening owners, the premises came to the defendant by deed bearing [**2] date
Apr. 19, 1817. The deed from Ten Eyck and the subsequent conveyances severally contained a covenant of warranty. At
the time of the sheriff's sale and previous to the purchase, Ten Eyck had notice of the deed from Charles Merrick to
Thomas Merrick, 2d. The defendant offered to prove that, at the time of the sheriff's sale, Ten Eyck was requested, by
Charles Merrick and by Thomas Merrick, 2d, to bid in the farm and to give Charles Merrick an opportunity to redeem
the same; that Thomas then stated to him that his deed had not been recorded, and that he would give up all claim to the
20 acres if Ten Eyck would comply with their request; and that Ten Eyck agreed to do as requested. That thereupon the
89 acres were sold by the sheriff and purchased by Ten Eyck, and an agreement in writing entered into by Ten Eyck and
Charles Merrick whereby Ten Eyck covenanted to convey the 89 acres to Charles Merrick, provided he was paid the
amount of his bid, with the interest thereof, by Dec. 1, 1809; and Charles Merrick agreed then to surrender the
possession of the land in case of default of payment, and the defendant offered to produce the agreement in court; which
evidence thus offered to be [**3] given was objected to, on the ground that the plaintiff was not a party to the
Page 147
agreement, and the objection was sustained by the judge. The defendant excepted. The defendant proved that Thomas
Merrick, 2d, resided on the farm of 89 acres with his father, previous to the date of the deed to him in 1807, and
continued to reside there subsequent to that conveyance; that he and his father cultivated the farm together, living in the
same family--all the crops were secured in the same barn and fed out to their cattle; that the 20 acres conveyed to
Thomas was principally meadow land; that there was no partition fence between the 20 acres and the residue of the
farm; no separate cultivation; and that the farm was managed in the same way after as previous to the deed to Thomas;
there being no apparent change in that respect. The value of the 69 acres, exclusive of the 20 acres claimed by the
plaintiff at the time of the sheriff's sale, was estimated at from $ 1,000 to $ 1,500. The defendant also produced an
exemplification of the record of judgment against Charles Merrick, under and by virtue of which the sheriff's sale took
place, by which it appeared that one of the causes of action set forth [**4] in the plaintiff's declaration was a
promissory note made by Charles Merrick to the plaintiffs, for the sum of $ 600, bearing date Mar. 17, 1807, and the
defendant insisted that the plaintiff was not entitled to recover, because Charles Merrick having contracted the debt on
which his farm was sold, previous to the date of the deed executed by him to his son, such deed was fraudulent and void
as against creditors; upon which the judge ruled that the conveyance to the plaintiff was not fraudulent in law, as it
appeared in proof that the residue of the farm was of a value more than sufficient to pay the debt. The defendant also
insisted that the plaintiff was not entitled to recover: 1. Because he, the defendant, and those through whom he derived
his title, were bona fide purchasers for valuable consideration, without notice to either of them, except Ten Eyck, of
the lessor's claim; that the constructive notice arising from the record of the deed to the lessor was more than neutralized
by the record of the deed from the sheriff to Ten Eyck, which being first recorded, showed that Ten Eyck had the better
title, and that, consequently, without other notice than that derived from the records, [**5] he, the defendant, and those
under whom he derived title, were, with the exception of Ten Eyck, bona fide purchasers, and entitled to the
protection intended to be secured by the Registry Act; and 2. That Charles Merrick being in possession of the premises
in question, before and at the time of the recovery of the judgment against him, and at the time of the levy and sale, had
such an interest in the premises as was the subject of a sale on execution, and upon which the judgment was a lien. The
judge overruled these several objections, and charged the jury that the plaintiff was entitled to their verdict; to which
decisions and charge the defendant excepted. The jury found a verdict for the plaintiff. The defendant asks for a new
trial.
DISPOSITION: New trial denied.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant property owner challenged, by filing a motion for a new trial, the decision of
the Madison Circuit Court (New York), which entered judgment in favor of plaintiff lessee in the lessee's ejectment
action.
OVERVIEW: The lessor, who leased the property to the lessee, claimed to recover 20 acres of land that had been
conveyed to him by his father. However, the property owner claimed that he held the premises by title derived under a
sheriff's sale. When the deed, which was conveyed to the party that purchased the land at the sheriff's sale, was
recorded, the deed from the lessor's father to the lessor was not on record. Moreover, the deed to the lessor from the
lessor's father was not recorded when the property owner purchased the property. The lessee, who rented the premised
from the lessor, brought an action for ejectment against the property owner. The property owner argued that he was
immune from the lessee's action because he was bona fide purchaser without notice of any lien. Moreover, the
property owner alleged that the lessor orally surrendered his rights to the property in question. The trial court entered
judgment in favor of the lessee. Thereafter, the property owner filed a motion for a new trial. The court held that the
property owner was not a bona fide purchaser because he was charged with notice of the lessor's preexisting lien on
the property.
OUTCOME: The court denied the property owner's motion for a new trial.
Page 148
15 Wend. 588, *; 1836 N.Y. LEXIS 96, **3
CORE TERMS: deed, notice, recorded, purchaser, conveyed, fide purchaser, conveyance, void, sheriff's sale, prior
deed, grantor, sheriff's deed, grantee, acres, parol agreement, actual notice, subsequent purchasers, inquire, vendee,
lessor, valuable consideration, former decision, bona fide, constructive notice, unrecorded deed, recording, abandoned,
apprehend, effectual, anterior
[HN1] The object of recording is to give notice to all the world that the title has passed from the vendor to the vendee. If
the vendee neglects to record his deed, in consequence of which another person purchases bona fide, such vendee, so
neglecting to record his deed, loses his title; but if the second purchaser has actual notice of the first conveyance, he is
not a bona fide purchaser.
[HN2] The Act requiring deeds to be recorded does not say that the deed first recorded shall have preference, but that
the unrecorded deed shall be considered void as against a subsequent bona fide purchasers.
[HN3] If a subsequent purchaser knows of the unregistered conveyance at the time of his purchase, he cannot protect
himself against that conveyance; and whatever is sufficient to make it his duty to inquire as to the rights of others, is
considered legal notice to him of those rights.
HEADNOTES
Registration of Deeds--Rights of Purchaser--Notice-- What Sufficient--Purchase at Sheriff's Sale--Notice of Prior
Deed--Parol Agreement, Held Inadmissible in Evidence-- Voluntary Conveyance-- When Valid as against Creditors.
A purchaser, for a valuable consideration, cannot hold the land conveyed to him, if, previous to the conveyance to
his grantor, the premises were conveyed to a third person by deed, and such deed be recorded anterior to the last
purchase, although the deed to his grantor be first recorded.
Both deeds being on record at the time of the last purchase, the purchaser has notice that the grantee under the prior
deed, although last recorded, intends to assert his title; being thus put on inquiry, the purchaser is deemed to have
such notice of the prior deed as to render his purchase mala fide.
A purchaser of lands at a sheriff's sale, under a judgment and execution, will hold the same, although the
defendant in the execution had, previous to the judgment, sold and conveyed the lands by deed, provided that the deed
from the sheriff is recorded previous to the record of the deed from the debtor in the execution, unless the purchaser at
sheriff's sale had actual notice of the prior deed. The cases of Jackson v. Town, 4 Cow. 599, and Jackson v. Post, 9 Id.,
120, commented on and explained.
Still, if the deed from the defendant in the execution be recorded before the purchaser at the sheriff's sale conveys
away the property, the grantee of such purchaser is chargeable with notice of the prior deed, although the sheriff's deed
be recorded before the prior deed is put upon record.
Page 149
15 Wend. 588, *; 1836 N.Y. LEXIS 96, **5
A parol agreement, by the owner of land, that another shall purchase it and that he will surrender all claim to it,
cannot be given in evidence in a court of law, in an action subsequently brought by such owner to recover possession of
the land from such purchaser.
A voluntary conveyance is not void as against creditors, on the ground that the grantor at the time of the
conveyance is indebted, if it be shown that the residue of the real estate of the grantor was amply sufficient to pay his
debts.
Citations--9 Cow. 120; 6 Wend. 226; 8 Wend. 626, 627; 4 Cow. 599.
COUNSEL: Mr. J. A. Spencer, for the defendant, insisted that Ten Eyck having made the purchase of the 89 acres, not
only with the knowledge but at the request of Thomas Merrick, cannot be considered as having unduly obtained title to
the land and inequitably gained a preference over a prior purchaser, whose deed he knew was not recorded; the purchase
having been made at the request of the prior purchaser, and the terms of the agreement [**6] under which it was made
fully carried into effect. In Storrs v. Barker, 6 Johns. Ch. 166, it was held that a person having the legal title to land,
who acquiesces in the sale of it by another claiming or having color of title to it, is estopped from afterwards aserting
his title against a purchaser, especially if he has advised and encouraged the parties to such sale to deal with each other.
Chancellor Kent, in delivering his opinion in that case, quoted what was said by Mr. J. Lawrence, in 6 Term. R. 556,
that he recollected a case in which Ld. Mansfield would not suffer a man to recover, even in ejectment at law, who had
stood by and seen the defendant build on his land. Ten Eyck, in reference to the prior deed, was as much a bona fide
purchaser as if he had purchased without notice, and the evidence of the agreement in respect to his purchase ought,
therefore, to have been received by the judge. But if Ten Eyck is not entitled to be considered as a bona fide
purchaser, by reason of his having had notice of the prior deed, his grantee and the subsequent purchasers are not
affected by that notice, as no principle is better settled than that a purchaser for [**7] a valuable consideration, without
notice, has a good title, though his grantor obtained a conveyance by fraud. 10 Johns. 185. The fact of the prior deed
having been placed on record previous to the conveyance from Ten Eyck, does not help the lessor of the plaintiff,
because the same records which gave notice of that deed also showed that Ten Eyck's deed was first recorded, and of
course that he had the better title. The counsel also insisted that the deed to the lessor of the plaintiff was void as
respects creditors, having been executed when the grantor was heavily indebted; and further, that Charles Merrick
having remained in possession and occupied the premises in question in the same manner after as before the
conveyance to his son, the judgment against him was a lien upon the land, his interest in it was the subject of sale, and
entitled the purchaser to his possession, as part of the title.
Mr. S. L. Edwards, for the plaintiff, supported the decision of the circuit judge in excluding the testimony offered by the
defendant. The title of the lessor to the 20 acres could not be devested by parol, and still that must have been the sole
object of the proof. The judge [**8] was right also in ruling that the deed from Charles Merrick to his son was not
fraudulent as to creditors, under the evidence in the case, as it was shown that the residue of the farm was of sufficient
value to pay his debts. He also insisted that the defendant and those through whom he claimed were not bona fide
purchasers; Ten Eyck had actual notice of the prior deed, and the others had constructive notice, as the deed to the
lessor was recorded previous to the time when Ten Eyck conveyed. Although the subsequent purchasers would see by
the records that Ten Eyck's deed was first recorded, they would also see that the lessor's deed of an anterior date was on
record, which was enough to put them on inquiry, and if without inquiry they purchased, they did so at their peril. He
further insisted that Charles Merrick, at the time of the rendition of the judgment against him, had no interest in the 20
acres, the premises in question, upon which the judgment could operate as a lien, or which was the subject of sale; he
had conveyed the property previous to the docketing of the judgment, and at the time of the sale he had not even
possession of it; the delivery of the deed to his son was [**9] a delivery of possession of the property. The counsel
relied upon the former decision of this court in the same case, when a new trial was granted after a verdict for the
defendant. 9 Cow. 120. He also quoted 4 Cow. 604, and 6 Wend. 225, and cases cited.
OPINION
Page 150
15 Wend. 588, *; 1836 N.Y. LEXIS 96, **5
[*593] Per Curiam. The case is substantially the same as when heretofore before us, as reported in 9 Cow. 120. It
differs in some particulars: 1. The defendant offered to prove an agreement by parol of the plaintiff, that he would give
up all claim to the 20 acres if Ten Eyck would become the purchaser at the sheriff's sale, and give Charles Merrick time
for redemption. This evidence was excluded, and in excluding it the judge was correct, and assigned a good reason for
the decision; Thomas Merrick was not a party to the written agreement, and it cannot be contended that a parol
agreement to release a title to land is valid. The alleged agreement by T. Merrick was an agreement by parol to give up
his claim to land which had been conveyed to him by deed; it was void by the Statute of Frauds.
The judge was right also in deciding that the deed from C. Merrick to T. [**10] Merrick was not void in law as
made in fraud of creditors, because, although the grantor was indebted, there was property enough left to pay his debts.
It was not necessary, in 1829, when this cause was tried, to submit such a question to the jury, nor does it appear that the
defendant's counsel requested the judge so to submit it.
Although the judge may have erred in overruling the position that C. Merrick, being in possession at the time of the
levy and sale, had an interest which was the subject of sale on execution; such error did not prejudice the defendant; it
was an abstract proposition which could have no bearing on the case. Had Charles Merrick been the defendant in an
action of ejectment brought by Ten Eyck, such a proposition would have been appropriate. Actual possession is
evidence of title. Ten Eyck having purchased C. Merrick's rights, was entitled to the possession as against him. Ten
Eyck came into his place, and took all his interest. But Charles Merrick had no right to the possession as against the
present plaintiff; of course his grantee could have none derived through him. Had the judge, therefore, informed the
jury that C. Merrick being in possession had an interest [**11] which was the subject of a sheriff's sale, he must also
have told them that C. Merrick had no right to the possession against the legal owner, T. Merrick.
[*594] There is another particular in which this case differs from the former. It there ap peared that all those
through whom the title passed from Ten Eyck to the defendant, and the defendant himself, had notice of T. Merrick's
deed. That evidence is not in this case; but enough appears to put the subsequent purchasers upon inquiry, and to
show that Ten Eyck, under whom the defendant claims, had no title to the 20 acres in dispute. The object of the
Recording Acts is to prevent frauds--to prevent the person having title to land from selling it more than once, and
thereby defrauding one or more of the purchasers. [HN1] The object of recording is to give notice to all the world that
the title has passed from the vendor to the vendee. If the vendee neglects to record his deed, in consequence of which
another person purchases bona fide, such vendee, so neglecting to record his deed, loses his title; but if the second
purchaser has actual notice of the first conveyance, he is not a bona fide purchaser. The record of the first [**12] deed
is constructive notice of the fact of the existence of the deed; if, however, actual notice has been given to the second
purchaser, he cannot complain of want of constructive notice. Notice to the second purchaser, whether actual or
constructive, that the land has been previously sold and conveyed, deprives him of the character of a bona fide
purchaser. It is a conceded fact in the present case, that Ten Eyck had notice of the present plaintiff's title at the time of
the sheriff's sale. He was not, therefore, in law, a bona fide purchaser; on the contrary, he acquired no title to the 20
acres. As to those 20 acres, Ten Eyck's deed was void--as much so as if T. Merrick's deed had been recorded. Had Ten
Eyck, therefore, remained in possession, and been the defendant instead of the present defendant, he could not make any
plausible defense. It may be said, however, that the defendant had no notice of T. Merrick's deed, except the record, and
that the same record informed him that Ten Eyck's deed was first recorded and, therefore took precedence. It is true that
Ten Eyck's deed was first recorded, but it is also true that T. Merrick's was recorded before Ten Eyck conveyed [**13]
the premises. [HN2] The Act requiring deeds to be recorded does not say (as the Act requiring mortgages to be
registered does) that the deed [*595] first recorded shall have preference, but that the unrecorded deed shall be
considered void as against a subsequent bona fide purchaser. When, therefore, the present defendant saw by the
record that T. Merrick's deed was anterior in date to Ten Eyck's, he was bound to inquire whether Ten Eyck was a
bona fide purchaser. He did not become such by the mere fact of putting his deed first on record. If the defendant had
made such inquiry, he could not have failed to have ascertained the true state of the case, and to have learned that Ten
Eyck had, in fact, no title as against T. Merrick, the present plaintiff. In Tuttle v. Jackson, 6 Wend. 226, it was said, by
Chancellor Walworth: [HN3] " If the subsequent purchaser knows of the unregistered conveyance at the time of his
Page 151
15 Wend. 588, *; 1836 N.Y. LEXIS 96, **9
purchase, he cannot protect himself against that conveyance; and whatever is sufficient to make it his duty to inquire
as to the rights of others, is considered legal notice to him of those rights." And surely the record of T. Merrick's deed
was sufficient [**14] to make it the duty of all subsequent purchasers to inquire as to the rights of T. Merrick. The
fact that his deed was recorded subsequent to Ten Eyck's, conveyed an intimation that he intended to assert his title. It
is, therefore, perfectly clear to our minds that the decision of the judge at the circuit was right, without considering the
authority of the former decision. We have heretofore had occasion, in Jackson v. Chamberlain, 8 Wend. 626, 627, to
speak of this case as reported in 9 Cow. 120, and of Jackson v. Town, 4 Cow. 599. In the latter case the plaintiff claimed
to recover under a sheriff's deed, and his right of recovery depended upon the fact that Eleanor Town had title to the
premises when the judgment was docketed under which the sale was made. The only evidence of title consisted of the
fact that Eleanor Town had been some 4 or 5 years in possession; but she had abandoned possession 2 years before the
cause of action accrued upon which the judgment was recovered. No paper title was shown in E. Town. Several months
after she abandoned the possession, she conveyed to her daughter, the defendant, who took possession [**15] some 3
years afterwards. The learned judge, who delivered the opinion of the court in the first place, placed the decision upon
true ground--the [*596] want of title in E. Town. Had he left it there, the correctness of that decision, we apprehend,
could never have been doubted. In order to fortify the case, he undertook to show, that if E. Town had had title when
she occupied the premises, she had parted with it before the judgment against her under which the plaintiff claimed. The
reasoning of the learned judge on that point is not satisfactory, and in our opinion fails to prove the proposition that E.
Town had legally conveyed her title. The deed to Lydia Town conveyed all the interest of the grantor to the grantee
without being recorded; as between the parties and others having notice, it was valid, but as against subsequent bona
fide purchasers, it was void. On the supposition that Eleanor Town had title when she conveyed to Lydia Town, there
can be no doubt that, had she conveyed to the lessor, Stewart, at the time when he took the sheriff's deed, if his
purchase was bona fide without notice of the deed to L.Town, it would have been the better title; for the unrecorded
[**16] deed was by the statute fraudulent and void against subsequent bona fide purchasers for valuable
consideration. A judgment and sale under it are a species of conveyance, and equally effectual to transmit the title of the
defendant in the judgment, as a deed from such defendant. As, therefore, the lessor had no notice of the defendant's deed
when he took the sheriff's deed, he took all the title which the judgment debtor was capable of conveying to a bona fide
purchaser. It is, therefore, clear to us, that if E. Town had title, her deed to her daughter, although good as between the
parties, was void as to a subsequent bona fide purchaser, which the lessor of the plaintiff was. The case was, however,
in our opinion, rightly decided upon the first ground, to wit, absence of any proof of title in E. Town. When this cause
was before this court formerly, as reported in 9 Cow. 120, the preceding point in the decision of Jackson v. Town was
cited, and apparently relied on. It was unnecessary to resort to that ground, as it appeared then as it does now--that Ten
Eyck, when he purchased, had full notice of the previous deed to the plaintiff. His sheriff's deed [**17] had the same
force and efficacy as a quitclaim deed from C. Merrick of the same date would have had; and having notice, he
purchased [*597] with as full knowledge of the plaintiff's deed as if it had been recorded. In such cases we consider the
lien of the judgment as of no force, by way of giving priority; it is the sale under the judgment which is effectual, and
the lien is not regarded as an incumbrance, but only as an ingredient in the conveyance. The facts of this case, therefore,
justified the former decision, and so we apprehend they do the present.
New trial denied.
Page 152
15 Wend. 588, *595; 1836 N.Y. LEXIS 96, **13
112 of 314 DOCUMENTS
Caution
As of: May 27, 2014
TUTTLE v. JACKSON, ex dem. HILLS.
COURT FOR THE CORRECTION OF ERRORS OF NEW YORK
6 Wend. 213; 1830 N.Y. LEXIS 310
December, 1830, Decided
PRIOR HISTORY: [**1] ERROR from the Supreme Court. In October Term 1822, Hills, in the name of James
Jackson, as nominal plaintiff, commenced an action of ejectment against Tuttle for the recovery of 36 acres of land,
which was tried at the Oneida Circuit in October, 1826, before the Hon. Nathan Williams, one of the Circuit Judges.
The plaintiff produced an exemplification of a transcript of a justice's judgment, filed in the clerk's office of the County
of Oneida, in the following form: "Oneida County, Justice's Court. Jesse Hills v. Daniel Gridley. March 24, 1820.
Judgment rendered for plaintiff for the sum of $ 49.64--costs $ 1.18--$ 50.82; costs of copy to be added. I certify the
above to be a true copy of a judgment on record in my office. Dated April 3d, 1820 (signed), Samuel Wetmore, justice
of the peace." The transcript was filed Apr. 4, 1820, and a judgment docketed by virtue thereof, by the clerk of Oneida.
On July 18, 1820, an execution upon this judgment was delivered to a deputy of the sheriff of Oneida, tested July 15.
On Oct. 13, 1820, the premises in question were sold by the deputy to Hills, the plaintiff in the execution, for the sum of
$ 60. On Jan. 16, 1822, a deed of the premises [**2] was executed by the deputy in the name of his principal, to Hills,
which was acknowledged by the deputy before a proper officer, and recorded Dec. 17, 1822. At the time of the
execution of the deed by the deputy, the term of office of his principal had expired. At the time of the delivery of the
execution to the deputy, Gridley was in possession of the premises, and had been in such possession for several years;
but at the time of the sale, the defendant Tuttle, was in possession, and continued in possession at the time of the trial.
On this evidence the plaintiff rested. The defendant moved that the plaintiff be non-suited, because: 1st. The transcript
was not competent evidence of the existence of the judgment, it not showing that the justice had jurisdiction over the
parties or subject-matter; and 2d. That the demise in the declaration was laid previous to the accruing of the lessor's title,
to wit: on the first; whereas his title did not accrue until Jan. 16, 1822. The judge refused to nonsuit the plaintiff,
intimating as to the second ground of exception taken, that the Supreme Court would permit an amendment of the
declaration so that the demise should conform to the title.
On [**3] the part of the defendant the following facts appeared: In Sep., 1815, Gridley, the defendant in the
Page 153
judgment under which the plaintiff claimed, executed a mortgage of the premises in question to Tuttle, the defendant, to
secure the payment of $ 775.35 Apr. 15 then next; which mortgage was duly acknowledged and registered Aug. 6,
1816. In 1817, it was agreed between Tuttle and Gridley that the premises should be appraised, and that Tuttle should
pay Gridley whatever amount they should be appraised at exceeding his mortgage. The premises were appraised, but at
what amount did not appear; but it was shown that Gridley tendered a deed to Tuttle, who took it to examine it, when it
was snatched out of his hands and carried away by Gridley. In Feb., 1818, the mortgage was duly foreclosed by
advertisement, and Tuttle became the purchaser for the sum of $ 590, and in Aug., 1818, he commenced an ejectment
against Gridley; a verdict was rendered for the defendant, which was subsequently set aside and a new trial ordered.
After the new trial was ordered, Tuttle and Gridley May 31, 1820, submitted all matters in controversy between them to
arbitration, and it was agreed by Gridley that if the [**4] arbitrators should award that he should deliver possession of
the mortgaged premises to Tuttle, that he would give a relicta and cognovit in the ejectment suit; and at the time of the
arbitration Gridley put the deed which he had executed in 1817 to Tuttle, into the hands of the arbitrators, and agreed
that they should deliver the same to Tuttle if they should award in his favor. The arbitrators, July 20, 1820, made their
award, adjudging that Gridley should, on or before the first Monday of August then next, yield up the possession of the
mortgaged premises to Tuttle, and if he did not do so, that he should immediately after that day give a confession of
judgment to Tuttle in the ejectment suit to enable him to obtain the possession of the premises; and the arbitrators
delivered to Tuttle the deed deposited with them by Gridley, which was a deed of the premises in question duly
executed by Gridley and wife, conveying the same to Tuttle, bearing date Apr. 1, 1817, duly acknowledged June 11,
1817, and purporting to have been executed for the consideration of $ 1,000. On Aug. 12, 1820, the attorney of Gridley
gave a relicta and cognovit in the ejectment suit, on which a judgment was [**5] duly entered, and in the latter part of
the same month Gridley was turned out and Tuttle put into possession of the premises in question by virtue of a writ of
possession, issued upon such judgment. The litigation between Tuttle and Gridley was hostile, and not fictitious or
colorable.
Previous to the arbitration Tuttle requested Hills to sell Gridley's land under his judgment, promising to become the
purchaser to the full amount of the judgment, as he was apprehensive that his own title might possibly fail. The plaintiff
also alleged that the mortgage from Gridley to Tuttle was usurious; on which point evidence was adduced by both
parties. The judge decided that the deed from Gridley to Tuttle, not having been recorded, was inoperative and void as
against Hills, under the Registry Act; that, therefore, whether the deed was or was not duly delivered in 1817, was an
immaterial fact, and that in his opinion the plaintiff was entitled to a verdict, unless the jury should find that the
mortgage from Gridley to Tuttle was free from usury, and he accordingly instructed the jury, who found a verdict for
the plaintiff. The defendant, on a bill of exceptions tendered by him to the various [**6] decisions made against him in
the course of the trial, applied to the Supreme Court for a new trial, which was refused, and the defendant sued out his
writ of error. See opinion delivered in Supreme Court, denying new trial, 9 Cow., 233. As to the objection taken at the
circuit, that the demise from the lessor of the plaintiff was laid previous to the accruing of his title, it now appeared from
the record that the demise was laid subsequent to the accruing of the title, the plaintiff below having obtained a rule to
amend, and having amended his record accordingly, but from the bill of exceptions attached to the record it still
appeared that the demise was previous to the title.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant owner challenged an order of the supreme court (New York), which denied
his application for a new trial after a jury returned a verdict for plaintiff purchaser in his action of ejectment against the
owner for the recovery of 36 acres of land.
OVERVIEW: Judgment was rendered for the purchaser against a previous property owner, and an execution of the
judgment was delivered to the sheriff. When the purchaser bought the previous property owner's land at the sheriff's
Page 154
6 Wend. 213, *; 1830 N.Y. LEXIS 310, **3
sale, an owner was in possession of the land. The purchaser filed an ejectment action against the owner. A jury returned
a verdict in the purchaser's favor because the owner's deed was not recorded. The lower court denied the owner a new
trial. The court reversed and held that the purchaser was not protected against the owner's unrecorded deed, provided
that it was actually or constructively delivered before the judgment became a lien on the premises. The owner was in
actual possession of the premises at the time the sale. This was good constructive notice to the subsequent purchaser
to make it his duty to inquire as to the rights of the person in possession.
OUTCOME: The court reversed the order denying the owner's application for a new trial in the purchaser's ejectment
action and granted the owner a new trial.
CORE TERMS: deed, purchaser, notice, unregistered, conveyance, bona fide purchaser, clerk, sheriff's sale, mortgage,
subsequent purchaser, constructive notice, bill of exceptions, clerk's office, exemplification, recording, county clerk,
ejectment suit, delivery, void, declaration, demise, Registry Act, rule of law, actual possession, judgment debtor, real
estate, person in possession, duty to inquire, unrecorded, deposited
Civil Procedure > Judgments > Entry of Judgments > General Overview
Civil Procedure > Remedies > Judgment Liens > General Overview
[HN1] The Act of 1818, 4 Laws 9, makes it the duty of a justice, on request of the party, in whose favor the judgment
is rendered, to give him a transcript thereof, which the county clerk is directed to file in his office, and to enter the
judgment in a book to be kept by him for that purpose. The judgment so entered by the clerk shall, from and after that
time, be a lien on real estate to all intents and purposes as if the same had been rendered in the Court of C.P.
Civil Procedure > Remedies > Judgment Liens > General Overview
Real Property Law > Purchase & Sale > Contracts of Sale > Enforceability > Mistake
Real Property Law > Title Quality > Adverse Claim Actions > Ejectment
[HN2] The correctness of a judgment as entered in the clerk's office cannot be inquired into collaterally, in an
ejectment suit brought by a purchaser, although the clerk has actually made a mistake in the entry thereof. The filing of
the transcript makes the judgment a judgment of the Court of C. P. for all purposes of proceeding against real estate.
The record, although not very full and formal, must in such cases be deemed sufficient authority to the clerk to issue the
execution, and if sufficient for that purpose, it is so, prima facie, to protect the purchaser under the sheriff's sale.
Real Property Law > Financing > Mortgages & Other Security Instruments > Foreclosures > General Overview
Real Property Law > Landlord & Tenant > Tenancies > Tenancies at Will
[HN3] If a party is in possession of land having two titles, one valid, and the other void or voidable, the law presumes
him to have entered under the legal and better title.
[HN4] Where a purchaser under an unregistered deed is in the open and visible possession of the premises, it is
sufficient notice to protect him against a subsequent purchaser, and to charge the latter with a knowledge of his rights.
This notice may be express, or it may be implied from the first purchaser being in the open and exclusive possession of
the estate under his deed. There is no difference between personal and constructive notice in its consequences, except as
to guilt.
Page 155
6 Wend. 213, *; 1830 N.Y. LEXIS 310, **6
HEADNOTES
Deeds--Recording--Time of Delivery--Sheriff's Registered Deed--Effect of as Against Party in Possession under
Prior Unregistered Deed--Notice of Fraud on Part of Subsequent Purchaser Cognizable at Law as well as
Equity--Actual Possession is Good Constructive Notice--Pleadings in Record of Judgment--Bill of
Exceptions--Error--Practice--Champerty.
A purchaser at a sheriff's sale of real estate who procures his deed to be duly registered, cannot claim the benefit of
the Registry Act against a third person, in the actual possession of the land at the time of the sale, under an unregistered
deed; such possession being constructive notice to the purchaser, and imposing upon him the duty to inquire as to the
rights of the person in possession.
Where, in a case thus circumstanced, the judge at the circuit decided that the time of the delivery of the deed to the
person in possession was immaterial, it was held that he erred, and a venire de novo was awarded.
The rule of equity under our recording Acts is also the rule of law; whatever will in equity charge the party with
notice of the equitable rights of a prior purchaser or incumbrancer, so as to deprive him of the privilege of pleading that
he is a bona fide purchaser without notice, will, in a court of law, be sufficient to protect the legal rights acquired
under an unregistered deed, against a subsequent recorded conveyance.
It seems that the purchaser would be protected under the recording Acts against a prior unregistered deed or
mortgage, of which he had neither actual or constructive notice, if the judgment debtor was in possession of the land at
the time of the sale, having an interest, the proper subject of a sale and conveyance by the sheriff.
A transcript of a justice's judgment filed in a county clerk's office, and of the entry of a judgment thereon by the
county clerk, may be proved by an exemplification.
A bona fide purchaser at a sheriff's sale under such judgment is not bound to go beyond the transcript filed in the
clerks office, to prove the right of the sheriff to sell the property.
A cognovit given in an ejectment suit, in pursuance of an award under a submission entered into subsequent to a
judgment against the defendant, does not affect such judgment, although the ejectment suit was commenced long
previous to the entry of the judgment.
The Statute against Buying and Selling Pretended Titles does not apply to judicial sales.
A deputy-sheriff who has commenced the execution of process by a levy on the property of the defendant, during
the term of office of his principal, may, after the expiration of such term, proceed and complete the execution thereof by
the giving of a deed.
The Court for the Correction of Errors look at the pleadings as they appear on the record, and not as set forth in the
bill of exceptions; although at the time the exceptions were taken the pleadings were in the form set forth in the bill.
Citations-- 4 Wend., 75; 9 Cow., 182; Act 4 Laws, 80, sec. 9; 1 Rawl., 223; Laws of 1824, 297, sec. 45; 2 Cow.,
596; 5 Cow., 31; 3 Hawks, 281; 4 Wash., C. C., 724, 619; 4 Cow., 599; 9 Cow., 120; 1 Huds, & B., 623, 735; 4 N. H.,
262; 2 Mass. 508; 2 Ball. & Beat., 301; 2 Bro., P. C., 425; 3 Pick., 149; 3 Russ. Ch., 273; 5 Binn., 129; 6 Mass. 487;
Daniel, 80, note a; 2 Eden., 228; 2 Rand., 100; 7 Anne Ch., 20; 5 Barn. & Ald., 142; 4 Rand., 212; 2 Bibb, 420.
COUNSEL: Mr. Greene C. Bronson, Atty-Gen., for the plaintiff in error. The paper purporting to be the transcript of a
justice's judgment filed in the clerk's office, not being a record, could not be proved by an exemplification. The rolls
containing the judgments and sentences of courts are records, and may be proved by exemplifications, because they
import absolute verity. Co. Litt., 260 a, 117 b; 1 Phil., Ev., 237, 309. An entry in the minutes of a court, though it
Page 156
6 Wend. 213, *; 1830 N.Y. LEXIS 310, **6
vacates a judgment, [**7] is not a record. 9 Johns. 287. A record is proved by an exemplification; other papers by the
production of the originals, or of sworn copies; but where the paper itself is not conclusive evidence, the original must
be produced. 1 Phil. Ev., 309; 1 Stark. Ev., 155, 156, 181, 245. The paper called a transcript is not conclusive evidence:
it might be denied that the person making it was a justice, or the verity of the signature might be questioned. An
examination take by a magistrate in a criminal case is not evidence until the signature of the magistrate be proved. 2
Burr., 1179; 1 Str., 126. The transcript might authorize the clerk to docket the judgment, but nothing further can be
claimed under it. The fact of the transcript being filed in pursuance of the directions of a statute, does not make it
evidence; deeds in the military tract were directed to be filed, but when filed, they were not, therefore, per se evidence;
nor is an appeal bond of itself evidence, though directed to be filed; unless papers thus filed are made evidence by
statute, exemplifications cannot be received. The transcript was not competent evidence of the existence of the [**8]
judgment. Previous to the statutory provisions on the subject, a party wishing to prove a justice's judgment, was bound
to produce the justice and his docket or book of entries. 3 Johns. 429; 5 Id., 351. In 1809 the official certificate of the
justice, certifying the proceedings and judgment, verified by a certificate of the clerk of the county, was made evidence
by statute, 5 Stat., 569, Web. ed.; which provision was re-enacted in the Act of 1824, extending the jurisdiction of
justices. 6 Stat., ch. 292, sec. 29. To render the certificate of the justice evidence, he must set forth not only the
judgment, but the proceedings; at least, so far forth as to show that he had jurisdiction of the person of the defendant and
of the subject-matter. Benn v. Borst, 5. Wend., 292. The transcript here was used as a certificate, and being deficient in
both particulars, it was incompetent evidence; it neither stated that the defendant was brought into court on process, or
that he voluntarily appeared; nor did it show in what county, or in what State the judgment was renderd. The plaintiff
showed a judgment docketed, but not a judgment rendered. In Jackson v. Jones, 9 Cow., 191, [**9] referred to by the
Supreme Court in this case, the court say that the Legislature seem to have determined that the transcript should be
sufficient evidence of the judgment; but the Legislature had not so declared. Had that been the intent of the Act it would
have been so declared. If arguments ab inconvenienti are resorted to, the balance of inconvenience is greatly against the
construction of the court. It is asked by the court, why a transcript should not be evidence to sustain a title of a
purchaser under execution? The answer is, that a purchaser is always bound to show a judgment and execution; 12
Johns.213; 20 Id., 328; 2 Stark. Ev., 1357; and why should he be relieved from doing so in this case? Besides, the paper
by virtue of which the judgment was docketed, is not a transcript, but merely a certificate.
The plaintiff below was not entitled to recover, because the defendant was in possession, under a judgment in ejectment,
duly entered in a suit commenced previous to the plaintiff's judgment; the circumstance of the judgment in ejectment
being entered on a cognovit, given subsequent to the plaintiff's judgment, cannot affect the rule of law on the subject,
when, as in [**10] this case, it is shown that it was compulsory, and not fraudulent.
The deed from Gridley to Tuttle, although not recorded, was a valid deed as against the judgment of Hills; the grantor
being devested of his title, a lien could not attach in favor of the judgment creditor. Jackson v. Post, 9 Cow., 120. Hills
cannot claim any benefit under the Registry Act, for when he obtained his deed Tuttle was in possession of the premises
under a conveyance. The object of that Act is to give notice of a claim to the land; notice is equivalent to a registry; and
Tuttle being in the actual possession of the premises, no other notice was necessary. 3 Mass. 573, App.; 6 Id., 24,
487-489; 4 Id., 637; 5 Id., 459; 2 Id., 508. The Supreme Court were not warranted in saying that Tuttle was not in
possession under the deed; when he took possesion he had the deed of Gridley, and why should he not be considered as
holding under it, as well as under his judgment ?
The deed to the plaintiff below was void, because at its execution Tuttle was in possession, holding adversely. Co. Litt.,
214 a; 2 Bl. Com., 290; 12 Johns. 453; 9 Id., 55. This doctrine applies as [**11] well to judicial as to other sales;
otherwise, a party might do indirectly what he could not do directly. 13 Johns. 488.
Mr. J. A. Spencer, for defendant in error. To render a justice's certificate of a judgment evidence in a suit on such
judgment, it is conceded that it must appear by the certificate that the justice had jurisdiction of the person of the party
against whom the judgment is entered, and of the subject-matter; but it is not necessary that this should appear in the
transcript. The entry of a judgment before a justice is in the simplest form, stating little else than the names of the
parties in whose favor the judgment is rendered, and the amount thereof; no record is made up setting forth the cause of
Page 157
6 Wend. 213, *; 1830 N.Y. LEXIS 310, **6
action, or embodying the pleadings. With a full knowledge of the mode in which business is transacted by justices, the
Legislature enact that "it shall be the duty of any justice of the peace on the demand of any person in whose favor a
judgment shall have been entered by such justice, to give a transcript of the same ;" and after providing that the same
may be filed in a county clerk's office, it makes it the duty of the clerk to enter the judgment in [**12] a book to be by
him provided for the purpose, and declares that such judgment, so entered, shall be a lien on real estate. 4 Stat., ch. 80,
sess of 1818. The duty of the clerk on receiving the transcript is clearly pointed out: the statute proceeds on the
assumption that he knows the person giving the transcript to be a justice, and submits its genuineness to his
determination. He is the keeper of the appointment of the justices of his county, and has the custody of the rolls of the
oaths of office. A transcript thus filed, at all events, is prima facie evidence of the judgment. If it be not genuine, if the
person granting the same be not a justice, or if the judgment was fraudulently rendered, the party sought to be affected
is not remediless. Neither of these pretenses were set up on the trial, and imaginary mischiefs ought not to defeat the
plaintiff's recovery.
The deed from Gridley to Tuttle, although bearing date in 1817, if operative at all, took effect only from its delivery by
the arbitrators to Tuttle in July, 1820. This was subsequent to the plaintiff's judgment. Besides, the plaintiff's deed being
first recorded, obtained a preference under the Registry Act. 2 Cai., 61; [**13] 4 Johns. 216; 12 Id., 559; 13 Id., 371,
471; 4 Cow., 559. Again; Tuttle, claiming under a deed from a judgment debtor, had not such an adverse possession as
would effect a conveyance by a purchaser under such judgment, Jackson v. Collins, 3 Cow., 89; much less would it
effect a conveyance under a judicial sale. If the doctrine on the other side be right, it is in the power of a debtor to
prevent a sale of his property by his judgment creditor.
OPINION
[*220] The following opinion was delivered :
By the Chancellor. The first objection embraced in the bill of exceptions is, that the circuit judge received an
exemplification of the transcript and of the entry of the judgment in the book kept for that purpose, by the county clerk,
as evidence that such a transcript was filed and such an entry made in his office. As to this point I think the decision of
the court below was correct. The transcript and entry were in the nature of a record of certain judicial proceedings which
by law were deposited in that office. The exemplification under the official seal of the clerk is as good evidence of the
fact that such a transcript is filed, and that such [**14] an entry of the judgment is made, as a sworn copy of the same
transcript and entry would be, if produced. This point was substantially decided by this court at their last, December
Term, in the case of Pac. Ins. Co. v. Catlett, 4 Wend., 75, where the exemplification of a document filed in the Treasury
Department at Washington, under the seal of that department, was considered good evidence of the fact that such a
document was deposited in the office of the Register of the Treasury. The question as to the legal [*221] effect of that
evidence, when produced, more properly arises under the second point raised by the plaintiff in error.
The next objection is that the transcript and entry, if duly proved by an exemplification thereof, were not competent
evidence to prove the existence of the judgment for the purposes of this suit. The statute has pointed out the mode of
authenticating the proceedings before a justice in ordinary cases, by a certified copy signed by the justice, and a
certificate of the county clerk, under his official seal, showing that the person whose name was subscribed, was a
justice, and that the signature is in his proper handwriting. Such [**15] a document, or the original entry in the docket
of the magistrate, or a sworn copy thereof, might have been necessary, if the purchaser at a sheriff's sale was bound to
go beyond the transcript returned into the clerk's office, to prove the right of the sheriff to sell the property. But I concur
in the opinion of the Supreme Court on this question; which opinion is stated more at length in Jackson v. Jones, 9
Cow., 182. [HN1] The Act of 1818, under which this judgment was entered in the clerk's office, 4 Laws, p. 80, sec. 9,
made it the duty of the justice, on request of the party, in whose favor the judgment was rendered, to give him a
transcript thereof, which the county clerk was directed to file in his office, and to enter the judgment in a book to be
kept by him for that purpose. The statute declares that the judgment so entered by the clerk shall, from and after that
time, be a lien on real estate to all intents and purposes as if the same had been rendered in the Court of C. P. It is
evident that the Legislature intended to make the judgment, as entered by the clerk, at least prima facie evidence of the
Page 158
6 Wend. 213, *; 1830 N.Y. LEXIS 310, **11
right to issue an execution thereon against the real [**16] estate of the defendant in such judgment, if not conclusive
evidence of the fact in favor of a bona fide purchaser under the sheriff's sale. All the justices of the peace in the county
are officially known to the clerk, and their commission was at that time deposited in his office, as well as their official
oaths. It is not to be presumed that the clerk will file a transcript, and enter a judgment in his office, unless he knows the
signature of the magistrate to be genuine and that he is a justice, any more [*222] than that he would file a judgment
record in the Court of C. P. when he knew the person signing it was not a judge or that the name of the judge had been
forged. And I can see no good reason for requiring further evidence of his signature or official character in the one case
than in the other. If this transcript was sufficient to authorize the clerk to enter the judgment in his office, and to issue an
execution thereon, there was sufficient evidence of the authority of the sheriff to sell, and of the existence of the lien, to
enable the purchaser to recover in ejectment.
Neither are we without precedent on this subject. Under the Pa. Statute, which is somewhat [**17] similar to our
own, the Supreme Court of that State have decided that [HN2] the correctness of the judgment as entered in the clerk's
office cannot be inquired into collaterally, in the ejectment suit brought by the purchaser, although the clerk has
actually made a mistake in the entry thereof; that the filing of the transcript makes the judgment a judgment of the Court
of C. P. for all purposes of proceeding against real estate. Arnold v. Gorr, 1 Rawle 223. And the Legislature of this State
as well as the Supreme Court have given the same construction to this provision in the Act of 1818. Laws of 1824, p.
297, sec. 45; 2 Cow., 506; 5 Id., 31. The record, although not very full and formal, must in such cases be deemed
sufficient authority to the clerk to issue the execution; and if sufficient for that purpose, it is so, prima facie, to protect
the purchaser under the sheriff's sale; see Doe v. Greenlee, 3 Hawk. 281; and Lessee of Lanning v. Dolph, 4 Wash. C. C.
624.
The third objection relates to the admission of parol declarations of the defendant in this suit to prove the existence
of the judgment. This evidence was [**18] clearly inadmissible; but as there was legal proof sufficient to establish the
fact, this point becomes unimportant, in the decision of this cause.
The objection, that the demise was laid before the lessor's title accrued by the giving of the sheriff's deed, was valid
when made; and would have been fatal had the pleadings continued in the same situation in which they then were; but it
was a mere matter of form, as the suit was not commenced [*223] until the expiration of many months after the deed
was given. It being impossible to prejudice the merits of the case by a subsequent amendment, the judge very properly
refused to nonsuit on that ground, and left the parties to dispose of the question of form before the Supreme Court,
where the plaintiff had a right to apply for the amendment. The demise in the declaration having been altered to Jan. 17,
the record comes up here as though it had been originally laid as of that time. If the declaration is set out at length in the
bill of exceptions, containing the demise as it was before the amendment, we must in this court reject it as inconsistent,
and not founded on the pleadings as amended. Previous to the Act of Mar., 1809, the [**19] bill of exceptions had
nothing to do with the judgment record in the Supreme Court, but was brought directly into this court by the party who
tendered the same at the circuit. It was then proper to set out the pleadings at length in the bill; so that it might appear to
have been taken in the same cause in which the judgment was given; but after the passing of that Act, which made it the
duty of the circuit judge to return the bill of exceptions into the Supreme Court with the postea, to be passed upon there
and to be incorporated into the record, a repetition of the pleadings becomes useless and improper; and they ought not to
be set out a second time in the record of the Supreme Court which is sent up here on the writ of error. After the record
of the Supreme Court has been actually removed here by writ of error, this court may refuse to award a certiorari to
bring up an amended record, but while the record remains before that court they may make such amendments, in their
discretion, as the purposes of justice demand. It is not to be presumed the power will be abused or improperly exercised;
and their proceedings, in relation to such amendments, cannot be reviewed on a writ [**20] of error--which only brings
up the record as amended.
The fifth objection is that there was no title proved in Gridley under whom the lessor of the plaintiff claimed. There
was evidence that Gridley was in possession of the premises, claiming them as his own, prior to the giving of the
mortgage to Tuttle. This was prima facie evidence of title [*224] in Gridley, and sufficient to enable a purchaser under
a judgment against him to recover of any one who could not show a better right or prior possession. As the demise laid
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6 Wend. 213, *221; 1830 N.Y. LEXIS 310, **15
in the declaration in Tuttle's ejectment suit was long subsequent to that time, the recovery in that suit, and the entry
under the same, did not necessarily rebut the presumption of a previous title in Gridley. It was sufficiently proved, in the
course of the trial, that the claim under which that recovery was had, was founded either upon the mortgage or the
subsequent deed of Gridley. If they were both invalid, and the award was not a bar, Gridley himself might have
recovered back the premises in an action of ejectment founded on his previous possession only; and the purchaser under
the judgment against him is entitled to the same right. The award cannot [**21] bind such purchaser, his judgment was
docketed previous to the submission to the arbitrators, and any subsequent agreement of Gridley could not affect his
rights.
I am satisfied the Statute against Buying and Selling Pretended Titles cannot apply to judicial sales. The statute,
except as to the penalty, is merely in affirmance of the common law; and that never has been considered as preventing
the change of property by operation of law, or by a sale by the proper officer under a bona fide judgment or decree of a
court having competent jurisdiction to order such sale. It does not come within the mischiefs intended to be guarded
against by the statute.
It has long since been settled, and I think correctly, that the deputy who had commenced the execution of the
process, by a levy on the property during the term of office of his principal, may proceed and complete the execution
thereof afterwards. The giving of the conveyance after the expiration of the time limited for the redemption of real
property, is as necessary a part of the duty or the officer to complete the sale, as the putting up the property and striking
it off to the highest bidder. An actual removal of the deputy by [**22] his principal before the execution was
completed, would present a different question.
The only remaining point in this case relates to the unregistered deed from Gridley to Tuttle. This conveyance
[*225] bore date long before the docketing of the judgment under which the lessor of the plaintiff derived his title. And
if there was either an actual or constructive delivery thereof, at or about the time it bears date, the defendant was in
possession, under a legal title to the premises, at the time of the sale to Hills by the sheriff. It is no answer to say that
Tuttle was in possession under the mortgage and foreclosure thereon and not under the deed. [HN3] If a party is in
possession of land having two titles, one valid, and tha other void or voidable, the law presumes him to have entered
under the legal and better title. Per Washington, J., 4 Wash. C. C. 609, 619. If the deed was valid, Gridley was a mere
tenant at will to Tuttle, at the time Hill's judgment was docketed, and the suit was then pending to devest even that
possession. This tenancy being determined before the sheriff's sale, there was no interest whatever remaining in Gridley
at that time on which the lien [**23] of the judgment attached, and which could be a subject of sale. If, therefore, the
decision of the Supreme Court was right in Jackson v. Town, 4 Cow., 599, and in Jackson v. Post, 9 Id., 120, the
unrecorded deed was valid as against the purchaser at the sale. I know the correctness of one of these decisions has been
questioned by some members of the profession, and perhaps it may not be necessary for me to express any opinion on
that point here; but I find a similar decision was made by the Court of K. B. in Ireland, in 1822, in the case of Fury v.
Smith, 1 Huds. & B. 735. And in the case of Warburton v. Loveland, which came before the Court of Exchequer
Chamber in 1828, although the twelve judges were equally divided on another question which arose in the cause, all
who expressed an opinion on this subject, admitted that the case of Fury v. Smith was rightly decided. 1 Huds. & B.
623. Where the judgment debtor is in possession at the time of the sheriff's sale, so that he has a possessory right, or an
equity of redemption, or any other interest which is the proper subject of a sale and conveyance by the sheriff, I do not
mean [**24] to be understood as admitting that the purchaser will not be protected under the Recording Acts, against a
prior [*226] unregistered deed or mortgage, of which he had neither actual or constructive notice at the time of his
purchase; nor do I understand that either of the cases referred to go that length. In Jackson v. Town, the defendant in the
execution had sold and conveyed the premises, and had actually abandoned the possession thereof before the recovery
of the judgment. If the purchaser in that case even supposed he was buying a good title, yet the debtor had in fact no
interest in the land on which the judgment could be a lien, or which could be a subject of sale by the sheriff, on the
execution. In Jackson v. Post, the premises were conveyed previous to the judgment, though the grantor remained in
possession; but the purchaser had actual notice of the unrecorded deed at the time of his purchase. He, therefore,
bought nothing but the possession of the judgment debtor, and was not a bona fide purchaser of anything else.
Page 160
6 Wend. 213, *224; 1830 N.Y. LEXIS 310, **20
If the subsequent purchaser knows of the unregistered conveyance at the time of his purchase, he cannot protect
himself against that [**25] conveyance, and whatever is sufficient to make it his duty to inquire as to the rights of
others. is considered legal notice to him of those rights. Here Tuttle, the person to whom the unregistered deed was
given, was in the actual possession of the premises at the time of the sheriff's sale, and this was good constructive notice
to the subsequent purchaser to make it his duty to inquire as to the rights of the person in possession. In Colby v.
Kenniston, 4 N.H. 262, [HN4] where the purchaser under an unregistered deed was in the open and visible possession
of the premises, it was held sufficient notice to protect him against a subsequent purchaser, and to charge the latter
with a knowledge of his rights. So in Norcross v. Widgery, 2 Mass. 506, Ch. J. Parsons says: "This notice may be
express, or it may be implied from the first purchaser being in the open and exclusive possession of the estate under his
deed." See, also, Eyre v. Dolphin, 2 Ball & B., 301; Forbes v. Denniston, 2 Bro. P. C., 425; M'Mecham v. Griffing, 3
Pick., 149; Malpas v. Ackland, 3 Russ. Ch., 273; [**26] Lessee of Billington v. Welsh, 5 Binn. 129; [*227] Davis v.
Blunt, 6 Mass. 487; Daniels v. Davison, 16 Ves., 254; S. C., 17 Id., 433; Allen v. Anthony, 1 Merriv. 282; Taylor v.
Baker, Dan. 80, note a. In Sheldon v. Cox, 2 Eden 228, Ld. Northington, in reference to notices under the Registry Acts,
says there is no difference between personal and constructive notice in its consequences, except as to guilt. And in
Newman v. Chapman, 2 Rand. 93, 100, in the Va. Court of Appeals, Green, J., holds the same language. Under the
Middlesex Registry Act, 7 Anne, ch. 20, the first deed is absolutely void at law, as against the second purchaser even
with actual notice thereof, and the party there is bound to seek his relief in chancery. Such was the decision of the K. B.
in Doe v. Alsop, 5 Barn. & Ald., 142. But that decision is placed upon the ground that the statute is imperative that the
first conveyance shall be void against any subsequent purchaser, and that the words "bona fide purchaser" are not
used in the Act. Such was also the decision under the first Va. [**27] Statute similarly worded; but after the words "for
valuable consideration and without notice" were added in a subsequent revision, it then became a rule of law. 4 Rand.
208, 212; see, also, 2 Bibb 420. By our recording Acts the unregistered deed or mortgage is only void as against a
subsequent bona fide purchaser. The rule of equity here is, therefore, the rule of law, and whatever would in equity
charge the party with notice of the equitable rights of a prior purchaser or incumbrancer so as to deprive him of the
privilege of pleading that he is a bona fide purchaser without notice, must in a court of law be sufficient to protect the
legal rights acquired under the unregistered deed, against the subsequently recorded conveyance.
I think, therefore, that Hills was not protected against the unrecorded deed to Tuttle, provided the same was actually
or constructively delivered before the judgment became a lien on the premises, and that the judge erred in deciding that
the time of the delivery was immaterial. On this ground alone, I think the judgment of the court below should be
reversed and a new trial granted.
[*228] On the question being put--Shall the judgment [**28] of the Supreme Court be reversed ?--the members
voted as follows :
For affirmance--Senators Allen, Conklin, Hubbard, Mather and Throop--5.
For reversal--The CHANCELLOR, and Senators Armstrong, Beardsley, Benton, Boughton, Deitz, McCarty,
McLean, Oliver, Rexford, Sherman, Tallmadge, Todd, Wheeler and Woodward--15.
Whereupon, the judgment of the Supreme Court was reversed.
Page 161
6 Wend. 213, *226; 1830 N.Y. LEXIS 310, **24
Positive
As of: May 27, 2014
PHILANDER SEWARD, Survivor of WILLIAM SEWARD and PHILANDER
SEWARD, Plaintiff in Error, v. JAMES JACKSON, ex dem. JOHN B. VAN
WYCK, Defendant in Error.
8 Cow. 406; 1826 N.Y. LEXIS 140
September and December, 1826, Decided
PRIOR HISTORY: [**1] ON ERROR from the Supreme Court. The action in the court below was by James
Jackson, on the demise of John B. Van Wyck, against the two Sewards, defendants, to recover two pieces of land--the
one a farm of about 230 acres, with a small piece of adjoining land, about two acres, including a house and garden,
formerly constituting part of, but sold and separated from the larger piece. Both were situate in the Town of Fishkill,
Dutchess Co.
The facts, so far as they relate to the larger piece of land, are stated in the report of this case in the court below (5
Cow. 67), except that the conveyance from the sheriff under which the lessor of the plaintiff claimed was at p. 69,
printed as in 1820, whereas it should have been 1822, and the time of exhausting the property of William Seward, Jr., is
stated, at p. 68, as in Feb., whereas it should have been in June, 1819. After these verbal corrections, the case need not
be stated further in this place.
The judgment in the Supreme Court was general, for the plaintiff below; and one question made here was, whether
it should not be reversed in toto, inasmuch as it was clearly erroneous in respect to part--the two acres. This [**2]
branch of the case will be found stated in the commencement of the opinion of Spencer, Senator, post.
The judgment was, as will be seen by the report referred to, rendered for the plaintiff below on a case, which was
turned into a special verdict, in which form it came here. One question made by Jones, Chancellor, it will be perceived,
was on the frame of the special verdict; yet I do not give its form, for I think the opinion of the Chancellor, which
commences with this branch of the case, will be found sufficiently descriptive.
The reasons for the opinion of the court below, were assigned as in 5 Cow. 70-73, per Sutherland, J.
Page 162
CASE SUMMARY:
PROCEDURAL POSTURE: Defendants, father and son, challenged a judgment by the Supreme Court (New York),
which granted judgment to plaintiff, a creditor of the father, and held that the transfer of a deed to land from the father
to the son was invalid because it was done fraudulently to avoid the debt owed to the creditor.
OVERVIEW: A creditor filed an action for ejectment arguing that a transfer of deed in land from a father to son was
done with the purpose of fraudulently avoiding debt that the father owed to the creditor. A jury returned a special
verdict finding that there was no fraud. Nonetheless, the supreme court entered a judgment for the creditor. On review,
the court held that the supreme court erred and reversed the judgment. The court first examined the nature of special
verdicts and noted that it was the jury who was to decide on the facts, and the supreme court who was to apply the law
to the facts. In this case, however, the court found that the supreme court had impermissibly made a finding on the
factual issue of fraud when it awarded judgment for the creditor. The court then held that the jury's finding of no actual
fraud was proper. The court held that the deed transfer was not an invalid "voluntary conveyance," because the son had
given consideration of $ 10,000 for the land. Moreover, the court noted that the jury found that the father intended to
settle the disposition of his property by transferring it to his children because he was old, not because he wanted to
defraud creditors.
OUTCOME: The court reversed the judgment awarding the creditor. The father's conveyance of deed to land to his son
was not done fraudulently to avoid the creditor because the father did not have intent to defraud and the son gave
valuable consideration in exchange for the transfer.
CORE TERMS: fraudulent, conveyance, deed, special verdict, settlement, void, voluntary conveyance, conclusive,
valuable consideration, grantor, indebted, annuity, evidence of fraud, actual fraud, acre, voluntary settlement, purchaser,
question of fact, adjudge, defraud, fraudulent intent, daughters, indebtedness, bankrupt, farm, question of law, purchase
money, subsequent creditor, ownership, ejectment
Civil Procedure > Trials > Jury Trials > Province of Court & Jury
Civil Procedure > Trials > Jury Trials > Verdicts > Special Verdicts
[HN1] It is of the essence of a special verdict, that it should be a finding by the jury of the facts on which the court is to
pronounce the law, and not the evidence of the facts upon which it is the province of the jury to adjudicate. The jury is
to receive the evidence under the direction of the judge who presides at the trial, and to find the facts in issue between
the parties, according to their deliberate judgment upon that evidence. To the court it belongs to apply the law to the
facts; but the court has no jurisdiction to decide upon evidence, or to enter into any question of fact that may arise in a
cause.
Civil Procedure > Appeals > Records on Appeal
[HN2] The facts must appear on the record sent to the court, upon which the court's judgment is to be given. The court
possesses no jurisdiction to adjudicate upon evidence, and cannot perform the office of a jury, by drawing the
conclusions of fact from the evidence given at the trial; nor is it in the power of the parties, by any consent they can
give, to confer such a jurisdiction upon the court, the organization and power of which are settled by the constitution of
Page 163
8 Cow. 406, *; 1826 N.Y. LEXIS 140, **2
the state.
Civil Procedure > Appeals > Records on Appeal
[HN3] It cannot be admissible for the parties to introduce the case itself into the record, as a substitute for the special
verdict, which the judges, or the parties, under their direction, were to form from the case.
[HN4] The jury, in a special verdict, must find facts and not evidence of facts.
Civil Procedure > Judgments > Entry of Judgments > Enforcement & Execution > General Overview
[HN5] Where a general verdict is given for the plaintiff, he is restricted to taking possession of only that which he gave
evidence of his title to at trial.
Civil Procedure > Judgments > Relief From Judgment > General Overview
Civil Procedure > Appeals > Appellate Jurisdiction > General Overview
[HN6] Where the judgment is entire, it cannot be reversed for part, and affirmed for part.
Real Property Law > Purchase & Sale > Fraudulent Transfers
[HN7] A voluntary conveyance is defined to be a deed without any valuable consideration.
[HN8] A deed from a parent to a child, for the consideration of love and affection, is not absolutely void as against
creditors.
[HN9] Strictly speaking, there is no such thing as fraud in law; fraud or no fraud is and ever must be, a fact; the
evidence of it may be so strong as to be conclusive, but still it is evidence, and as such must be submitted to a jury. No
court can draw it against the finding of a jury.
Bankruptcy Law > State Insolvency Laws
Civil Procedure > Settlements > Settlement Agreements > General Overview
[HN10] A voluntary settlement made by a person indebted at the time, is presumed to be fraudulent in respect to such
debts, and no circumstances will repel the presumption of fraud; but as to subsequent debts, there is no such necessary
legal presumption; and there must be proof of fraud in fact; and the indebtedness at the time, though not amounting to
insolvency, must be such as to warrant that conclusion.
Page 164
8 Cow. 406, *; 1826 N.Y. LEXIS 140, **2
Civil Procedure > Settlements > Settlement Agreements > General Overview
Torts > Business Torts > Fraud & Misrepresentation > Actual Fraud > General Overview
[HN11] If the party be indebted at the time of a voluntary settlement, it is presumed to be fraudulent in respect to such
debts; and no circumstances will permit those debts to be affected by the settlement, or repel the legal presumption of
fraud; that the presumption of law does not depend upon the amount of the debts or the extent of the property in
settlement, or the circumstances of the party. The fraud in the voluntary settlement is an inference of law, and ought to
be so, as far as concerned existing debts; but as to subsequent debts there is no such necessary legal presumption, and
there must be proof of fraud in fact; thus making a distinction between fraud in law and fraud in fact, as arising upon the
statute.
[HN12] Fraud by the common law, is a deceit in the conveyance of lands or chattels, to the injury of another person,
and involves the intent of the wrong-doer.
Civil Procedure > Judgments > Preclusion & Effect of Judgments > General Overview
Governments > Courts > Judicial Precedents
[HN13] When a conveyance has been adjudged fraudulent upon a given state of facts, those facts, as well as the law,
become a precedent for a succeeding chancellor, and binds the judgment by the force of analogy, upon the question of
intent and purpose, as well as law. And when an analogous state of facts in the courts of law has been referred to a jury,
and the jury has said there was no fraud, the sayings of equity judges have been resorted to for legal presumptions,
independent of intentional fraud; and hence the modern distinction between fraud in law and fraud in fact.
[HN14] A voluntary conveyance is only prima facie evidence of fraud.
HEADNOTES
1. Special Verdict--Must Find Facts, not the Evidence of Facts--Change of a Case into Bill of Exceptions, or
Special Verdict. 2. Judgment for Recovery of Two Parcels of Land in Ejectment, on a Single Demise and Single Count,
Cannot be Reversed as to One Parcel and Affirmed as to the Other. 3. Certainty Required in Declaration in Ejectment.
4. Conveyance by Father to Son after Having Guarantied Payment of a Judgment against Another, who Might Well be
Supposed Solvent--Execution by Son, of an Annuity Bond to Father--Judgment Against Father, on
Guaranty--Conveyance, not Voluntary--Annuity Bond, Held to be a Valuable Consideration--Conveyance not
Conclusively Presumed Fraudulent--Question for Jury--Actual Fraud should be Proved.
A special verdict, to enable a court of error to act upon it, must find facts, not merely state the evidence.
And where the jury find the evidence merely, as that such a witness was sworn and testified to certain facts, and
that other facts were admitted by counsel, &c., without stating their own conclusions, the Court of Errors cannot notice
the matters so found; and if other facts are properly found, and judgment in the court below be rendered contrary to the
facts so properly found, the judgment will be reversed, though the evidence and admissions, &c., found as such, might
have warranted a verdict and judgment the other way. Per Jones, Chancellor, who goes fully into the case and bases his
opinion on the defect in the special verdict.
But if a special verdict, on a mixed question of law and fact, find facts from which the court can draw clear
Page 165
8 Cow. 406, *; 1826 N.Y. LEXIS 140, **2
conclusions, it is no objection to the verdict, that the jury have not themselves drawn such conclusions, and stated them
as facts in the case. In the Exchequer Chamber, Monkhouse v. Hay, 8 Price, 256, a summary of which is given in note a
at the close of the Chancellor's opinion.
The practice of the Supreme Court in reviewing the decisions of juries on a case, &c., explained and approved. Per
Jones, Chancellor.
How such case should be changed into a bill of exceptions, or special verdict, where the right is reserved. Per Jones,
Chancellor.
A judgment in ejectment, for the plaintiff, on a single demise, contained in a single count, that he recover his term
in two parcels of land, being erroneous as to one parcel, is so in toto. Per Spencer, Senator.
For a court of error cannot divide a judgment, which is entire, reversing it in part and affirming it in part. Per
Spencer, Senator.
Otherwise, perhaps, where the declaration in ejectment contains more than one count. Per Spencer, Senator.
Difference between ancient, and modern certainty; required in a declaration in ejectment. Per Spencer, Senator.
Possession is now taken according to proof at the trial. Per Spencer, Senator.
Plaintiff may take a verdict for certain described premises, and as to other described premises, enter a verdict for
the defendant. Per Spencer, Senator.
A father, having guarantied the payment of a judgment against S., who had lands bound by the judgment, which, at
a fair value, might well be supposed sufficient to pay the judgment, then disposed of all his real estate, by giving to his
son a full covenant deed in fee, and taking from the son a bond to himself (the father) to pay an annuity for his life. The
son, also, in consideration of the deed, gave separate bonds to two of his sisters for their portions; after which, the
property of S. was exhausted by executions upon the judgment, and proved insufficient to pay the judgment; and the
father was sued upon his guaranty, and had judgment against him on execution, upon which the real estate thus
conveyed for the benefit of his children, was sold. In ejectment by the purchaser, the jury found against all actual fraud
in the parties. Held, that the conveyance was not legally fraudulent as against the creditor on the guaranty. Per Spencer,
Allen and Stebbins, Senators. And per Jones, Chancellor, quaere.
A bond or other security, by a purchaser, for the purchase money of land, is a valuable consideration. Per Spencer
and Allen, Senators.
So to secure an annuity or rent. Per Spencer, Senator.
One gives his bond for the purchase money of land, which another pays. This does not raise a resulting trust in
favor of the latter. Per Spencer, Senator.
A guarantee is to be deemed a creditor to the guarantor, on a covenant of guaranty, even before it is broken. Per
Spencer, Senator. Stebbins, Senator, contra.
A special verdict should find all the facts, and a bill of exceptions should admit them. Per Spencer, Senator.
Where a special verdict omits to find the facts, on error it was suggested that the defect might be remedied by
reversing the judgment, and directing a venire de novo. Per Spencer, Senator.
To make a deed voluntary, it must be without any, the least valuable consideration. Per Spencer, Senator.
Page 166
8 Cow. 406, *; 1826 N.Y. LEXIS 140, **2
Where one, being indebted, sells his lands, taking security, which he gives to others without valuable consideration
though the sale be valid, yet the security may be reached in the hands of the donees, at the suit of the creditor, in a court
of equity. Per Spencer, Senator.
A sale of land reserving a rent or annuity, is not void as to creditors, within Mackie v. Cairns, 5 Cow. 547, as a
reservation of part of the subject sold. Per Spencer, Senator.
Where a conveyance of land is upon any, the least valuable consideration, the question whether it be fraudulent as
to creditors, belongs exclusively to the jury. Per Spencer, Senator.
A conveyance from a parent to a child, in consideration of love and affection, is not absolutely void as to creditors;
but the presumption that it is fraudulent may be repelled by circumstances. Per Spencer, Senator, citing Hinde's Lessee
v. Longworth, 11 Wheat. 213.
Even admitting this doctrine to be otherwise as to present subsisting debts, yet an unbroken guaranty for the
payment of a debt, a warranty of title to land, and the like, are not subsisting debts within the meaning of the cases, as to
which a voluntary conveyance by the guarantor, warrantor, &c., would be fraudulent per se; but in such case actual
fraud should be proved. Per Stebbins, Senator.
A conveyance, or settlement, in consideration of blood and natural affection though by one indebted at the time, is
prima facie, only, and not conclusively fraudulent. Conclusion, after a very full review of all the English and American
cases, on the point, per Allen, Senator.
Citations--Hob., 187, 262; 1 Cai., 60; 1 Arch. Pr., 191; 3 T. R., 198, 435; 1 Hen. & M., 236; 10 Co., 57; Bulstr.,
308; Cro. Eliz., 495; 3 Burr., 1243; 11 Wheat, 199, 211, 213; 1 Johns. Cas., 73, 101; 2 Johns. Ch., 409; 15 Johns. 167,
168, 263, 477; Com. Dig. Bargain & Sale, B, 11; 2 Roll., 788; 1 Mod., 179, 263; 5 Cow. 547; 3 Johns. Ch., 481, 492,
501, 502; 12 Johns. 536, 554; 4 Cow. 603; 8 T. R., 386; 9 Johns. 127; 20 Johns. 472; Act, Feb. 26, 1787; 1 N. R. L., 75;
Cowp., 710; 3 Co., 80; 2 Vern., 44; 1 Vent., 193; 27 El. Ch., 4; 1 Atk., 15, 93, 188; 2 Ves., 1, 10; 2 Lev., 146; Gilb. Eq.,
37, 39; 9 East 59, 63, 64; Hardres, 398; 1 Lev., 146; 1 Keb., 486; Style, 446; Cro. Jac., 158; 1 Sid., 133; Prec. Ch., 14;
Cas. temp. King. C., p. 65; 1 Eq. Cas. Abr., 334; 2 Atk., 511; 3 Atk., 410; 1 Ves., 27; 2 Bro. Ch., 92; 9 Ves., 193; 5
Ves., 384; Cowp., 432, 705; 8 D. & E., 528; 4 Dos. & P., 332; 18 Ves., 100; 2 Taunt., 82; 14 Johns. 498; 1 Day, 525; 11
Tyng. 421; 8 Mass. 390; 12 Mass. 462; 1 Bay, 173; 2 Bay, 546; 4 Des., 232; 1 Hawk., 320, 341; 2 Bibb 416; 3 Marsh.,
239, 241; 2 Munf. 342; 8 Wheat., 242; 3 Cow. 166; 2 T. R., 587; 2 Bl. Com., 443.
COUNSEL: The cause was argued in Sep., 1826, at the session of this court in the City of N. Y., by,
Messrs. J. Tallmadge, T. A. Emmet, for the plaintiff in error, and,
Mr. T. J. Oakley, for the defendant in error. But it was so fully discussed by the learned Chancellor and Senators, who
delivered opinions upon its various branches, as to present every argument and authority of the counsel, which can be
deemed material.
JUDGES: JONES, Chancellor. SPENCER, Senator. STEBBINS, Senator, ALLEN, Senator.
OPINION BY: JONES; SPENCER; [**3] STEBBINS; ALLEN
OPINION
[*409] JONES, Chancellor. The writ of error in this cause purports to be upon a special verdict in an action of
ejectment. Upon looking at the record, it appears that the jury have found the whole of the evidence produced to them,
with an account of what took place at the trial, and sent the entire proceedings at the circuit, in the form of a special
verdict, to the Supreme Court for their consideration; and the first question that presents itself is, whether this record
Page 167
8 Cow. 406, *; 1826 N.Y. LEXIS 140, **2
can be regarded as a special verdict, upon which this court can act.
[HN1] It is of the essence of a special verdict, that it should be a finding by the jury of the facts on which the court
is to pronounce the law, and not the evidence of the facts upon which it is the province of the jury to adjudicate. The
jury is to receive the evidence under the direction of the judge who presides at the trial, and to find the facts in issue
between the parties, according to their deliberate judgment upon that evidence. To the court it belongs to apply the law
to the facts; but the court has no jurisdiction to decide upon evidence, or to enter into any question of fact that may arise
in a cause. This is a [**4] cardinal rule in the law of special verdicts, which has always been observed and enforced by
courts of law, and ought, in my opinion never to be relaxed. It defines the line between the jurisdiction of the court and
the jury, with unerring accuracy; and so long as it continues to prevail; and is preserved in its purity and integrity, it will
keep each in its proper sphere. But should it ever be dispensed with or relaxed, the boundary between the provinces of
the court and the jury will be unsettled; and the two jurisdictions which our excellent system of jurisprudence intended
to keep separate and distinct, will be blended together; and questions of fact which belong to the jury, be brought for
decision to the court, whose province it is to settle the [*410] law. The inconvenience of this innovation might not be
so sensibly felt by the Supreme Court, as it must be by this court; for that court has a supervisory power over the
verdicts of juries, which it exercises for the advancement of justice, and with great benefit to suitors, by setting aside the
verdict of the jury when against evidence, or otherwise erroneous and unjust; and by granting new trials, directing
nonsults, or [**5] otherwise disposing of the matter, as the merits of the case may be found to require. This jurisdiction
cannot be exercised, without having the evidence which was before the jury brought before the court; and that evidence,
in such cases, comes up by affidavit, or in a case made by the parties, and settled by the judge. To that court, too, it
belongs to render judgment upon the verdicts of the jury before the circuit judges, and to decide the questions arising
upon the evidence, and upon the merits, and brought to that court for decision. Regularly, these matters are to come
before that court in the form of special verdicts, bills of exceptions, or demurrers to evidence: but as the Supreme Court
has original jurisdiction, and the immediate cognizance of the causes in which the points arise, a practice has, for the
convenience of suitors, been introduced, and has long prevailed, to dispense with the more regular forms, and bring the
matters in dispute before the court for decision, upon a case reserved at the trial, or made up by consent between the
parties. This practice has been so extended, as very often to make the case a substitute for the verdict; and the utility and
conveniency [**6] of the substituted case to the parties, in enabling them to combine in the same case, for the decision
of the court, all questions of law and of fact that the merits of the cause involve, and all points of evidence that could be
made by either party at the trial, has brought it into very general use in that court. The objection to it is, that it
substitutes the court for the jury, to try the questions of fact in the cause. But as both parties consent to waive the right
to trial by jury, neither has any cause of complaint; and all questions both of law and fact, being open [*411] and
undetermined at the time the case is made, the parties are induced to consent to a course of proceeding, which gives to
each the benefit of all the objections he makes to the demands or defense of the other, and is equal in its advantages and
disadvantages to both. If the parties are content to abide by the decision of the Supreme Court, they repose themselves
on the case agreed upon between them. But if they contemplate ulterior measures, in given events, for the review of the
judgment, they reserve the right to turn the case into a bill of exceptions or special verdict, to enable them to bring the
[**7] questions to this court for revision. Such has been the course in this case.
The record before us disclosed the fact that a verdict was taken for the plaintiff, subject to the opinion of the
Supreme Court, on a case to be made, with leave to either party to turn it into a special verdict; and the history of the
trial incorporated in the record, and imputed to the jury as the special verdict found by them, bears internal evidence of
conclusive force, that it is, in fact, the case made by the parties, with very little more of even the form of a special
verdict, than the formal conclusion attached to it.
Can such a record be received by this court? The case which was made for the Supreme Court, and is now
engrafted upon this record in the form it now assumes, is a report by the jury of the evidence at the trial, and not a return
to the court of the facts found by their verdict. In the Supreme Court this procedure produced no embarrassment, for that
court having original jurisdiction of the cause, and being substituted by consent for the jury, had the power to decide
upon questions of fact, as well as points of law, and were at liberty to draw inferences and conclusions from the
Page 168
8 Cow. 406, *409; 1826 N.Y. LEXIS 140, **3
evidence [**8] disclosed in the cause; and upon the facts thus found by them, as the just deductions from the evidence,
to pronounce the law.
But this is a court of appellate jurisdiction. [HN2] The facts must appear on the record sent to us, upon which our
judgment is to be given. The court possesses no jurisdiction [*412] to adjudicate upon evidence, and cannot perform
the office of a jury, by drawing the conclusions of fact from the evidence given at the trial; nor is it in the power of the
parties, by any consent they can give, to confer such a jurisdiction upon this court, the organization and power of which
are settled by the Constitution of the State. We sit as a Court for the Correction of Errors in the judgments of the
Supreme Court. We are to decide, in the last resort (as respects our state system of jurisprudence), upon questions of
law which have been adjudicated upon by that court; and in exercising such appellate jurisdiction, this court must look
to the facts on which the Supreme Court gave their judgment. No regard can be paid by this court to any matters of
evidence that may have been before that court. If the parties, for their own convenience, have agreed upon a case, by
which [**9] they have spread before the judges of the Supreme Court the evidence in the cause, and submitted the
question, both of fact and law, which that evidence involved to that court, that case, when turned into a special verdict
for the consideration of this court, must present the facts which the judges, acting as jurors, have found, and on which
the judgment was given, and not the evidence contained in the case from which the facts were so found by the court. As
the jury, when the special verdict is given by them, must draw their own conclusions from the evidence, and find the
facts which that evidence, in their opinion, proves; so the judges of the Supreme Court, when the evidence is submitted
to them, must form their conclusions from the evidence so submitted, and, in turning the case into a special verdict,
must make that verdict consist of the facts which they find that evidence to establish, and not the evidence contained in
the case, and by which the facts are proved. [HN3] It cannot be admissible for the parties to introduce the case itself into
the record, as a substitute for the special verdict, which the judges, or the parties, under their direction, were to form
from the case.
Why [**10] was not the case, in this cause, turned into a regular special verdict? The only assignable reason is, the
[*413] difficulty of settling the facts. The parties could not agree upon them, and both parties being indisposed to
appeal to the Supreme Court to find the facts for them, they agreed to refer the evidence to this court, for us to draw the
conclusions of fact from it for ourselves. This was, in effect, avowed on the argument; but though an excuse for the
parties, it is not sufficient to give us the jurisdiction, obviously intended to be conferred upon us.
If a procedure so irregular, and so subversive of all certainty, and of the settled distinctions between the jurisdiction
of the court and the jury, should be allowed in this case, a precedent would be set, which must be followed in all
subsequent causes. The consequence is easily foreseen. Every case made for the consideration of the Supreme Court,
where the right is reserved to turn it into a special verdict, will be brought by the failing party to this court, upon the
case itself, for re-examination; and we must assume the same jurisdiction which the Supreme Court possess in deciding
upon it, or we cannot do justice [**11] between the parties.
This court, then, would become, in effect, a court of original jurisdiction, deciding questions of fact upon the
evidence, as well as questions of law upon the facts; a jurisdiction which would destroy the design and usefulness of an
appellate jurisdiction, and open sources of litigation which would overwhelm the court.
The rule that [HN4] the jury, in a special verdict, must find facts and not evidence of facts, is well established, and
familiar to jurists. (Hob., 262; 1 Cal. 55 at 60; 1 Archb. Pr., 191; 3 T. R., 198; 1 Hen. & Munf. 236.) The finding, by a
jury, of a conversion in the action of trover, is a striking instance of the application of the rule, and illustrates the
principle on which it rests. A demand and refusal in that action is evidence of a conversion and, if unexplained, and not
repelled by other testimony, it is conclusive, because the jury are to presume that the defendant has converted the goods
to his own use, which he refused, on demand of the true owner, to restore; but yet [*414] it is only evidence; and if it
be found, by special verdict, that the plaintiff requested the goods of the defendant, and he refused to deliver them
[**12] up, it is not a finding upon which the court can adjudge a conversion. 10 Coke 57; Case of the Chancellor of
Oxford, Hob., 187; Bulst., 308; Cro. Eliz., 495; 3 Burr., 1243.
Page 169
8 Cow. 406, *411; 1826 N.Y. LEXIS 140, **7
But it is said, that if the evidence gives a violent presumption of the fact, or in other words, if the matter appearing
in the special verdict be such as to lead necessarily to a conclusion, which admissible evidence could repel, it shall be
sufficient, and supply the place of the fact. Suppose such a case to form an exception to the general rule. Is this such a
case ?
The leading question between the parties in this cause, at the trial, appears to have been, whether the deed of
settlement from the elder Seward to Philander, his son, was fraudulent and void as against the lessor of the plaintiff, as a
creditor of Seward, the grantor. The jury say that actual fraud had not been shown, and they find a verdict for the
defendant on the facts before them, upon that point. But whether the conveyance was fraudulent in law, and void as to
the plaintiff's claim against W. Seward, they submit to the court upon the matters set forth in the case. I pass by this
distinction, thus made in a court of law, on [**13] a question of fraud before a jury, between actual fraud and fraud in
law, or constructive fraud, and proceed to look into this record, to see what the case, as professed to be turned into a
special verdict, does contain. It consists of the testimony of Benjamin Everitt, set forth at large, an exemplified copy of
the record of a judgment in the S. C. in favor of the lessor of the plaintiff against Wm. Seward, on a written guaranty by
him, that a certain judgment against his son, W. S., Jr., assigned by him to the lessor, was due and collectable, an
exemplified copy of a writ of fi. fa. issued on that judgment, and a deed from the Sheriff of Dutchess to the lessor for
the premises in question, on a sale under the writ of fi. fa., as the evidence on the part of the plaintiff; and with which
evidence this special verdict represents the plaintiff to have rested his [*415] cause. The defendant is then made to
enter upon his defense, which appears to consist of the following matters: He first produced a deed for the premises in
question, prior in date to the judgment on the guaranty, but subsequent to the guaranty itself, from W. Seward, the
father, to Philander Seward, the son, [**14] for the ostensible consideration of $ 10,000, acknowledged and recorded
on the day of its date; and then offered to produce testimony to show that W. Seward, the younger, before the
assignment of the judgment against him to the lessor, owned real estate in this State, obtained by him from the lessor, on
an exchange of property between them, to a greater amount in value than the amount of the judgment so assigned and
guarantied, and out of which that judgment might have been collected by the lessor; which testimony was objected to,
but admitted, and is set forth at large in the verdict.
The defendant then offered, the jurors say, to prove that the deed of the premises in question, from the elder Seward
to his son Philander, was made and given by the elder Seward, who was then very aged, feeble and infirm, by way of
making a settlement of his property upon his children; and without any intention to defraud his creditors; and that, on
giving the deed to his son, he took back from him a bond to secure an annuity to himself and wife; and that the son, at
the same time, gave bonds to his sisters, to secure to them certain sums as their portions of the estate of their father.
That this testimony [**15] was objected to, but admitted, and it is also set forth at large in the verdict.
The jurors then proceed to set forth the testimony at large, of a witness produced on the part of the plaintiff; and
after stating an admission of counsel on the point of fraud, they say that actual fraud had not been shown; and they find
the verdict in favor of the defendant upon the facts before them, on the question of actual fraud; but whether the
conveyance was fraudulent in law, and void as to the plaintiff's claim against Wm. Seward, and whether or [*416] not,
upon the whole matter, the defendant was guilty of the trespass and ejectment, they say they are ignorant, and pray the
advice of the court thereon.
From this abstract of the special verdict, it will be seen that the jury, instead of deciding the general question of
fraud, have attempted to divide it; and, after declaring by the verdict, that there was no actual fraud in the transaction,
have referred the whole evidence before them to the court, to say whether there was any other fraud to vitiate the
settlement. This proceedings of the jury appears to have been grounded upon the confession of the plaintiff's counsel,
which is inserted [**16] in the verdict, and forms part of it; and the counsel, on the argument, conceded that the elder
Seward is not chargeable with a fraudulent intent in making the sale to his son Philander. The plaintiff in error contends
that this concession, supported and confirmed by the verdict of the jury, is conclusive against the lessor's right to
recover--insisting that there can be no fraud without a fraudulent intent. But the defendant in error, whilst he absolves
the grantor from intentional fraud, impeaches the deed of conveyance he gave to his son, as fraudulent and void in law,
against him as a creditor of the elder Seward; and insisting that he is to be regarded as a prior creditor, he objects to the
Page 170
8 Cow. 406, *414; 1826 N.Y. LEXIS 140, **12
settlement as fraudulent in law and void--first, because it is voluntary; secondly, because it purports to be an absolute
deed for valuable consideration, when no consideration was paid for it, and it was, in fact, a mere testamentary
disposition, and gift or settlement on the family; and, thirdly, as being void on account of the reservation of the annuity
of $ 500 for the benefit of the grantor. On the other hand, the plaintiff in error insists that the entire question of fraud has
been put [**17] at rest by the verdict, but that if it is, for any purpose, open, on the distinction between fraud in law and
fraud in fact, the conveyance was not fraudulent in law, because it was not voluntary, but founded on sufficient
inducements and stipulations; that the quo animo was open to inquiry and settled by the verdict; and that [*417]
Philander, the grantee, is to be considered a bona fide purchaser, and for valuable consideration paid and secured.
These are the points presented to this court, by the parties, for adjudication; and I now ask, what facts have the jury
found so as to enable us to adjudicate upon them ? It is admitted that they have not found the fact of fraud, either in the
elder Seward or his son Philander. They have negatived all intention of fraud on the part of the father, and impute no
such intention to the son. Is this court, then, at liberty to intend or deduce fraud, where not found by the jury, from
circumstances, as an inference of law? In the case of Meriel Littleton, cited in 10 Colo. 56, 14 P. 105, it was
unanimously resolved " that forasmuch as no fraud is found by the jury, the court could not adjudge the feoffment to be
fraudulent; [**18] and although the jury finds circumstances and presumption to incite the jury to find fraud, yet it was
but evidence to the jury, and not any circumstance upon which the court could adjudge fraud; and the office of the
jurors is to adjudge upon the evidence concerning matters of fact, and themselves to give the verdict, and not to leave
matter of evidence to the court to adjudge, which does not belong to them."
But if, as contended upon the authority of other cases, the question whether fraud or not is a question of law for the
court to decide on the facts of the case, it is material to inquire what facts this case presents to guide our decision. The
defendant in error avers the deed to be voluntary; but the plaintiff in error controverts that averment, and contends that it
was founded on sufficient consideration. Have the jury found the fact, either that it was a voluntary conveyance or that
it was founded on sufficient consideration ? They have reported to the court the evidence before them on the point from
which the counsel for the defendant in error infer the fact that it was a voluntary deed, and from which the jury, perhaps,
might have drawn the same conclusion as the judges [**19] of the Supreme Court, acting as jurors in determining a
question of fact, probably did; but it is evidence only which appears upon the record before us. The testimony, in
substance, is [*418] that the father executed the deed to his son as an absolute conveyance; and that the son, as the
consideration for it, gave the father a bond in $ 10,000, to secure him an annuity for life, and a bond to each of his two
sisters for upwards of $ 2,000 apiece. And the plaintiff in error has a right to say that a jury would, on that evidence,
coupled with the other circumstances of the case, find the deed to be for sufficient consideration. Besides, the plaintiff
in error insists that the son had no knowledge of the covenant or guaranty on which the judgment was obtained against
the father, and is, therefore, to be regarded as a bona fide purchaser. The jury have reported the evidence of one
witness on the point of notice, but they have not found the fact either way, whether the plaintiff in error had notice of
the debt or not.
Again; it was objected to the deed that it expresses a false consideration, and that the grantor continued in
possession of the premises; and those circumstances [**20] were strongly pressed as indicia of fraud; and the objection
was repelled, and the deed defended, with equal confidence, upon the ground that its verity, and the actual possession of
the grantee under it, were supported by the testimony; yet neither the fact of the continuance of the father in possession,
nor the fact of the son's possession, nor the fact of the truth or falsehood of the consideration expressed in the deed, is
found by the jury. They inform the court that Everitt, a witness, testified before them that old Mr. Seward was feeble
and infirm, and the principal part of the management of the farm devolved on Philander, the son, by whom it was
conducted, and who lived upon the farm with his father until his death; that Philander, the son, lived with and managed
the farm under the father from 1808 to 1818, during which period it was understood that the farm belonged to the father;
but that about May 1, 1818, it was understood that the father had made over the farm to the son; and, from that time, the
son had the charge of all the business of the farm, in a different way from what he had before, and acting in all things as
the owner. The testimony of [*419] Thankful [**21] Seward, the widow, is also given, who states that the son, after
the deed, managed everything for himself. This constitutes the whole substance of the evidence on the fact of
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8 Cow. 406, *416; 1826 N.Y. LEXIS 140, **16
possession; and as regards the consideration of the deed, the widow and Ackerman are the only witnesses who testify to
the terms of the settlement, or the consideration actually given by the son to the father for the premises. Their testimony
is given at large, and they state the consideration to have consisted of the bonds to the father and sisters of the grantee.
But the jury draw no conclusion of their own from the testimony of these witnesses, nor find any fact as established by
it. In the language of the court, in the case cited from Coke, it was the office of the jury to adjudge upon the evidence
concerning matters of fact, and to give their verdict thereon; and not to leave matters of evidence to the court to adjudge.
In this verdict the jury has left the evidence to the court, to adjudge concerning matters of fact. But we have no
jurisdiction of such a subject, and cannot settle the question which that evidence presents. The same difficulty occurs in
every branch of the case, with the exception only of [**22] the question of actual fraud.
The whole of the special verdict, with the exception of the documentary evidence, consists of the testimony of
witnesses, reported as they gave it. If we adjudicate upon this record, we must found our judgment, so far as facts are
concerned, upon the evidence of the witnesses, and not upon the finding of the jury. We must adjudge for ourselves
what facts that evidence proves, and then make those facts the basis of our judgment on the question of law; and if the
conclusions of fact which we draw from the evidence should happen to differ from the conclusions drawn from it by the
Supreme Court, we might reverse the judgment for erroneous conclusions on questions of fact, without disagreeing with
them on the law applicable to the case.
But the facts established by the documents may, perhaps, be said to be found by the jury; and it was intimated
[*420] on the argument that these alone, rejecting all the other matters in the special verdict as irrelevant and
immaterial, were sufficient to entitle the defendant in error to judgment.
Assuming, then, that the documentary facts are sufficiently the finding of the jury for this court to act upon, what
are [**23] those facts ? To state them most favorably to the defendant in error, they are, that the defendant in error, in
1820, recovered a judgment against the elder Seward, for about $ 2,700, upon his covenant or engagement, entered into
and made Nov. 6, 1817, whereby he covenanted and agreed that a judgment against his son, assigned by him to the
defendant in error, was due and collectable; that an execution was issued on that judgment, and that the sheriff sold and
conveyed the farm in question, under that execution, to the defendant in error; and that the same premises were, by deed
of April 16, 1818, granted and conveyed by the elder Seward to his son Philander, the plaintiff in error, and that the
consideration expressed in the deed was $ 10,000; that it contains full covenants, and was acknowledged and recorded
on the day it bears date.
Take these facts in connection with the verdict of the jury, negativing the imputation of fraud in fact to the elder
Seward, and can the court adjudge the deed to the plaintiff in error to be fraudulent and void against the defendant in
error, as a judgment creditor of the grantor? If we are to be limited to these facts, there is but one of the several [**24]
objections taken by the defendant in error to the validity of the deed that can be urged, and the foundation of that one
would be, at best, but slender. The objections on the ground of the falsity of the consideration expressed in the deed, the
reservation of the annuity for life to the grantor, and his continuance in possession, rest upon the testimony of the
witnesses; and if that evidence is expunged, those objections must disappear.
The remaining objection is that the deed is fraudulent in law and void, because it is a voluntary conveyance, and the
defendant in error is a prior creditor of the grantor. This objection [*421] is urged on the authority of the case of Reade
v. Livingston, 3 Johns. Ch., 481, as being so decisive that no evidence can be adduced to repel or explain it.
Suppose it to be so; the deed must be admitted or proved to be merely voluntary, and the party who impeaches it, to
be a prior creditor of the grantor, before the rule can be applied. If the judgment of the plaintiff in error against the elder
Seward, is to be regarded as the debt, and not the previous covenant, he would be a subsequent and not a prior
creditor; and if he is [**25] a subsequent creditor, he must, on the authority of Reade v. Livingston, show a
fraudulent intent on the part of the grantor, in giving the deed, or he cannot avoid it; and this court could never impute a
fraudulent intention to this grantor, as an inference or presumption of law from the facts, against the explicit finding of
the jury upon the same facts, that there was no such fraudulent intent.
Page 172
8 Cow. 406, *419; 1826 N.Y. LEXIS 140, **21
But suppose the defendant in error to be, in judgment of law, a prior creditor; was the deed to the defendant in error
a voluntary conveyance ?
The whole finding of the jury on this point, if the testimony of the witnesses is to be disregarded, consists of the
naked fact of the deed itself, which appears, on the face of it, to be a conveyance of the premises, by the father to the
son for $ 10,000, with full covenants.
It surely cannot be intended, that a conveyance for the consideration of $ 10,000 is voluntary, because it is a deed
from a father to his son. A jury might, possibly, be warranted, on the testimony of Everitt, and in the absence of proof of
the payment of the consideration expressed to be given, in finding it a voluntary conveyance, or fraudulent and void.
But a jury, [**26] without any other evidence than the deed itself, would exceed its legitimate powers in declaring it
void; and this court surely could not, in such a case, adjudge it to be voluntary and fraudulent. It may be said, that the
bonds of the son, proved by Ackerman, being written evidence, and speaking for themselves, are to be regarded as facts
found by the jury, and not the mere evidence of the witness. Suppose them to be so; they [*422] prove nothing of
themselves, but the debts contracted thereby to the father and the sisters of the son. Taken in connection with the
testimony, they would appear to constitute the consideration of the conveyance from the father to the son; and the jury
might, on that evidence, have so found the fact, or probably they might have been borne out in such finding, by the
correspondence of the dates of the instruments, and the relations in which the parties stood to each other and to the
transaction. But this court cannot make the intendments, and draw the inferences necessary to connect the bonds with
the deeds, which a jury might; or if the court could intend that the bonds were given as the consideration of the deed, the
question of fact would still [**27] remain, whether the transaction was a purchase by the son, or a gratuitous settlement
by the father; and which question it was the province of the jury to answer on the evidence before them. The counsel
have discussed the point upon the evidence as a litigated question; and if the court decide it, they must put their
decision, to some extent at least, upon the testimony of the witnesses, and not upon the facts found by the jury.
But if the deed could be regarded, upon the facts appearing on this record, as a testamentary disposition and gift by
the father to his children, would that fact be, of itself, conclusive, or might it not be met and rebutted by evidence on the
other side, or could the court pronounce it fraudulent and void on that evidence, or must not the question of fraud be
submitted to a jury ? I do not conceive it to be necessary to decide these questions in this cause; but I am not prepared to
say that the court could, under such circumstances, adjudge the deed to be fraudulent. The case of Reade v. Livingston
was a decree of the Court of Chancery, and in that court the Chancellor exercises the jurisdiction of a jury, as well as
that of a judge. When sitting [**28] in that court, I have the jurisdiction to decide questions of fraud upon the evidence;
but I should hesitate to act upon the principle that a voluntary deed to children is absolutely void, as against creditors
having debts owing to them at the time, and that no facts or circumstances [*423] can be sufficient to repel the legal
presumption of fraud; and when, in addition to my hesitation upon that point, I am called upon in a court of law, and of
appellate jurisdiction, to adjudge the deed to be fraudulent without any verdict of a jury finding the fact of fraud, and
against a verdict which negatives the existence of actual fraud, I cannot but distrust my powers and am unwilling to act.
The Supreme Court of the U. S., in the case of Hinde's Lessee v. Longworth, 24 U.S. 199, 11 Wheat. 199, 6 L. Ed.
454, held that a deed from a parent to a child, for the consideration of love and affection, is not absolutely void as
against creditors; that the want of a valuable consideration is a badge of fraud; but that it is only presumptive, and not
conclusive evidence of it, and may be met and repelled by other testimony. "If," say the court in that case, "it could be
shown [**29] that the grantor was in prosperous circumstances and unembarrassed; and that the gift to the child was a
reasonable provision, according to his state and condition in life, and leaving enough for the payment of the debts of the
grantor, the presumptive evidence arising from the want of a valuable consideration for the deed, would be met and
repelled." Others combinations of circumstances might produce the same effect, in repelling this presumptive evidence
of fraud. It would be the duty of this court, before it pronounced its judgment, to look at the whole case, to determine
whether the deed from the father to the son was voluntary, or for consideration; and if voluntary, how far the other facts
of the case would repel the presumption of fraud, which the character of the conveyance would create. But we cannot
look into the whole of this case, because the greater part of it, and matters contained in it which the parties deem
material, consist of the evidence of witnesses, and not of facts found by the jury. The Supreme Court was under no
Page 173
8 Cow. 406, *421; 1826 N.Y. LEXIS 140, **25
embarrassment from this circumstance, because they adjudicated not upon a special verdict, but upon a case made by
the parties, constituting them the [**30] judges of questions of fact, as well as questions of law. The Court of Chancery
is equally unembarrassed [*424] in deciding questions that come before the Chancellor upon pleadings and proofs; for
that court equally performs the office of the jury, in determining questions of fact upon the evidence in the cause. But
this court being to adjudicate upon a special verdict, must confine itself to the facts appearing by that special verdict to
be found by the jury, and cannot adjudge facts upon the evidence of witnesses, nor intend any matter which is not found
by the jury.
This appears to me to be the established course of the court. The rule rests upon the soundest principles, and I hope
we shall adhere to it. I cannot usurp the powers of a jury, and form my judgment, in this court of appellate jurisdiction,
upon the testimony of witnesses.
I am constrained to declare that I cannot decide the questions of law raised by the parties for the consideration of
the court, upon this special verdict. I conceive it radically and substantially defective; and its defects are, in my
judgment, incurable in this court. The proper course, in such cases, appears to me to be, to reverse the judgment. [**31]
(
a
)
a After an opinion so full and clear upon a special verdict, which was insufficient to raise the intended
questions of law, it will, I am persuaded, not be deemed obtrusive by the profession, if I insert here the abstract
of a case lately decided in the Exchequer Chamber of England, showing what will bring the verdict within,
perhaps, the extreme outline of sufficiency :
MONKHOUSE v. HAY, 8 Price, 256.
The action in the K. B., Hay v. Fairbairn, 2 B. & A., 193, was to recover, as money had and received, the
proceeds of the sale of a ship assigned to the defendants below, by the bankrupt before his bankruptcy, for the
purpose of being sold, in order to pay a debt due to them. The action was founded on the Statute 21 Jac., 1, ch.
19, sec. 11, which, it will be recollected, makes a very important par the English bankrupt system; declaring, that
if, at the time any one becomes bankrupt, he shall, by the consent and permission of the true owner and
proprietary, have in his possession, order or disposition any goods or chattels whereof he shall be reputed owner,
the commissioners may treat it, in all respects, as the bankrupt's property in possession. In other words, it shall
be deemed his property. Vide 7 Pickering's ed. Stats. at L., 287. The defendants below, having sold and
converted the ship pledged by the bankrupt into cash, the consequence was, they were liable in this action to his
assignees, should the latter bring themselves within the statute. This was the only question in relation to which
the frame of the verdict was contested. The case was, originally, like the principal one; a verdict subject to the
opinion of the court on a case to be turned into a special verdict. In doing this, on the point of reputed
ownership, the jury were made to find, that the act of bankruptcy was in Dec., 1815; and June 19, 1816, the
plaintiffs below were appointed assignees; that in Nov., 1815, the bankrupt assigned the ship, registered in his
name, but then at sea, in trust to sell her in May (then) next, if the debt was not paid in the meantime. In the deed
of assignment, the bankrupt covenanted to insure the ship in trust for the defendants below; and it was agreed,
moreover, that in the meantime, and until the said ship should be sold under the trusts of the deed, the bankrupt
should be permitted peaceably and quietly to have, hold and enjoy the same, and to receive and take the gains
and profits thereof, for his own use and benefit, without the lawful let, &c. That the registry was duly changed,
so as to stand in the name of Fairbairn, one of the defendants below, before May, 1816, when the commission of
bankruptcy issued. That the bankrupt, at the time of the assignment, had possession of the ship then at sea, under
the command of a captain appointed by him; and he continued, from that time until the first of June, 1816, to
exercise all acts of ownership, by appointing successive captains, employing and chartering the ship on different
voyages, and receiving the freight from Jan.to Apr., 1816; that during that time, he, from time to time, repaired
and insured the ship at his own expense, but she was navigated under a certificate of registry granted to Fairbairn
Jan. 31, 1816; that the defendants below had never interfered in any way with the ship, till June 1, 1816, when
they took possession, and afterwards sold her; the clear proceeds amounting to # 585.
Page 174
8 Cow. 406, *423; 1826 N.Y. LEXIS 140, **29
The avowed object of the writ of error was, to bring under review the cases of Robinson v. M' Donell, 5
Maule & S., 228, and Hay v. Fairbairn, 2 B. & A., 193, on a question as to the effect of the Registry Acts on the
Stat. 21 Jac. 1, ch. 19, sec. 11; but with that we have nothing to do.
Mr. Parke, for the plaintiffs in error, in addition to the question upon the merits, raised one of form as to the
special verdict. He said the finding of the jury in that verdict was not sufficient, as to the fact of the reputed
ownership, to entitle the defendants in error to recover and that, therefore, as that was a question for the jury, and
they had not determined it, there ought to be a venire de novo awarded. The reputed ownership was rather a
question of fact than of law, as was said by Eyre, Ch. J., in Lingham v. Biggs, to have been "well observed by
Mr.Justice Buller, in Walker v. Burnell, that questions on the 21 Jac. have much more of fact than of law in
them."
Had the jury found a fact, to which no other fact found were opposed, the court might then decide on the
law as applicable; but where, as here, the jury find conflicting evidence of ownership, and do not strike the
balance between them, the court cannot do it. The effect of finding that the ship was registered anew in the name
of Fairbairn, must be to negative reputed ownership in the bankrupt, or it would be of no effect at all, which
would be no finding on that material part of the case. If, as in Fraser v. Marsh, 2 Camp., 517, a ship were let for
years, the jury would be bound to decide in whom the reputed ownership was, at the time of the bankruptcy; and
they are equally bound to do so in the present case where it might depend on particular circumstance, as the
custom of a port, and many others. Unless, therefore, the case should go back to the jury, to draw some
conclusion, he submitted no judgment could be given on this record; and in Muller v. Moss, 1 Maule & S., 335,
Ld. Ellenborough distinctly said that reputed ownership, was a fact that ought to have been found.
Mr. Tindal, contra, insisted that the point upon the form of the verdict was not sustainable, for in all the
cases on this subject, the question has been considered to be one mixed both of fact and law; and it has been left
to the court to decide whether, under all the facts stated, a reputed ownership was in the bankrupt or not. If the
jury had found the reputed ownership to be in him, no question would have been left for the court. It is the
conflict in the mind of the jury, which makes it necessary for the court to determine the question upon the facts
found to have been proved in the case; for otherwise, cadet questio. Therefore, taking the special verdict as it
now stands, there is enough to enable the court to decide that the defendants in error are entitled to recover in the
action which they have brought; but if that objection were persisted in, the defendants in error might insist on
their judgment.
The Court, by Dallas, Ch. J., said "sufficient facts are stated on this record, to refer to the court the
consideration of the question of law whether the trader had such apparent ownership as comes within the
mischief intended to be remedied by the Statute of James? And it appears to us, that the conclusion to be drawn
in point of law is, that the bankrupt had such reputed ownership." &c.Judgment affirmed.
The marginal note on the above point in the case, as given by the reporter, is: "If a special verdict on a
mixed question of fact and law, find facts from which the court can draw clear conclusions, it is no objection to
the verdict, that the jury have not themselves drawn such conclusions, and stated them as facts in the case."
[**32] [*425] SPENCER, Senator. A question arises respecting the two acres of land sold by Everitt, which
should be first disposed of, before entering into the other parts of the case, because it is unconnected with them. The
record of the judgment of the Supreme Court is not printed, but the counsel on both sides agree in stating that the
declaration contained but one demise; that it was general for 500 acres of land, without specifying [*426] any
particular tract or parcels; that, on the trial, the plaintiff claimed the farm of 220 acres, and also the two acres adjoining,
on which there was a house and garden; and that, upon the return of the special verdict, the Supreme Court gave
judgment generally for the [*427] plaintiff, and it is objected that a clear title having been shown in the defendant to
the two acres, the judgment so far is erroneous, at all events, and that it must be reversed in toto. And it is admitted, that
the objection to the plaintiff's right of recovery for the two acres was made and argued in the Supreme Court.
Page 175
8 Cow. 406, *424; 1826 N.Y. LEXIS 140, **31
This is one of those perplexing questions which so often arise upon the mere form of the proceedings in ejectment.
The ancient rule required [**33] the description of the premises in the declaration to be so certain, that the sheriff might
know, from his execution, exactly of what to deliver possession. The relaxation of that rule has opened the way to
numerous and vexatious applications to correct the errors of the sheriff in delivering possession; and the settled rule of
the Supreme Court, [HN5] where a general verdict is given for the plaintiff, is to restrict him to the taking possession of
so much only, as he gave evidence of his title to, on the trial. (1 Johns. Cas., 101.) In this case the plaintiff gave
evidence of title to the two acres, and the Supreme Court, by their judgment, have decided that title to be valid. Of
course, that court cannot order a restitution of the two acres, if possession of them should be given to the plaintiff. And
it is presumed that no writ of error would lie on that refusal to award restitution, so long as the judgment remained in
force to warrant the execution. The only remedy, therefore, is by a writ of error on the judgment itself. When we come
to look at the record, we find that the plaintiff has recovered an indefinite quantity of land, and the difficulty arises,
how, upon that [**34] record, this court can distinguish the parcels he ought to have recovered, from those he ought not
to recover ? But this difficulty is one of the plaintiff's own making; for, according to the forms given in Runnington's
Treatise on Ejectment, he might have taken a verdict for his term in certain premises, describing them, and for the
defendant as to other premises, also describing them and entered his judgment accordingly. The omission of the plaintiff
to do this, ought not to prejudice the defendant by depriving him of all remedy to correct the alleged error.
If, then, there be error in the recovery of the two acres, is it to be corrected by a reversal of the whole judgment, or
[*428] can the judgment be reversed in part and affirmed in part ? It seems to be well settled, that [HN6] where the
judgment is entire it cannot be reversed for part, and affirmed for part. The authorities are collected by Mr. Archbold in
his Treatise on Practice, Vol. I., p. 236, and the following is given by him as an illustration of the principle : " Thus,
where an action is brought for a croft and a messuage in one count, and upon error it is holden that the action does not
lie of a croft, the judgment [**35] must be reversed, both as to the croft and the messuage; " for which he cites a
number of authorities, most of which I have examined, and they fully sustain him. It is needless, perhaps, to say that the
case there put is the very case under consideration. The plaintiff has declared in one count for different pieces of land,
and if he fails as to one piece, his whole judgment must be reversed. If there had been several counts in the declaration,
the consequence might have been different.
We are, then, brought to the inquiry, whether the defendant, from the facts found by the special verdict, has a valid
title to the two acres for which the plaintiff has recovered. The counsel for the plaintiff below did not contend on the
argument, that the recovery for the two acres could be sustained. Still, perhaps, it is proper to examine the question
briefly. Everitt sold the two acres to Philander Seward, on his own credit, and took his bond for the purchase money,
although William Seward subsequently paid that bond. In the case of Botsford v. Burr, 2 Johns. Ch., 409, the late
Chancellor Kent states the law applicable to the question whether a resulting trust would be raised [**36] for William
Seward under such circumstances in these words : " Nor would a subsequent advance of money to the purchaser, after
the purchase is complete and ended, alter the case. It might be evidence of a new loan, or be the ground of some new
agreement; but it would not attach, by relation, a trust to the original purchase; for the trust arises out of the
circumstance, that the moneys of the real, not the nominal purchaser, formed, at the time, the consideration of that
purchase, and became converted into the land." There can be no doubt of the correctness of that principle, and it decides
this [*429] question; for the credit was solely to Philander Seward, and his bond was taken at the time, for the price of
the land. The advance by William was subsequent, and did not enter into the consideration for the purchase. Upon this
ground, therefore, that the plaintiff has erroneously recovered two acres of land, I cannot escape the conclusion, that the
judgment must be reversed.
Here, perhaps, I ought to stop; but from the organization of this court, if a majority of the members should not be of
the same opinion as to the two acres, I shall be called on to give my vote on the remaining [**37] questions in the case,
and I, therefore, proceed to consider them as briefly as possible.
I am of opinion that Van Wyck, the lessor of the plaintiff, was a creditor at the time of the conveyance by William
Seward, to his son; and I am satisfied with the reasoning of Justice Sutherland on that point.
Page 176
8 Cow. 406, *427; 1826 N.Y. LEXIS 140, **32
The next, and most important question is, whether that conveyance was voluntary, or whether it was made for a
valuable consideration, on a purchase by Philander Seward. This question ought to have been determined by the jury,
but they have not passed upon it. They have found for the defendant on the question of actual fraud, and no other; and
every other question is left by them to be decided by the Supreme Court. This court has much reason to complain of this
mode of proceeding, by which the members are compelled to assume the functions of a jury and decide questions of fact
upon the testimony. The practice which prevails in the Supreme Court of having cases which present questions of law
and of fact, is not applicable to a court constituted like this. A special verdict should find all the facts, a bill of
exceptions should admit them and both should present only questions of law; and [**38] no considerations, other than
that much time has been spent in the argument of this cause, and that expense and litigation may be saved by deciding it
on the merits presented, induce me to consent to an investigation of the facts. And if I had not come to a conclusion
satisfactory to my own mind, I should deem it a duty to propose a reversal of the judgment, and a venire de novo, to
have a new [*430] trial, in which the facts might be ascertained. That course is rendered the less necessary in the
action of ejectment, because either party may bring a new suit at his pleasure, notwithstanding any former judgment.
[HN7] A voluntary conveyance is defined to be a deed without any valuable consideration. In this the books all
agree, and I do not understand the counsel in this case to differ respecting it. The adequacy of the consideration does not
enter into the question, and only becomes material to ascertain a fraudulent intent. But the character of purchase or
voluntary is determined by the fact, whether anything valuable passed between the parties. The execution of a bond to
pay the purchase money made in good faith, and intended to be paid, is a valuable consideration, and makes [**39]
the transaction a purchase, as much as the actual payment of money. If it does not, then one half of the titles to lands in
this State are invalid; and it is too late to inquire whether a security for money, accepted by the grantor, is not equivalent
to money. If, then, William Seward had taken from Philander Seward his bond for the payment of the purchase money,
with a fair and bona fide intent, on the part of both, that it should be paid, and it was not merely colorable to conceal a
fraudulent transaction, if Philander had entered into the possession of the premises and the whole had been open, public
and avowed, surely no one could doubt that it was a purchase. If, instead of taking a bond for the payment of a gross
sum of money, he had taken one to pay such an annuity as the parties, upon a fair calculation of all contingencies,
deemed equivalent to the price agreed to be paid, surely the transaction must be viewed in the same light as if the
money were paid, or a bond for its payment had been taken. And if securities for the payment of the purchase money to
himself had been taken, and he had assigned those securities to a third person, no one would have pretended that it was
[**40] not a purchase for a valuable consideration; and whether the securities are taken directly to such third person, or
indirectly, through the medium of an assignment, cannot vary the case. In this plain and common sense view of the case,
the taking of the bonds by William Seward for the payment of part of the purchase money to [*431] his daughters,
must be considered the same as if taken to himself, and by him given to his daughters and, therefore, the transaction was
upon a valuable consideration, and a purchase to all intents and purposes.
The gift of the money, or the securities, to his daughters, was unquestionably voluntary; and, as between them and
creditors, might be impeached, and they might be required to deliver them up. And here, it appears to me, is the root of
the fallacy which has led to the calling of the sale to Philander Seward a voluntary settlement. That sale is confounded
with the disposition made by the vendor of the proceeds of the sale. But with them Philander Seward had nothing to do.
Admit that it was the intention of the father to make provision for his daughters, and suppose, in order to effect it, he
had received money for his land, lent it out, and [**41] taken securities payable to his daughters, the sale would not be
affected by such an application of the securities. It would still be a purchase by the vendee; and if, instead of the
purchaser paying the money, he should himself borrow it and execute securities to the daughters, what possible
difference could it make as to his character of purchaser? And it must be the same thing whether he executed his bond
for the consideration of the sale at once, or whether he went through the useless ceremony of paying his money and
receiving it back again. The case of Jackson v. Austin, 15 Johns. 477, if any decision were necessary for so plain a
proposition, decides an analogous principle, that where a mortgage was given for the purchase money of land to the
third person, who had advanced the money to the vendor, such mortgage was entitled to the preference given by statute
to mortgages for the purchase money. Admitting, therefore, that the greater part of the price of the land was intended to
be appropriated by William Seward as an advancement to his daughters, as stated by Mr. J. Sutherland in his opinion,
Page 177
8 Cow. 406, *429; 1826 N.Y. LEXIS 140, **37
yet that intent cannot determine whether the conveyance to Philander [**42] Seward was a voluntary settlement or a
purchase; because that advancement was subsequent to the sale, and could not and did not form any part of the
consideration of the conveyance to Philander Seward. He might have sold to a [*432] stranger with the same intent,
taken the money and invested it in stocks or private securities, and assigned those securities to his daughters as an
advancement to them. This could not relate back, and make that sale a voluntary settlement on his daughters.
But if the intent is to be regarded, in order to determine whether this was a fraudulent deed, there is an end of the
controversy; for the jury have found against such intent.
I cannot bring my mind to any other conclusion, than that this was a technical purchase and not a voluntary gift,
and that there was a valuable consideration in the bonds given to the daughters. I do not inquire whether this was or was
not fraudulent in fact, because that is not the question when we are determining upon the character of this deed. The
deed itself was in consummation of a sale and purchase, and if the proceeds were voluntarily bestowed on his daughters,
let them be called on to account for them to the creditors.
[**43] It appears to me that the bond to pay William Seward $ 500 during his life, is also a valuable consideration,
as much as if it had been to pay him a sum of money which would purchase or produce such an annuity. And if it had
been for a gross sum, no one would question the transaction being a purchase. But, Justice Sutherland says, " the
annuity cannot inure by way of pecuniary consideration to the support of the deed, because," he says, " the annuity was
in the nature of rent for the use of the farm, and cannot be considered the consideration for the conveyance." It certainly
was not the whole consideration, but it clearly was a part of the consideration on which the conveyance was made. This
is apparent on the face of the transaction; it is sworn to by James Emott, and the deed itself is assailed by the lessor of
the plaintiff on that express ground. Still, if the annuity is to be regarded as rent for the use of the farm, then, according
to the best authorities, that is sufficient, In the Sutton Hospital case, in 10 Coke 34, it was held the reservation of rent in
a bargain and sale, was a sufficient consideration. This is stated by Comyn, Dig., Bargain and Sale, b, 11, as the [**44]
settled [*433] law; and he refers to 2 Roll., 788, and 1 Mod., 263, which fully sustain him.
But I do not wish to put my opinion on this ground; for I cannot entertain a doubt that the bond to pay $ 500
annually during the life of Wm. Seward was, in fact, and without any legal inference, a part of the consideration for the
purchase.
And so the counsel for the plaintiff consider it, and upon that fact, found an objection of another kind, which is, that
admitting the sale to be for a valuable consideration, it is void on account of the annuity being reserved to the grantor;
and the case of Mackie v. Cairns, decided in this court (5 Cow. 547), is relied upon to establish, 1. That a reservation to
the grantor is fraudulent against creditors; and 2. That being fraudulent and void in part, the whole is void. I do not see
any occasion to review that decision in the present case, because, in my view, it is not applicable. There is no
reservation here, any more than there would have been if the grantor had taken a bond to himself for the purchase
money. Instead of doing so, he sold his land for a security that would yield him $ 500 a year during his [**45] life,
which, according to the tables of annuity, was worth to a man 71 years old, the purchase or principal of about $ 2,600;
and it amounts to the same thing as taking a bond for that principal. If this be a reservation, then is every sale of land on
a credit for the whole or a part of the purchase money, equally a reservation; and upon the authority cited, in itself
fraudulent and void. This court, I apprehend, will pause long, and require the most conclusive authority before it comes
to such a result.
I think, therefore, that this was not a voluntary conveyance, but that there was some valuable consideration,
whether sufficient or not, whether the whole was not a continuance to avoid the payment of Van Wyck's demand, are
other and distinct questions, depending upon a variety of facts and circumstances, and which, it is conceded on all
hands, must be decided by a jury. And it is further conceded, that if it be not voluntary, if there were any valuable
consideration, then the jury also must pass on the question of fraud. [*434] The jury have determined that question by
their verdict for the defendant; and if there was a valuable consideration, that verdict is conclusive, and [**46]
judgment should have been rendered pursuant to it.
Page 178
8 Cow. 406, *431; 1826 N.Y. LEXIS 140, **41
If the view already taken be correct, the case is disposed of without going into the inquiry, whether, even under a
voluntary conveyance, the question of fraud is not one of fact, to be determined by the jury. I shall not pretend to
examine the authorities produced, or the reasoning offered by the counsel on the different sides, but be content with
stating my judgment in the language of the unanimous opinion of the Supreme Court of the U. S., as delivered by Mr. J.
Thompson at the last term of that court, in the case of Hinde's Lessee v. Longworth, reported in 24 U.S. 199, 6 L. Ed.
454, 11 Wheat. 199 at 213, and which I repeat, because, according to my notes, it was not cited on the argument: [HN8]
"A deed from a parent to a child, for the consideration of love and affection, is not absolutely void as against creditors.
It may be so under certain circumstances; but the mere fact of being in debt to a small amount, would not make the deed
fraudulent, if it could be shown that the grantor was in prosperous circumstances and unembarrassed, and that the gift to
the child was a reasonable provision according to his state [**47] and condition in life, and leaving enough for the
payment of the debts of the grantor. The want of a valuable consideration may be a badge of fraud; but it is only
presumptive and not conclusive evidence of it, and may be met and rebutted by evidence on the other side." The plain
sound sense of this decision, and its accordance with the natural dictates of justice, will commend it to the consideration
of this court, no less than the exalted character of the high tribunal which pronounced it. After all the contradictions of
the cases in England, and in this country, in which we find the sages of the law arrayed against each other, it is
consolatory to discover a spot of ground, reared by the talents and learning of the highest American court, on which we
may safely and firmly rest. It is a decision which meets directly the position of the plaintiff below, and overthrows it;
for if "the want of a valuable consideration is only a badge of fraud, presumptive, [*435] and not conclusive evidence
of it," then the jury must pass upon it, and having found for the defendant in this case on that question, there ought to be
judgment accordingly.
Indeed, it will be a fortunate circumstance, [**48] if the decision of this court should not only finally settle in this
State this long agitated question, but should also restore the vital principle upon which trial by jury depends.
In the present case, even upon the ground taken by the counsel for the plaintiff below, the judge who tried the cause
should have been called on to decide, whether, if the jury found this a voluntary conveyance, it was not in law
conclusively fraudulent. If he had so decided, it would have been still submitted to the jury, and if they had found in
accordance with the charge, the defendant might have excepted and brought up the question on a motion for a new trial.
If they had found against the charge, the plaintiff never could have moved for judgment against the verdict, but might
have asked for a new trial. The plaintiff did not require the decision of the judge, in order that it might be submitted to
the jury (which, in my judgment, was the only occasion where a decision on the legal construction of the instrument
could have been had), but the whole question of fraud was left to the jury, who have found for the defendant below; for
the language of the verdict will bear no other construction; and I cannot [**49] conceive how a judgment can be
rendered on the alleged ground of fraud, until that verdict is removed and another obtained.
This view will reconcile the language of many cases, which speak of fraud in law and fraud in fact. [HN9] Strictly
speaking, there is no such thing as fraud in law; fraud or no fraud is and ever must be, a fact; the evidence of it may be
so strong as to be conclusive, but still it is evidence, and as such must be submitted to a jury. No court can draw it
against the finding of a jury.
I am of opinion, therefore, that the judgment of the Supreme Court is erroneous as respects the two acres of land;
that being entire and on one count, it cannot be affirmed in part and, therefore, must be reversed wholly. I am further
[*436] of opinion that the conveyance of Wm. Seward to Philander Seward was made for some valuable consideration,
and was not voluntary; and that, therefore, it was a question of fact for the jury to say whether it was with a fraudulent
intent. And I am still further of opinion, that if it was voluntary, it was not conclusive evidence of fraud, and was still to
be submitted to the jury; and that the jury having found for the defendant, it was erroneous [**50] to render judgment
against him.
I am, therefore, of opinion that the judgment of the Supreme Court should be reversed.
STEBBINS, Senator, after stating the facts. It is contended that the conveyance from Wm. Seward to his son
Page 179
8 Cow. 406, *434; 1826 N.Y. LEXIS 140, **46
Philander, being partly voluntary, is wholly void as against Van Wyck, although the jury by the special verdict, find that
there is no actual fraud, and acquit the parties of any fraudulent intent.
The case of Reade and Livingston, 3 Johns. Ch., 492, a leading one in our courts upon this subject, and relied upon
by the Supreme Court in their opinion in this cause, has been assailed by the counsel for the plaintiff in error; but
leaving the doctrine of that case untouched, in my opinion, the judgment of the Supreme Court in this cause, ought to be
reversed. The doctrine of that case is, that [HN10] "a voluntary settlement made by a person indebted at the time, is
presumed to be fraudulent in respect to such debts, and no circumstances will repel the presumption of fraud; but that as
to subsequent debts, there is no such necessary legal presumption; and there must be proof of fraud in fact; and the
indebtedness at the time, though not amounting to insolvency, [**51] must be such as to warrant that conclusion." (
Id., 501, 502.)
That this distinction does exist, is settled by this and many other cases; 12 Johns. 536; 4 Cow. 603; and there would
seem to be some reason for presuming that a voluntary conveyance was made to defraud existing creditors; but I can see
none for presuming that such a conveyance was intended to defraud persons afterwards to become creditors.
[*437] I think Van Wyck was not a creditor at the time of the conveyance by William Seward. He, at that time,
held an unbroken covenant, carrying no evidence of indebtedness on its face, and which might or might not give him a
right of action thereafter, depending upon the contingency of his collecting the judgment out of the property of William
Seward, Jr. He would not have been considered a creditor under the English Bankrupt Laws or our Insolvent Laws; 3 T.
R., 435; 8 Id., 386; 1 Johns. Cas. 73; 9 Johns. 127; and I see no reason why the rule should be different under the
Statute of Frauds. If he was a creditor in this case, he would have been equally so, had he held an unbroken covenant of
warranty of lands; [**52] and the consequence would be, that no person could make a settlement upon his children
with safety, so long as an outstanding covenant of warranty remained against him. That the Statute of Frauds protects "
others " than creditors, is granted; but there must be actual fraud. The legal presumption of fraud arising from
indebtedness, does not seem to be interposed by the courts in favor of any but creditors, at the time of the conveyance.
Van Wyck, as a subsequent creditor, is undoubtedly entitled to the protection of the statute; but he must show actual
fraud. Jackson v. Myers, 18 Johns. 425, was a case of apparent actual fraud; and the court say that the facts leave no
doubt in their mind, that the conveyance was made "for the purpose of placing the property beyond the reach of any
judgment or execution which Morse might obtain in the action then pending."
In Wilcox v. Fitch, 20 Johns. 472, also, the plaintiff had an action pending.
In the case under consideration, there was not only no action pending at the time of the conveyance, but no right of
action existed in Van Wyck; and his covenant was not such as to afford any evidence of indebtedness.
[**53] The claim for the two acre lot being abandoned by the counsel, and considering Van Wyck as becoming a
creditor of William Seward, subsequent to the conveyance by him to his son Philander, which conveyance is found by
the verdict to be untainted with actual fraud, in my opinion, Van [*438] Wyck is not entitled to recover the premises in
question, and the judgment of the Supreme Court ought to be reversed.
ALLEN, Senator. It was admitted, on the trial of this cause, by the counsel for the plaintiff below, that actual fraud
had not been shown in the conveyance from William to Philander Seward, and that the defendant below was entitled to
a verdict in his favor upon that point, and that he should be considered as having obtained such verdict, reserving to the
plaintiff below the question, whether the conveyance was fraudulent in law. Indeed, the jury say expressly, in the
special verdict, that actual fraud has not been shown, and find in favor of the defendant below upon that question.
But the plaintiff below contends that upon the whole matter he is entitled to judgment, because the conveyance was
fraudulent in law, and void under the 2d section of the Act of Feb. 26, 1787, sess. [**54] 10, ch. 4, which is the same
as the Statute 13th Eliz., ch. 5; and the Supreme Court, upon that principle, gave judgment for him.
Two questions have, therefore, been presented for the consideration of this court: 1. Was Van Wyck a creditor
Page 180
8 Cow. 406, *436; 1826 N.Y. LEXIS 140, **50
within the statute; and 2. If so, was the conveyance fraudulent as against him?
In the view I have taken of the subject, it has been necessary to examine only the second question. Mr. J.
Sutherland, in giving the opinion of the Supreme Court, held that the conveyance was voluntary and, therefore, not valid
against a prior creditor; and this opinion is grounded upon the decision of Chancellor Kent, in Reade v. Livingston, 3
Johns. Ch., 481. Opinions coming from such a source press upon the mind with great weight, and are entitled to the
highest respect and consideration. But being in a court where the law is finally to be settled, and considering the
importance of the principle, I have examined the authorities cited in that case and some others, and have come to the
conclusion that the legal presumption there laid down as the doctrine of the courts, is not warranted by a just
interpretation of the statute; and that the English [**55] decisions previous to Apr. 19, 1775, do not so conclusively
[*439] and satisfactorily settle the principle that it ought to be held binding upon this court, as common law authority.
The Chancellor held in that case, that the intent with which a voluntary conveyance is made is not material as regards
prior creditors, but that it is fraudulent and void per se. His language is: [HN11] " If the party be indebted at the time of
a voluntary settlement, it is presumed to be fraudulent in respect to such debts; and no circumstances will permit those
debts to be affected by the settlement, or repel the legal presumption of fraud; that the presumption of law does not
depend upon the amount of the debts or the extent of the property in settlement, or the circumstances of the party." And
in making a distinction between prior and subsequent debts, he observes, that " the fraud in the voluntary settlement is
an inference of law, and ought to be so, as far as concerned existing debts; but as to subsequent debts there is no such
necessary legal presumption, and there must be proof of fraud in fact;" thus making a distinction between fraud in law
and fraud in fact, as arising upon the statute.
[**56] But what are we to understand by the expressions, " legal presumptions of fraud," " fraud is an inference of
law," &c., &c., when we are looking for the construction of a statute made for the prevention of frauds? [HN12] Fraud
by the common law, is a deceit in the conveyance of lands or chattels, to the injury of another person, and involves the
intent of the wrong-doer. A, intending to defraud B, sells him a horse and affirms him to be sound, when he knows the
contrary. Here are two propositions; and when they are connected the fraud follows as a conclusion of law from both.
How then does the law presume or infer fraud? Directly it does not. But it may presume and infer facts; and if the facts
it infers are necessary to make the fraud, then the fraud follows as a like conclusion. It is the judgment of law on facts
and intents. If there be a loan of money, and more than seven per cent. taken for interest, the law will presume an intent
to evade the statute; for without that fact there would be no usury. The Statute 13 Eliz. avoids conveyances made with
intent and purpose to defraud. [*440] Now, it must either be proved directly that such was the intent and purpose of the
conveyance, [**57] or the fact must be presumed. If presumed, how does the law prevent that presumption from being
repelled? Repelling the presumption is only disproving the fact which has been presumed.
If the legal presumption is to be held conclusive, I confess I do not see how fraud, as contemplated by the statute, is
involved in the question; for, on that principle, every prior debt is a lien on the debtor's estate against all conveyances
however meritorious or honest, if made without a valuable consideration; and is as perfect in effect as if the prior
creditor had a mortgage or judgment on the property conveyed. But it is conceded by the same authority that
subsequent creditors would be required to go so far as would be sufficient to raise reasonable evidence of a fraudulent
intent; so that as to prior creditors the conveyance would be conclusive and fraudulent per se, and the presumption
could not be repelled by any circumstances. But as to subsequent creditors, it would be only prima facie evidence, and
the intent and purpose of the grantor might be inquired into. That most of the authorities before Ld. Hardwicke make no
such distinction, I think cannot be doubted. They go upon the [**58] ground that the voluntary conveyance is, of itself,
presumptive, but not conclusive evidence of a fraudulent intent. And how could they go beyond this? The voluntary
conveyance is not proof positive of such intent, because it may have been made honestly; and when the conveyance and
the fact of prior indebtedness come out in proof together, it is then a reasonable presumption it was made to defraud
creditors.
If we take the statute and examine its plain and simple language, unembarrassed by conflicting constructions, it is
difficult to perceive the ground of such a distinction.
Page 181
8 Cow. 406, *438; 1826 N.Y. LEXIS 140, **54
The 2d section of the Act, 1 N. R. L., 75, recites that for the avoiding and abolishing of all feigned, covinous and
fraudulent feoffments, gifts, grants, alienations, conveyances, &c., &c., which have been and are devised and contrived
of malice, fraud, covin, collusion or guile, to the end, purpose and intent to delay, hinder or defraud creditors and others
of their [*441] just and lawful actions, suits, debts, &c., &c., and then enacts that all conveyances made for any intent
and purpose before declared and expressed, shall be void. What language can be stronger, to show that the intent and
purpose [**59] of the grantor are material in all cases under the Act? It speaks only of those conveyances which are
devised and contrived of malice, fraud, covin, collusion, &c., &c., to the end, purpose and intent to defraud
creditors--using every common law term that could well be found to express the corrupt purpose and intent of the
wrong-doer. And the 4th section which makes the conveyance penal and subjects the parties to a forfeiture, shows the
sense of the Legislature; and Ld. Mansfield, in Doe v. Routledge, Cowp., 710, cites this part of the statute to show that a
voluntary settlement, as such, was not covinous and fraudulent.
It must, therefore, be obvious, if we look at the statute only, that the intent and purpose of the parties are no more
the subject of inquiry, when the conveyance is made to defraud creditors whose debts are contracted subsequent to it,
than they are when made to defraud prior creditors. It may not be so common an occurrence for a man to dispose of his
property for the purpose of contracting future debts he never means to pay, as it is to dispose of it to avoid debts already
made. But that men might do so to avoid the payment of future debts, was foreseen [**60] by the Legislature; and that
they have done it cannot be disputed. It is admitted that in that case the intent and purpose may be inquired into. If so,
why not in the other ? It does appear to me that the only real difference is in the weight of evidence or proof. If a man
puts away his property while he is in debt, it is strong evidence of an intent to defraud his creditors. If he does it when
not in debt, but with a view to making future debts he never means to pay, it is evidence of a fraudulent intent, but
comparatively weak; and in either case, the evidence is made stronger or weaker according to circumstances. These are
as various as the different situations, actions and devices of men. They depend on the solvency or insolvency of the
debtor, the amount of property conveyed, the amount of the debts, the time and manner of conveyance and the [*442]
person or persons to whom the conveyance is made; and they are to be considered and determined by courts of equity
and juries. But on the contrary principle, there is no inquiry into any circumstances. A debt of $ 5 is as conclusive
evidence of fraud as $ 5,000.
It was said on the argument, that the doctrine of legal fraud had [**61] its origin at that period, when the courts
were inclined to take the power from the jury. But another suggestion that it is the offspring of the Court of Chancery, I
believe the true one. There the Chancellor determines both the law and the fact, and the purpose and intent of the
conveyance are before him, as before a jury in the courts of law. [HN13] When a conveyance had once been adjudged
fraudulent upon a given state of facts, those facts, as well as the law, became a precedent for a succeeding Chancellor,
and bound the judgment by the force of analogy, upon the question of intent and purpose, as well as law. And when an
analogous state of facts in the courts of law has been referred to a jury, and the jury has said there was no fraud, the
sayings of equity judges have been resorted to for legal presumptions, independent of intentional fraud; and hence the
modern distinction between fraud in law and fraud in fact.
It becomes, then, an important question, whether, when a voluntary conveyance, made upon the consideration of
blood and affection, is impeached on the ground of its being fraudulent as against creditors, and, on a trial at law, the
jury has declared in a special verdict that [**62] the conveyance was not made with the intent and purpose expressed in
the statute, the court can, notwithstanding the verdict, pronounce upon the record, that the conveyance is fraudulent and
void ?
Is the conveyance only prima facie evidence of fraud; or is it conclusive, and not to be repelled ?
Twyne's case, 3 Co., 80, is a leading one on the subject of fraudulent conveyances, and arose a few years after the
statute. Several points were resolved by the court, and all of them clearly adopted as evidence of the fraudulent intent. It
was said the gift had the signs and marks of fraud, because it was general, without exception of his apparel, or anything
[*443] of necessity; that the donor continued in possession of the chattels, and used them as his own; and that it was
made in secret, and pending the writ; and that there was a trust between the parties, &c., &c. All these were the
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circumstances drawn from the case, and the evidence by which the court determined the transaction to be fraudulent.
Sagitary v. Hide, 2 Vern., 44, was a case in chancery. The plaintiff was a creditor by bond to J. S., who settled his
real estate on his wife [**63] for life, remainder to one Middleton, with power of revocation; and Middleton sold to the
defendant Hide, who had part of the purchase-money in his hands, out of which the plaintiff sought to be satisfied his
debt. For the plaintiff it was insisted that the settlement was fraudulent, and that the estate ought to be assets. But it was
said by the court, that every voluntary conveyance is not, therefore, fraudulent; but a voluntary conveyance, if there was
a reasonable cause for the making of it, may be good and valid, even against a creditor.
And in Sir Ralph Bovy's case, 1 Vent., 193, it was said by the court, if there had been no precedent agreement to
make the settlement, so that it had been a voluntary conveyance, though every such an one carries an evidence of fraud,
yet it is not upon that account only, always to be reckoned fraudulent, or to be avoided by a purchaser upon a valuable
consideration. It is to be observed that this was a case of a subsequent purchaser, under the 27 Eliz., ch. 4, and the
courts have construed this statute more strongly in favor of purchasers than that of 13 Eliz. in favor of creditors. Walker
v. Burrows, 1 Atk., 93; [**64] Ld. Townsend v. Windham, 2 Ves., Sr., 1, 10. And the same distinction is laid down in
Ld. Teynham v. Mullins, 1 Mod., 119. Hale, Ch. J., and Twisden, J., there said the settlement was not fraudulent, and
that a deed might be voluntary and yet not fraudulent; otherwise most of the settlements in England would be avoided.
That was a case under the 13 Eliz., 1 Mod., 119, Leach's ed., note a.
In Lavender v. Blackstone, 2 Lev., 146, one ground the court took as an evidence of fraud, was the continuance in
[*444] possession of Pudsy, who had made the settlement; and Hale, Ch. J., said every such conveyance, prima facie,
shall be deemed fraudulent against a purchaser.
But circumstances may alter the case; and in the East Ind. Comp. v. Clavell, Gilb. Eq., 37, it is obvious that the
Lord Chancellor grounds his opinion upon the purpose and character of the settlement; for he observed, "it was a
reasonable, just and honest provision, and no color of fraud in it." (Id., 39.)
It is admitted by Ld. Ellenborough, in Doe v. Manning, 9 East 63, 64, in discussing the same subject in relation to
subsequent purchasers, [**65] that in several of the cases which arose nearest to the time of passing the statute, the
judges seem to have thought that a voluntary settlement was only prima facie fraudulent against a purchaser, according
to the language of Sir Ralph Bovy's case; and he cites, to the same effect, Jenkins v. Kemishe, Hardres, 398, and 1 Lev.,
146; Garth v. Mois, 1 Keb., 486; and in Style, 446, he says : " It is stated to have been said, on a trial at bar (Ld. Rolle
being then Ch. J.), that a voluntary conveyance, upon consideration of natural affection, hath no badge of fraud, unless
he who makes it be indebted at the time, or in treaty for the sale of the lands. And in addition to these printed cases, Sir
Robert Eyre, then Ch. J. of C.B., according to a manuscript note formerly belonging to Mr. Justice Cline, in a case of
Standon v. Charlwood, tried before him at the London sittings, after Trinity Term, 1732, laid it down that a voluntary
settlement, made upon marriage, by Sir Richard Anderson, was not fraudulent because voluntary; but the question was,
whether it was not made with an intent to defraud; and the jury so found it." He then [**66] introduces several ancient
cases, which he supposes establish a contrary principle. The earliest case, he says, in which this is distinctly laid down,
is Woodie's case, cited by Tanfield in Colville v. Parker, Cro. Jac., 158, where it was adjudged, " that an assignment of a
lease of lands by one quasi in jointure to his wife, he taking the profits, and afterwards selling it without notice, was
within the statute; though not made in trust to be revoked, nor with any clause of revocation; because it [*445] was a
voluntary conveyance at first, and shall be intended fraudulent at the beginning." It will be recollected, that this was the
language of Tanfield, upon evidence to the jury, on an information, in which it cannot be supposed that a fraud in law
would be conclusive upon the defendant. It does not appear to me, from this note, that the distinction was so clearly
taken in Woodie's case as was supposed. The expression, that it shall " be intended fraudulent at the beginning," is
satisfied with the idea that it shall be presumed to be so, until the contrary appears. Nor do I perceive, on a careful
examination of the other cases, that the contrary principle [**67] is so clearly established. They are Prodgers v.
Langham, 1 Sid., 133; White v. Hussey, Prec. in Chan., 14; Gardiner v. Painter, Cas. t. King, C, p. 65, and Tonkins v.
Ennis, 1 Eq. Cas. Abr., 334.
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In examining the cases decided by Ld. Hardwicke, it is manifest that he often regards the conveyance and the
circumstances as evidence of fraud; and when it is considered he was determining facts as well as law, it is sometimes
difficult to understand, whether he takes the facts and circumstances as evidence of the fraudulent intent, and thus
adjudges the conveyance void; or considers that the law makes it void without regard to circumstances. I will notice
them in the order of time in which they arose.
In Russell v. Hammond, 1 Atk., 15, which was the case of a prior creditor, he said: "The question is, whether this
shall prevail against the creditors of German and Hammond, as a good settlement. It depends upon circumstances, and
every case varies in that respect. There are many opinions that every voluntary settlement is not fraudulent. What the
judges mean is, that a settlement being voluntary, is not, for [**68] that reason, fraudulent, but is evidence of fraud
only. Bovy's case, 1 Vent., 193; Ld. Teynham v. Mullins, 1 Mod., 119. Though I have hardly known a case where the
person conveying was indebted at the time of the conveyance, that has not been deemed fraudulent. There are, to be
sure, cases of voluntary settlements that are not fraudulent; and those are, where the person making it is not indebted at
[*446] the time. Subsequent debts will not shake such settlement." But, he said, in the last settlement there was a plain
badge of fraud; and he goes on to state what the badge of fraud was.
Were there no other decisions of Ld. Hardwicke, I should have doubt whether, in this case, he intended to go
beyond the doctrine of the cases cited by him. After noticing the opinion of former judges, that the voluntary settlement
was evidence of fraud only, he says, he had hardly known a case, where the person conveying was indebted at the time,
that had not been deemed fraudulent. I should understand him to mean, that indebtedness at the time of the conveyance,
was so strong an evidence of fraud in itself, that it had been sufficient in almost all the cases, [**69] to defeat the
conveyance; and it seems plain, that in determining the last settlement in the case to be fraudulent, he did so upon the
evidence and badges of fraud.
Stileman v. Ashdown, 2 Atk., 477; Middlecomb v. Marlow, 2 Atk., 519; Fitzer v. Fitzer, 2 Atk., 511, and Walker v.
Burrows, 1 Atk., 93, were cases of subsequent creditors; and Ld. Hardwicke determined, from the circumstances,
whether the conveyances were fraudulent or not. They are not material to the point in discussion, except so far as in his
observations he makes a distinction between prior and subsequent creditors. In Fitzer v. Fitzer, in answer to a question
put by himself to the counsel, he says, it is certain that every conveyance of the husband that is voluntary, and for his
own benefit, is fraudulent against creditors. If it is to be inferred, from this general remark, that prior indebtedness was,
in his mind, a conclusive presumption, the same inference may be applied to subsequent indebtedness; for he speaks,
without distinction, of every conveyance purely voluntary. And in Walker v. Burrows, after reciting the [**70]
language of the Act, he says, unless the conveyance was made for the purpose expressed in the statute, it would not be
void; for there was no proof that the father was indebted at the time, or soon after, so as to collect from thence the
intention to be fraudulent.
In Brown v. Jones, 1 Atk. 188 and [*447] Wheeler v. Caryl, Amb., 121 his attention was drawn principally to the
question, whether the consideration was sufficient to support the settlement; and in White v. Sansom, 3 Atk., 410,
whether the debt accrued before or after the settlement. Beaumont v. Thorp, 1 Ves., Sr., 27, was the case of a prior
creditor, and being merely voluntary, and not made in pursuance of any marriage articles, the settlement was held
fraudulent.
In the case of Ld. Townsend v. Windham, 2 Ves., Sr., 1, 10, which I believe is the last in point of time but one, I
think it must be admitted, he goes the full length of the doctrine, that the legal presumption is conclusive; for he said he
knew of no case on the 13 Eliz. where a man, indebted at the time, made a mere voluntary conveyance to a child
without consideration, and died indebted, [**71] but that it should be considered a part of his estate for the benefit of
his creditors.
But it seems to me that the doctrine of Ld. Hardwicke has not been fully adhered to by subsequent judges; and that
Ld. Mansfield, in particular, if he did not wholly disregarded it, followed the ancient principle, as more agreeable to the
spirit and language of the statute.
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In Stephens v. Olive, 2 Bro. Ch., 92, the Master of the Rolls held, that although the settler was indebted at the time,
yet if the debt was secured by a mortgage, the settlement was valid; and in George v. Milbank, 9 Ves., 193, Ld. Eldon
admits, that if a settlement contains a provision for the payment of debts then existing, it will be good against a
subsequent creditor, coming to impeach the settlement. But if a prior indebtedness was a conclusive presumption of
fraud, and a subsequent creditor could be let in, by showing that fact, how, I would ask, does a mortgage or a
provision for the debt, affect the principle, except on the ground that they exclude the idea of intentional fraud ?
In Lush v. Wilkinson, 5 Ves., 384, a subsequent creditor came to impeach the [**72] settlement by proving prior
debts, and the Master of the Rolls said that proof of a single debt would not do; that every man must be indebted for the
common bills of his house, though he pays them every week; that [*448] it depended upon this: whether he was in
insolvent circumstances at the time. This language has been considered a loose dictum; but whether authority or not, it
shows a disposition to escape from that construction which made every debt, great or small, and under any
circumstances, conclusive evidence of fraud.
The cases of Cadogan v. Kennett, Cowp., 432, and Doe v. Routledge, Cowp., 705, decided by Ld. Mansfield, are,
in my judgment, strongly opposed to the doctrine of Ld. Hardwicke. The first was the case of a marriage settlement, and
the defendant was a creditor at the time of the settlement. Ld. Mansfield, in speaking of the statute, says, "such a
construction is not to be made in support of creditors, as will make third persons sufferers. Therefore, the statute does
not militate against any transaction bona fide, and where there is no imagination of fraud; and so is the common law.
The Statute 27 Eliz., ch., 4," he says, "does not [**73] go to voluntary conveyances, merely as being voluntary, but to
such as are fraudulent. A fair voluntary conveyance may be good against creditors, notwithstanding its being voluntary.
The circumstance of a man being indebted at the time of his making a voluntary conveyance, is an argument of fraud.
The question, therefore, in every case is, whether the act done is a bona fide transaction, or whether it is a trick and
contrivance to defeat creditors," In the second case, he says, " the statute does not say a voluntary settlement shall be
void, but that a fraudulent settlement shall be void." There is no part of the Act of Parliament which affects voluntary
settlements, eo nomine, unless they are fraudulent. One circumstance, he says, should always be attended to; whether
the person was indebted at the time he made the settlement; if he was, it is a strong badge of fraud. It will not be
presumed Ld. Mansfield was unacquainted with the doctrines of the courts in his time. He speaks of them himself, in
this very case, and says, "a custom has prevailed and leant extremely, to construe voluntary settlements fraudulent
against creditors, but if the circumstances of the transaction [**74] show it was not fraudulent at the time, it is not
within the meaning of the statutes." Language so decided, bearing so directly [*449] upon the question, and coming
from so high authority, must be entitled to great weight.
But other judges, since those decisions, have spoken in a different language. In Nunn v. Wilsmore, 8 T. R., 528, Ld.
Kenyon speaks of the deed as being either actually fraudulent or voluntary, from which the law infers fraud; and in Doe
v. Martyr, 4 Bos. & P., 332; Doe v. Manning, 9 East 59; Buckle v. Mitchell, 18 Ves., 100, and Hill v. Bishop of Exeter,
2 Taunt., 82, which arose upon the 27th Eliz., the voluntary conveyance was held fraudulent upon the presumption of
law. But it is evident the judges adhered to the rule with reluctance, and found themselves bound to conform to it, on the
ground that the safety of too many estates depended upon it.
It may be well now to notice the view that has been taken of this subject, by some of our own judges, previous to
the decision in this cause.
In Jackson v. Brush, 20 Johns. 5, a verdict was taken, subject to the [**75] opinion of the court on a case. The deed
set up by the plaintiff, and on which his claim rested, was held to be without any consideration; and Mr. J. Yates, in
giving the opinion of the court, adjudged it fraudulent from the circumstances. He declared it to be without
consideration, and made with intent to defraud creditors, and void by the statute. In Manhattan Co. v. Osgood, 15 Johns.
162 at 167, 168, he said the law was well settled, that if a party execute a voluntary conveyance, indebtedness at the
time was evidence of fraud. And in Verplank v. Sterry, 12 Johns. 536, et seq. decided in this court, Mr. J. Spencer has
gone into the subject, and forcibly combated the modern doctrine of the English courts upon the 27 Eliz. He observed,
that Ld. Ellenborough, in Doe v. Manning, did not present the opinion of Ld. Mansfield, in Doe v. Routledge, in the
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strong point of view it merited; and on examining the construction which had been given to the 13 Eliz., he said, it is
perfectly well settled, that to impeach a voluntary settlement made on a meritorious consideration, it is necessary that
the seller should not only be indebted, [**76] but should be insolvent, or in [*450] doubtful circumstances at the time.
The 13 Eliz. was intended to prevent the conveyance of property, with a design to defraud creditors; and in Sands v.
Hildreth, 14 Johns. 493, I understand him to mean, that the fraud contemplated by the statute is always a matter of fact,
intent and purpose. And in Jackson v. Ham, 15 Johns. 261, he says the voluntary deeds which may be avoided by a
subsequent purchaser under the 27 Eliz. are such as are made with intent to deceive such purchaser, and this intent to
deceive is evidenced by a voluntary conveyance, coupled with a subsequent agreement to sell again.
The subject has been discussed in several of the state courts, and in some of them, the point has been expressly
decided. Salmon v. Bennett, 1 Day, Conn. N. S., 525, was a case in the Supreme Court of Errors of Conn. Chancellor
Kent, in Reade v. Livingston, admits that it lays down a rule somewhat different from that which he had deduced from
the English cases. The deed in question was from the father to the son, in consideration of natural affection. It was
adjudged that a distinction existed, [**77] in the case of a voluntary conveyance, between the children of the grantor
and strangers; and that mere indebtedness at the time would not, in all cases, render a voluntary conveyance void as to
creditors, when it was a provision for a child, and the deed was supported by the court against a prior creditor.
The case of Bennett v. Beaford Bank, 11 Tyng, 421, arose in Mass. It was there decided, that as there was no fraud
in fact, the deed was good against a subsequent creditor, and all but such as were creditors at the time. But the
question of prior indebtedness was not directly before the court. In Parker v. Proctor, 9 Mass. 390, the same principle is
recognized; and in Harrison v. Trustees, etc., 12 Mass. 456, the question was, whether the grantee participated in the
fraudulent intent of the grantor, to defraud his creditors. Parker, Ch. J., said there was not conclusive evidence of that
fact; and fraud was not to be presumed in a court of law.
In S. C., the law appears to be settled, that a voluntary conveyance upon a meritorious consideration, [*451] is
only prima facie evidence of fraud, and may be repelled by circumstances [**78] Thus, in Hamilton v. Greenwood, 1
S.C. L. 173, 1 Bay 173, a settlement of several negroes was made by the husband on the wife, he at the same time
having other personal property to a considerable amount. Afterwards, he mortgaged one of the negroes to the defendant,
to secure a debt he owed previous to the settlement. The court said the transaction depended wholly upon the intent with
which it was done; that fraud or not fraud was a matter very proper for the consideration of a jury; that to say no
voluntary deed, made for the support and advancement of a part of a man's family, was good, because a man happened
to be embarrassed at the time, would be carrying the matter much further than the principles of law or justice would
warrant; that a fair voluntary conveyance might be good against creditors, notwithstanding it was voluntary; that the
circumstance of a man's being indebted at the time, might be an argument of fraud. So in Teasdale v. Reaborne, 2 S.C.
L. 546, 2 Bay 546, and Taylor v. Heriot, 4 Desauss., 232. The same doctrine appears to be settled in N. C. and Ky. In
Smith v. Niel, 8 N.C. 341, 1 Hawks 341, [**79] it is held that fraud or not fraud under the statute, is a question of fact
and not of law. Trotter v. Howard, 8 N.C. 320, 1 Hawks 320, S. P., and see Gilpin v. Davis, 5 Ky. 416, 2 Bibb 416.
Taylor v. Eubank, 3 Marsh., 289, 241, is in point that the question of fraud where the settler is indebted at the time, must
go to the jury.
The case of Alexander v. Deneale, 16 Va. 341, 2 Munf. 341, determined by the Supreme Court of Appeals of Va.,
was cited by the counsel for the defendant in error, as establishing a contrary doctrine; but I think not. The only question
was, whether the vendor of chattels, retaining the possession after an absolute sale, rendered it fraudulent and void, per
se, as to creditors ? The court held it to be so according to modern decisions.
Hinde's Lessee v. Longworth, 24 U.S. 199, 11 Wheat. 199, 6 L. Ed. 454, came before the Supreme Court of the U.
S., on error [*452] to the Circuit Court of Ohio. It was the case of a prior creditor; and Judge Thompson, in giving the
opinion of the court upon the exceptions taken in the court below, says the evidence [**80] offered by the plaintiff, to
repel the presumption of fraud, was improperly rejected by the court; that a deed from a parent to a child, for the
consideration of love and affection, is not absolutely void as against creditors; that it may be so under certain
circumstances; but that the mere fact of being in debt to a small amount, would not make the deed fraudulent, if it could
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be shown that the grantor was in prosperous circumstances, and unembarrassed; and that the gift was a reasonable
provision according to his state and condition in life, and having enough for the payment of the grantor's debts; that the
want of a valuable consideration may be a badge of fraud, but not conclusive, and may be repelled by evidence. He also
observed, " it is said that a voluntary deed is void only as to antecedent and not subsequent creditors, unless made with
a fraudulent intent; and this appears to be the doctrine of this court as laid down in Sexton v. Wheaton, 21 U.S. 229, 8
Wheat. 229, 5 L. Ed. 603, after a review of the leading authorities on this question." It does not strike me that the judge,
by this observation, means to say that the doctrine of the court goes so far [**81] as to make void all voluntary
conveyances, merely upon the ground of prior indebtedness; for he says afterwards, in the same page, that the accounts
might be looked to for the purpose of showing that Doyle, the elder, was in debt at the date of the deed; but whether to
an extent which would avoid the deed, must depend on circumstances which are not to be inquired into by the court.
And I would ask, whether what is noticed here as the doctrine of the court in Sexton v. Wheaton is not rather to be
looked upon as a passing admission of the Chief Justice in that cause, that such was the modern doctrine in England ?
For it appears to me that the point did not necessarily come before him in that cause. The grantor there was not indebted
at the time of the conveyance; and the principal inquiry of the [*453] Chief Justice was, whether there was sufficient
evidence of fraud to impeach the settlement in favor of a subsequent creditor. He refers to the principal authorities
cited by Chancellor Kent, in Reade v. Livingston, and remarks generally, that " in construing the Statute 13 Eliz. the
courts have considered every conveyance not made on consideration, deemed valuable [**82] in law, as void against
previous creditors; that with respect to subsequent creditors, the application of the statute appeared to have admitted
of some doubt."
Another principle arising upon the statute had been fluctuating in our courts, until it was finally settled by the
Supreme Court, in Bissell v. Hopkins, 3 Cow. 166. This was, whether possession of goods continuing in the vendor after
sale, was conclusive, or only prima facie evidence of fraud as to creditors. It was there settled, after an examination of
the principal authorities, that it is only a presumption, and may be explained, agreeably to the doctrine of Ld. Mansfield,
in Cadogan v. Kennett, and contrary to the modern English doctrine, as laid down in Edwards v. Harben, 2 T. R., 587.
If we are to adopt a legal presumption as conclusive in one case, arising upon the statute, why not in another ? I do
not see why possession, in the vendor of a chattel, is not as conclusive evidence of fraud as a voluntary conveyance
made upon the meritorious consideration of blood and affection. The delivery of possession is considered the very
perfection of the sale of chattels; without which, [**83] a secret trust between the parties would be a most effectual
means of fraud.
From this view of the law, imperfect as it is, I think the following conclusions may fairly be drawn : that the ancient
decisions are nearly uniform in construing [HN14] the voluntary conveyance as only prima facie evidence of fraud; that
this doctrine is supported by the great authority of Ld. Mansfield; that the legal presumption is conclusive, is to be
deduced from the decisions of Ld. Hardwicke; that some of his successors have followed him, and others have
materially narrowed his ground; that among the [*454] state authorities in this country, with the exception of our own,
there is a striking preponderance in favor of the ancient doctrine. Do the English decisions, then, previous to Apr. 19,
1775, settle the question in favor of the conclusive presumption, with so much clearness and certainty, that this court is
bound by them, as by common law authority, in construing an Act of the Legislature, passed in 1787 ? In my judgment
they do not; but there is, on the other side of the question, great weight of authority, supported by the obvious meaning
and spirit of the Act.
Believing, therefore, as I do, [**84] that there is no settled authority that binds this court upon the question, and
that the judgment of the Supreme Court is incorrect, being founded upon a principle of legal fraud, which entirely
disregards the intent and purpose of the conveyance, I am constrained to dissent from it, as inconsistent with the
declared and manifest intention of the Legislature. And were it necessary for the court to lay down a general rule, giving
a true and rational construction to the Act, I should say that a voluntary conveyance in consideration of blood and
affection, by one indebted at the time, was prima facie only, and not conclusive evidence of fraud.
But I do not consider the deed in this case as purely voluntary. It is, in good sense, a deed, in part upon a
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meritorious, and in part upon a valuable consideration. The sum of $ 10,000, expressed in the deed, may be considered
the fair value of the farm. The grantee, on receiving the deed, executes a bond to the grantor, to secure an annuity of $
500' during is life, and bonds to the daughters of the grantor, for $ 4,452.50, payable in six months after his death.
Admitting that the annuity, which was regularly paid for four years, is to be [**85] considered only as a fair equivalent
for the rents and profits of the farm, upon what principle is the consideration not to be deemed valuable, as far as the
bonds to the daughters go ? It cannot be necessary, to make a consideration valuable, that money should be paid down.
Security, or sufficient personal responsibility, would amount to the same thing. Blackstone, in giving the requisites of a
valuable consideration [*455] (2 Bl. Com., 443), reckons marriage, money, work done, or other reciprocal contract.
Philander Seward, when he gave these bonds, was perfectly solvent. He had an estate worth $ 10,000, and there is
no evidence of any other charge upon it, except these bonds and the annuity. In my judgment, it is not the same thing as
if the father had parceled out the estate among his children, reserving an annuity from each in proportion. In that case, if
the deed should fail, each child would lose an individual portion, and have nothing. Here the daughters get the purchase
money to the amount of the bonds, and lose nothing; but the grantee loses the whole farm, and pays the bonds besides. I
know of no principle upon which these bonds can be avoided. To say the obligor will [**86] not be able to pay them,
makes nothing against the argument.
I do not, however, rely upon this view of the case. I take the broader ground on which I set out. I am aware that the
policy of permitting the voluntary conveyance to be only prima facie evidence of fraud, has been questioned. It has
been said it would be embarrassing, if not dangerous to the rights of creditors, and prove an inlet to fraud. If it were
really so, and the law has not gone far enough for the support of creditors, it belongs to the Legislature, and not the
courts, to extend it. But how would the principle be embarrassing and prevent the detection of fraud ? When the creditor
comes to impeach the deed, he is supported, in the very outset, by the presumption that it is fraudulent; and this
presumption he can fortify and strengthen, by every fact and circumstance that has a tendency to show the fraud; and all
this must be repelled by evidence, so clear and irresistible, as to leave no doubt of the fairness and honesty of the
transaction; and where there is actual fraud, such as in my view comes within the Act, I believe the rights of a creditor
will be safe before a jury. It is true there might be cases where [**87] injustice would be done to a creditor, and so it
must be in all human institutions. But would not the other rule sometimes [*456] produce an evil ? I think it would,
and that the case before us is evidence of it. When William Seward transferred and guarantied to Van Wyck the
judgment against William Seward, Jr., it could not reasonably be supposed that the property which had been conveyed
to the latter by Van Wyck, would not be amply sufficient to meet that judgment. By that conveyance, William Seward,
Jr., became the owner of 2,800 acres of land in the Counties of Essex and Warren, valued in the conveyance at $ 11,200;
and 188 acres in the County of Oneida; at $ 1,880, besides the other property; and it was baffling human foresight that
all these lands would produce at sheriff's sale only about $ 574. Under these impressions of perfect safety, and before
executions had been issued against the property of William Seward, Jr., the old man, near the close of life, sets down, in
good faith and honesty, to divide his property among his children, upon the principles of equal and exact beneficence. In
that settlement, the son, in equal good faith, enters into bonds to pay his sisters [**88] their shares. But it turns out
eventually, that by the silent operation of a principle of fraud in law, without any fault on their part, this settlement, with
its attendant contracts and stipulations, is to be torn from its foundations. It does appear to me, the evil is not so trivial
as to be disregarded.
I am, accordingly, of opinion that the judgment of the Supreme Court ought to be reversed.
The Court concurring in the result of these opinions, except MALLORY, Senator.
The judgment of the Supreme Court was reversed.
Page 188
8 Cow. 406, *454; 1826 N.Y. LEXIS 140, **84
Caution
As of: May 27, 2014
SETH AND ALPHEUS HAWLEY AND URIAH MARVIN v. JOHN CRAMER,
HOUSE & MYERS, KNICKERBACKER & STEWART AND WILLIAM DE
WOLF.
4 Cow. 717; 1825 N.Y. LEXIS 162
July, 1825, Decided
PRIOR HISTORY: [**1] THE bill in this cause was filed in Nov., 1823. The defendants appeared and put in their
several answers, to which, replications were filed; and witnesses were examined. The material facts in the case, are fully
stated in the opinion of the court. The cause was brought to hearing, on the pleadings and proofs, at the stated term of
the court, in Mar., 1825; and was argued with much ability, by
CASE SUMMARY:
PROCEDURAL POSTURE: After defendant attorney bought and sold the debtor's farm as an agent defendant
creditors, even though the attorney had previously obtained an execution on a judgment against the debtor on behalf of
all creditors, complainant creditors brought an action against defendants to recover a pro rata share of the final sale price
of the debtor's farm to a third party.
OVERVIEW: A debtor owed the creditors various sums of money. The attorney obtained an execution on a judgment
against the debtor on behalf of the creditors. By virtue of this execution, the sheriff levied on all the debtor's real
property. Shortly before, or at the foreclosure sale, defendant creditors asked the attorney to attend the sale as their
agent, and bid upon the debtor's farm, at his discretion, for their separate benefit. In the absence and without the
knowledge of complainant creditors, the attorney successfully bid on the debtor's farm for approximately one-sixth of
its fair value. The attorney then sold the farm at a substantial profit to a third party. Complainants were only given a pro
rata share of the low bid price, but defendant creditors divided the remaining profit from the high sale price.
Complainants filed suit against defendants. The court found for complainants, holding that they were entitled to
proportionate shares of the sale price to the third party because such sale took place without their knowledge or consent.
Page 189
Moreover, the attorney's ethical obligations to complainants incapacitated him from purchasing the debtor's farm as the
agent of defendant creditors.
OUTCOME: The court entered a decree in favor of complainants.
CORE TERMS: bid, purchaser, sheriff's sale, proportion, farm, notice, decree, fraudulent, decreed, equitable, deed,
purchase money, residue, purchasing, adjudged, reasonable time, whole amount, supposed, attend, resale, bona fide
purchaser, compelled, assignee, admit, persons interested, public policy, chancery, analogy, auction, divide
[HN1] The purchaser of a mere chose in action takes the right of the seller subject to all the equities which existed
against that right.
Governments > Legislation > Statutes of Limitations > Time Limitations
Real Property Law > Deeds > Types > Sheriff's Deeds
Real Property Law > Deeds > Statutes of Frauds
[HN2] In ordinary cases, the execution of the sheriff's deed will have relation to the back time when the sale actually
took place; and it is the usual practice to date them at that time, though executed afterwards. But this relation, which is a
fiction of law, is never to be adopted when third persons, who are not parties or privies, will be prejudiced thereby. The
statute of limitations cannot begin to run until the purchasers become legally liable for the purchase money, which is not
until the actual execution of the deed by the sheriff. A sheriff's sale is within the statute of frauds; and the execution of
the deed is necessary to divest the title of the defendant in the execution.
[HN3] The bond, as against the debtor, is conclusive evidence of the debts, unless some fraud or mistake in the
transaction could be shown. And it must, at least, be prima facie evidence of the indebtedness as against third persons;
especially where such third persons are parties to the same instrument.
Civil Procedure > Jurisdiction > Subject Matter Jurisdiction > Jurisdiction Over Actions > Concurrent Jurisdiction
[HN4] There are a great variety of cases where courts of equity have concurrent jurisdiction with courts of law; and
such is the case in all matters of account. The extension of the equitable principles upon which actions for money had
and received may be sustained in courts of law has not divested the courts of equity of their ancient jurisdiction in all
matters of account. It is an established principle, that where a court of equity once had jurisdiction, it will still insist on
retaining it, though the original ground of jurisdiction, the inability of the party to recover at law no longer exists.
[HN5] It is a settled rule in equity, that when the court has gained jurisdiction of the cause for one purpose, it may retain
it generally.
Civil Procedure > Parties > Joinder > Misjoinder
Page 190
4 Cow. 717, *; 1825 N.Y. LEXIS 162, **1
Civil Procedure > Parties > Joinder > Necessary Parties
[HN6] All persons having an interest in the distribution of the fund or in the subject matter of the suit must be made
parties, either as complainants or defendants, if within the jurisdiction of the court. And although there are exceptions to
this rule, those exceptions are only by way of excuse for not bringing all the parties in interest before the court.
Civil Procedure > Pleading & Practice > Pleadings > Rule Application & Interpretation
Evidence > Inferences & Presumptions > Presumptions > Rebuttal of Presumptions
[HN7] If a party, in his answer, admit the existence of facts which render the transaction, in which he has been engaged,
legally or constructively fraudulent as against the complainants, his general denial of all fraud will not counteract or
alter the legal effect of such admission. It may rebut the presumption of a corrupt intention to defraud, but it cannot
affect the legal conclusion which the court is bound to draw from the facts admitted.
[HN8] An agreement by two persons that they would not bid against each other at an auction, that one should buy in the
articles, and they would afterwards divide the same equally between them, is against public policy, and is void, as
tending injuriously to affect the character and the value of sales at auction.
[HN9] A person who is incapacitated from purchasing on his own account, cannot in any case, or under any
circumstances, buy as the agent of a third person.
Criminal Law & Procedure > Counsel > Right to Counsel > General Overview
[HN10] A person cannot be relieved from the consequences of his own illegal act. Any person, who is a party in
interest, and who supposes himself injured by the illegal act, may apply for redress, if he thinks proper to do so. If a
resale of the property is ordered, it is to be put up again at the price bid by the former purchaser; and if nothing further is
bid he may be compelled to take the property and to account for the proceeds of the first sale.
Business & Corporate Law > Agency Relationships > Establishment > General Overview
Business & Corporate Law > Agency Relationships > Types > Attorney & Client
Legal Ethics > Client Relations > Conflicts of Interest
[HN11] An attorney, retaining that character, may contract with his principal, where the principal is acting in his own
right, and not as agent or trustee for another; or he may purchase at public auction, or private sale, in cases where his
client is interested in the proceeds of such sale, provided the purchase is made with the knowledge and consent of his
client. But in all cases where the relation of attorney and client exists, and which is in any manner referable to the
subject of the purchase, whether such purchase be made by the attorney on his own account, or as the agent or for the
benefit of others, the purchaser must be subject to the onus of making it fully manifest that no advantage has been taken
of the client.
Legal Ethics > Client Relations > Conflicts of Interest
[HN12] In contracts between attorney and client, if there is a great inadequacy in the price paid on a purchase by the
attorney, the contract will not be sustained in a court of equity.
Page 191
4 Cow. 717, *; 1825 N.Y. LEXIS 162, **1
Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Waiver & Preservation
[HN13] Acquiescence, for a great length of time, after the party was in a situation to enforce his right, and with a full
knowledge of the facts, was evidence of a waiver, or abandonment of the right. The application to set aside the sale, or
for other relief, must be made within a reasonable time; but what is a reasonable time cannot well be defined so as to
establish any general rule and must, in a great measure, depend upon the exercise of the sound discretion of the court,
under all the circumstances of each particular case.
[HN14] In cases of purchases by trustees, or others who are not authorized to purchase without the consent of their
principal or cestui que trust, the rule of equity is, that if the purchaser has not divested himself of the property, it is to be
put up again, at the amount of the former bid, together with he value of beneficial and lasting improvements, made
thereon after the sale, and if it brings nothing more, he is to be holden to his purchase. But if he has parted with the
estate, he may be compelled to account for all the property which has been made by him on the resale. And he must pay
interest upon the profits which he has made upon the sale.
HEADNOTES
Entry of Judgment, on Bond and Warrant of Attorney, for Benefit of Several Creditors--Levy, on Real
Estate--Agreement, by three Creditors, to Authorize Agent to Attend Sale and Purchase for their Benefit--Sale, by
Agent, to Bona Fide Purchaser--Purchaser Acquires Title--The three Creditors Accountable to Remaining Creditors
for Share of Profits--When Attorney may Purchase--Application, to Set Aside Purchase by Agent or Trustee--Must be I
in Reasonable Time--when Right of Action Barred in Equity--Parties--Notice--Jurisdiction of Equity--Having Gained
for One Purpose, Retains for All.
A debtor, being in failing circumstances, and owing to five of his creditors $ 7,540, in separate and distinct debts,
gave them a judgment bond, in which all their debts were included; and C, as their attorney, entered upon the judgment,
and issued an execution, upon which the real property of the debtor was advertised for sale by the sheriff. Three of the
creditors attended the sale, in the absence of the other two, and agreed not to bid against each other, but to employ an
agent to bid in the property and to divide the profits of the purchase between them, in proportion to their respective
debts; and for this purpose they employed C., the attorney, who bid in the property for $ 625, which was less than one
fifth of its cash value; and a few days thereafter the attorney sold the premises for $ 3,600, and divided the profits,
arising from the resale, among the three creditors, to the exclusion of the other two; held, that the purchase, by the
attorney, as agent for three of his clients only, was fraudulent, as against the other two, who were absent at the sheriff's
sale. But as the resale was made to a bona fide purchaser, who had no notice of the fraud; also, held, that both sales
must stand; and that the three creditors, who made the fraudulent purchase, must account to the other two, for their
shares of the proceeds of the last sale; in proportion to the amount of their several interests, in the judgment, at the time
of the sheriff's sale.
An agreement between persons having separate and distinct interests, not to bid against each other, at the sheriff's
sale, but to divide the profits of the purchase, is against public policy; and is a fraud upon other persons interested in the
sale.
It seems that an attorney, who issues an execution, cannot become a purchaser at the sheriff's sale, either on his own
account, or as the agent of a third person, without the consent, and against the interest of his client; and leaving the
client's debt unsatisfied.
Where the client, himself, is not prohibited from purchasing, the attorney may purchase, with his assent; and neither
Page 192
4 Cow. 717, *; 1825 N.Y. LEXIS 162, **1
the defendant in the execution or a third person can object to the validity of such a purchase.
A purchase, made by a person standing in the situation of agent or trustee for the sale, however fair and honest it
may have been, must be set aside, on the application of the cestui que trust, or principal, if such application is made
within a reasonable time.
If the application is not made within a reasonable time, it will be considered as a waiver or abandonment of the
right.
What shall be deemed a reasonable time has not been settled by any fixed rule : and seems to depend upon the
exercise of the sound discretion of the court, under all the circumstances of each particular case.
A person who is incapacitated from purchasing on his own account, cannot purchase as the agent of a third person;
neither can he become a purchaser through the intervention of another.
The shortest period which a court of equity is bound to consider an absolute bar to a suit respecting real estate, in
analogy to the limitation of actions at law, is twenty years.
In cases of implied trusts in relation to personal property, or to the rents and profits of real estate, where persons
claiming in their own right are turned into trustees by implication, the right of action in equity will be considered as
barred in six years, in analogy to the limitations of similar actions at law.
A dormant partner, who has never been known in the transactions to which the suit relates, need not be made a
party.
The purchaser of a chose in action takes it subject to all equities, although a bona fide purchaser without notice.
Whatever is sufficient to put a purchaser on inquiry is, in equity, considered as conveying notice.
A bond given by a debtor to his creditor is prima facie evidence of his indebtedness, even as against third persons.
An objection to the jurisdiction, on the ground that a perfect remedy existed at law, should be raised by demurrer to
the bill, or insisted on by the defendant in his answer. It is too late to make the objection at the hearing, unless the court
be wholly incompetent to afford the relief sought by the bill.
Where courts of equity once had jurisdiction of a case, they still retain it, though the original ground of jurisdiction,
the inability of the plaintiff to recover at law, no longer exists.
Courts of equity have concurrent jurisdiction with courts of law in all matters of account.
Where a court of equity has gained jurisdiction of a cause for one purpose, it may retain it generally.
Citations-- 2 Vern., 692, 764; 2 Johns. Ch., 271, 369, 252, 512; 3 Conn., 146; 1 Johns. Ch., 267, 344; 2 Ves., Jr.,
200, 440; 2 Sch. & L., 474, 599; 8 Johns. 520; 2 Cai., 56, 54, 40, 37; 9 Johns. 505; 17 Johns. 388; 10 Johns. 596; 16
Ves., 324; 6 Johns. 194; 3 Johns. Cas. 32; 4 Johns. Ch., 254, 121; 8 Ves., Jr., 352; 8 Wheat., 441; 10 Ves., 381, 423; 11
Johns. 464; Code Civ. Dis. Francais. Liv. 3, tit. 6, ch. 2, art. 1596, 7; 1 Cox. Cas., 140; 14 Ves., 91, 214, 517; 5 Ves.,
682, 707; 6 Ves., 266, 625, 631; 5 Johns. 47, 48; 2 Cow., 191; Sug. Vend., 431; 18 Ves., 120, 311; 12 Ves., 373; 4 Br.
Ch., 350; 4 Desaus. Ch., 503, 702, 716; Cooper Ch. Cas., 201; I Cai. Cas., 1; 3 Binn., 64; 2 Hen. & Munf., 245; 2 Br.
Ch., 400; 4, Ves., 417; 4 Binn., 44; 9 Ves., 292; 12 Johns. 141; 2 P. Wins., 307.
COUNSEL: Mr. W. Hay, for the complainants, and
Mr. S. G. Huntington, for the defendants.
Page 193
4 Cow. 717, *; 1825 N.Y. LEXIS 162, **1
A final decree in the cause was made at the July Term, 1825; and the following opinion was filed by the circuit judge,
as containing the reasons on which that decree was founded :
JUDGES: WALWORTH, Ch. J.
OPINION BY: WALWORTH
OPINION
[*719] WALWORTH, Ch. J. " The facts in this case, as they appear from the pleadings and proofs, are
substantially these : John M. Berry of Moreau, in the County of Saratoga, was indebted to the complainants, S. & A.
Hawley, in the sum of $ 1,300, and to Marvin in the sum of $ 500. He was also indebted to the defendants, House &
Myers, $ 1,820; Stewart & Knickerbacker $ 520, and to DeWolf $ 950. One Isaac B. Payne was also supposed to be
holden as indorser and surety for Berry in [**2] the sum of $ 2,450, including a small debt actually due to him from
Berry.
August 6, 1816, Berry being in failing circumstances, to secure the payment of these several sums, he gave to all
those creditors a joint bond, in the penalty of $ 15,000, conditioned to pay $ 7,540, with interest; and also gave a
warrant of attorney to confess judgment on the bond. The defendant, Cramer, witnessed the bond; on the back of which
was a memorandum of the amount due to the obligees respectively. A judgment was entered in the Supreme Court, on
the bond and warrant, the 9th day of the same [*720] month, by Cramer and his partner, Given, as attorneys for the
obligees. At the execution of the bond and warrant, it was known to all the parties that the $ 2,450, included therein,
was not all due to Payne; but that it principally consisted of debts for which he was holden as Berry's surety. One of
these debts was a note from Berry to William Given, indorsed by Payne. On this note the drawer and indorser were both
sued, and separate judgments obtained against them thereon; and a fieri facias was issued on the one against Berry, to
the Sheriff of Saratoga, in Oct. 1816, for the amount of that judgment [**3] and interest. In Feb. 1817, the Hawleys
paid Given the amount due on the note, together with the costs of both suits, and protest, and took an assignment of both
of his judgments; and in Mar. thereafter, the execution was satisfied, by a sale of Berry's personal property; which was
bid off by one of the Hawleys.
The debt to Knickerbacker & Stewart was reduced to $ 301 by payments from Berry. The amount actually due to
Payne, including all the Berry debts for which he was made responsible as his surety, was ascertained to be only $ 890;
and for that sum he afterwards assigned to De Wolf, all his interest in the $ 15,000 judgment. In Mar. 1817, Cramer and
Given, as attorneys for the plaintiffs, and at the request of House, Knickerbacker and De Wolf, issued an execution on
the judgment, with a direction to levy $ 7,557.75 and interest, &c. By virtue of this execution the sheriff levied on all
the real property of Berry, a farm in Moreau worth $ 5,000; and Aug. 8, it was advertised to be sold at Waterford, Sept.
23, 1817.
Shortly before, or at the sale, the Waterford creditors, who with Cramer are the defendants in this suit, without the
knowledge of the complainants, mutually agreed [**4] that Cramer, the attorney should attend the sale as their agent,
and bid upon the farm, at his discretion, for their separate benefit. He did, accordingly, attend the sale as the agent of the
Waterford creditors, in the absence and without the knowledge of the other persons interested in the judgment, and bid
off the farm for $ 625. Dec. 26, [*721] 1817, by direction of the Waterford creditors, Cramer sold the farm to Hugh
Peebles for $ 3,600, in cash; which was the full value of the farm, exclusive of a mortgage of $ 1,400 which Peebles
held thereon. Cramer gave a quitclaim deed of the farm and received the $ 3,600, for the defendants, out of which they
permitted him to retain $ 38.12 for the costs of suit and sheriff's fees, and also $ 20 claimed by him to be due on an
older judgment, belonging to him, against the premises. They also left in Cramer's hands what they considered the
complainants' shares of the $ 625, after deducting the $ 58.12 therefrom, and divided the residue of the $ 3,600 among
themselves; but in what proportions or by what ratio does not appear, except that De Wolf admits he received from $
1,818 to $ 1,840, as his proportion. Before the filing of the bill, [**5] Cramer paid to the Hawleys $ 94.19, as their
proportion of the proceeds of the sale, and which was received without prejudice to their further claims; and he admits
Page 194
4 Cow. 717, *; 1825 N.Y. LEXIS 162, **1
he has still in his hands $ 41.22, for Marvin, which he is and ever has been ready to pay over to him, as and for his
share.
A preliminary question has been raised by the counsel for the defendants, of which I will first dispose. It is alleged
in the answer of House and Myers, that one Reynolds was jointly interested with them in their debt as a partner. And it
is now insisted that he should have been made a party to the suit.
It might, perhaps, be considered a sufficient answer to this objection, that Reynolds was not a party to the judgment
against Berry, and has never been known in the transactions connected therewith; and therefore, as to the parties in this
suit, he must be considered a dormant partner. But what is conclusive against the defendants, on this point, is the fact,
that the statement of the interest of Reynolds, in the answer, is not responsive to anything contained in the bill and,
therefore, is not evidence for the defendants. And they have produced no proof whatever to show that he was, in fact, a
[**6] partner, or a party in interest.
On the part of the Hawleys, it is insisted that the Given debt, with the two bills of cost thereon, being covered by
[*722] the amount inserted in the judgment bond for Payne, they as assignees of the debt, are entitled to a priority; or at
least to stand in the place of Payne, pro tanto.
So far as it respects the principal debt, and the costs of the suit against the drawer of the note, the Hawleys can have
no pretense of claim on the fund raised by the sale of the real estate of Berry. The evidence is conclusive that the whole
amount of the judgment against the drawer of the note was raised by the sale of his personal property, which was bid off
by Alpheus Hawley; who also gave a receipt in full of the execution. As to the cost of the suit against the indorser
(about $ 35), under all the circumstances connected with that transaction, I think it may be fairly presumed to have been
an advance of that amount, by the Hawleys, for the benefit of Berry, without any intention on their part of holding
Payne responsible therefor; and without any expectation of being reimbursed out of the property secured by the $
15,000 judgment. They have, therefore, [**7] no claim to be substituted in the place of Payne for the amount of that
cost.
Neither can the claim of the defendant De Wolf, for the whole $ 2,450, under the assignment from Payne, be
sustained in a court of equity In his answer De Wolf denies all knowledge of the actual amount due from Berry to Payne
at the time of the assignment. But this is not sufficient to entitle him to the whole amount, as a bona fide purchaser
without notice. He was [HN1] the purchaser of a mere chose in action; and took the right of Payne subject to all the
equities which existed against that right, in the hands of Payne. Coles v. Jones, 2 Vern., 692; Turton v. Benson, 2 Vern.
764; Tourville v. Naish, 3 P. Wms. 307; Livingston v. Hubbs, 2 Johns. Ch. 512. But on the principles which are
applicable to purchasers of the legal estate, De Wolf cannot be considered a bona fide purchaser for this whole
amount. Being a party to the bond and warrant, he is constructively chargeable with notice of the real situation of
Payne's debt. Besides, he had actual information of that which was sufficient to put him on inquiry; and whatever
[**8] is sufficient to put a party on inquiry is, in equity, considered [*723] as conveying notice. (3 Conn. 146.) On
this ground, in Sterry v. Arden, 1 Johns. Ch., 267; Chancellor Kent held a purchaser chargeable with constructive
notice, who had only heard that the vendor had made some provision for his daughter, out of the property. And this
principle is fully supported by the English authorities.
In Taylor v. Stibert, 2 Ves., Jr., 440, Ld. Rosslyn says : " It has been determined that a purchaser being told
particular parts of an estate were in possession of a tenant, without any information as to his interest, and taking it for
granted it was a lease from year to year, was bound by a lease the tenant had, which was a surprise upon him. That was
rightly determined; for it was sufficient to put the purchaser upon inquiry that he was informed the estate was not in
the actual possession of the person with whom he contracted." And these remarks of Ld. Rosslyn are quoted with
approbation by Ld. Redesdale, as containing a doctrine which had never been doubted. Crofton v. Ormsby, 2 Sch. & L.,
599.
De Wolf, in his answer, admits [**9] that at or about the time of executing the bond and warrant, which was many
Page 195
4 Cow. 717, *721; 1825 N.Y. LEXIS 162, **5
months previous to his purchase of Payne's right, he was informed that the $ 2,450 was not all due to Payne, but was
intended to cover indorsements and responsibilities for Berry, and which he might thereafter be compelled to pay. And
with this knowledge, if De Wolf did, in fact, as he alleges in his answer, purchase of Payne without ascertaining how
much was actually due, it was crassa negligentia. Payne sold to him his right in the judgment for $ 890, the exact sum
due; and if De Wolf was not informed that was the real amount due, he must have remained intentionally and willfully
ignorant of that fact, for the purpose of obtaining more than his fair proportion of the proceeds of the judgment. And it
appears by his answer that he has, in truth, obtained more than his fair proportion; even as between him and his
co-defendants in this cause. Under such circumstances he has no reason to complain of any hardship in the application
of the maxim caveat emptor, to his purchase of Payne's interest in [*724] the judgment. The assignment must be
permitted to stand only for the $ 890 actually due; and the [**10] residue of the $ 2,450, together with the amount paid
by Berry to Knickerbacker and Stewart, must be considered as stricken out of the judgment. It appears from the
testimony of Payne, that the assignment was made after the sale of the personal property, which was in March, 1817 :
and if the $ 890 included in the interest oil Payne's claim up to that time, which is not at all improbable, De Wolf will
still get a dividend on a few dollars more than his equitable right in the judgment.
It follows, from the reduction of De Wolf's claim under the assignment, to the real amount which was due to Payne,
that the amount left in the hands of Cramer for the complainant's shares of the purchase money bid at the sheriff's sale,
is less than they were actually entitled to, even if they are to be concluded by that sale. And if they are limited to their
proportions of the $ 625 bid at that sale, there can be no propriety in permitting Cramer to retain out of that amount the
$ 20 alleged to be due him on an older judgment. If the purchase by him as the agent of the Waterford creditors was a
bona fide and legal purchase, it was a purchase subject to all prior incumbrances; and if any such existed, [**11] the
Waterford creditors should have paid them without deducting the amount from the purchase money in which other
persons had an interest. As well might they claim to deduct from that purchase money the whole amount of the
mortgage to Peebles, which was also an older incumbrance on the premises sold. The costs and sheriff's fees, only,
being deducted from the amount bid, would leave $ 586.88 to be distributed; and the whole amount due on the
judgment, exclusive of interest, was $ 5,761. Considering these as the basis of distribution, the proportionate share of
the Hawleys would exceed $ 130, and that of Marvin would be something more than $ 50. But the amount left in
Cramer's hands for the Hawleys was only $ 107.16, and for Marvin $ 41.22, of which the latter has received nothing;
and the former for some cause which is unexplained, have been paid only $ 94.19. Admitting, therefore, that the
complainants have no claim beyond this amount they have an [*725] unquestionable right to a decree for an account of
the net proceeds of the sheriff's sale, and for the payment of their respective proportions thereof.
But the defendants insist that this part of the claim is barred by the Act [**12] of Limitations. The sheriff's sale
was in Sept., 1817; the bill of the complainants was filed in Nov., 1823, and the appearance of all the defendants was
entered Dec. 8, thereafter, and within six years after the sale to Peebles. The sheriff's deed is not among the exhibits in
the cause, and has not been read in evidence. It does not, therefore, certainly appear at what time the sale was
consummated by the execution of a deed. But I think it may be fairly inferred, from the facts in the case, that the deed
was not actually executed until about the time of the sale of the farm to Peebles. [HN2] In ordinary cases, the execution
of the sheriff's deed will have relation to the back time when the sale actually took place; and it is the usual practice to
date them at that time, though executed afterwards. But this relation, which is a fiction of law, is never to be adopted
when third persons, who are not parties or privies, will be prejudiced thereby. Heath v. Ross, 12 Johns. 140. The Statute
of Limitations could not begin to run until the purchasers became legally liable for the purchase money, which was not
until the actual execution of the deed by the sheriff. It has been [**13] frequently decided by the Supreme Court that a
sheriff's sale is within the Statute of Frauds; and that the execution of the deed is necessary to devest the title of the
defendant in the execution. These decisions have been sanctioned by the highest judicial tribunal in the State. Catlin v.
Jackson, in Error, 8 Johns. 520. The execution on which the farm was sold, is in evidence, but there is no return
thereon, neither is there any receipt or memorandum to show that any money was ever received by the sheriff or by any
other person on the execution. The necessary inference from these facts, taken in connection with the answers of the
defendants, is, that no money was paid or received on account of the farm until the sale to Peebles. And the attempt by
the defendants, at that time, to apportion to the complainants [*726] their shares of the proceeds of the sheriff's sale, is
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a sufficient admission of their liability to account, to take the case out of the Statute of Limitations.
Another objection which has been urged by the defendant's counsel is, that there is no evidence to support the
averment in the complainant's bill, that Berry was indebted to them in [**14] the sums therein stated--the defendants in
their answers having denied all knowledge of such indebtedness.
The defendants all admit, by their answers, that in the bond and warrant given by Berry, there was included the sum
of $ 1,300, as and for a debt of that amount due from him to the Hawleys, and $ 500 as and for a debt of that amount
due to Marvin. The bond executed by Berry has been proved and is an exhibit in the cause; and that, taken in connection
with this admission in the answers of the defendants, is prima fascia evidence of the debts due to the complainants, as
stated in their bill. The defendants, by their answers, do not even pretend that they have any reason to believe these
sums were fraudulently inserted in the bond and warrant, when no such debts were really due. If the defendants had any
reason to suspect that the sums, thus included in the bond and warrant, were not real and bona fide debts due from Berry
to the complainants, or that any part of the same had been paid to them by Berry, they might have set up that defense in
their answer. In which case the defendants would have been permitted to establish the fact by proof at the hearing or by
a cross-bill, [**15] they might have called on the complainants to disclose the consideration and grounds of such
indebtedness, and the payments, if any, which had been made thereon. [HN3] The bond, as against Berry, is conclusive
evidence of the debts, unless some fraud or mistake in the transaction could be shown. And it must, at least, be prima
facie evidence of the indebtedness as against third persons; especially where such third persons are parties to the same
instrument.
Another objection has been made by the defendants' counsel which goes to the jurisdiction of the court. It is urged
that if the complainants have any subsisting claim against any of the defendants, they have a complete and ample
remedy at law.
[*727] Although the counsel, on the argument, appeared to have but little confidence in this objection, yet, as it
has been made one of the formal points in the cause, it may be proper that I should give it some consideration. This
objection to the jurisdiction is made, for the first time, at the hearing. It was neither raised by demurrer to the bill, nor
insisted on as a ground of defense, in the answer of the defendants. They have thus submitted the cause' to the
cognizance of the court, [**16] and they now come too late with this objection to its jurisdiction, unless the court be
wholly incompetent to grant the relief which the complainants have sought by their bill. Ludlow v. Simond, 2 Cai. Cas.
1, per Kent, Ch. J.; 2 Cai. Cas. 40, per Thompson, J., and Underhill v. Van Cortlandt, 2 Johns. Ch., 869.
If the defendants were not too late with this objection, it would still be somewhat doubtful whether the
complainants had a remedy at law, against their co-plaintiffs in the judgment, to recover their equitable proportions of
the amount raised by the sale, though I am inclined to the opinion that they might have recovered against them,
respectively, in actions for money had and received, within the principles which by modern decisions have been applied
to that action. But the remedy at law was doubtful, and would have required a multiplicity of actions; either of which
grounds would be sufficient to authorize the interference of a court of equity. Neither does it follow, of course, that this
court is ousted of jurisdiction in all cases where the party has a perfect remedy at law. The proposition is undoubtedly
correct as [**17] a general principle; but the rule is subject to many exceptions. [HN4] There is a great variety of cases
where courts of equity have concurrent jurisdiction with courts of law; and such is the case in all matters of account. Per
Thompson, J., in Ludlow v. Simond, 2 Cai. Cas., 37, and per Kent, Ch. J., in Post v. Kimberly, 9 Johns. 470. The
extension of the equitable principles upon which actions for money had and received may be sustained in courts of law
has not devested the courts of equity of their ancient jurisdiction in all matters of account. It is an established principle,
that where a court of equity once had jurisdiction, [*728] it will still insist on retaining it, though the original ground of
jurisdiction, the inability of the party to recover at law no longer exists. Per Spencer, Ch. J., in King v. Baldwin, 17
Johns. 384. And the late Chancellor Kent, while delivering his opinion in the Court of Errors, in Ludlow v. Simond,
observes: "I should regret exceedingly that any opinion which might be given by this court should tend to embarrass the
benign and well settled jurisdiction of chancery, in the unlimited [**18] cognizance of accounts." (2 Cai. Cas. 54.)
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4 Cow. 717, *726; 1825 N.Y. LEXIS 162, **13
Again; the complainants had a right to come into this court for a discovery of the amount paid to the defendants by
Berry; to ascertain the proceeds of the judgment, which had been received by them respectively; to ascertain the amount
which was actually due to De Wolf, under the assignment from Payne; and to settle the rights and proportions of the
respective parties in the distribution of the fund.
And [HN5] it is a settled rule in equity, that when the court has gained jurisdiction of the cause for one purpose, it
may retain it generally. Per Spencer, J., in Rathbone v. Warren, 10 Johns. 587.
Another objection contained in the written points of the defendants, but which was not mentioned on the argument,
is, that the complainants are improperly joined.
This objection could not have been intended to be seriously urged; for there is no rule in equity which is better
settled than the one that [HN6] all persons having an interest in the distribution of the fund or in the subject-matter of
the suit must be made parties, either as complainants or defendants, if within the jurisdiction of the court. And although
there [**19] are exceptions to this rule, those exceptions are only by way of excuse for not bringing all the parties in
interest before the court. In Cockburn v. Thompson, 16 Ves., 324, Ld. Eldon mentions a variety of cases of this
description. The objection that there is a misjoinder of complainants can only be sustained where several persons file a
joint bill, for separate and distinct causes of action, having no connection with each other; neither as it respects the
rights of the complainants, or the rights of the defendants. [*729] In this case, the subject-matter of the suit, in respect
to all the parties, is the same; though their rights and liabilities may be separate and distinct, as it respects the
distribution of the fund; and it would have been a valid objection that either of the parties to the judgment, and who had
a subsisting interest in the subject-matter of the suit, was not a party.
Having disposed of these preliminary questions, I proceed to the examination of the one of more importance, the
principal one in the cause, and which has probably produced this suit.
Have the complainants any claim beyond their proportionate shares of the amount of the [**20] bid at the sheriff's
sale ?
I have examined this question with much care and attention, not so much on account of the effect which my
decision may have upon the interests of the parties to the suit, which should always be a subject of secondary
consideration with the court, as on account of the important principles which are involved in that decision. After a full
investigation of the subject, I have arrived at the conclusion that the validity of the purchase at the sheriff's sale cannot
be sustained; and, consequently, that the complainants are entitled to their proportionate shares of the amount which
was received by the defendants, on the subsequent sale of the farm to Peebles.
But though, under all the circumstances of this case, I am compelled to pronounce the purchase at the sheriff's sale
fraudulent and void as against the complainants, upon the principles of equity, there is nothing in this decision which
necessarily implicates the characters of the defendants. The transaction was a contest by creditors to obtain a preference
in the collection of their just demands which were due from a debtor who was insolvent. And though these defendants,
for the purpose of securing such [**21] preference, acting under a mistaken impression as to their legal rights, have
made a purchase which is deemed constructively fraudulent, as being contrary to public policy and inconsistent with the
equitable rights of the complainants, it is still perfectly [*730] reconcilable with the moral honesty of the persons
concerned in making such purchase.
The complainants allege that the purchase at the sheriff's sale was fraudulent and void as against them :
1. Because the execution was issued without their knowledge or consent.
2. Because they were not informed of the time and place of sale; and,
3. Because John Cramer, one of the attorneys for the plaintiffs, and whose name appeared upon the execution as
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such attorney, became the purchaser, by collusion with the other defendants, at a sum far below the real value of the
property; and this in the absence and without the knowledge or consent of the complainants. And in connection with this
is the point arising out of the facts stated in the answer, as to the agreement made by the defendants with each other,
previous to and at the sale.
Before I proceed to the examination of these points, I will barely remark that as it satisfactorily [**22] appears that
no money was paid to the sheriff by the defendants, or by Cramer, the agent of the Waterford creditors, on the sale upon
the execution; and the purchase being made with the moneys due on the judgment, a part of which purchase money
belonged to the complainants, it might be questionable whether a trust in their favor, pro tanto, was not created by such
purchase. But as this has neither been made a point in the cause, nor discussed at the hearing, I shall not go into the
examination of that question.
1. It is admitted in the answers of some of the defendants, that the execution was issued at the request of House,
Knickerbacker and De Wolf, in the absence of the complainants; and probably, at the time, it was without their
knowledge. But the defendants all deny any fraudulent intent in taking out the execution, and the complainants have
produced no evidence whatever to contradict this point of the answers. And all suspicion of fraud, or of any improper
object in issuing the execution, is rebutted by the fact that it remained nearly five months in the sheriff's hands before
the farm was advertised for sale thereon. Besides, there can be no doubt [*731] of the right [**23] of either of the
parties interested in the judgment to call for an execution, without consulting their co-plaintiffs, unless there was some
express agreement or understanding to the contrary; and none is pretended in this case.
2. It appears that the farm was advertised for sale in the manner prescribed by law, in a public newspaper of the
county. And whether that paper was published at Waterford, as both parties have supposed in their pleadings in this
cause, or at Ballston Spa, as the proofs would seem to indicate, is wholly immaterial. In the absence of all evidence to
the contrary, I am also bound to presume that the officer complied with the other requisites of the Statute, by affixing up
notices, of the time and place of sale, at three of the most public places in the town where the land was to be sold. This
was legal notice to all persons interested in the sale. But in addition to this legal notice, the answer of De Wolf is
positive, that, before the sale, he gave actual notice to Marvin of the time and place when it was to be made, and
requested him to attend, or to make some arrangement in relation to the property. This part of the answer is responsive
to the bill, and being [**24] uncontradicted, is conclusive evidence of the fact. The testimony of Given is nearly as
positive, as to the information which he communicated to Alpheus Hawley. And though it is probable Hawley may have
mistaken the day, or even possible that Given unintentionally misinformed him as to the time, yet neither of those
circumstances could form any sufficient ground for impeaching the validity of the sale.
3. The defendants have expressly denied the existence of any fraud or fraudulent intentions, in the employment of
Cramer to purchase in the property for them on the execution. But this general denial is not sufficient in this case,
though it may be sufficient to rebut the presumption of any corrupt intention on the part of the defendants. [HN7] If a
party, in his answer, admit the existence of facts which render the transaction, in which he has been engaged, legally or
constructively fraudulent as against the complainants, his general denial of all fraud will not counteract or alter the legal
[*732] effect of such admission. It may rebut the presumption of a corrupt intention to defraud, but it cannot affect the
legal conclusion which the court is bound to draw from the facts admitted.
[**25] In this case, from the admission of the defendants, there can be no doubt of the fact that the Waterford
creditors agreed not to bid against each other at the sheriff's sale; and that they also agreed to employ Cramer, one of the
attorneys for all the parties on the record, as their separate agent to bid in the property for their joint benefit in the
proportion to their respective interests in the judgment; and to exclude the complainants from any participation in the
benefits arising from the purchase, beyond their proportions of the amount actually bid at the sale.
If the plaintiffs in the judgment are to be considered as having distinct and separate interests therein, and as
respecting different rights, their agreement not to bid against each other, but to unite in the purchase, was, of itself,
against public policy and was constructively fraudulent, not only as against their co-plaintiffs, but also as against Berry,
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4 Cow. 717, *730; 1825 N.Y. LEXIS 162, **21
the defendant in the execution.
In Doolin v. Ward, 6 Johns. 194, the Supreme Court of this State decided that [HN8] an agreement by two persons
that they would not bid against each other at an auction, that one should buy in the articles, and they [**26] would
afterwards divide the same equally between them, was against public policy, and was void, as tending injuriously to
affect the character and the value of sales at auction. In Jones v. Caswell, 3 Johns. Cas. 29, Radcliff, J., observes : " The
law has regulated sales on execution with a jealous care, and enjoined such proceedings as are likely to promote a fair
competition. A combination to prevent such competition is contrary to morality and sound policy. It operates as a fraud
upon the debtor and remaining creditors, by depriving the former of the opportunity which he ought to possess of
obtaining a full equivalent for the property which is devoted to the payment of his debts, and opens the door for
oppressive speculations." And these principles are expressly recognized and fully sanctioned by the late Chancellor, in
Troup v. Wood, 4 Johns. Ch., 254. [*733] In the present case, can there be any doubt that the sacrifice of the Berry
farm, for about one sixth of its actual value in cash, was the immediate and inevitable result of this agreement, entered
into by the five Waterford creditors, representing three distinct and separate [**27] interests in the judgment; and this,
too, in the absence and without the knowledge of the other persons who were interested in the sale ? Had this illegal
agreement not been entered into, there is no probability that either of them would have suffered the property to be sold
at such an enormous sacrifice, and leave their debts unpaid.
But this is not the only objection which the complainants urge against the validity of the purchase. They also
complain that the Water-ford creditors employed the attorney on record to make the purchase; that they seduced him
from the allegiance which he owed to all the plaintiffs in the execution as their common agent for the collection of the
amount due on judgment; and that they engaged him to become the separate agent of a part of his clients, in a
speculation not only inconsistent with but directly opposed to the interests of the rest, and contrary to the duty which he
owed to the whole collectively. And here the important question arises, which I will now consider.
Can the attorney on record, who issues an execution, become a purchaser at the sheriff's sale on such execution,
either for his own benefit, or as the agent of others, against the interest [**28] and without the consent of those for
whose benefit the execution issued ?
I consider the fact that the purchase was made by the attorney, without the consent and against the interest of some
of his clients, or those for whose benefit he is supposed to act as attorney, as important in this case. For notwithstanding,
the court, in Howell v. Baker, 4 Johns. Ch., 121, said that the rule disqualifying solicitors and attorneys from purchasing
at sales brought about by their agency, had strong pretensions to be applied to the case of an application by the
defendant in an execution to set aside a purchase made by the plaintiff's attorney, the late Chancellor, intentionally
[*734] avoided deciding that point, though it was directly before him in that suit. I think the doctrine has never been
carried to that extent, even in the decisions of the English courts, which have gone the farthest on this subject. The
reasons why the attorney or agent is not permitted to purchase, is because it is supposed to be inconsistent with the duty
which he owes to those for whom he is employed to act; and from the relation which exists between the agent and his
principal; or between [**29] the attorney and his client. But these reasons cannot apply to the defendant in the
execution. The plaintiff's attorney owes no allegiance to the defendant, and is under no obligation of duty to take care of
his interest; neither is there any confidential connection existing between them. There can be no doubt of the right of a
plaintiff to purchase on his own execution. And I think there can be as little doubt of the right of the attorney to
purchase for his client, with his assent; or to purchase for himself, or as the agent of a third person, with the like
permission. There are cases in which the client, himself, is not permitted to purchase, and in all such it may be proper to
extend the like prohibition to his attorney or agent. The case of a solicitor to a commission of bankruptcy, in England, is
one of this description. The assignees are not permitted to become purchasers of the bankrupt's effects; and the same
rule is applied to the solicitor to the commission, who is their agent in the management of the estate. He cannot
purchase, even by permission of the assignees, without the consent of all the parties interested in the fund arising from
the sale. Ex parte James, 8 [**30] Ves., Jr., 352.
All the cases, on the subject of purchases by persons standing in the situation of actual trustees for the sale, were
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ably and elaborately reviewed by Chancellor Kent, in Davoue v. Fanning, 2 Johns. Ch., 252. It would, therefore, be
considered presumption in me to go over that ground, and I shall not attempt it; but content myself with observing that
the principles there settled, by him, have been sanctioned by the highest court in the Union. Wormley v. Wormley, 8
Wheat. 421. In all such cases, the rule appears now to be fully settled, that the purchase, however [*735] fair and
honest it may have been, must be set aside on the application of any of the parties in interest; provided such application
be made within a reasonable time after the sale; which is to be judged of by the court, under all the circumstances of the
case. And the fact that the purchase was made by the trustee through the intervention of a third person, or that the
trustee purchased as agent for another, makes no difference in the legal effect of the transaction, or in the application of
the general rule. [HN9] A person who is incapacitated from purchasing [**31] on his own account, cannot in any case,
or under any circumstances, buy as the agent of a third person. Ex parte Bennet, 10 Ves., Jr., 381.
So far as I have been able to discover, the question, whether an attorney can become a purchaser without the
consent of his client, for whose benefit the sale is made; or whether he stands in the same situation as regards his client,
as the trustee or other agent does in relation to his cestui que trust or principal, has not been judicially settled in any of
the courts of this country. In the English courts the rule is frequently referred to by counsel, as being perfectly settled,
and well understood. But even there I have been able to find but few reported cases, except in bankruptcy, where a
purchase by the attorney has been set aside, notwithstanding it was perfectly fair in all its circumstances. The fact that
lands are not there sold under judgments in the common law courts, and that sales made by order of the courts of equity
are examined and passed upon by the court, on the coming in of the master's report of the sale, will, probably, account
for the small number of cases that appear in the English reports. The case of Owen [**32] v. Foulkes, mentioned in a
note to Lacy's case, 6 Ves. Jr. 631, was a purchase by the solicitor in the cause; a bill filed by creditors; the purchase
perfectly fair; the solicitor bidding openly in the presence of very respectable persons concerned for mortgages and
creditors, and declaring that he was bidding for himself; the sale, at that time, being also necessary. The reporter says, "
but the general rule prevailed." And the sale was set aside, as has been done in a number of cases there mentioned,
where the purchase has been made by the solicitor to the commission in bankruptcy.
[*736] By the Roman law, guardians were prohibited from purchasing the property of their wards; agents and
attorneys, the property intrusted to their care and management; and generally, all persons, having a trust or charge, were
disabled from purchasing the property which was the object of such trust. And the disability was extended to their
children and other persons under their control. And the new Civil Code of France has carried the principle to its fullest
extent. The 1596th article, under the title "Que peut acheter au vendre," having prohibited on sales at auction [**33] or
to the highest bidder, guardians from becoming purchasers of the goods which they have in guardianship; agents from
purchasing goods of which they have the charge of the sale; administrators, those things the settlement whereof is
committed to their care and administration; and public officers, the goods of the nation of which they have the ordering
of the sale, &c.; the next article prohibits the judges of the courts, and their petitioners, or suitors, the attorneys,
registers, bailiffs, notaries and other officers, &c., (Les juges, leurs suppleants, les commissaires du gouvernement, les
substitutes, les greffies, huissiers, avoues, defenseurs officieux, et notaries), from becoming the purchasers of anything
connected with the suits litigated in the tribunals, within the jurisdiction of which, they exercise their functions; under
the penalty of having the sale made void, and of paying the costs with damages and interest. (Code Civil, Des Francais,
Liv. 3, tit. 6, ch. 2, art. 1596, 1597.)
The principles of the French Code, so far as it relates to attorneys, are sustained by Ld. Thurlow, in Hall v. Hallet, 1
Cox. Cas. 140. In speaking of an assignment of certain [**34] debts, made by an administrator to an attorney who had
been employed generally in the management of the legal business of the estate, he declared that if the decision rested
upon the simple fact of the assignment only, the assignee should not be entitled to any advantage from the purchase of
the debts; for no attorney could be permitted to buy things in a course of litigation, of which litigation he has the
management. And in the case of the petition of Frances James, in bankruptcy, 8 Ves., 352, Ld. Eldon set [*737] aside a
purchase made by a solicitor, who had been employed by the assignees in the business of the estate; although the sale
was perfectly fair, and the purchase sanctioned by most of the persons interested in the estate--the amount bid, being, at
the time of sale, considered the full value of the premises. He observes, " this doctrine, as to purchases by trustees,
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4 Cow. 717, *734; 1825 N.Y. LEXIS 162, **30
assignees, and persons having a confidential character, stands much more upon general principle than upon the
circumstances of any individual case. It rests upon this, that the purchase is not permitted in any case, however honest
the circumstances--the general interest of justice requiring [**35] it to be destroyed in every instance--as no court is
equal to the examination and ascertainment of the truth, in much the greatest number of cases."
But it is supposed, by the counsel for the defendants, that the case of Beardsley v. Root, in the Supreme Court of
this State, 11 Johns. 464, and Nelthrop v. Pennyman, in the English Court of Chancery, 14 Ves., Jr., 517, have
established the doctrine that attorneys may become purchasers without the consent and against the interests of their
clients. In the first case, the Supreme Court decided that the attorney for the plaintiff, as such, without other authority,
had no right to make a purchase for the client, especially under the circumstances of that case, where the client would
have to pay the' amount due upon an older judgment. And the attorney, having made such purchase when it was
absolutely necessary for the protection of his client's interests, and having taken a deed in his own name, the court held
him liable to his client for the amount bid on his execution. In the other case, Ld. Eldon refused to discharge the
solicitor in the cause from a purchase of the property, which had been made by him to [**36] prevent the sale at an
undervalue. And he declared that the solicitor purchasing under such circumstances must keep the property, if the court
thought he ought to keep it. This last case was not a contest between the attorney and client, but it was an application to
be relieved from the purchase, that there might be a resale; and other parties in the cause, besides his own client, had an
interest in the question and [*738] might hold him to his purchase. Neither of these cases establish the right of the
attorney to purchase for himself, as against his client. They are both founded upon a principle which is well settled, both
in equity and at law, that [HN10] a person cannot be relieved from the consequences of his own illegal act. Any person,
who is a party in interest, and who supposes himself injured by the illegal act, may apply for redress, if he thinks proper
to do so. If a resale of the property is ordered, it is to be put up again at the price bid by the former purchaser; and if
nothing further is bid he may be compelled to take the property and to account for the proceeds of the first sale.
Whelpdale v. Cookson, 5 Ves., Jr., 682; Ex parte Reynolds, 5 Ves., Jr., 707; [**37] Ex parte Lacy, 6 Ves., Jr., 625;
Jackson v. Van Dalfsen, 5 Johns. 43. If an attorney is not authorized to purchase for his client in any case, or under any
circumstances, without an express authority for that purpose, it does not necessarily follow that he has the right to
purchase for himself, or as the agent for a third person. He still has a duty to perform, in the execution of the trust
reposed in him as attorney. I incline to the opinion that there may be cases in which it would be the duty of the attorney
to purchase for his client if it became absolutely necessary to do so, in order to prevent a very great sacrifice of
property, and a certain and irreparable loss to his client. And this seems to be the opinion of the court in Beardsley v.
Root, though I admit it must be an extreme case, to justify such an interference by the attorney, without consulting his
client.
But in this case, although Cramer had no authority to purchase for the complainants, he had, in virtue of his
character of attorney in the execution, the power to direct and control the proceedings thereon. When he found that the
interests of a part of his clients were about to be [**38] sacrificed, in their absence, in consequence of the combination
among the other plaintiffs in the execution, he could have apprised the officer thereof, and requested him to postpone
the sale. And if the sheriff had refused to adjourn the sale, under such circumstances, and had proceeded to sacrifice the
property, the court would have set aside the proceedings as fraudulent [*739] and oppressive on the part of the officer.
M'Donald v. Neilson, 2 Cow. 139, per Savage, Ch. J. It was urged by the defendant's counsel that Marvin had no right to
complain because he was requested by De Wolf to attend the sale and bid upon the property, and he declined attending.
What his reasons were, for not attending, does not appear. His debt was small, when compared with most of the others,
and he probably supposed the property would sell for something like its fair value. He had a right to presume the sale
would be conducted in good faith, under the immediate observation of his attorneys, both of whom resided at the place
where the sale was to be made. He could not anticipate that there would be a combination among the other creditors, to
prevent a fair competition, or which [**39] would have the effect to destroy all competition among themselves, and
thus reduce the amount of the bids. Much less could he anticipate that one of those attorneys, with the knowledge that
such an arrangement had been entered into, would not only suffer the property to be thus sacrificed, but that he would
also become the agent of the purchasers to bid in the property for them. And certainly that attorney mistook the duty
which was imposed upon him by the relation in which he stood to the complainants, when he consented, under such
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circumstances, to make the purchase as the agent of the Water-ford creditors, without first letting the complainants
know that he would no longer attend to their rights, in the collection of the judgment. It is true Cramer, in his answer,
says he was only employed to enter judgment and issue execution. But I do not understand him to mean that there was
any special agreement or understanding that he should do that and nothing more; but only as intending to say, there was
nothing said about any further services. This would leave him the full control of the execution, on a retainer to enter the
judgment and to issue execution, as in ordinary cases.
There [**40] are strong reasons, on the ground of public policy, against permitting the attorney to become the
purchaser, either for himself or as agent of another, in any case, where it [*740] can possibly interfere in any manner
with the rights of his client. And I strongly incline to the opinion that the only safe rule is, to set aside all such
purchases, as of course, on the application of the client, where the purchase has been made without his knowledge and
consent, if any part of his debt remains unsatisfied. But it is not necessary that I should go that length for the decision of
this case. It is not necessary for me to carry the doctrine to the extent to which it is carried by the Napoleon Code, which
is only an extension of the principles of the Macedonian Decree of the civil law; or even to the extent to which it has
been carried in the English courts; where the sale would be set aside without showing any unfairness or want of
consideration in the purchase. It will be sufficient if I apply to this case the general principles which regulate and are
applicable to the dealings between attorney and client. The rule, as I understand it, is this : [HN11] an attorney, retaining
that character, [**41] may contract with his principal, where the principal is acting in his own right, and not as agent or
trustee for another; or he may purchase at public auction, or private sale, in cases where his client is interested in the
proceeds of such sale, provided the purchase is made with the knowledge and consent of his client. But in all cases
where the relation of attorney and client exists, and which is in any manner referable to the subject of the purchase,
whether such purchase be made by the attorney on his own account, or as the agent or for the benefit of others, the
purchaser must be subject to the onus of making it fully manifest that no advantage has been taken of the client. Testing
the present case by this rule, the purchase at the sheriff's sale could not be supported, even if the attorney had bid with
the knowledge and permission of the complainants. The property was purchased at a very great undervalue, leaving
their debts unsatisfied. Under such circumstances it would still be incumbent on the purchaser to satisfy the court,
beyond all doubt, that the attorney was ignorant of the value of the property, or that he fully apprised the complainants
of its real value before [**42] the sale. If the attorney knew that Peebles wished to become a purchaser of the property,
and that [*741] he was willing to pay its real value, or something near that value, it would be necessary for him to
show that his clients were informed of that fact, before he could be permitted to sustain a purchase to himself, at an
undervalue. But though sufficient was stated in the bill to create a suspicion that he was aware of the fact, which is all
that was necessary to throw upon the defendants the burden of removing such suspicion, the attorney does not deny his
knowledge of the fact; but contents himself with only denying that he has any recollection that Peebles apprised him of
his intention to attend the sale and that he promised to give him notice of the time and place. If he had only heard the
fact from some other source, he would be bound to communicate that information to his clients, before he could be
permitted to purchase at so great an undervalue, even with their consent. And if he had no such knowledge or
information, it should have been fully and explicitly denied in his answer. And before he could become the purchaser,
as the agent of the Water-ford creditors, it would [**43] also be indispensably requisite that he should give information
to the complainants that he was employed to bid for those creditors; and also of the agreement which they had made not
to bid against each other, and to divide the profits of the purchase in proportion to their debts. (Sudg. L. V., 431.) Again;
the property was bid in, by the attorney, for about one sixth part of its known cash value; and this total inadequacy of
price when taken in connection with the other circumstances of this case, is sufficient to vacate the sale. As between
parties perfectly independent of each other, where no confidential relation exists between them, and where no undue
influence has been exercised, mere inadequacy of price, unless it be so great as to be evidence of fraud, is not sufficient
to avoid a purchase; especially where the sale was at public auction. But the rule is otherwise where the relation of
attorney and client exists, between the purchaser and the person interested in selling. [HN12] In contracts between
attorney and client, if there is a great inadequacy in the price paid on a purchase by the attorney, the contract will not be
sustained in a court of equity. Gibson v. Jeyes, 6 Ves. Jr. [*742] 266; [**44] Wood v. Downes, 18 Ves. Jr., 120;
Morse v. Royal, 12 Ves., Jr., 373; Montesquieu v. Sandys, 18 Ves., Jr., 311; Newman v. Payne, 2 Ves., Jr., 200; S. C., 4
Bro. C. C., 350; Butler v. Haskell, 4 Desaus. Eq. 651.
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4 Cow. 717, *739; 1825 N.Y. LEXIS 162, **39
It is true that in Wendell v. Van Rensselaer, 1 Johns. Ch., 344, Chancellor Kent refused to set aside a deed given to
an attorney, although there was a great inadequacy of consideration. But it will be seen by a reference to that case that
the attorney had not been employed as such in relation to the property in question. In the language of an English
Chancellor he was not attorney in hac re; neither was he the general agent of Wendell, in relation to his property. Under
the circumstances of that case, Van Rensselaer, not being the attorney of Wendell in relation to this matter, might
become the purchaser, as he was under no obligations of duty to advise in relation to that transaction. But, even in that
case, the Chancellor declares that if he had been able to discover the least scintilla of fraud or imposition, on the part of
Van Rensselaer, in procuring the deeds, he should [**45] annul the transaction.
But it has been urged, in this case, that the complainants have lost their remedy by lapse of time. In cases of implied
trusts, in relation to personal property, or the rents and profits of real estate, where persons claiming in their own right
are turned into trustees by implication, or by operation of law, it is a general rule that the right of action, in equity, will
be considered as barred in six years, in analogy to the limitation at law. And probably if the commencement of this suit
had been delayed a few days longer, the complainants would have lost all remedy by the operation of the Statute of
Limitations. In cases of this description, independent of the Statutes of Limitation, if the person entitled to relief against
an improper purchase acquiesce for a long time, without making any objection, or bringing a suit, equity will not grant
relief. But in this case there has not been any acquiescence of either of the complainants; neither is the length of time
sufficient to bar their claim. The Statute of Limitations cannot apply to this case, because the suit was commenced, and
the appearance of the defendants [*743] actually entered therein, within [**46] six years after the land was converted
into money, by the sale to Peebles. The shortest limitation of actions at law, in this State, respecting real property, is
twenty years; and by analogy that would be the shortest period which a court of equity would be bound to consider as an
absolute bar to the equitable rights of the complainants upon the land, while it remained in the hands of the defendants.
But in cases of this kind courts of equity have frequently refused relief where the suit was commenced within the
twenty years; not, however, on the ground of any analogy to the limitation of actions, of the like nature, at law, but on
the principle that [HN13] acquiescence, for a great length of time, after the party was in a situation to enforce his right,
and with a full knowledge of the facts, was evidence of a waiver, or abandonment of the right. In all cases like the
present, the application to set aside the sale, or for other relief, must be made within a reasonable time; but what is a
reasonable time cannot well be defined so as to establish any general rule and must, in a great measure, depend upon the
exercise of the sound discretion of the court, under all the circumstances of each [**47] particular case. In Gregory v.
Gregory, Coop. Ch. Cas. 201, the Master of the Rolls refused to set aside a purchase, by a trustee, after a lapse of
eighteen years. In Bergen v. Bennet, I Cai. Cas., 1, the Court of Errors refused the application, after sixteen years
acquiescence. In Butler v. Haskell, the Court of Chancery of S. C. did not consider eleven years an unreasonable delay,
and in many cases relief has been granted after a much longer period. Purcell v. M' Namara, 14 Ves., 91; Pickett v.
Loggon, 14 Ves., 214; Hatch v. Hatch, 9 Ves., 292; Murray v. Palmer, 2 Sch. & L., 474.
Having arrived at the conclusion that the validity of Cramer's purchase, for the Water-ford creditors, cannot be
sustained, and that the remedy has not been lost by lapse of time, I now come to the last question in the cause : to what
relief are the complainants in this case entitled. It is urged by the defendant's counsel that, if the purchase by the
attorney was illegal, it was a fraud upon the whole world, [*744] and that the only remedy is by a resale, on the
execution.
The premises having [**48] been purchased, by Peebles, bona fide, without notice of any fraud or illegality in the
sheriff's sale, the purchase made by him must be sustained; and of course there can be no resale upon the execution. (
Per Brakenridge, J., 3 Binn. 64.) The remedy in cases like the present goes to the persons who had an interest in the
property before the sale, and no other person can apply to set the sale aside. 2 Hen. & M. 245; 5 Johns. 47. In this case
the whole value of the property, being insufficient to satisfy the judgment on which it was sold, no person, except the
complainants, could have any interest in the remedy, unless it might be Berry, the defendant in the execution. He has no
interest in the distribution of the fund raised by the sale to Peebles and, therefore, is not a necessary party to this suit.
And it may not be too late for him to compel the plaintiffs, in the judgment, to allow the whole amount of the purchase
money, paid by Peebles, towards satisfying the judgment, if the purchase at the sheriff's sale should be considered
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4 Cow. 717, *742; 1825 N.Y. LEXIS 162, **44
illegal, as against him.
[HN14] In cases of purchases by trustees, or others who are not authorized to purchase without [**49] the consent
of their principal or cestui que trust, the rule of equity is, that if the purchaser has not devested himself of the property,
it is to be put up again, at the amount of the former bid, together with he value of beneficial and lasting improvements,
made thereon after the sale, and if it brings nothing more, he is to be holden to his purchase. But if he has parted with
the estate, he may be compelled to account for all the property which has been made by him on the resale. 4 Desaus. Eq.
503, per James, Ch.; Davoue v. Fanning, 2 Johns. Ch., 271; Randall v. Erington, 10 Ves., 423; Lester v. Lester, 6 Ves.,
631; 4 Binn., per Tilghman, Ch. J., 44; Ex parte Reynolds, 5 Ves., 707; Fox v. Macreath, 2 Bro. Ch. Cas., 400; Ex parte
Lacy, 6 Ves., 625; Butler v. Haskell, 4 Desaus. Eq. 651; Ld. Hardwicke v. Vernon, 4 Ves., 417. And according to the
decision in Fox v. Macreath, he must pay interest upon the profits which he has made upon the sale.
[*745] I shall, therefore, decree that the complainants, [**50] respectively, are entitled to their ratable
proportions of the amount which was raised by the sale to Peebles, of the Berry farm; deducting therefrom the costs and
sheriff's fees, and the balance due on Cramer's judgment, amounting in all to $ 58.12. And that they are entitled to
interest, on the amount of such ratable proportions, from the time of the last mentioned sale, excepting on such part
thereof as was left in the hands of Cramer for their use. The apportionment to be made agreeably to the principles, and
on the amounts or sums, above settled as due to the respective parties. That the defendant Cramer pay to the
complainants the amount received for them, respectively, which has not already been paid over by him. And that the
other defendants pay to them the residue of their proportionate shares, respectively, and the interest thereon as aforesaid,
together with the costs of the complaints in this suit to be taxed. And inasmuch as they have not disclosed the amount of
the purchase money, received by them respectively, in such a manner as to enable me to decree contribution among
them, I shall direct that the complainants have execution against them, jointly, for the amount due, [**51] with the
costs. And if any of them shall be compelled to pay more than what he or they shall consider their just and equitable
proportion thereof, he or they may go before the clerk of this court, or a master in chancery, on the foot of the decree,
and obtain a report of the amount, which has been received and paid by the said Water-ford creditors respectively, and a
statement of the account between them, on the principles of the decree in this cause; to the end that, on the coming in of
the said report, such further decree may be made, for an equitable contribution between them, as shall be just; and that
the usual liberty be given to the master to examine the parties and others on oath, and to compel the production of books
and papers, on the taking of such account.
The following decree was entered in the cause :
" This cause having been heard on the pleadings and proofs, at the stated term of this court, in Mar. last, and [*746]
the same being duly considered by the court, it is this day ordered, adjudged, declared and decreed, and this court, by
virtue of the authority therein vested, doth order, adjudge, declare and decree that the complainants, S. H. & A. H., have
no right [**52] or claim to any part of the proceeds of the judgment against B. in favor of the said complainants and
others, for $ 15,000 of debt, besides damages and costs, entered in the Supreme Court of Judicature, on the 9th day of
August, 1816, in the said pleadings and proof particularly mentioned, over and above their original debt, included
therein; for an account of the assignment of the judgments in favor of W. G. against P. and against the said B. in the said
pleadings also mentioned. And it is further declared and decreed, that the assignment made by P. to W. D. W., one of
the defendants, of the interest of the said P. in the said judgment, in favor of the complainants and others, against B. was
not valid for any greater sum than $ 890, which was the whole amount that was actually due on the said judgment, to
the said P. for debts due from, and responsibilities incurred for the said B. And it is, therefore, decreed that the said
assignment from P. of his interest in the said judgment, be permitted to stand for the said sum of $ 890, with the interest
thereon as hereafter mentioned, only; and that the residue of the sum of $ 24.50, included in the said judgment for P's.
supposed debts [**53] and responsibilities, together with the sum of $ 219, paid by the said B. to K. & S., before the
sheriff's sale under the said judgment, be considered as stricken out of the said judgment. And it is further adjudged,
declared and decreed that the relative proportions, rights and interests of the parties respectively, in the said judgment,
against B. at the time of the sale of the Berry farm, under the said judgment, were as follows, to wit : there was due to S.
& A. H. $ 1,300, to U. M. $ 500, to H. & M. $ 1,820, to K. & S. $ 301, and to W. D. W., for his original debt and for the
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4 Cow. 717, *744; 1825 N.Y. LEXIS 162, **48
amount due to him under the assignment from P. $ 1,840, with interest on the said sums, respectively, from the 6th day
of August, 1816. And it appearing to this court, by the said pleadings and proofs, that the defendant, J. C., at the sheriff's
[*747] sale, on the execution issued upon the last said mentioned judgment, became the purchaser of the Berry farm, as
the agent of the other defendants, under an illegal agreement, between such defendants, not to bid against each other, at
the said sheriff's sale, but to employ the said J. C. to bid for them jointly, and to divide the profits which might be
[**54] made on such purchase, between them, in proportion to their respective debts; and it further appearing to this
court that at the time of the said purchase, the said J. C. was the attorney, as well of the complainants as of the said
defendants on the execution upon which the said sheriff's sale was made; and that he made the said purchase, as agent of
the other defendants in this cause, in consequence of such illegal agreement between them, and in the absence of the
complainants, and without their knowledge or consent; and that the amount bid at the said sheriff's sale, and for which
the said premises were struck off to the said attorney, was less than one fifth of the known cash value of the said farm;
whereby nearly the whole of the complainants' debts, secured by the said judgment, remain unsatisfied; it is, therefore,
further adjudged, declared and decreed that the said purchase of the Berry farm, by the said J. C., as the agent of the
other defendants, was illegal, fraudulent and void, as against the complainants in this cause. But it further appearing to
this court that after the said illegal and fraudulent purchase of the said Berry farm, to wit; on the 26th day of December,
[**55] 1817, and within six years before the time of filing the bill of the complainants, and of the entering the
appearance of the defendants, in this cause, the said J. C., as agent of the said other defendants, sold the said Berry farm
to H. P. for the sum of $ 3,600; and that the said H. P. purchased bona fide, and actually paid the purchase money,
without notice of such illegality or fraud, in the purchase at the sheriff's sale; it is further decreed and declared that the
said sheriff's sale, and the said sale to the said H.P., be permitted to stand and remain valid, for the protection of the
legal and equitable rights of the said bona fide purchaser; and that the said complainants are, in equity, entitled to their
ratable proportions of the purchase [*748] money, received on the sale to the said H. P. And it is further declared and
decreed that the costs of entering the judgment and issuing the said execution, and the sheriff's fees on the same, and the
balance of an older judgment against the said B., in favor of the said J. C., which was a lien on the said farm, and which
costs, sheriff's fees and balance, amount to $ 58.12, were properly retained by the said J. C., and [**56] paid out of the
moneys received on the said sale to H. P. And that out of the residue of the moneys received on the said sale to H. P.,
amounting to the sum of $ 3,541.88, the said S. & A. H. were entitled to receive the sum of $ 799.24, and the said U. M.
was entitled to receive $ 307.40, as their respective ratable proportions of the said purchase money, in proportion to the
amounts due them on the said judgment against B. And it further appearing to the court that, of the sums which the
complainants were so entitled to receive, the defendant J. C. received and has in his hands, for the use of the said U. M.
$ 41.22; and that he also received for the use of the said S. & A. H., the sum of $ 107.16, of which sum he has paid over
to them $ 94.19, and that the residue, $ 12.97, remains in his hands for their use; it is further ordered, adjudged and
decreed that the said J. C. pay over to the said complainants, respectively, the said sums of money so remaining in his
hands for their use And the said other defendants, H. & M., K. & S. and W. D. W. having divided the residue of the
money which belonged to the said complainants, among themselves; and not having disclosed the amount thereof,
[**57] which they have severally and respectively received, in such manner as to enable the court to decree
contribution, among them, in the payment of the same, to the complainants; it is further ordered, adjudged and decreed
that the said five last mentioned defendants are jointly and severally liable for the payment thereof to the said
complainants, together with the interest thereon from the time they so received and divided the same between them, at
the time of the sale to H. P. And it is, therefore, further ordered, adjudged and decreed that the said five last mentioned
defendants pay to the said [*749] S. & A. H. $ 692.08 for their proportion of the residue aforesaid; and that they also
pay to them interest thereon, at the rate of seven per cent. per annum, for the said 26th day of December, 1817, until
they so pay the same; and that the said last mentioned defendants also pay to the said U. M., for his proportion of the
said residue, the sum of $ 266.18, together with the interest thereon, at the rate and from the time last aforesaid, until
they shall so pay the same; and that the said five last mentioned defendants also pay to the complainants their costs of
this suit [**58] to be taxed; and that the said complainants have execution for the said sums, so adjudged to them, with
the interest, as aforesaid, and costs, agreeable to the course and practice of the court.
And it is further ordered and decreed that if any of the said five last mentioned defendants shall, under this decree,
be compelled to pay more than his or their equitable proportion of the said sums, so adjudged to the said complainants,
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4 Cow. 717, *746; 1825 N.Y. LEXIS 162, **53
or of the costs of this suit, such defendant or defendants may apply to a master in chancery, or to the clerk of this court,
on the foot of this decree, and obtain a report of what has been received and paid out by the said last named defendant,
respectively, and a statement of the account thereof between them, on the principles of this decree, to the end that on the
coming in of the said report, such further order and decree may be made for an equitable contribution among the said
defendants, as shall be just. And the usual liberty is given to the said master or clerk to examine the parties, and all other
parties on oath, as witnesses, and to compel the production of books and papers, upon taking such account, as he shall
deem proper and necessary."
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4 Cow. 717, *749; 1825 N.Y. LEXIS 162, **58
Cited
As of: May 27, 2014
JACKSON, ex dem. BONNELL ET AL., v. SHARP.
SUPREME COURT OF JUDICATURE OF NEW YORK
9 Johns. 163; 1812 N.Y. LEXIS 70
August, 1812, Decided
PRIOR HISTORY: [**1] THIS was an action of ejectment, brought to recover part of lot No. 72, in the township
of Aurelius, in the County of Cayuga. The cause was tried at the Cayuga Circuit, before Mr. Justice Yates, the 11th of
June, 1811.
The plaintiff gave in evidence a patent from John Bonnell, one of the lessors of the plaintiff, for lot No. 72,
Aurelius, dated the 8th July, 1790, and a deed from Bonnell to Andrew Goodyear, the other lessor, dated 11th
September, 1807, which was recorded the 25th April, 1811. The possession by the defendant of the premises in question
was also proved.
The defendant gave in evidence a power of attorney, dated 7th April, 1805, duly acknowledged, and recorded the
17th October, 1806, from Stephen Thorn, authorizing Joseph Grover to sell the whole of lot No. 72, in Aurelius, &c.;
and articles of agreement between Joseph Grover, as attorney of Thorn, and Samuel and Abraham Foster, by which
Thorn, by his said attorney, covenanted to convey one hundred acres of lot No. 72, and which included the premises in
question, at a future day, to S. and A. Foster, for the sum of five hundred dollars, to be paid at a future day. This
agreement, with the premises, was, afterwards, [**2] by a written indorsement, under the hands and seals of S. and A.
Foster, dated the 26th of April, 1805, assigned to Sharp, the defendant. A deed was also read in evidence, dated the 26th
of November, 1807, from Thorn to the defendant, for eighty acres, part of lot No. 72, being the premises in question, for
the consideration of four hundred dollars.
John Haring, a witness, testified that the Fosters were in possession of the premises a year or two before the date of
the agreement with Thorn, but under whom they claimed title he could not say, but supposed it was under one
Carpenter, who claimed to be the owner; that the title to the lot was frequently questioned; that the defendant had said
that he had doubts or fears about the title. About three years before the trial, the witness went to Virginia to purchase the
lot of Bonnell, for the occupants; Bonnell was at Clarksburgh, and refused to convey the lot, saying that he had
Page 208
conveyed to Goodyear. The witness, on his return, informed Grover of the answer of Bonnell.
Abraham Foster testified that he entered on the land without title; that he spoke to Joseph Grover to procure a title,
who told him, about a year afterwards, that [**3] Thorn had a title from the soldier Bonnell.
Another witness testified that he told the defendant that Goodyear had all the title to the premises which was
necessary; and that the defendant, on the 12th April, 1810, said that he never believed in his former title.
The defendant gave in evidence a deed from Bonnell to the defendant and the other occupants, of the whole of lot
No. 72, dated 29th September, 1808, and recorded the 12th October, 1808, having been proved and acknowledged, on
the day of its date, before a notary public, in Harrison County, in Virginia. Joseph Grover was a witness to the execution
of this deed, which expressed a consideration of five hundred dollars.
Jabez Gould testified that Grover requested him to go to Virginia and buy the lot, and said, that from all accounts,
Goodyear had got the right soldier.
A verdict was taken for the plaintiff, by consent, subject to the opinion of the court on a case containing the above
facts.
DISPOSITION: Plaintiff entitled to judgment.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant registered owner sought review of a judgment of the Cayuga Circuit Court
(New York), which ruled in favor of appellee unregistered owner in the latter's action of ejectment, brought to recover
part a lot of land.
OVERVIEW: The lower court ruled in favor of the unregistered owner and awarded him his claim to a part of the
registered owner's land. On appeal, the court affirmed this judgment. The court found that the unregistered owner was
not entitled to the land under the theory of adverse possession. It noted that he was never in possession of the land. The
court found that the registered owner had held possession, without setting up any adverse title, and under a contract for
a title to be derived from the prior owner. The court further found that the registered owner's deed was not superseded
by the subsequent deed from the prior owner to the registered owner. The court relied upon the fact that there was no
doubt that if a subsequent purchaser had notice, at the time of his purchase, of a prior unregistered deed, it was the
same to him as if it had been registered. The court noted that the conveyance to the registered owner was not a secret
conveyance by which he could have been prejudiced or defrauded. He was aware of the unregistered deed because
notice to his agent was notice to the registered owner.
CORE TERMS: deed, notice, adverse possession, afterwards, patentee, covenant, convey, true owner, prior deed,
unregistered, registered, subsequent purchaser, positive proof, subordination, well-settled, communicated, impression,
conveyance, confessed, succeeded, pretense, conveyed, occupants, spoke, recorded, registry
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9 Johns. 163, *; 1812 N.Y. LEXIS 70, **2
[HN1] Adverse possession, so as to defeat the conveyance of the true owner, must be made out, clearly and positively.
Real Property Law > Priorities & Recording > General Overview
[HN2] If a subsequent purchaser has notice, at the time of his purchase, of a prior unregistered deed, it is the same to
him as if it had been registered.
Business & Corporate Law > Agency Relationships > Duties & Liabilities > Knowledge & Notice > General
Overview
[HN3] Notice to an agent is notice to his principal.
HEADNOTES
Possession of Land without Title--Assignment Deed from Owner with Notice of Prior Unrecorded Deed by
Owner--Original Possession not Adverse--What Constitutes Adverse Possession--Notice to Agent.
A. entered into possession of land, without title, and afterwards entered into a contract with T., who covenanted to
give him a deed for the land. A. assigned the contract to S., who took possession, and afterwards received a deed from
T. in November, 1807, and afterwards a deed from B., the patentee and true owner, in September, 1808, which was duly
recorded in October, 1808. A previous deed had been given by B., the patentee, in September, 1807, to G., but which
was not registered until April, 1811.
It was held that the original possession of A., being without title, was to be deemed the possession of B., the
patentee, and that the possession of S., under the covenant from A. to T., was not adverse.
The doctrine of adverse possession is to be taken strictly, and must be made out by clear and positive proof, and not
by inference. Every presumption is in favor of a possession, in subordination to the title of the true owner.
If a subsequent purchaser has notice, at the time of his purchase, of a prior unregistered deed, it is the same to
him as if such deed had been registered; and if the agent of such subsequent purchaser, at the time of making the
purchase, knows of the prior unregistered deed, it is the same as notice to is principal.
Citations--8 Johns. 220; 3 Atk. 646; 1 Ves. 64; Amb., 436; 13 Ves. 120.
COUNSEL: Mr. Sill, for the plaintiff. The lessors of the plaintiff having shown a regular paper title, the only questions
are, 1. As to a subsisting adverse possession at the time of the conveyance; [**4] and, 2. As to the effect of the prior
registry of the deed from Bonnell to the defendant.
1. The possession commenced under Foster who entered without any claim of title. To constitute an adverse possession,
it must be adverse at its commencement, and so continued. A person who enters without claiming title is deemed to hold
for the rightful owner. (1 Johns. 156; 6 Johns. 218; 2 Sch. & Lef. Rep., 97.) Prior to the deed to Goodyear, the lessor,
there was no person in possession, pretending to hold under a deed. There was nothing more than a contract for a deed,
from a person who had no title.
Again, both parties in this case claim under Bonnell; and there can be no adverse possession where both persons claim
under the same title. (4 Johns. 230; 12 East 153.)
2. The prior registry of the deed to the defendant cannot avail him, since he had notice of the deed to Goodyear, at the
time of the purchase; for Grover must be deemed to be the agent of the defendant (8 Johns. 140); and there was a direct
notice to him of the deed to Goodyear before the purchase. (3 Ves. Jun., 478.)
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9 Johns. 163, *; 1812 N.Y. LEXIS 70, **3
Mr. Russell, contra. 1. As [**5] to the adverse possession, the true inquiry is, how the tenant held at the time of the
deed to the lessor. If he claims to hold under a title different from, or hostile to that of the lessor, it is sufficient. No
matter whether such title be valid or spurious. In Jackson v. Todd, 2 Caines' Rep., 133; S. C., 6 Johns. 267, the
defendant came into possession under Cady, who held under an agreement with Isaacs.
A person who holds possession under an agreement for a deed, may set it up in his defense against an action of
ejectment. (Yea v. Bucknell, Cowp. 473; Burr. Rep,, 2209.) If a possession is given under a contract for a deed, though
it is only an equitable title, it is good as against the owner; but if he give a deed to a third person, such person, having
the legal as well as equitable title, must prevail against him who has only an equitable title.
2. The deed from Bonnell to the defendant was first registered. The act (sess. 17, ch. 1) declares all deeds relating to the
military bounty lands, which are not recorded, fraudulent and void against a subsequent purchaser, for a valuable
consideration, unless first recorded. The deed from the patentee [**6] being first recorded, nothing can defeat its
perference--not even a notice, for the language of this act is different from that relative to the registering of mortgages.
If a party who has a deed for a valuable consideration gets it first recorded, it will be valid. If a notice is to have any
effect, it must be clearly proved and be direct, fair and bona fide. The notice was to Grover not to Sharp, and at the time
of the notice to Grover, Goodyear disclaimed holding under the deed, which was concealed. A notice, under these
circumstances, can have no effect. Besides, Grover was the agent of Thorn, not of Sharp, who never had notice.
Mr. Cady, in reply, observed that to render the case analogous to that of Jackson v. Todd it should have been shown that
there was a deed from Bonnell to Thorn. If Thorn had entered, declaring that he had a deed from Bonnell, when in fact,
he had none, his possession would not have been adverse. Though Thorn, supposing he should get a deed from Bonnell,
promised to convey to Foster; yet Bonnell, though he had covenanted to convey to Thorn, might give a deed to
Goodyear, who would have a valid and legal title.
It must be inferred, from the facts [**7] in the case, that Grover went to Bonnell as the agent of Sharp, who must,
therefore, be charged with the notice to his agent.
OPINION
[*166] Per Curiam. To entitle the plaintiff to recover upon this case, two propositions must be established: 1. That
the deed from Bonnell to Goodvear was not void by reason of an adverse possession existing at the time. 2. That notice
of that deed destroyed the effect of the prior registry of the deed from Bonnell to the defendant.
1. When the patentee Bonnell executed his deed to Goodyear, the defendant was in possession, under a covenant
from Stephen Thorn to the Fosters, to convey to them the premises, upon a [*167] consideration to be paid. The
Fosters entered upon the premises, without title, as one of them confessed, and he spoke to Grover, the agent of Thorn,
to procure a title. When he first spoke to Grover, the latter did not say that Thorn had any title; but, about a year
afterwards, Grover told him that Thorn had a deed from the soldier Bonnell. The defendant entered under an assignment
of the covenant to the Fosters. Whatever pretense or color of title the defendant had, at the time of the execution of the
deed to Goodyear, [**8] it was avowedly under Bonnell, the patentee. The original possession by the Fosters, being
without any pretense of title, was to be deemed the possession of Bonnell, the true owner; and I think it would be
carrying the doctrine of adverse possession beyond the authorities, and beyond the truth of the case, to consider the
covenant of Thorn, who said, or, what is the same thing, whose agent said, that he held under Bonnell, as amounting to
an ouster of Bonnell, and an act in denial of, and in hostility to, his right. What kind of right or title Thorn pretended to
have from Bonnell does not appear. His right might have been under a mere covenant or contract to convey, such as he
afterwards made with the Fosters; and we have no ground to infer that he had any better pretension, when Bonnell
conveyed to Goodyear, in September, 1807. It is a settled rule that the doctrine of adverse possession is to be taken
strictly, and not to be made out by inference, but by clear and positive proof. Every presumption is in favor of
possession in subordination to the title of the true owner. It is not unusual for persons to contract to convey at a future
day, in expectation of a capacity to convey by [**9] the given day, though they have no title at the time of the contract.
Page 211
9 Johns. 163, *; 1812 N.Y. LEXIS 70, **4
The Fosters were originally in possession, in judgment of law, under Bonnell; and they never meant to change that
character, and to oust Bonnell, by taking the covenant from Thorn. They took it, undoubtedly, under the impression that
Thorn then was, or would thereafter be, authorized to convey the title of Bonnell; and the defendant, as the assignee of
the Fosters, must be deemed to have succeeded to the possession under the same impression. Thorn was never in
possession, and, of course, there was no adverse possession to be imputed to him. Fosters and the defendant held
possession, without setting up any adverse title, and under a contract for a title to be derived from Bonnell. To consider
[*168] Bonnell as thereby disseised or dispossessed of his freehold, and to have lost his capacity to convey the land, is
inadmissible. [HN1] Adverse possession, so as to defeat the conveyance of the true owner, must be made out, clearly
and positive; and so the court said in the case of Wickham v. Concklin, 8 Johns. 220.
2. The next question is, whether this deed was superseded by the subsequent deed from [**10] Bonnell to the
defendant, of September, 1808, and which was first recorded.
There is no doubt that [HN2] if a subsequent purchaser has notice, at the time of his purchase, of a prior
unregistered deed, it is the same to him as if it had been registered. It is not a secret conveyance by which he can be
prejudiced or defrauded; and if he purchases with knowledge of such prior deed, and with the expectation of getting his
deed first registered, he does an act against good conscience, and in abuse of the statute, which was made to prevent and
not to protect fraud. It is, therefore, a well-settled principle, that such notice supplies the place of a prior registry, and
the only question here is whether the defendant is chargeable with such notice.
In July, 1808, and about three months before the defendant's deed, John Haring went, as an agent for the defendant
and the other occupants of the lot, to purchase the lot of Bonnell. Bonnell refused to sell, and told him that he had
already conveyed the lot to Goodyear, one of the lessors of the plaintiff. Here, then, was a direct and positive notice to
the agent of the defendant. Haring communicated this fact to Joseph Grover, who, in September following, [**11]
went, as agent for the defendant, and the other occupants, to purchase, and succeeded in his mission. It is to be inferred
that Grover was the agent also of the defendant, and, as such, made the purchase because he had before acted as agent
for Thorn, in selling the lot, and because he applied to Gould to go to the patentee and make the purchase, and, lastly,
because we find him in Virginia at the time of the purchase, and a witness to the execution of the deed. No doubt he was
the agent who made the purchase, and from whom the deed was afterwards received. Here we have then notice of the
prior deed given to two successive agents of the defendant, and both employed for the very purpose of making the
purchase. The notice in each case was direct and positive, and given prior to the purchase. Can we possibly doubt, after
this, whether the knowledge of the prior [*169] deed was communicated from these agents to their principal, and
especially by the first agent, whose object was defeated, in consequence of the very fact of the prior deed? The
defendant confessed, in 1810, that "he never believed in his former title." But we need not bring home the notice to the
defendant, for it is [**12] a well-settled rule, that [HN3] notice to the agent is notice to his principal. This has been
frequently so ruled, in respect to the very question of a prior unregistered deed, and in respect to the agent employed to
effect the purchase. (Le Neve v. Le Neve, 3 Atk. 646; 1 Ves. 64; Amb., 436, S. C.; Lord Forbes v. Deniston, and other
cases therein cited; 13 Ves. 120.)
We are, accordingly, of opinion that the plaintiff is entitled to judgment.
Page 212
9 Johns. 163, *167; 1812 N.Y. LEXIS 70, **9
Analysis
As of: May 27, 2014
Ruby Williams, respondent, v Esdel Mentore, et al., defendants, Wells Fargo Bank,
N.A., appellant. (Index No. 13135/11)
2012-08346
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, SECOND
DEPARTMENT
115 A.D.3d 664; 981 N.Y.S.2d 763; 2014 N.Y. App. Div. LEXIS 1412; 2014 NY Slip Op
1449
NOTICE:
THE LEXIS PAGINATION OF THIS DOCUMENT IS SUBJECT TO CHANGE PENDING RELEASE OF THE
FINAL PUBLISHED VERSION. THIS OPINION IS UNCORRECTED AND SUBJECT TO REVISION BEFORE
PUBLICATION IN THE OFFICIAL REPORTS.
PRIOR HISTORY: Williams v. Mentore, 2012 N.Y. Misc. LEXIS 3548, 2012 NY Slip Op 31965(U) (N.Y. Sup. Ct., July
9, 2012)
CORE TERMS: deed, incumbrancer, void, matter of law, summary judgment, equitable subrogation, bona fide,
counterclaim, entitlement, conveyance, mortgagee, notice, subject property, mortgage, Property Law, ground of fraud,
properly denied, inquiry notice, prima facie, grantor, inquire, conveys
COUNSEL: [***1] Dorf & Nelson LLP, Rye, N.Y. (Jonathan B. Nelson of counsel), for appellant.
Steven Banks, Kew Gardens, N.Y. (Jenny Braun-Friedman and Kasowitz, Benson, Torres & Friedman LLP [David J.
Abrams, Eric S. Askanase, and David M. Rubinstein], of counsel), for respondent.
JUDGES: REINALDO E. RIVERA, J.P., JOHN M. LEVENTHAL, LEONARD B. AUSTIN, SHERI S. ROMAN, JJ.
RIVERA, J.P., LEVENTHAL, AUSTIN and ROMAN, JJ., concur.
Page 213
OPINION
[*664] [**764] DECISION & ORDER
In an action, inter alia, to set aside two conveyances and a mortgage on the ground of fraud, the defendant Wells
Fargo Bank, N.A., appeals from an order of the Supreme Court, Queens County (Elliot, J.), dated July 9, 2012, which
denied its motion for summary judgment dismissing the complaint insofar as asserted against it and on its counterclaim
for equitable subrogation.
ORDERED that the order is affirmed, with costs.
The 83-year-old plaintiff resides at the subject property, which she purchased in 1976. On January 5, 2007, the
plaintiff executed a deed purporting to transfer the subject property to the defendant Aman Bindra. On October 16,
2008, Bindra executed a deed purportedly transferring the subject property to the defendant Garfield London, and
London executed a mortgage [***2] in favor of the defendant Wells Fargo Bank, N.A. (hereinafter Wells Fargo). The
plaintiff contends that the deed to Bindra was obtained by fraud and, therefore, that the deeds to Bindra and London and
the Wells Fargo mortgage are void.
The Supreme Court properly denied that branch of Wells Fargo's motion which was for summary judgment
dismissing the complaint insofar as asserted against it. Real Property Law & 266 protects the "title of a purchaser or
incumbrancer for a valuable consideration, unless it appears that he [or she] had previous notice of the fraudulent intent
of his [or her] immediate grantor, or of the fraud rendering void the title of such grantor." Thus, a mortgagee is not
protected in its title if it had previous notice of potential fraud by the immediate seller, or knowledge of facts which put
it on inquiry notice as to the existence of a right in potential conflict with its own (see Maiorano v Garson, 65 AD3d
1300, 1303, 886 N.Y.S.2d 190). A mortgagee has a duty to inquire when it is aware of facts that would lead a
reasonable, prudent lender to inquire into the circumstances [**765] of the transaction at issue (see LaSalle Bank
Natl. Assn. v Ally, 39 AD3d 597, 600, [*665] 835 N.Y.S.2d 264). A mortgagee who fails [***3] to make such an
inquiry is not a bona fide incumbrancer for value (see Booth v Ameriquest Mtge. Co., 63 AD3d 769, 881 N.Y.S.2d 152).
Here, Wells Fargo's submissions contain information regarding the plaintiff's possession of the property that put it
on inquiry notice as to the plaintiff's potential right to the property (see Stracham v Bresnick, 76 AD3d 1009,
1010-1011, 908 N.Y.S.2d 95). Thus, Wells Fargo failed to establish its prima facie entitlement to judgment as a matter
of law on the issue of whether it lacked notice of a potential fraud (see JP Morgan Chase v Munoz, 85 AD3d 1124, 927
N.Y.S.2d 364; cf. Commandment Keepers Ethiopian Hebrew Congregation of the Living God v 31 Mount Morris Park,
LLC, 76 AD3d 465, 908 N.Y.S.2d 1).
Real Property Law & 266 also does not protect a bona fide incumbrancer for value where there has been fraud in
the factum, as the deed is void and conveys no title (see Karan v Hoskins, 22 AD3d 638, 803 N.Y.S.2d 666). Such a
conveyance conveys nothing, and a subsequent bona fide incumbrancer for value receives nothing (see Solar Line,
Universal Great Brotherhood, Inc. v Valdemar Prado, 100 AD3d 862, 863, 955 N.Y.S.2d 96; First Natl. Bank of Nev. v
Williams, 74 AD3d 740, 742, 904 N.Y.S.2d 707; GMAC Mtge. Corp. v Chan, 56 AD3d 521, 522, 867 N.Y.S.2d 204; Cruz
v Cruz, 37 AD3d 754, 832 N.Y.S.2d 217). Here, Wells [***4] Fargo failed to establish its prima facie entitlement to
judgment as a matter of law on the issue of whether the subject deeds are void ab initio on the ground of fraud in the
factum (see First Natl. Bank of Odessa v Fazzari, 10 NY2d 394, 397, 179 N.E.2d 493, 223 N.Y.S.2d 483; Dalessio v
Kressler, 6 AD3d 57, 61, 773 N.Y.S.2d 434; Mix v Neff, 99 AD2d 180, 182, 473 N.Y.S.2d 31).
Wells Fargo failed to establish its prima facie entitlement to judgment as a matter of law on its counterclaim for
equitable subrogation. Triable issues of fact exist as to whether Wells Fargo should have been aware of potential fraud
in connection with the conveyance (see Countrywide Home Loans Inc. v Dombek, 68 AD3d 1041, 1042, 892 N.Y.S.2d
465; Crispino v Greenpoint Mtge. Corp., 304 AD2d 608, 608-610, 758 N.Y.S.2d 367). Accordingly, the Supreme Court
Page 214
115 A.D.3d 664, *; 981 N.Y.S.2d 763, **;
2014 N.Y. App. Div. LEXIS 1412, ***1; 2014 NY Slip Op 1449
properly denied that branch of Wells Fargo's motion which was for summary judgment on its counterclaim for equitable
subrogation (see Arbor Commercial Mtge., LLC v Associates at the Palm, LLC, 95 AD3d 1147, 1149, 945 N.Y.S.2d 694;
Cashel v Cashel, 94 AD3d 684, 688, 941 N.Y.S.2d 236).
RIVERA, J.P., LEVENTHAL, AUSTIN and ROMAN, JJ., concur.
Page 215
115 A.D.3d 664, *665; 981 N.Y.S.2d 763, **765;
Cited
As of: May 27, 2014
Robert G. Lucas, Appellant, v J&W Realty and Construction Management, Inc., et
al., Defendants, Dwinell Bedard et al., Respondents. (Index No. 27672/09)
2011-08067
DEPARTMENT
5502
July 11, 2012, Decided
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff filed an action to foreclose a mortgage and moved for summary judgment on
defendants' first affirmative defense and that plaintiff's lien on the subject real property was superior to any interest
claimed by defendants. The Supreme Court, Queens County (New York), denied the motion. Plaintiff appealed.
OVERVIEW: Although the evidence in the case presented an issue of fact as to whether one of the defendants was in
actual possession of the property when plaintiff acquired its mortgage interest, which was sufficient to require an
inquiry by plaintiff into the existence of any right which defendants were able to establish, such an inquiry would
have revealed that neither defendant had any valid ownership interest in the property, let alone an interest that was "in
potential conflict" with plaintiff's mortgage. Under the circumstances, plaintiff satisfied his burden of demonstrating,
prima facie, that defendants' first affirmative defense was without merit as a matter of law and that defendants failed to
raise a triable issue of fact in opposition. The deeds and mortgage documents submitted by the parties established, as a
matter of law, that plaintiff's mortgage was superior to the purported interests claimed by defendants.
OUTCOME: The order of the Supreme Court was reversed. Plaintiff's motion for summary judgment was granted.
CORE TERMS: mortgage, mortgage interest, subject property, affirmative defense, interest claimed, ownership,
purchaser, subject real property, recorded, matter of law, actual possession, issue of fact, notice, deeds, action to
foreclose, summary judgment, deed dated, acquire, convey
Page 216
[HN1] The recording of a transaction involving real property provides potential subsequent purchasers with notice of
previous conveyances and encumbrances that might affect their interests Where a purchaser has knowledge of any fact,
sufficient to put him on inquiry as to the existence of some right or title in conflict with that he is about to purchase,
he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of
a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser. Similarly, a mortgagee is
under a duty to make an inquiry where it is aware of facts that would lead a reasonable, prudent lender to make
inquiries of the circumstances of the transaction at issue. Actual possession of real estate is sufficient notice to a person
proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in
HEADNOTES
Mortgages--Foreclosure--Existence of Right or Title in Conflict
COUNSEL: [***1] McMillan, Constabile, Maker & Perone, LLP, Larchmont, N.Y. (William Maker, Jr., of counsel),
for appellant.
DelBello Donnellan Weingarten Wise & Wiederkehr, LLP, White Plains, N.Y. (Eric J. Mandell of counsel), for
respondents.
JUDGES: RUTH C. BALKIN, J.P., L. PRISCILLA HALL, PLUMMER E. LOTT, JEFFREY A. COHEN, JJ.
BALKIN, J.P., HALL, LOTT and COHEN, JJ., concur.
OPINION
[**392] [*642] In an action to foreclose a mortgage, the plaintiff appeals from an order of the Supreme Court,
Queens County (Agate, J.), dated June 28, 2011, which denied its motion for summary judgment dismissing the first
affirmative defense of the defendants Dwinell Bedard and Golden First Mortgage Corp., and determining that its lien on
the subject real property was superior to any interest claimed by the defendants Dwinell Bedard and Golden First
Mortgage Corp.
Ordered that the order is reversed, on the law, with costs, and the plaintiff's motion for summary judgment
dismissing the first affirmative defense of the defendants Dwinell Bedard and Golden First Mortgage Corp., and
determining that its lien on the subject real property was superior to any interest claimed by the defendants Dwinell
Bedard and Golden First Mortgage Corp., [***2] is granted.
By deed dated January 16, 2009, and recorded on January 30, 2009, the defendant J&W Realty and Construction
Management, Inc. (hereinafter J&W), acquired title to the subject property from a nonparty entity, PM0 1 B1, LLC. On
that same date, the plaintiff acquired a mortgage from J&W encumbering the subject property, and recorded his
mortgage interest on January 23, 2009. Subsequently, the plaintiff commenced the instant action to foreclose on his
mortgage.
As their first affirmative defense, the defendants Dwinell Bedard (hereinafter Bedard) and Golden First Mortgage
Corp. (hereinafter Golden) alleged that they each held a prior interest in the subject property which was superior to the
plaintiff's January 16, 2009, mortgage interest. In support of this affirmative defense, they offered a deed dated October
16, 2008, several months before the plaintiff acquired his mortgage, purporting to convey title to the property from
Page 217
97 A.D.3d 642, *; 949 N.Y.S.2d 391, **;
2012 N.Y. App. Div. LEXIS 5476, ***; 2012 NY Slip Op 5502
J&W to Bedard, as well as a contemporaneous mortgage document in which Bedard purportedly gave Golden a
mortgage on the property. Although Bedard and Golden (hereinafter together the respondents) did not record their
respective ownership and mortgage [***3] interests until after J & W and the plaintiff had recorded their respective
ownership and mortgage interests arising from the January 16, 2009, transactions, there was evidence that Bedard was
in actual possession of the property when the plaintiff acquired his mortgage interest on January 16, 2009.
[*643] However, the record contains two additional deeds with respect to the subject property which establish that
J&W did not have title to the subject property to convey to Bedard on October 16, 2008, and Bedard did not otherwise
acquire valid title to the subject property. Therefore, since Bedard did not acquire valid title to the subject property on
October 16, 2008, he could not give Golden a valid mortgage interest in the property on that date.
[HN1] "The recording of a transaction involving real property provides potential subsequent purchasers with
notice of 'previous conveyances and encumbrances that might affect their interests' " (Stracham v Bresnick, 76 AD3d
1009, 1010, 908 NYS2d 95 [2010], quoting Andy Assoc. v Bankers Trust Co., 49 NY2d 13, 20, 399 NE2d 1160, 424
NYS2d 139 [1979]; see Real Property Law 291). "[W]here a purchaser has knowledge of any fact, sufficient to put
him on inquiry as to the existence of some right or title in conflict [***4] with that he is about to purchase, he is
presumed either to have made the inquiry, [**393] and ascertained the extent of such prior right, or to have been
guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser" (Williamson v
Brown, 15 NY 354, 362[1857]; see Maiorano v Garson, 65 AD3d 1300, 1303, 886 NYS2d 190 [2009]; Ward v Ward, 52
AD3d 919, 920-921, 859 NYS2d 774 [2008]). Similarly, a mortgagee is under a duty to make an inquiry where it is
aware of facts "that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction
at issue" (LaSalle Bank Natl. Assn v Ally, 39 AD3d 597, 600, 835 NYS2d 264 [2007]). "Actual possession of real estate
is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the existence of any
right which the person in possession is able to establish" (Phelan v Brady, 119 NY 587, 591-592, 23 NE 1109 [1980];
see 1426 46 St., LLC v Klein, 60 AD3d 740, 743, 876 NYS2d 425 [2009]; Ward v Ward, 52 AD3d at 920-921).
Although the evidence in this case presented an issue of fact as to whether Bedard was in actual possession of the
property when the plaintiff acquired its mortgage interest, which was sufficient to require an inquiry by the plaintiff
into "the existence [***5] of any right which [the respondents were] able to establish" (Phelan v Brady, 119 NY at
592), such an inquiry would have revealed that neither Bedard nor Golden had any valid ownership interest in the
property, let alone an interest that was "in potential conflict" with the plaintiff's mortgage (Maiorano v Garson, 65
AD3d at 1303; cf. Stracham v Bresnick, 76 AD3d at 1011). Under these circumstances, the plaintiff satisfied his burden
of demonstrating, prima facie, that the respondents' first affirmative defense was without merit as a matter of [*644]
law (cf. Vita v New York Waste Servs., LLC, 34 AD3d 559, 559, 824 NYS2d 177 [2006]), and the respondents failed to
raise a triable issue of fact in opposition. The deeds and mortgage documents submitted by the parties established, as a
matter of law, that the plaintiff's mortgage was superior to the purported interests claimed by the respondents.
The respondents' remaining contentions are without merit.
Accordingly, the Supreme Court should have granted the plaintiff's motion for summary judgment dismissing the
respondents' first affirmative defense and determining that its lien on the subject real property was superior to any
interest claimed by the respondents. Balkin, [***6] J.P., Hall, Lott and Cohen, JJ., concur.
Page 218
97 A.D.3d 642, *642; 949 N.Y.S.2d 391, **392;
Positive
As of: May 27, 2014
Bertram Stracham, Appellant, v Alan Bresnick et al., Respondents. (Index No.
9571/05)
2009-04038
DEPARTMENT
6629
PRIOR HISTORY: Stracham v Bresnick, 11 Misc 3d 1085A, 819 NYS2d 851, 2006 N.Y. Misc. LEXIS 929 (2006)
CORE TERMS: mortgage, contract of sale, deed, purchaser', subject property, real property, closing date, transferring,
recorded, conveyances, subsequent purchasers, designated, notice, lease, transferred, property acquired, leasehold
interest, possessory interest, potential conflict, enforceable, contested, conveyed, inter alia, purchase money mortgage,
rent payments, remainder, invalid
HEADNOTES
Deeds--Validity.--Deeds transferring title to real property and mortgage held by defendant were valid--title to
property was never conveyed to plaintiff and thus, he never became owner of property; although plaintiff resided on
premises, which was sufficient to require inquiry by purchasers and defendant into existence of any right which
plaintiff was able to establish, such inquiry would have revealed only leasehold interest held by plaintiff; such
possessory interest was not in potential conflict with interests in property acquired by purchasers and defendant;
furthermore, recorded contract of sale is enforceable against subsequent purchasers, but only for 30 days after closing
date, and plaintiff did not record contract of sale until nearly five years after date designated as closing date in contract
of sale, and contested conveyances of property occurred even later.
COUNSEL: [***1] C. Steve Okenwa, P.C., Brooklyn, N.Y., for appellant.
Jerry F. Kebrdle II, White Plains, N.Y., for respondent Long Beach Mortgage Company.
Page 219
JUDGES: A. GAIL PRUDENTI, P.J., PETER B. SKELOS, ANITA R. FLORIO, SANDRA L. SGROI, JJ.
OPINION
[*1009] [**95] In an action, inter alia, to declare certain deeds to real property invalid, the plaintiff appeals, as
limited by his brief, from so much of a judgment of the Supreme Court, Kings County (Partnow, J.), dated March 26,
2009, as, upon an undated decision of the same court, made after a hearing (Sunshine, Ct. Atty. Ref.), declared that the
deeds [**96] transferring title to certain real property from the defendant Almar Roofing & Sheet Metal Corp., also
known as Almar Roofing Corp., to the defendant Chukwuma Osakwe, from the defendant Chukwuma Osakwe to the
defendant Angela Headley, and from the defendant Angela Headley to the defendant 819 Dean Street Corp., and the
mortgage held by the defendant Long Beach Mortgage Company, were valid, awarded costs and disbursements to the
defendant Long Beach Mortgage Company, and, in effect, dismissed the remainder of the complaint.
Ordered that the judgment is affirmed insofar as appealed from, with costs.
On May 18, 1992, the [***2] plaintiff entered into an agreement with the defendant Almar Roofing & Sheet Metal
Corp., also known as Almar Roofing Corp. (hereinafter Almar), whereby he leased from Almar, for a period of 30
years, a certain parcel of real property which was encumbered with a mortgage held by the City of New York. On the
same day, the plaintiff and Almar executed a contract of sale, which provided for the plaintiff's purchase of the same
property from Almar, to be financed by a purchase money mortgage. Although the contract of sale designated May 18,
1992, as the closing date, no closing actually occurred. A rider to the lease contained a clause providing that once the
mortgage held by the City of New York was satisfied, the plaintiff's rent payments to Almar would be credited to the
[*1010] purchase money mortgage the plaintiff gave to Almar. The plaintiff and Almar's principal, the defendant Alan
Bresnick, also agreed that once the rent payments were converted into mortgage payments, Bresnick would give the
plaintiff the deed to the subject property. The lease and the contract of sale were recorded by the plaintiff on April 30,
1997.
By deed recorded on October 28, 1997, before Almar's mortgage with the [***3] City of New York was satisfied,
Almar transferred the subject property to the defendant Chukwuma Osakwe. In 2002, Osakwe, in turn, transferred the
subject property to the defendant Angela Headley. To finance that purchase, Headley obtained a mortgage loan from the
defendant Long Beach Mortgage Company (hereinafter Long Beach). In 2003, Headley transferred the subject property
to the defendant 819 Dean Street Corp. In February 2005, the City of New York acknowledged the satisfaction of its
mortgage. However, the closing referred to in the May 18, 1992, contract of sale never occurred, and the deed to the
subject property was never delivered to the plaintiff.
In March 2005, the plaintiff commenced this action, seeking, among other things, a judgment declaring that the
deeds transferring title to Osakwe, Headley, and 819 Dean Street Corp. (hereinafter collectively the purchasers), and the
mortgage held by Long Beach, are invalid. After a hearing before a court attorney referee, the Supreme Court entered a
judgment which, inter alia, declared that the deeds transferring title and the mortgage were valid, and, in effect,
dismissed the remainder of the complaint. The plaintiff appeals.
The [***4] recording of a transaction involving real property provides potential subsequent purchasers with
notice of "previous conveyances and encumbrances that might affect their interests" (Andy Assoc. v Bankers Trust Co.,
49 NY2d 13, 20, 399 NE2d 1160, 424 NYS2d 139 [1979]; see Real Property Law 291). In addition, "'[w]here a
purchaser has knowledge of any fact, sufficient to put him [or her] on inquiry as to the existence of some right or title
in conflict with that he [or she] is about to purchase, he [or she] is presumed either to have made the inquiry, and
ascertained [**97] the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his [or
her] claim, to be considered as a bona fide purchaser'" (Maiorano v Garson, 65 AD3d 1300, 1303, 886 NYS2d 190
[2009], quoting Williamson v Brown, 15 NY 354, 362 [1857]). Similarly, a mortgagee is under a duty to make an
inquiry where it is aware of facts "that would lead a reasonable, prudent lender to make inquiries of the
circumstances of the transaction at issue" (LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 600, 835 NYS2d 264 [*1011]
Page 220
76 A.D.3d 1009, *; 908 N.Y.S.2d 95, **;
[2007]). "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property,
and to all the world of the existence of any right [***5] which the person in possession is able to establish" (Phelan v
Brady, 119 NY 587, 591-592, 23 NE 1109 [1890]; see 1426 46 St., LLC v Klein, 60 AD3d 740, 743, 876 NYS2d 425
[2009]).
Title to the subject property was never conveyed to the plaintiff and, thus, he never became the owner of the
property. Therefore, regardless of whatever notice the purchasers may have had as a result of the lease and contract of
sale recorded by the plaintiff, the plaintiff did not have an ownership interest in the property that would defeat any of
the conveyances to those parties or Long Beach's mortgage. Moreover, although the plaintiff resided on the subject
premises, which was sufficient to require an inquiry by the purchasers and Long Beach into "the existence of any
right which [the plaintiff was] able to establish" (Phelan v Brady, 119 NY at 591-592), such an inquiry would have
revealed only the leasehold interest held by the plaintiff. Such a possessory interest was not "in potential conflict"
(Maiorano v Garson, 65 AD3d at 1303) with the interests in the property acquired by the purchasers and Long Beach.
Furthermore, a recorded contract of sale is enforceable against subsequent purchasers, but only for 30 days after the
closing date (see [***6] Real Property Law 294 [1], [4] [a]; [5], [8] [a]). Here, the plaintiff did not record the
contract of sale until nearly five years after the date designated as the closing date in the May 18, 1992, contract of sale,
and the contested conveyances of the subject property occurred even later. Accordingly, the Supreme Court properly
declared that the deeds transferring title to Osakwe, Headley, and Dean Street, and the mortgage held by Long Beach,
were valid.
The plaintiff's remaining contentions are without merit (see Chambers v City of New York, 309 AD2d 81, 764
NYS2d 708 [2003]; Allied Scrap & Salvage Corp. v State of New York, 26 AD2d 880, 274 NYS2d 317 [1966]). Prudenti,
P.J., Skelos, Florio and Sgroi, JJ., concur.
Page 221
76 A.D.3d 1009, *1011; 908 N.Y.S.2d 95, **97;
Positive
As of: May 27, 2014
Gene Maiorano et al., Appellants-Respondents, v Isaac Garson, Defendant, Victor
N. Angelillo, Respondent, and Fremont Investment & Loan, Respondent-Appellant.
(Action No. 1.) Fremont Investment & Loan, Respondent-Appellant, v Victor N.
Angelillo, Respondent, and Gene Maiorano et al., Appellants-Respondents, et al.,
Defendants. (Action No. 2.) (Index Nos. 6693/06, 24691/06)
2008-01821
DEPARTMENT
6812
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff/defendant owners appealed and defendant/plaintiff lender cross-appealed an
order by the Westchester County Supreme Court (New York) that denied their respective motions for summary
judgment in the owners' action to void a deed and the lender's action to foreclose it mortgages on the owners' property.
OVERVIEW: To avoid foreclosure, the owners entered into an unrecorded agreement with defendant buyer for the
purpose of refinancing the property and using the buyer's credit. Shortly thereafter, title to the property was conveyed to
the buyer. When the buyer was forced to make payments for the new mortgage by using his own funds, he sold the
property to defendant borrower, who financed the purchase with two mortgage loans from the lender. Thereafter, the
owners sought to cancel the deed from the buyer to borrower. When the borrower defaulted on his loans, the lender
commenced a foreclosure action. The appellate court found, inter alia, that the owners raised a triable issue of fact as to
whether the lender was a bona fide encumbrancer under Real Property Law 266 by pointing to their actual
possession of the subject premises, as well as documents in the lender's possession that should have led it to inquire
further about the buyer's ownership thereof. Accordingly, the lender's motion for summary judgment dismissing the
owners' causes of action insofar as asserted against it was properly denied.
Page 222
OUTCOME: The order was modified by deleting the provision thereof denying the lender's motion for summary
judgment as to the owners' claim for attorney's fees, and by substituting therefor a provision granting that branch of the
motion; as so modified, the order was affirmed.
CORE TERMS: summary judgment, mortgage, cause of action, deed, foreclosure, subject premises, triable issue of
fact, conveyed, prima facie, bona fide, subject property, properly denied, encumbrancer, purchaser, recorded, cancel,
void, new mortgage, burden of establishing, record owner, fact sufficient, potential conflict, counterclaim,
cross-appeals, entitlement, joined, notice, seller, actual possession, financial difficulties
[HN1] Pursuant to Real Property Law 266, a bona fide purchaser or encumbrancer for value is protected in his or
her title unless he or she had previous notice of the alleged prior fraud by the immediate seller.
HEADNOTES
Mortgages--Foreclosure.--Loan company met its prima facie burden of establishing that it was bona fide
encumbrancer for value by showing that title search revealed that mortgagor was record owner of subject property at
time of closing, after grantor conveyed deed to him, and that there were no recorded contracts affecting title; however,
appellants raised triable issue of fact by pointing to their actual possession of subject premises, as well as documents in
loan company's possession that should have led it to inquire further about grantor's ownership thereof; appellants
raised triable issue of fact as to whether loan company had knowledge of facts which put it "on inquiry" as to existence
of right in potential conflict with its own.
COUNSEL: [***1] O'Kelley & Faller, P.C., White Plains, N.Y. (Jeffrey I. Klein of counsel), for
appellants-respondents.
Delbello Donnellan Weingarten Wise & Wiederkehr, LLP, White Plains, N.Y. (Lee S. Wiederkehr and Michael J.
Schwarz of counsel), for respondent-appellant.
James J. Huben, Elmsford, N.Y., for respondent.
JUDGES: ROBERT A. SPOLZINO, J.P., HOWARD MILLER, DANIEL D. ANGIOLILLO, THOMAS A.
DICKERSON, JJ. SPOLZINO, J.P., MILLER, ANGIOLILLO and DICKERSON, JJ., concur.
OPINION
[**191] [*1300]
In an action, inter alia, pursuant to RPAPL article 15 and Real Property Law 329 to determine claims to real
Page 223
65 A.D.3d 1300, *; 886 N.Y.S.2d 190, **;
property and to cancel of record a deed as being void and of no effect (Action No. 1), and a related foreclosure action
(Action No. 2), which were joined for all purposes, including trial, the plaintiffs in Action No. 1 and defendants in
Action No. 2 appeal from so much of an order of the Supreme Court, Westchester County (Liebowitz, J.), entered
January 23, 2008, as denied their cross motion for summary judgment on the first cause of action in the complaint in
Action No. 1, and, among other things, for summary judgment on their counterclaim and dismissing the complaint
insofar as asserted against them in Action No. [***2] 2, and Fremont Investment & Loan, a defendant in Action No. 1
and the plaintiff in Action No. 2, cross-appeals from so much of the same order as denied its motion for summary
judgment dismissing the complaint [**192] in Action No. 1 insofar as asserted against it.
Ordered that the order is modified, on the law, by deleting the provision thereof denying that branch of the motion
of Fremont Investment & Loan which was for summary judgment dismissing the third cause of action of the complaint
in Action No. 1 insofar as asserted against it, and substituting therefor a provision granting that branch of the motion; as
so modified, the order is affirmed insofar as appealed and cross-appealed from, without costs or disbursements.
In 1971 Gene Maiorano and Rosemarie Maiorano, the plaintiffs in Action No. 1 and defendants in Action No. 2,
[*1301] purchased residential property located in Dobbs Ferry. In 2002 they encountered financial difficulties and
could not make their mortgage payments. To avoid foreclosure, they entered into an agreement with Isaac Garson, a
defendant in Action No. 1, for the purpose of refinancing the property and using Garson's credit. The agreement, which
referred to Garson as a "Trustee," [***3] provided that the Maioranos would enter into a contract to sell the property to
Garson, and Garson would obtain a new mortgage. The Maioranos would then pay Garson the monthly payments on the
new mortgage. The agreement also provided that Garson could sell the property, without the Maioranos's consent, if an
"Impound Fund," from which Garson could make mortgage payments, fell below a certain amount, and they failed to
increase the amount within 15 days after receiving notification from Garson. The agreement was not recorded. Shortly
after executing the agreement, title to the property was conveyed to Garson.
In 2005 the Maioranos again encountered financial difficulties and Garson was forced to make payments for the
new mortgage by using his own funds. As a result, Garson sold the property to Victor N. Angelillo, a defendant in both
actions, who financed the purchase by obtaining two mortgage loans from Fremont Investment & Loan (hereinafter
Fremont). Fremont is a defendant in Action No. 1, and the foreclosure plaintiff in Action No. 2.
The Maioranos commenced Action No. 1 against Garson, Angelillo, and Fremont, inter alia, seeking to cancel of
record the deed from Garson to Angelillo. [***4] In essence, they claimed that Garson conveyed the property to
Angelillo without prior notice to them, allegedly in violation of his duties as Trustee under the agreement.
After Angelillo defaulted on his mortgage loans, Fremont commenced Action No. 2 against him and the Maioranos,
among others. The Maioranos interposed a counterclaim in the foreclosure action, seeking to void and cancel the
Garson-to-Angelillo deed as well as the Fremont mortgages. The two actions were later joined for all purposes,
including trial.
Fremont moved in Action No. 1 for summary judgment dismissing the Maioranos' complaint insofar as asserted
against it. The Maioranos cross-moved in both actions, seeking summary judgment (1) declaring the Garson to
Angelillo deed void, and cancelling it of record, (2) dismissing Action No. 2 insofar as asserted against them, and (3)
directing the cancellation of Angelillo's mortgages to Fremont.
The Supreme Court denied the motion and cross motion. The [*1302] Maioranos appeal, and Fremont
cross-appeals. We modify the order.
In Action No. 1, Fremont made a prima facie showing of entitlement to judgment as a matter of law dismissing the
Maioranos' third cause of action, which sought [***5] to recover an attorney's fee (see generally Alvarez v Prospect
Hosp., 68 NY2d 320, 501 NE2d [**193] 572, 508 NYS2d 923 [1986]). No triable issue of fact was raised in response.
Indeed, the Maioranos admitted that their third cause of action "makes no claim" against Fremont. Therefore, the
Page 224
65 A.D.3d 1300, *1300; 886 N.Y.S.2d 190, **191;
Supreme Court should have granted that branch of Fremont's motion in Action No. 1 which was for summary judgment
dismissing the third cause of action of the complaint insofar as asserted against it.
The remaining branches of Fremont's motion were properly denied. [HN1] Pursuant to Real Property Law 266, a
bona fide purchaser or encumbrancer for value is protected in his or her title unless he or she had previous notice of
the alleged prior fraud by the immediate seller (see LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 599-600, 835 NYS2d
264 [2007]; Karan v Hoskins, 22 AD3d 638, 803 NYS2d 666 [2005]). Here, Fremont met its prima facie burden of
establishing that it was a bona fide encumbrancer for value by showing that a title search revealed that Angelillo was
the record owner of the subject property at the time of the closing, after Garson conveyed the deed to him, and that there
were no recorded contracts affecting title (see Fleming-Jackson v Fleming, 41 AD3d 175, 838 NYS2d 506 [2007];
Emerson Hills Realty v Mirabella, 220 AD2d 717, 633 NYS2d 196 [1995]).
However, [***6] the Maioranos raised a triable issue of fact sufficient to defeat Fremont's motion by pointing to
their actual possession of the subject premises, as well as documents in Fremont's possession that should have led it to
inquire further about Garson's ownership thereof. For example, Gene Maiorano submitted an affidavit in which he
claimed that, in connection with the Garson-to-Angelillo transaction, an appraiser visited the subject premises.
Maiorano claimed that he informed her that he was the "owner" of the premises, and was "considering doing a
refinance." On a subsequent visit, Rosemarie Maiorano also informed the same appraiser that the plaintiffs were the
owners of the property. The resulting appraisal report, which was in Fremont's possession, indicated that the subject
property's occupant was the "owner," and that the underlying transaction was a refinance rather than a purchase.
Moreover, an HUD-1 settlement statement prepared in connection with the Garson-to-Angelillo transaction, also in
Fremont's possession, contained a typewritten entry for the "seller," reading [*1303] "Rosemarie Maiorano," and
containing her address at the subject premises. However, her name was crossed out by [***7] hand, and Garson's name,
with the address of the subject premises, was handwritten adjacent thereto.
[HN2] "[W]here a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of
some right or title in conflict with that he is about to purchase, he is presumed either to have made the inquiry, and
ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to
be considered as a bona fide purchaser" (Williamson v Brown, 15 NY 354, 362 [1857]; see Phelan v Brady, 119 NY
587, 591-592, 23 NE 1109 [1890]; but see Fleming-Jackson v Fleming, 41 AD3d 175, 838 NYS2d 506 [2007]).
On this record, we conclude that the Maioranos succeeded in raising a triable issue of fact as to whether Fremont
had knowledge of facts which put it "on inquiry" as to the existence of a right in potential conflict with its own
(Williamson v Brown, 15 NY 354, 362 [1857]; see Doyle v Siddo, 31 AD3d 697, 818 NYS2d 474 [2006]; Vitale v Pinto,
118 AD2d 774, 500 NYS2d 283 [1986]). Accordingly, those branches of Fremont's motion which were for summary
judgment dismissing the first and second causes of action insofar as asserted against it were properly denied.
[**194] The Maioranos' cross motion was properly denied, as they failed to make a prima [***8] facie showing of
entitlement to relief (see generally Alvarez v Prospect Hosp., 68 NY2d 320, 501 NE2d 572, 508 NYS2d 923 [1986]).
The parties' remaining contentions are either without merit or improperly raised for the first time on appeal.
Spolzino, J.P., Miller, Angiolillo and Dickerson, JJ., concur.
Page 225
65 A.D.3d 1300, *1302; 886 N.Y.S.2d 190, **193;
Caution
As of: May 27, 2014
HSBC Mortgage Services, Inc., Respondent, v Kenyon J. Alphonso, Also Known as
Kenyon Alphonso, et al., Defendants, and Point Holding Alpha, LLC, Appellant.
(Index No. 18890/06)
2007-09265
DEPARTMENT
190
January 13, 2009, Decided
PRIOR HISTORY: HSBC Mtge. Servs., Inc. v. Alphonso, 16 Misc 3d 1131A, 2007 N.Y. Misc. LEXIS 6034 (2007)
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant property transferee (PT) appealed an order of the Supreme Court, Kings
County (New York), which granted a motion by plaintiff mortgage assignee (MA) for summary judgment on its
foreclosure complaint. The trial court held that the PT was not a bona fide purchaser at the time that it acquired title to
the property, such that its interest was subordinate to the MA's interest.
OVERVIEW: The title to the subject property was transferred from an original owner to a purchaser. On the same date
as title was acquired, the purchaser mortgaged the property to a bank. Thereafter, the purchaser sold the property to a
new owner (NO) and that deed was recorded. The purchaser paid off the mortgage with the sale proceeds and a
satisfaction of mortgage was recorded. Prior to when the NO's deed was recorded, he transferred title of the property to
the PT for a much lesser sum, and that deed was recorded prior to the NO's deed. Further, the NO had taken out a large
mortgage on the property, which was later assigned to the MA. It filed the foreclosure action and the PT asserted that it
had recorded its deed prior to the filing and recording of the mortgage, such that it had priority of title. The trial court
granted summary judgment to the MA, finding that the PT was not a bona fide purchaser because it knew of the
mortgage. On appeal, the court found that the PT had at least constructive knowledge of the mortgage. Further, it did
not pay valuable consideration for purposes of being a bona fide purchaser for value under Real Property Law 291.
Page 226
OUTCOME: The court affirmed the order of the trial court.
CORE TERMS: mortgage, subject property, recorded, deed, purchaser, recording statutes, action to foreclose,
summary judgment, valuable consideration, bona fide purchaser, deed dated, constructive knowledge, real property,
citations omitted, actually paid, foreclosure, investigate, discrepancy, appraised, invoke, repairs, record owner, doing
business, satisfaction, transferred
Evidence > Inferences & Presumptions > Presumptions > General Overview
Real Property Law > Financing > Mortgages & Other Security Instruments > General Overview
[HN1] The lien of a mortgage is extinguished upon the sale of the real property affected thereby unless a purchaser has
knowledge, either actual or constructive, of the existence of the mortgage. Moreover, the intended purchaser must be
presumed to have investigated the title, and to have examined every deed or instrument properly recorded, and to have
known every fact disclosed or to which an inquiry suggested by the record would have led. If the purchaser fails to use
due diligence in examining the title, he or she is chargeable, as a matter of law, with notice of the facts which a proper
inquiry would have disclosed.
[HN2] The purchase of subject property for valuable consideration is a condition for a purchaser to invoke the
protection of the recording statutes (Real Property Law 291). A nominal sum, though actually paid, or an antecedent
debt, or a promise on the part of a grantee from which he can be relieved, do not constitute valuable considerations.
HEADNOTES
Mortgages--Foreclosure.--In action to foreclose mortgage, plaintiff's motion for summary judgment was properly
granted against defendant--at time defendant purchased property, person in possession of property was not owner of
record; defendant, therefore, had duty to investigate apparent discrepancy; consequently, defendant had at least
constructive knowledge of mortgage; had defendant engaged in any effort to pay mortgage of record, it would have
discovered that mortgage had been satisfied few weeks before it purchased subject property--moreover, defendant did
not purchase subject property for valuable consideration, condition for purchaser to invoke protection of recording
statutes; because defendant was not bona fide purchaser for value, it was not entitled to protection of recording
statutes (see Real Property Law 291).
COUNSEL: [***1] Stephen David Fink, Forest Hills, N.Y., for appellant.
Solomon & Siris, P.C., Uniondale, N.Y. (Bill Tsevis and Stuart Siris of counsel), for respondent.
JUDGES: FRED T. SANTUCCI, J.P., JOSEPH COVELLO, JOHN M. LEVENTHAL, ARIEL E. BELEN, JJ.
SANTUCCI, J.P., COVELLO, LEVENTHAL and BELEN, JJ., concur.
OPINION
[**132] [*598] In an action to foreclose a mortgage, the defendant Point Holding Alpha, LLC, appeals, as limited
by its brief, from so much of an order of the Supreme Court, Kings County (Lewis, J.), dated August 20, 2007, as
granted the plaintiff's motion for summary judgment on the complaint insofar as asserted against it.
Page 227
58 A.D.3d 598, *; 874 N.Y.S.2d 131, **;
Ordered that the order is affirmed insofar as appealed from, with costs.
The real property at issue is a two-family house in Brooklyn. By deed dated January 6, 2004, and recorded in the
Office of the City Register of the City of New York (hereinafter the Office) on August 10, 2004, title to the subject
property was transferred from Terrance Bridgeman to Chaim Parnes for the sum of $600,000. On January 6, 2004, the
same date as he acquired title, Parnes mortgaged the subject property to Florida Bank, N.A. doing business as Florida
Bank Mortgage, for the sum of $420,000. This mortgage (hereinafter [***2] the Florida Bank mortgage) was recorded
in the Office on August 10, 2004.
Parnes sold the subject property to the defendant Kenyon J. Alphonso, also known as Kenyon Alphonso by deed
dated October 11, 2005, for $600,000 (hereinafter the Alphonso deed). The Alphonso deed was filed in the Office on
November 21, 2005. Parnes used $416,627.11 of the proceeds he received from Alphonso to pay off the Florida Bank
mortgage. A satisfaction of mortgage memorializing the satisfaction of the Florida Bank [*599] mortgage, dated
October 27, 2005, was recorded on December 9, 2005.
Just a month after he purchased the subject property, two weeks before his own deed was recorded, Alphonso
transferred title to the subject property to Point Holding Alpha, LLC (hereinafter Point), by deed dated November 7,
2005, for just $20,000 (hereinafter the Point deed). The Point deed was recorded three days later, on November 10,
2005, 11 days before the Alphonso deed.
Alphonso had taken out a $480,000 mortgage on the subject property from Encore Credit Corp, doing business as
ECC Encore Credit (hereinafter Encore), on October 11, 2005, the same day he took title to the subject property.
According to an appraisal of the [**133] subject property [***3] commissioned by Encore, the subject property was
worth $600,000. Encore recorded this mortgage (hereinafter the Encore mortgage) on November 21, 2005. Encore
subsequently assigned the Encore mortgage to the plaintiff, HSBC Mortgage Services, Inc. (hereinafter HSBC), by an
assignment of mortgage dated June 2006. The assignment (hereinafter the HSBC mortgage) was recorded in the Office
on July 20, 2006.
When Point purchased the subject property for $20,000, it admittedly knew that the subject property had been
appraised for $600,000, and was encumbered by the $480,000 mortgage. However, Point also apparently knew that the
Encore Mortgage had not yet been recorded at the time Point purchased the subject property. Indeed, at the time Point
purchased the subject property, a title search would have revealed that the seller, Alphonso, although in possession of
the subject property, was not the record owner; at the time, Parnes remained the record owner. A title search would have
also revealed that Parnes had satisfied the Florida Bank mortgage, also of record.
When HSBC brought the instant foreclosure action to foreclose on the HSBC mortgage, Point raised the affirmative
defense that it [***4] had recorded the Point deed to the subject property before HSBC filed and recorded the HSBC
mortgage. Thus, Point claimed that it had priority of title. HSBC moved for summary judgment, claiming that, since
Point did not purchase the subject property as a bona fide purchaser, its deed was, in fact, subordinate to the HSBC
mortgage. The Supreme Court agreed, and granted HSBC's motion. We affirm the order insofar as appealed from.
[HN1] "[T]he lien of a mortgage is extinguished upon the sale of the real property affected thereby unless the
purchaser has knowledge, either actual or constructive, of the existence of the [*600] mortgage" (Baccari v De Santi,
70 AD2d 198, 201, 431 NYS2d 829 [1979]). Moreover, "[t]he intended purchaser must be presumed to have
investigated the title, and to have examined every deed or instrument properly recorded, and to have known every fact
disclosed or to which an inquiry suggested by the record would have led [citations omitted]. If the purchaser fails to use
due diligence in examining the title, he or she is chargeable, as a matter of law, with notice of the facts which a proper
inquiry would have disclosed" (Fairmont Funding v Stefansky, 301 AD2d 562, 564, 754 NYS2d 54 [2003] [citations
omitted]). Here, at the time Point purchased [***5] the property at issue, the person in possession of the property was
not the owner of record. Point, therefore, had a reasonable duty of inquiry to investigate the apparent discrepancy (see
Fairmont Funding v Stefansky, 301 AD2d 562, 564, 754 NYS2d 54 [2003]; Hicksville Props. v Wollenhaupt, 273 AD2d
Page 228
58 A.D.3d 598, *598; 874 N.Y.S.2d 131, **132;
356, 357, 711 NYS2d 729 [2000]). Consequently, Point had at least constructive knowledge of a mortgage. Indeed,
Point's principal averred before the Supreme Court that matters of public record concerning the subject property were
"easy for me to find." Had Point engaged in any effort to pay the mortgage of record, it would have discovered that the
mortgage had been satisfied on October 27, 2005, a few weeks before it actually purchased the subject property.
Moreover, Point did not [HN2] purchase the subject property for valuable consideration, a condition for a purchaser
to invoke the protection of the recording statutes (see Real Property Law 291). "[A] nominal sum, though actually
paid, or an antecedent debt, or a promise on the part of the grantee from which he can be relieved, do not constitute
valuable considerations" (Turner v Howard, 10 AD 555, 559, 42 NYS 335 [1896]; see Lang v Mueller, 149 AD 926,
[**134] 133 NYS 1130 [1912]). Here, Point paid $20,000 for a property appraised [***6] at $600,000. Despite its
contention that the mortgage on the property should be deemed part of its consideration, Point presented no evidence
that it sought in any way to make payments on the alleged mortgage. Moreover, although it submitted a contract for
repairs totaling more than $100,000, it presented no evidence that it actually paid for any such repairs. Accordingly,
Point was not a bona fide purchaser for value and, therefore, was not entitled to the protection of the recording statutes
(see Real Property Law 291). Santucci, J.P., Covello, Leventhal and Belen, JJ., concur.
Page 229
58 A.D.3d 598, *600; 874 N.Y.S.2d 131, **133;
Positive
As of: May 27, 2014
Charles W. Ward, Appellant, v Barbara P. Ward, Defendant, and Accredited Home
Lenders, Respondent.
503624
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, THIRD
DEPARTMENT
4984
June 5, 2008, Entered
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff ex-husband appealed an order by the Delaware County Supreme Court (New
York) that granted defendant lender's motion for summary judgment in the ex-husband's action seeking, among other
things, to nullify the lender's mortgage.
OVERVIEW: Pursuant to a judgment of divorce, the ex-husband was granted sole possession of the marital residence
even though title was solely in the ex-wife's name. Thereafter, unbeknownst to the ex-husband, the ex-wife gave a
mortgage on the property to the lender. After learning of the mortgage, the ex-husband sought to nullify it. The lender
did not respond to the ex-husband's discovery demands and moved for summary judgment dismissing the complaint
against it. The ex-husband, in turn, cross-moved to strike the lender's answer and to preclude it from introducing
evidence withheld during discovery. The appellate court found that pursuant to Real Property Law 291, the
documents prepared in connection with the mortgage were relevant to ascertaining whether the lender knew or should
have known of the ex-husband's interest in the property. Given that the facts necessary for the ex-husband to oppose the
summary judgment motion were exclusively within the lender's knowledge, the lender was not entitled to summary
judgment. Accordingly, the trial court should have considered and ruled upon the ex-husband's cross-motion.
OUTCOME: The order was reversed, and the lender's motion was denied.
Page 230
CORE TERMS: mortgage, summary judgment, inquiry notice, discovery, marital, judgment of divorce, recording,
purchaser, notice, distributed
[HN1] Whether a party has actual or inquiry notice of a competing interest is a relevant consideration in determining if
that party is a bona fide purchaser entitled to the protection of the recording act. Real Property Law 291.
[HN2] In a recording act context, a party will be deemed to have inquiry notice when it had knowledge of facts that
would lead a reasonably prudent purchaser to make inquiry.
[HN3] Actual possession of real estate is notice to all the world of the existence of any right that the person in
possession is able to establish if such possession is inconsistent with the title of the apparent owner of record.
HEADNOTES
Mortgages--Validity
Judgments--Summary Judgment
COUNSEL: [***1] Frederick J. Neroni, Delhi, for appellant.
Farer & Schwartz, P.C., Latham (Steven D. Farer of counsel), for respondent.
JUDGES: Before: Spain, J.P., Lahtinen, Kane, Malone Jr. and Stein, JJ. Spain, J.P., Lahtinen, Kane and Stein, JJ.,
concur.
OPINION BY: Malone Jr.
OPINION
[*919] [**774] Malone Jr., J. Appeal from an order of the Supreme Court (Coccoma, J.), entered July 11, 2007
[**775] in Delaware County, which granted a motion by defendant Accredited Home Lenders, Inc. for summary
judgment dismissing the complaint against it.
[*920] Plaintiff and defendant Barbara P. Ward were divorced in 2002 and, pursuant to the judgment of divorce,
the marital residence was deemed marital property to be equitably distributed between the parties. Title was solely in
Ward's name. The judgment granted plaintiff sole possession of the property until it was sold at a price of not less than
the assessed value of $ 42,614, with the proceeds to be distributed equally after the payment of certain encumbrances.
The judgment of divorce was entered in the Delaware County Clerk's office on January 11, 2002.
Thereafter, unbeknownst to plaintiff, Ward gave a mortgage on the property in the amount of $ 80,000 to defendant
Accredited Home Lenders, Inc. [***2] (hereinafter defendant), which was recorded in the Delaware County Clerk's
office on October 2, 2006. After learning of the mortgage, plaintiff commenced this action against Ward and defendant
Page 231
52 A.D.3d 919, *; 859 N.Y.S.2d 774, **;
seeking, among other things, to nullify the mortgage. Following service of defendant's answer,
*
plaintiff served
various discovery demands. Defendant did not respond to these demands and moved for summary judgment dismissing
the complaint against it. Plaintiff, in turn, cross-moved to strike defendant's answer and to preclude defendant from
introducing evidence withheld during discovery. Supreme Court granted defendant's motion without considering
plaintiff's cross motion. Plaintiff now appeals.
* Ward defaulted in the action.
For his cause of action against defendant, plaintiff alleged that defendant failed to diligently search the title to the
property prior to recording Ward's mortgage and accepted the mortgage even though it was on notice of plaintiff's
interest in the property. In support of its motion for summary judgment dismissing this claim, defendant submitted the
affidavit of its attorney as well as that of a title searcher establishing that the public records did not disclose plaintiff's
[***3] ownership interest in the property or the judgment of divorce, which was sealed and entered in the judgment
docket only.
Even accepting the proof submitted by defendant as true, it does not conclusively establish if defendant acquired
actual or inquiry notice of plaintiff's interest. [HN1] Whether a party has actual or inquiry notice of a competing
interest is a relevant consideration in determining if that party is a bona fide purchaser entitled to the protection of the
recording act (see Ithaca Assoc. Co. v Plataniotis, 274 AD2d 640, 642, 710 NYS2d 688 [2000]; Tompkins County Trust
Co. v Talandis, 261 AD2d 808, 810, 690 NYS2d 330 [1999], lv dismissed 93 NY2d 1041, 719 NE2d 930, 697 NYS2d
569 [1999]; see also Real Property Law 291). [HN2] A party will be deemed to have inquiry notice when it had
[*921] " 'knowledge of facts that would lead a reasonably prudent purchaser to make inquiry' " (Morrocoy Mar. v
Altengarten, 120 AD2d 500, 500, 501 NYS2d 701 [1986], quoting 1 Warren's Weed, New York Real Property 1.05, at
357). Notably, [HN3] " 'actual possession of real estate is notice to all the world of the existence of any right which the
person in possession is able to establish' " if such possession is inconsistent with the title of the apparent owner of
record [***4] (Wardell v Older, 70 AD2d 1008, 1009, 418 NYS2d 196 [1979], quoting Ehrlich v Hollingshead, 275
App Div 742, 743, 87 NYS2d 682 [1949]).
[**776] In the case at hand, the documents prepared in connection with the mortgage are relevant to ascertaining
whether defendant knew or should have known of plaintiff's interest in the property. Such documents would reveal
defendant's knowledge, if any, of Ward's marital status, the fact that she was not paying taxes or insurance on the
property, as well as the fact that plaintiff occupied the property. Defendant, however, failed to produce such documents
in response to plaintiff's discovery demands. Given that the facts necessary for plaintiff to oppose the summary
judgment motion were exclusively within defendant's knowledge, defendant was not entitled to summary judgment (see
Tenkate v Moore, 274 AD2d 934, 935, 711 NYS2d 587 [2000]; Reohr v Golub Corp., 242 AD2d 850, 851, 661 NYS2d
889 [1997]; see also CPLR 3212 [f]). In view of this, Supreme Court should have considered and ruled upon plaintiff's
cross motion.
Spain, J.P., Lahtinen, Kane and Stein, JJ., concur. Ordered that the order is reversed, on the law, with costs, and
motion denied.
Page 232
52 A.D.3d 919, *920; 859 N.Y.S.2d 774, **775;
Caution
As of: May 27, 2014
Tompkins County Trust Company, Appellant, v. Gerald R. Talandis et al.,
Defendants, and Vita Talandis, Respondent.
83756
DEPARTMENT
261 A.D.2d 808; 690 N.Y.S.2d 330; 1999 N.Y. App. Div. LEXIS 5559
May 20, 1999, Decided
May 20, 1999, Entered
PRIOR HISTORY: [***1] Appeal from an order of the Supreme Court (Relihan, Jr., J.), entered May 5, 1998 in
Tompkins County, which, inter alia, granted defendant Vita Talandis' cross motion for summary judgment in a
mortgage foreclosure action and declared that her interest in the foreclosed property was senior to plaintiff's interest.
DISPOSITION: The order is reversed, on the law, with costs, defendant Vita Talandis' cross motion for summary
judgment denied, plaintiff's motion for summary judgment granted and it is declared that defendant Vita Talandis'
interest in the foreclosed property was subordinate to plaintiff's 1995 mortgage.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff mortgage lender sought review of an order of the Supreme Court, Tompkins
County (New York) that granted defendant's cross-motion for summary judgment in a mortgage foreclosure action, and
declared that defendant's interest in the foreclosed property was senior to plaintiff's interest.
OVERVIEW: Plaintiff mortgage lender brought a foreclosure action against defendant's ex-husband. Plaintiff moved
for partial summary judgment seeking a declaration that defendant's interest in the property was subordinate to its lien,
and defendant cross-moved for summary judgment asserting that her rights were superior. Defendant's cross motion was
granted, and plaintiff appealed. In reversing the decision, the court held that the entry of the divorce judgment did not
provide constructive notice to plaintiff of defendant's possessory interest. Because there was no record that the divorce
was filed in the same manner as the conveyance pursuant to N.Y. Real. Prop. Law 297(b), defendant's right to
Page 233
possession were not protected; no constructive notice in the chain of title to third parties was given. Defendant's four
judgments against her ex-husband did not suggest a possessory interest in the real property. Defendant failed to voice
any possessory interest in the property during the course of negotiations and dealings to arrange the consolidated
refinancing between plaintiff and her ex-husband, which included several direct contacts between plaintiff and
defendant prior to the loan closing.
OUTCOME: The court reversed the order that granted defendant's cross-motion for summary judgment, holding
defendant's interest was subordinate to plaintiff's mortgage. The court ruled that defendant's occupancy did not give rise
to a reasonable inference that she intended to assert an adverse claim inconsistent with her ex-husband's ownership.
CORE TERMS: mortgage, possessory interest, separation agreement, constructive notice, purchaser, summary
judgment, actual notice, consolidated, refinancing, subordinate, occupancy, divorce, marital residence, foreclosure
action, judgment of divorce, judgment of foreclosure, equitable, evident, lender, chain, negotiations, ownership, senior
[HN1] Reliance upon a chain of title search does not inoculate a lender where other evident circumstances, in the
exercise of reasonable diligence, would disclose an existing legal or equitable interest In the absence of disclosure based
on constructive notice, the issue of actual notice of a possessory interest must be examined. Although a purchaser may
have a duty to ascertain the extent of the interest of a person who is in possession of the premises, in order for the
possession to operate as the equivalent of actual notice, the possession must be actual, open and visible occupation,
inconsistent with the title of the apparent owner by the record; not equivocal, occasional, or for a special or temporary
purpose; neither can it be consistent with the title of the apparent owner by the record.
COUNSEL: Harris, Beach & Wilcox (Mark B. Wheeler of counsel), Ithaca, for appellant.
Kerrigan & Wallace (James M. Kerrigan of counsel), Ithaca, for respondent.
JUDGES: Cardona, P. J., Crew III, Peters and Carpinello, JJ., concur.
OPINION BY: Graffeo
OPINION
[*808] [**331] Graffeo, J.
This foreclosure action involves a priority dispute between a mortgage lender and the occupant, defendant Vita
Talandis (hereinafter defendant), of the premises at issue. Defendant and defendant Gerald R. Talandis (hereinafter
Talandis) were married in 1961 and entered into a separation agreement [***2] in [*809] April 1981 which provided
[**332] defendant with the exclusive right to occupy what had been the marital residence until the subject property was
sold, at which time defendant's right of possession would be transferred to a "substitute residence". Defendant was to
receive a second mortgage on the substitute residence equal to one half of the net proceeds of sale of the former marital
residence. The separation agreement was incorporated into, but not merged with, the judgment of divorce granted in
October 1982 and thereafter entered in the County Clerk's office. In August 1983, defendant selected a substitute
residence (hereinafter the Nelson Road property) and Talandis acquired title to the property. The parties modified their
agreement accordingly and, a little more than a year later, another amendment was executed by the parties to permit
Talandis to retain ownership of the former marital residence in consideration of $ 14,000 to be paid to defendant by
Page 234
261 A.D.2d 808, *; 690 N.Y.S.2d 330, **;
1999 N.Y. App. Div. LEXIS 5559, ***1
monthly payments pursuant to a promissory note. The amendments to the separation agreement were not filed.
At the time Talandis purchased the Nelson Road property in 1983, he obtained a $ 53,000 mortgage [***3] loan
from Troy Savings Bank. In October 1986 Talandis refinanced with plaintiff, securing a $ 64,000 mortgage loan and
satisfying the Troy Savings Bank lien. In 1992 Talandis defaulted on the loan and plaintiff secured a judgment of
foreclosure, but before consummating a foreclosure sale in 1995 plaintiff consented to a $ 73,500 consolidated
refinancing of the earlier mortgage and other moneys owed. When Talandis failed to make any of the payments on the
consolidated loan, plaintiff commenced this foreclosure action. Plaintiff moved for partial summary judgment seeking a
declaration that defendant's interest was subordinate to its lien and defendant cross-moved for summary judgment
asserting that her rights were superior. Supreme Court denied plaintiff's motion and granted defendant's cross motion,
finding that plaintiff was not a "bonafide purchaser for value" and, therefore, not protected by the recording statute
(see, Real Property Law 291) with respect to defendant's interest.
On appeal, plaintiff contends that its mortgage was senior to any interest that defendant acquired in the property
because it obtained and recorded its mortgage without [***4] notice of defendant's unrecorded interest and was,
therefore, a good-faith purchaser for value. Defendant, on the other hand, argues that her interest in the property upon
which plaintiff sought to foreclose was senior to plaintiff's rights because plaintiff had actual and/or constructive notice
of her possessory interest in the property.
[*810] Initially, we reject defendant's contention that the entry of the judgment of divorce provided constructive
notice to plaintiff of her possessory interest. Notably, the record does not support a finding that the divorce was filed in
the same manner as a conveyance pursuant to Real Property Law 297-b (see, Domestic Relations Law 234 [2]; see
also, Mondello v Mondello, 178 AD2d 587; cf., State St. Bank & Trust Co. v Hament, 213 AD2d 623, lv dismissed 86
NY2d 778; Scheinkman, 1988 Supp Practice Commentaries, McKinney's Cons Laws of NY, Book 14, Domestic
Relations Law C234:4, 1999 Supp Pamph, at 27). Such a filing would have protected defendant's right to possession by
providing constructive notice in the chain of title [***5] to third parties.
As Supreme Court correctly surmised, [HN1] reliance upon a chain of title search does not inoculate a lender where
other evident circumstances, in the exercise of reasonable diligence, would disclose an existing legal or equitable
interest (see, Sweet v Henry, 175 NY 268; Williamson v Brown, 15 NY 354). In the absence of disclosure based on
constructive notice (see, e.g., Witter v Taggart, 78 NY2d 234), the issue of actual notice of a possessory interest must be
[**333] examined (see, Schenectady Sav. Bank v Wertheim, 237 App Div 311, affd 263 NY 585). Although a purchaser
may have a duty to ascertain the extent of the interest of a person who is in possession of the premises (see, Sweet v
Henry, supra; Nethaway v Bosch, 199 AD2d 654), in order for the possession to operate as the equivalent of actual
notice, the possession must be "actual, open and visible occupation, inconsistent with the title of the apparent owner by
the record; not equivocal, occasional [***6] or for a special or temporary purpose; neither can it be consistent with the
title of the apparent owner by the record" (Holland v Brown, 140 NY 344, 347-348; see, Fekishazy v Thomson, 204
AD2d 959, 962, appeal dismissed 84 NY2d 844, lv denied 84 NY2d 812; see also, Schenectady Sav. Bank v Wertheim,
supra, at 313).
Therefore, the dispositive issues in this case are whether plaintiff was without knowledge "of facts that would lead
a reasonably prudent purchaser to make inquiry" (Nethaway v Bosch, supra, at 654) regarding defendant's
occupancy of the Nelson Road property, and whether defendant's occupancy and representations to plaintiff were
inconsistent with Talandis' fee interest and thereby constituted actual notice of an adverse interest (see, Fekishazy v
Thomson, supra, at 962; see generally, Yen-Te Hsueh Chen v Geranium Dev. Corp., 243 AD2d 708, lv dismissed 91
NY2d 921). Although it is undisputed that plaintiff was aware of the Talandises' divorce and defendant's [*811]
presence at the property, plaintiff denied that [***7] it had any knowledge of the terms of the divorce judgment or
separation agreement. Further, the record in this case indicates that the financial statement submitted by Talandis to
plaintiff did not indicate that he derived any rental income from defendant, implying that there was no written lease with
defendant. Defendant's four judgments against Talandis evidenced his considerable indebtedness to defendant, but did
not suggest a possessory interest in the real property.
Page 235
261 A.D.2d 808, *809; 690 N.Y.S.2d 330, **332;
1999 N.Y. App. Div. LEXIS 5559, ***2
While it is evident that defendant was under considerable pressure from Talandis to cooperate, defendant
nevertheless failed to voice any possessory interest in the property during the course of negotiations and dealings to
arrange the consolidated refinancing, which included several direct contacts between plaintiff and defendant prior to the
loan closing. Earlier, in anticipation of the 1993 judgment of foreclosure sale, defendant searched for another residence
and at some point, the property had been listed for sale for more than two years. Defendant's silence during the
refinancing negotiations, while represented by counsel, and her further consent to the subordination of her four
judgment liens against Talandis [***8] belied her future assertion of an equitable or legal interest in the property
superior to that of plaintiff.
We do not find that defendant's occupancy of the premises, in light of the totality of the circumstances, would give
rise to a reasonable inference that she intended to assert an adverse claim inconsistent with Talandis' ownership;
therefore, to the extent that it existed, defendant's interest was subordinate to plaintiff's 1995 mortgage.
Cardona, P. J., Crew III, Peters and Carpinello, JJ., concur.
Ordered that the order is reversed, on the law, with costs, defendant Vita Talandis' cross motion for summary
judgment denied, plaintiff's motion for summary judgment granted and it is declared that defendant Vita Talandis'
interest in the foreclosed property was subordinate to plaintiff's 1995 mortgage. [See, 176 Misc 2d 632.]
Page 236
261 A.D.2d 808, *811; 690 N.Y.S.2d 330, **333;
1999 N.Y. App. Div. LEXIS 5559, ***7
Caution
As of: May 27, 2014
DAVID FEKISHAZY et al., Respondents, v. JOHN E. THOMSON, Respondent,
and TRW TITLE INSURANCE OF NEW YORK INC., as Successor in Interest to
NATIONAL ATTORNEYS' TITLE INSURANCE COMPANY, Appellant.
70405
DEPARTMENT
May 26, 1994, Entered
SUBSEQUENT HISTORY: [***1] As Amended June 29, 1994. As Amended August 1, 1994.
CASE SUMMARY:
PROCEDURAL POSTURE: The Supreme Court (New York), upon a motion for reconsideration, adhered to its prior
decision denying defendant insurer's motion to dismiss the complaint filed against it and defendant lessee by plaintiff
purchasers. The insurer appealed.
OVERVIEW: When a mother and her son owned property as tenants in common, the mother leased part of it to the
lessee, her husband. The son did not sign the lease. The mother then conveyed the entire property to the son. Thereafter,
the mother recorded the lease. The son sold the property to the purchasers who had the insurer provide title insurance.
The policy excepted coverage for leases of record contained therein but it did not list any leases associated with the
property. The purchasers filed an action seeking declarations that the lease was not valid and that the insurer was liable
to indemnify them for counsel fees and costs associated with the action. The insurer's motion to dismiss was denied. On
appeal, the court found that because the grantor-grantee indexing system was used in the county in which the property
was located, the insurer was not charged with constructive notice of the lease because it had no duty to search outside
the chain of title. The court also found that lessee's presence on the property did not constitute actual notice of his lease
rights because the sales contract provided that the property was being sold subject to the lessee's month-to-month
tenancy.
Page 237
OUTCOME: The court reversed the judgment denying the insurer's motion to dismiss, as modified, so that it was
treated as a motion for a declaration in its favor.
CORE TERMS: lease, recorded, chain, notice, recording, insurance policy, month-to-month, purchaser, tenant, actual
possession, grantor-grantee, declaration, indexing, tenancy, sale contract, contract of sale, encumbrance, conveyance,
excepted, occupants', covenant, conveyed, prior decision, prior owner, record owner, summary judgment, subject
premises, inquiry notice, public record, constructive notice
Real Property Law > Title Quality > Marketable Title > Abstracts
[HN1] The recording statutes in a grantor-grantee indexing system charge a purchaser with notice of matters only in the
record of the purchased land's chain of title back to the original grantor. A purchaser is not normally required to search
outside the chain of title and is not chargeable with constructive notice of conveyances recorded outside of that
purchaser's direct chain of title where the grantor-grantee system of indexing is used.
Real Property Law > Title Quality > Marketable Title > Abstracts
[HN2] A purchaser is required to search the records only from the date on which a prior owner acquired title to the date
on which he or she parted therewith. This rule excludes from the chain of title any instrument recorded before
acquisition, or after a recorded relinquishment.
Real Property Law > Landlord & Tenant > Tenancies > Periodic Tenancies
Real Property Law > Purchase & Sale > Contracts of Sale > Period Between Execution & Closing > Right of
Possession
[HN3] Actual possession of real estate is notice to all the world of the existence of any right which the person in
[HN4] The possession that will be equivalent to actual notice must be inconsistent with the title of the apparent owner
by the record.
COUNSEL: Kleinman, Saltzman & Goodfriend (Stanley Zwillinger of counsel), West Nyack, for appellant.
Bloom & Bloom P.C. (Daniel J. Bloom of counsel), New Windsor, for David Fekishazy and another, respondents.
Silver, Forrester, Schisano & Lesser (Richard Schisano of counsel), Newburg, for John E. Thomson, respondent.
JUDGES: Before: Cardona, P.J., White, Casey, Weiss and Peters, JJ.
OPINION BY: CARDONA
OPINION
[**277] [*959] MEMORANDUM AND ORDER
Page 238
204 A.D.2d 959, *; 612 N.Y.S.2d 276, **;
1994 N.Y. App. Div. LEXIS 5669, ***1
Cardona, P.J.
Appeal (transferred to this court by order of the Appellate Division, Second Department) from an order of the
Supreme Court (Miller, J.), entered February 12, 1992 in Orange County, which, upon reconsideration, adhered to its
prior decision, inter alia, denying a motion by defendant TRW Title Insurance of New York Inc. to dismiss the
complaint against it.
On April 24, 1984 Ruth Thomson, the owner of property located in Ulster County and improved by a multiple-unit
residence, conveyed the property to herself and her son, Nicholas Amoroso, as tenants in common. On [***2] January
12, 1985 Ruth Thomson, as landlord, entered into a lease with defendant John E. Thomson, her husband, as tenant, for a
portion of the premises from February 1, 1985 through January 30, 1999 at an annual rent payable in equal monthly
installments. Amoroso did not sign the lease. By deed dated and recorded on May 6, 1986, Ruth Thomson and Amoroso
conveyed sole title to Amoroso. On May 10, 1990 Ruth Thomson recorded the lease.
Thereafter, on or about August 12, 1990, Amoroso entered into a purchase and sale contract with plaintiffs and
conveyed the property, a two-family house, by deed dated September 18, 1990. At closing, plaintiffs purchased a title
insurance policy (hereinafter the policy) from National Attorneys' Title Insurance Company, the predecessor in interest
of defendant TRW Title Insurance Company of New York Inc. (hereinafter TRW). The policy excepted coverage for,
inter alia, "leases of record as noted herein" and "rights of present tenants and [*960] occupants on a month to month
basis as per contract of sale". No lease of record was noted in the policy.
Plaintiffs commenced this action seeking declarations that the lease was not valid and that TRW was liable to
[***3] indemnify them for counsel fees and costs associated with the action. John Thomson counterclaimed for a
declaration that the lease was valid. TRW moved to dismiss the complaint pursuant to CPLR 3211. Plaintiffs and John
Thomson each cross-moved for summary judgment. Supreme Court denied TRW's motion as well as plaintiffs' cross
motion but, after determining that the lease was valid and ruling that he was entitled to joint occupancy, use and
possession with plaintiffs, granted John Thomson's cross motion. TRW thereafter moved for reargument, which
Supreme Court granted but adhered to its prior decision. TRW appeals.
TRW's primary contention is that the lease instrument, recorded more than five years after the lessor's conveyance
of the property, was not within the direct chain of title of the subject premises and therefore does not constitute a defect
or encumbrance affecting plaintiffs' title to the premises. Plaintiffs, while not directly disputing this contention, argue
that TRW was put on "inquiry notice" of the existence of the lease based upon Ruth Thomson's tenancy, even though
that tenancy was incorrectly shown on the sales contract as "month-to-month" "no written lease", because [***4] the
lease was a matter of public record in the chain of title of the subject premises and, therefore, plaintiffs had an absolute
right to rely on the expertise of TRW to locate it and raise it as an objection.
[HN1] The recording statutes in a grantor-grantee indexing system charge a purchaser with notice of
matters only in the record of the purchased land's chain of title back to the original grantor (see, Andy
Assocs. v Bankers Trust Co., 49 NY2d [13], supra, at 24; 4A Warren's Weed, op. cit., Recording, 1.04,
at 10; Aiello v Wood, 76 AD2d 1019, 429 N.Y.S.2d 486; Doyle v Lazarro, 33 A.D.2d [142], supra, at 144,
affd without opn 33 NY2d 981, supra). Buffalo Academy [Buffalo Academy of the Sacred Heart v Boehm
Bros. Inc., 267 NY 242, 196 N.E. 42] recognized that a "purchaser is not normally required to search
outside the chain of title" (Doyle v Lazarro, supra [emphasis added]; accord, [**278] Steinmann v
Silverman, 14 NY2d 243, 247, 251 N.Y.S.2d 1, 200 N.E.2d 192), and is not chargeable with constructive
notice of conveyances recorded outside of that purchaser's direct chain of title where, as in [Ulster]
[***5] County (see, Real Property Law 316-a), the grantor-grantee system of indexing is used (see,
Andy Assocs. v Bankers Trust Co., 49 NY2d supra, at 24; 4A Warren's Weed, op. cit., Restrictive [*961]
Covenants, 3.05, at 33-34; 5A Warren's Weed, op. cit., Title Examination, 5.18, at 67-68) ( Witter v
Page 239
204 A.D.2d 959, *959; 612 N.Y.S.2d 276, **277;
1994 N.Y. App. Div. LEXIS 5669, ***1
Taggart, 78 NY2d 234, 238-239, 573 N.Y.S.2d 146, 577 N.E.2d 338).
The concept of "chain of title" has been largely moulded [sic] by judicial decisions as to the scope of a
reasonable burden of searching the records. This has been, in turn, influenced by the indexing practices
of recording offices. In consequence, it is commonly held that [HN2] a purchaser is required to search
the records only from the date on which a prior owner acquired title to the date on which he [or she]
parted therewith. This rule excludes from the chain of title" any instrument recorded before acquisition,
or after a recorded relinquishment. (Powell, Real Property P 916 [abridged].)
Although the lease was recorded some four months before the conveyance of the property from Amoroso to
plaintiffs, given the current grantor-grantee recording system utilized in Ulster County, we find this [***6] recording
insufficient to charge plaintiffs with constructive notice of the lease (see, Real Property Law 291) because it was
recorded after Ruth Thomson's recorded relinquishment of her title to Amoroso. Consequently, the lease instrument was
outside the "chain of title". As subsequent purchasers, plaintiffs were not required to search in the grantor-grantee
indexing system outside their direct chain of title (see, Buffalo Academy of Sacred Heart v Boehm Bros., supra; Doyle v
Lazarro, supra).
1
1 In Smirlock Realty Corp. v Title Guar. Co. (52 NY2d 179, 437 N.Y.S.2d 57, 418 N.E.2d 650), relied on by
plaintiffs, the Court of Appeals held that the insured's failure to disclose a material fact that was readily
ascertainable by a search of the public record at the time the title insurance policy was issued was insufficient to
void the policy's coverage pursuant to its misrepresentation clause (see, id., at 189-190). That case is
distinguishable however, because the county in Smirlock employed a block and lot system of recording as
opposed to the grantor-grantee system in use in Ulster County. Furthermore, the title policy in Smirlock
contained an affirmative covenant insuring access to public streets. In this case, TRW's failure to discover and
note the recorded lease is an omission, not an affirmative covenant insuring against the existence of any
recorded leases.
[***7] Plaintiffs also contend that TRW was put on inquiry notice (see, Witter v Taggart, supra, at 241) of the
existence of the Thomson lease because Ruth Thomson, a prior owner of record, was listed in the sales contract as a
month-to-month tenant. "'The general rule is that [HN3] actual possession of real estate is notice to all the world of the
existence of any right which the person in possession is able to establish'" ( Wardell v Older, 70 AD2d 1008, 1009, 418
N.Y.S.2d 196, quoting Erlich v Hollingshead, 275 App Div 742; see, Phelan v Brady, 119 NY 587, 591-592, 23 N.E.
1109; [*962] Nethaway v Bosch, AD2d [Dec. 9, 1993]). Because it is not common practice for title insurance
examiners to physically inspect the premises prior to the issuance of title insurance policies, most policies except the
rights of persons in possession (see, Herbil Holding Co. v Commonwealth Land Tit. Ins. Co., 183 AD2d 219, 224, 226,
590 N.Y.S.2d 512) to avoid the notice problem that arises out of actual possession. In this case, however, the policy
issued by TRW's predecessor in interest, as previously noted, excepted only "rights of present tenants and occupants on
a month-to-month [***8] basis as per contract of sale". Therefore, the rights of all persons in possession, particularly
those in possession pursuant to a lease, were not excepted. Thus, TRW was chargeable with the same notice from the
occupants' actual possession of the property as plaintiffs.
Nevertheless, it is our view that the actual possession by Ruth Thomson did not provide notice of the [HN4] lease.
The possession that will be equivalent to actual notice must [**279] be "inconsistent with the title of the apparent
owner by the record" ( Holland v Brown, 140 NY 344, 348, 35 N.E. 577; see, Schenectady Sav. Bank v Wertheim, 237
App Div 311, 313, 261 N.Y.S. 193, affd 263 NY 585, 189 N.E. 710). The record owner in this case expressly provided in
the contract of sale that the premises were being sold subject to Ruth Thomson's month-to-month tenancy. Ruth
Thomson's possession of the premises was entirely consistent with her rights as a month-to-month tenant and, therefore,
her actual possession was not inconsistent with the title of the apparent owner by the record. Her possession, therefore,
could not provide notice of the lease. Furthermore, because John Thomson's residence in the apartment [***9] with his
wife was entirely consistent with her month-to-month tenancy, and not inconsistent with the title of the record owner,
Page 240
204 A.D.2d 959, *961; 612 N.Y.S.2d 276, **278;
1994 N.Y. App. Div. LEXIS 5669, ***5
his possession, like his wife's, could not establish actual notice of the lease (cf., Pope v Allen, 90 NY 298, 302;
Diamond v Wasserman, 8 AD2d 623, 624, 185 N.Y.S.2d 411). TRW's failure to inquire under these circumstances does
not defeat its claim that plaintiffs, as subsequent bona fide purchasers for value, were entitled to the protection of the
Recording Act (Real Property Law 290 et seq.; see, Sweet v Henry, 175 NY 268, 276, 67 N.E. 574; Wardell v Older,
supra; see also, United States v McCombs-Ellison, 826 F. Supp 1479, 1493-1494).
Accordingly, we grant judgment in TRW's favor
2
and declare [*963] that the lease from Ruth Thomson to John
Thomson does not constitute a defect or encumbrance affecting plaintiffs' title to the premises for the purposes of
determining TRW's liability under its title insurance policy and that TRW should be discharged of all responsibility to
plaintiffs under its title insurance policy. In anticipation of such a declaration, plaintiffs requested in their brief that we
take the additional step of declaring [***10] the lease to be invalid and unenforceable as against them. However,
plaintiffs failed to appeal Supreme Court's order that granted summary judgment to John Thomson and awarded him
joint occupancy, use and possession of the premises pursuant to the lease. Under these circumstances, we lack the
authority to grant their request for affirmative relief (see, Hecht v City of New York, 60 NY2d 57, 467 N.Y.S.2d 187, 454
N.E.2d 527).
2 Because this is a declaratory judgment action, we treat TRW's motion to dismiss for failure to state a cause
of action under CPLR 3211 (a) (7) as a motion for a declaration in its favor (see, Siegel, NY Prac 440, at 669
[2d ed]).
White, Casey, Weiss and Peters, JJ., concur.
ORDERED that the order is modified, on the law, without costs, by reversing so much thereof as denied the motion
by defendant TRW Title Insurance of New York Inc. to dismiss the complaint; said motion treated as a motion for a
declaration in its favor, motion granted, and it is declared that the lease [***11] from Ruth Thomson to defendant John
E. Thomson does not constitute a defect or encumbrance affecting plaintiffs' title to the premises and that defendant
TRW Title Insurance of New York Inc. is discharged of all responsibility to plaintiffs under its title insurance policy;
and, as so modified, affirmed.
Page 241
204 A.D.2d 959, *962; 612 N.Y.S.2d 276, **279;
1994 N.Y. App. Div. LEXIS 5669, ***9
Cited
As of: May 27, 2014
KENNETH Y. NETHAWAY SR. et al., Appellants, v. SILVANA Y. BOSCH,
Defendant, and ELEANOR K. ISABELLA, Respondent.
67406
DEPARTMENT
December 9, 1993, Entered
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff alleged property owner sought review of a decision of the Supreme Court of
Fulton County (New York), which granted defendant alleged property owner's motion for summary judgment. Plaintiff
had filed a declaratory judgment action against defendant, seeking a declaration that plaintiff was the sole and rightful
owner of the disputed property.
OVERVIEW: Plaintiff commenced a declaratory judgment action against defendant. Plaintiff had sought a declaration
that he was the sole and rightful owner of the disputed property. Defendant filed a motion for summary judgment,
contending that her rights to the property were established under the recording act (Act), codified at N.Y. Real Prop.
Law 290 et seq. The trial court granted defendant's motion for summary judgment and dismissed plaintiff's complaint.
The court reversed the trial court's judgement. The court held: (1) that one claiming as an alleged bona fide purchaser
for value under the Act was required to establish that she purchased the property for valuable consideration without
knowledge of facts that would lead a reasonably prudent purchaser to make inquiry; and (2) that plaintiff submitted
sufficient evidence to raise a question of fact that defendant had knowledge of facts that would lead a reasonably
prudent purchaser to make inquiry, as plaintiff did not pay rent to defendant for use of the property.
OUTCOME: With respect to plaintiff's declaratory judgment action against defendant that was related to the parties'
dispute over certain property, the court reversed the trial court's grant of defendant's motion for summary judgment.
Page 242
CORE TERMS: summary judgment, trucks, question of fact, conveyed, display, valuable consideration, used cars,
equitable interest, recording, purchaser, verified, eyesore, garage, notice, corner
Real Property Law > Title Quality > Adverse Claim Actions > General Overview
[HN1] Actual possession of real estate is notice to all the world of the existence of any right which the person in
COUNSEL: [***1] Kingsley, Towne and McLenithan, P.C. (Thomas A. Snyder of counsel), Albany, for appellants.
Caputo, Aulisi and Skoda (Charles P. Caputo of counsel), Gloversville, for respondent.
JUDGES: Before: Weiss, P.J., Mikoll, Yesawich Jr., Mahoney and Casey, JJ.
OPINION BY: CASEY
OPINION
[*654] MEMORANDUM AND ORDER
[**136] Casey, J.
Appeal from an order of the Supreme Court (Best, J.), entered August 3, 1992 in Fulton County, which granted
defendant Eleanor K. Isabella's motion for summary judgment dismissing the complaint against her.
In August 1991 defendant Silvana Y. Bosch conveyed an unimproved corner lot in the City of Gloversville, Fulton
County, to defendant Eleanor K. Isabella for $ 10,000. Shortly thereafter, plaintiffs commenced this action seeking,
inter alia, a declaration that plaintiff Kenneth Y. Nethaway Sr. (hereinafter Nethaway) is the sole and rightful owner of
the property. Isabella's motion for summary judgment dismissing the complaint as to her was granted, resulting in this
appeal by plaintiffs.
Isabella's motion was based upon her rights under the recording act (see, Real Property Law 290 et seq.) as an
alleged bona fide purchaser for value and, [***2] therefore, she was required to establish that she purchased the
property for valuable consideration without knowledge of facts that would lead a reasonably prudent purchaser to
make inquiry (see, Berger v Polizzotto, 148 AD2d 651, 652, 539 N.Y.S.2d 401, lv denied 74 N.Y.2d 612, 546 N.Y.S.2d
556, 545 N.E.2d 870). It is undisputed that Isabella paid $ 10,000 for the lot, and we agree with Supreme Court that
Nethaway's unsupported claim that the property is worth $ 35,000 is insufficient to create a question of fact on the issue
of valuable consideration (see, Reynolds v Springer Serv. Sta., 151 AD2d 466, 467, 542 N.Y.S.2d 256). We reach a
contrary conclusion regarding the knowledge issue.
According to Nethaway's affidavit in opposition to Isabella's motion, plaintiffs have, since 1984, operated a garage
business [*655] near the corner lot at issue and began renting [**137] the lot in 1986 in order to display used cars and
trucks. Nethaway purchased the lot in 1988 and in 1990 he conveyed the property, without consideration, to Bosch, his
daughter-in-law, who, according to the allegations of the verified complaint, promised to reconvey the property upon
demand. [***3] The deed from Nethaway to Bosch, which was duly recorded, did not refer to any equitable interest
retained by Nethaway.
"'The general rule is that [HN1] actual possession of real estate is notice to all the world of the existence of any
Page 243
199 A.D.2d 654, *; 605 N.Y.S.2d 135, **;
1993 N.Y. App. Div. LEXIS 11738, ***
right which the person in possession is able to establish'" ( Wardell v Older, 70 AD2d 1008, 1009, 418 N.Y.S.2d 196,
quoting Erlich v Hollingshead, 275 A.D. 742, 87 N.Y.S.2d 682; see, Phelan v Brady, 119 NY 587, 591-592, 23 N.E.
1109). Nethaway contends that the allegations of his use of the lot, as a partner in the family garage business to display
used cars and trucks, are sufficient to raise a question of fact as to whether Isabella had constructive notice of
Nethaway's claimed equitable interest in the property under the rule previously set forth. Isabella neither denies
plaintiffs' use of the lot to display cars and trucks nor claims that she had no reason to know of such use. Instead, she
contends that Nethaway failed to allege specifically that the use continued after the lot was conveyed to Bosch and,
therefore, according to Isabella, plaintiffs failed to carry their burden as the opponents of the motion for summary
judgment. [***4] We disagree.
The verified complaint alleges that plaintiffs paid no rent to Bosch for their use of the property and Isabella
admitted in her affidavit that, from time to time, there were older trucks and automobiles on the lot, which she
considered an "eyesore". Noticeably absent from Isabella's affidavit is any allegation that this "eyesore" did not continue
after August 1990 or that she was unaware that the vehicles belonged to plaintiffs' business. We are of the view that
Nethaway's allegations of fact, which were within his own personal knowledge, are sufficient to meet plaintiffs' burden
as the opponents of the summary judgment motion, particularly in view of the burden of proof imposed on Isabella as
the party claiming the benefit of the recording act (cf., Berger v Polizzotto, supra). We are also of the view that
Nethaway submitted sufficient evidence to raise a question of fact on plaintiffs' claim that Isabella acted as the agent of
her husband, who allegedly had actual knowledge of Nethaway's interest in the property.
Weiss, P.J., Mikoll, Yesawich Jr. and Mahoney, JJ., concur.
ORDERED that the order is reversed, on the law, with costs, and motion denied. [***5]
Page 244
199 A.D.2d 654, *655; 605 N.Y.S.2d 135, **137;
1993 N.Y. App. Div. LEXIS 11738, ***3
Cited
As of: May 27, 2014
Greenpoint Savings Bank, Respondent, v. Dominick Pennolino, Respondent, and
Katherine E. Pennolino, Defendant and Third-Party Plaintiff-Appellant. Lorraine
Backal, Third-Party Defendant-Appellant; Peter M. Wolf, Third-Party
Defendant-Respondent
Supreme Court of New York, Appellate Division, Second Department
January 19, 1988
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant former wife and third-party defendant sought review of orders of the
Supreme Court, Suffolk County (New York), which granted plaintiff bank's motion for summary judgment against the
former wife in its action to foreclose a mortgage, severed the foreclosure action from the former wife's third-party
action and all parties' cross claims against defendant former husband, and denied the former wife's motions for summary
judgment.
OVERVIEW: The bank filed an action against the former wife and the former husband to foreclose a mortgage on
property of which the former husband was the record owner and in which the former wife had an interest by virtue of a
separation agreement. The trial court granted the bank's motion for summary judgment and for a severance of the
foreclosure action from the other claims. The court modified the trial court's order by deleting the portions thereof that
granted the bank's motion for summary judgment against the former wife, struck affirmative defenses raised by the
former wife, and granted the severance. The court held that there was an issue of fact as to whether the bank was guilty
of negligence that was fatal to his claim that it was a bona fide purchaser under the recording statute, that a trial was
required to resolve this issue, and that severance of the claims was not warranted.
OUTCOME: The court modified the order of the trial court to deny the bank's motion for summary judgment against
the former wife, to reinstate the former wife's affirmative defenses, and to deny the bank's motion to sever its
foreclosure action from the other claims. As modified, the trial court's order was affirmed.
Page 245
CORE TERMS: summary judgment, severance, cross claims, foreclosure action, modified, notice, reargument,
affirmative defenses, interposed, mortgagee, mortgage, adhered, option to purchase, encumbrances, tenant's, mortgaged
premises, former spouse, record owner
JUDGES: [***1] Mangano, J. P., Kunzeman and Harwood, JJ., concur. Thompson, J., concurs in part and dissents in
part and votes to dismiss.
OPINION
[*600] [**584] In an action to foreclose a mortgage, the defendant third-party plaintiff Katherine E. Pennolino
appeals (1) from so much of an order of the Supreme Court, Suffolk County (McCarthy, J.), dated April 30, 1985, as (a)
granted the motion of the plaintiff Greenpoint Savings Bank (hereinafter the bank) for summary judgment against her,
and a severance of the foreclosure action from the third-party action and from all cross claims by all parties against the
defendant Dominick Pennolino, (b) denied, with leave to renew with respect to her first cross claim against the
defendant Dominick Pennolino, her cross motion for summary judgment against the plaintiff bank, against the
defendant Dominick Pennolino on her cross claims against him, and against the third-party defendants Lorraine Backal
and Peter M. Wolf on her third-party complaint against them, and (2) from so much of an order of the same court, dated
November 25, 1985, as, upon reargument of the plaintiff's motion and her cross motion, adhered to its original
determination; and the third-party defendant [***2] Lorraine Backal appeals, as limited by her notice of appeal and
brief, from so much of the order dated April 30, 1985, as (1) denied that branch of her motion which was for summary
judgment against the third-party defendant Peter M. Wolf, and (2) granted the plaintiff bank's motion for summary
judgment and a severance. The appeal by Lorraine Backal from so much of the order dated April 30, 1985, as granted
the plaintiff bank's motion, brings up for review so much of the order dated November 25, 1985, as, upon reargument,
adhered to the original determination with respect to that motion.
Ordered that the appeal by the defendant third-party plaintiff Katherine E. Pennolino from stated portions of the
order dated April 30, 1985, and the appeal by the third-party defendant Backal from so much of that order as granted the
plaintiff's motion is dismissed, as those portions of the order dated April 30, 1985, were superseded by the order dated
November 25, 1985, made upon reargument; and it is further,
[*601] Ordered that the order dated November 25, 1985, is modified, on the law, (1) by deleting therefrom those
provisions which adhered to so much of the original determination as (a) [***3] granted that branch of the plaintiff
bank's motion which was for summary judgment against the defendant Katherine Pennolino, (b) struck the fifth,
[**585] sixth, seventh and eighth affirmative defenses interposed in the answer of the defendant Katherine Pennolino,
and (c) granted that branch of the plaintiff bank's motion which was for a severance of its foreclosure action from the
third-party action and from all cross claims by all parties against the defendant Dominick Pennolino and (2) by
substituting therefor provisions (a) denying that branch of the plaintiff bank's motion which was for summary judgment
against the defendant Katherine Pennolino, (b) reinstating the fifth, sixth, seventh and eighth affirmative defenses
interposed in the answer of Katherine Pennolino, and (c) denying that branch of the plaintiff bank's motion which was
for a severance of its foreclosure action from the third-party action and all cross claims by all parties against the
defendant Dominick Pennolino; as so modified, the order dated November 25, 1985, is affirmed insofar as appealed
from and reviewed, and the order dated April 30, 1985, is modified accordingly; and it is further,
Ordered that on the appeal [***4] by the third party defendant Lorraine Backal from so much of the order dated
April 30, 1985, as denied that branch of her motion which was for summary judgment against the third-party defendant
Peter M. Wolf, that portion of the order is affirmed; and it is further,
Ordered that Katherine E. Pennolino is awarded one bill of costs, payable by the plaintiff.
The papers submitted by the plaintiff bank and by the defendant Katherine Pennolino in support of their respective
Page 246
136 A.D.2d 600, *; 523 N.Y.S.2d 583, **;
1988 N.Y. App. Div. LEXIS 417, ***
motion and cross motion for summary judgment raise an issue of fact as to whether the plaintiff bank was "guilty of a
degree of negligence fatal to its claim that it is a bona fide purchaser" under the recording statute ( Vitale v Pinto, 118
AD2d 774, 776; Real Property Law 291). Accordingly, a trial is required to resolve this issue which was effectively
raised by the defendant Katherine Pennolino in the fifth, sixth, seventh and eighth affirmative defenses interposed in her
answer. Finally, under the circumstances, severance of the plaintiff bank's foreclosure action from the third-party action
and the cross claims is not warranted (see, Shanley v Callanan Indus., [*602] 54 NY2d 52, 57).
CONCUR BY: [***5] THOMPSON (In Part)
DISSENT BY: THOMPSON (In Part)
DISSENT
Thompson, J., concurs in part and dissents in part and votes to dismiss Katherine E. Pennolino's appeal from the
order dated April 30, 1985 and Lorraine Backal's appeal from so much of that order as granted the plaintiff's motion,
and to otherwise affirm that order insofar as appealed from, and to affirm the order dated November 25, 1985, insofar as
appealed from and reviewed, with the following memorandum.
I believe that the determinations of Justice McCarthy should be sustained for the reasons stated in his memorandum
decision and in his order granting reargument.
I would add only that the case of Vitale v Pinto (118 AD2d 774) which was modified on appeal to this court
subsequent to the proceedings before Special Term, and upon which the defendant third-party plaintiff Katherine E.
Pennolino substantially relies on appeal, is factually distinct from the matter before us. Any reliance thereon is
misplaced. Vitale involved an arm's length transaction in which the plaintiff possessed a six-year lease of certain
premises with an option to buy the premises free of all encumbrances. Thereafter, the landlord mortgaged the [***6]
leased premises. In an action by the tenant to compel delivery of the title following her unsuccessful effort to exercise
her option to purchase the premises free of all encumbrances and for a judgment declaring the rights under the
mortgage, this court declared the mortgagee's rights under the mortgage to be subordinate to the plaintiff tenant's rights
under the option to purchase. The basis for this determination was the court's finding that the mortgagee was on inquiry
notice of the plaintiff's interest [**586] in the property because the plaintiff was in open possession of the property.
The Vitale ruling is not properly applicable to the case at bar involving as it does a former spouse of the record
owner who was in possession of the mortgaged premises. The possession by the defendant third-party plaintiff
Katherine E. Pennolino was not sufficiently inconsistent with the interests of her former spouse the defendant Dominick
Pennolino, the record owner, so as to have the plaintiff and mortgagee, the Green Point Savings Bank, on notice of
Katherine E. Pennolino's interest in the property. That interest, which was derived from a separation agreement, was
not of such a nature as [***7] would have come to the attention of the bank in the ordinary course of events.
Accordingly, unlike Vitale, the bank did not have constructive notice of the alleged adverse interest of one in
possession of the mortgaged premises.
Page 247
136 A.D.2d 600, *601; 523 N.Y.S.2d 583, **585;
1988 N.Y. App. Div. LEXIS 417, ***
Positive
As of: May 27, 2014
Barbara Vitale, Respondent, v. Salvatore Pinto et al., Defendants, and Lloyd Capital
Corp., Appellant
March 24, 1986
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant mortgagee challenged so much of a judgment from the Supreme Court, Kings
County (New York), as declared the mortgage issued by the mortgagee to defendant former property owner null and
void, and failed to conform to the memorandum decision dismissing plaintiff property owner's fourth cause of action.
The underlying action was for a judgment declaring rights under the mortgage and to compel delivery of title to
property.
OVERVIEW: The property owner's lease with the former property owner included an option to purchase the property
free from all encumbrances at the end of the lease. The former property owner retained an option to obtain a $ 15,000
mortgage. The lease was not recorded. The former property owner obtained a $ 38,825 mortgage from the mortgagee,
which was recorded. The mortgagee knew that the property was tenant occupied, but was told that the property owner
was a month-to-month tenant with no written lease. The property owner unsuccessfully attempted to exercise her option
to purchase. She was granted summary judgment as to the former property owner, who was ordered to convey the
property free from all encumbrances except the mortgage, which was declared null and void. On appeal, the court
modified the judgment. The court held that the property owner was in open possession of the property and the
mortgagee was on notice of all rights to the property that she could establish, however, the lease permitted the owner to
mortgage the property to the extent of $ 15,000, thus only that part of the mortgage beyond the $ 15,000 had to be
subordinated to the property owner's right to the property.
OUTCOME: The court modified the judgment by declaring the mortgagee's rights under the mortgage was subordinate
to the rights of the property owner to the extent of $ 23,825, dismissing the property owner's fourth cause of action
Page 248
pursuant to the decision of the supreme court, and severing the mortgagee's claim. As modified, the court affirmed the
judgment insofar as appealed from, with costs to the mortgagee. The matter was remitted to the supreme court.
CORE TERMS: mortgagee's, mortgage, lease, void, property free, encumbrances, bona fide purchaser, subordinate,
conveyance, recorded, tenant, option to purchase, decretal, unrecorded, fatal, cause of action, blanket mortgage,
subordinated, declaration, declaring, modified, adding, convey, null
[HN1] N.Y. Real Prop. Law 291 will act to void an unrecorded conveyance of an interest in property as against a
recorded subsequent lien only when the subsequent transaction is made in good faith and the subsequent purchaser is
a bona fide purchaser.
JUDGES: [***1] Gibbons, J. P., Brown, Lawrence and Kooper, JJ., concur.
OPINION
[*774] [**284] In an action for a judgment declaring rights under a mortgage and to [*775] compel delivery of
title to property, the defendant Lloyd Capital Corp. appeals from so much of a judgment of the Supreme Court, Kings
County (Bianchi, J.), entered January 31, 1985, as declared the mortgage null and void, and failed to conform to the
memorandum decision dismissing the plaintiff's fourth cause of action.
Judgment modified by (1) deleting the first decretal paragraph and substituting therefor a provision declaring the
mortgagee's rights under the mortgage recorded on February 13, 1981, Liber 1218, page 433, subordinate to the rights
of the plaintiff under the option to purchase to the extent of $ 23,825, (2) adding a fifth decretal paragraph dismissing
the plaintiff's fourth cause of action pursuant to the decision of the Supreme Court, and (3) adding a sixth decretal
paragraph severing the defendant Lloyd Capital Corp.'s claim. As so modified, judgment affirmed, insofar as appealed
from, with costs to appellant, and matter remitted to the Supreme Court, Kings County, for further proceedings
consistent [***2] herewith.
The plaintiff leased the premises at 1697 Schenectady Avenue from its owner, Salvatore Pinto, for a six-year period
commencing November 1976. The lease included an option to purchase the property free from all encumbrances,
although the owner retained the right to mortgage the property for up to $ 15,000 during the term of the lease; for this
option the plaintiff paid $ 4,000. The plaintiff did not record the lease.
In January 1981, Pinto, along with the defendant Lucy Ferrare, executed a blanket mortgage to mortgagee Lloyd
Capital Corp. with respect to both the Schenectady Avenue property and a piece of property owned by Ferrare, to secure
a loan of $ 38,825; the mortgage was recorded in February 1981. The mortgagee was aware that the Schenectady
Avenue property was tenant occupied but was told by the owner, Pinto, that the plaintiff was a month-to-month tenant
with no written lease.
In August 1982 the plaintiff attempted to exercise her option to purchase, but was unsuccessful. She then brought
the instant action against Pinto seeking specific performance of the option and conveyance of the property free of all
encumbrances and against the mortgagee for a declaration [***3] that the mortgage was void as it affected the
Schenectady Avenue property.
Page 249
118 A.D.2d 774, *; 500 N.Y.S.2d 283, **;
1986 N.Y. App. Div. LEXIS 54632, ***
The plaintiff was granted summary judgment as to Pinto, who was ordered to convey the property free of all
encumbrances except the mortgage in question. After trial, the [*776] mortgage in question was declared [**285]
null and void as it affects the Schenectady Avenue property.
The trial court properly ruled that the recording statute (Real Property Law 291) is not applicable under these
circumstances to make the plaintiff's unrecorded lease subordinate to the mortgagee's interest in the property. The
plaintiff was in open possession of the property; therefore, the mortgagee was on notice of all rights to the property
plaintiff could establish (see, Phelan v Brady, 119 NY 587, 591-592; Leeds v State of New York, 20 NY2d 701, 703).
Thus, the mortgagee "is presumed either to have made the inquiry, and ascertained the extent of [the] prior right, or to
have been guilty of a degree of negligence * * * fatal to [its] claim [that it is] a bona fide purchaser" ( Williamson v
Brown, 15 NY 354, 362). Having failed to inquire of the tenant as to her interest in the property, the mortgagee [***4]
is guilty of a degree of negligence fatal to its claim that it is a bona fide purchaser. [HN1] Real Property Law 291
will act to void an unrecorded conveyance of an interest in property as against a recorded subsequent lien only when the
subsequent transaction is made in good faith and the subsequent purchaser is a bona fide purchaser; such is not the
case here.
However, because the lease permitted the owner to mortgage the property to the extent of $ 15,000, even had the
mortgagee made proper inquiry and discovered the lease, it would have been entirely proper to secure a $ 15,000 loan
with a mortgage on the property. Thus, the mortgagee's security interest in the property should not be entirely
subordinated to the plaintiff's right under the lease option; only that part of the blanket mortgage beyond $ 15,000 must
be subordinated to the plaintiff's right to the property.
The owner was ordered to convey the property to the plaintiff by order of Special Term. That conveyance must be
deemed to have been encumbered by a $ 15,000 mortgage.
Furthermore, the mortgagee's interest need not be voided; a declaration that the mortgagee's lien is subordinate to
the plaintiff's interest to [***5] the extent it exceeds $ 15,000 provides sufficient protection to the plaintiff. Moreover,
as to the remainder of the lien, the plaintiff retains her rights as against Pinto who was obligated to deliver the property
free of all encumbrances.
Because the appellant's cross claim remains undecided, we remit this matter to the Supreme Court.
Page 250
118 A.D.2d 774, *775; 500 N.Y.S.2d 283, **284;
1986 N.Y. App. Div. LEXIS 54632, ***3
Positive
As of: May 27, 2014
Leslee L. Miles et al., Respondents, v. Nicholas De Sapio et al., Appellants
Supreme Court of New York, Appellate Division, Third Department
August 4, 1983
CASE SUMMARY:
PROCEDURAL POSTURE: Defendants sought review of a judgment from the County Court of Rensselaer County
(New York), which ruled in favor of plaintiffs in an action commenced with regard to a property dispute between the
parties.
OVERVIEW: Defendants bought a parcel of land but did not record their deed. A property dispute emerged between
the parties, which resulted in a lawsuit wherein plaintiffs commenced this action to enjoin defendants from interfering
with their use of the 30-foot right of way. Following a trial without a jury, the court determined that, since defendants
had not recorded their deed prior to plaintiffs' purchase and recording, plaintiffs had acquired a 30-foot easement over
defendants' land. The court reversed, holding that plaintiffs knew that defendants lived in a large house trailer on the
property through which the purported easement passed and that their claimed easement immediately adjoined (within a
matter of feet) defendants' house trailer. Plaintiffs had sufficient facts in their possession to be on inquiry notice to
defendants' interest in the disputed parcel. Their failure to inquire as to defendants' rights removed them from the
protection of the recording act, and defendants' prior title in the property prevailed.
OUTCOME: The judgment of the trial court finding in favor of plaintiffs in the parties' dispute concerning an easement
was reversed and remitted for further proceedings on defendants' counterclaim for damages from plaintiffs' intrusion.
CORE TERMS: easement, deed, dirt road, right of way, recording act, house trailer, recorded, feet, parcel of land,
subsequent purchaser, inquiry notice, counterclaim, unrecorded, purchaser, disputed, remitted, inquire, lived, fatal
Page 251
[HN1] Where there are conflicting claims between a prior unrecorded deed and a subsequent purchaser, if the
purchaser has knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in
conflict with that he is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent
of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a
bona fide purchaser. Furthermore the general rule is that actual possession of real estate is notice to all the world of
the existence of any right which the person in possession is able to establish.
Real Property Law > Limited Use Rights > Easements > Creation > Express Easements
[HN2] An easement is clearly a conveyance of real property subject to the recording act and related case law, which
expressly conditions the superiority of the rights of the subsequent grantee on his having purchased "in good faith."
JUDGES: [***1] Kane, J. P., Main, Mikoll, Yesawich, Jr., and Levine, JJ., concur.
OPINION
[*970] [**849] Appeal from a judgment of the County Court of Rensselaer County in favor of plaintiffs, entered
January 11, 1982, upon a decision of the court at Trial Term (Dwyer, Jr., J.), without a jury. In 1969, defendants bought
a parcel of land in the Town of Schaghticoke from Myron Wetsel but did not record their deed. Along the eastern border
of defendants' property runs a dirt road approximately 10 feet wide. Even prior to purchasing this land, defendants had
put a house trailer on the property just a few yards west of the dirt road, and they have lived there with their children
ever since. In 1976, Wetsel sold plaintiffs a parcel of land north of defendants' property and, at the same time,
conveyed to plaintiffs a quitclaim "agreement" conveying a 30-foot wide easement or right of way that included the
existing 10-foot wide dirt road and a portion of the adjoining land previously deeded to defendants. Plaintiffs promptly
recorded both the deed and the agreement from Wetsel. In 1978, plaintiffs began to widen the 10-foot right of way
pursuant to the agreement. When they attempted to extend [***2] the widened roadway onto defendants' property,
defendants objected and belatedly recorded their 1969 deed. Plaintiffs then commenced this action to enjoin defendants
from interfering with their use of the 30-foot right of way. Following a trial without a jury, the court determined that
since defendants had not recorded their deed prior to plaintiffs' purchase and recording, plaintiffs had acquired a 30-foot
easement over defendants' land. The court held that actual knowledge of a prior unrecorded interest by the subsequent
purchaser of an easement was irrelevant under the applicable recording act. Defendants have appealed. [HN1] Where
there are conflicting claims between a prior unrecorded deed and a subsequent purchaser, if the purchaser "has
knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he
is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or
to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser" (
Williamson v Brown, 15 NY 354, 362; accord 487 Elmwood v Hassett, 83 [***3] AD2d 409, 412, app dsmd 55 NY2d
1037). Furthermore "[the] general rule is that actual possession of real estate is notice to all the world of the existence
of any right which the person in possession is able to establish" ( Erlich v Hollingshead, 275 App Div 742; see, also,
Holland v Brown, 140 NY 344, 347; Phelan v Brady, 119 NY 587, 591-592; Wardell v Older, 70 AD2d 1008, 1009).
Here, plaintiffs knew that defendants [*971] lived in a large house trailer on the property through which the purported
easement passed and that their claimed easement immediately adjoined (within a matter of feet) defendants' house
trailer. It is further uncontested that the physical appearance of the dirt road or right of way crossing defendants'
property was only 10 feet in width, as opposed to the 30-foot wide easement. Plaintiffs admit they did not inquire of
defendants as to defendants' possible rights or title in the disputed property, and there is no indication in the record that
Page 252
96 A.D.2d 970, *; 466 N.Y.S.2d 848, **;
1983 N.Y. App. Div. LEXIS 19593, ***
if such an inquiry had been made, defendants' interest would not have been disclosed. [HN2] An easement is clearly a
conveyance [**850] of real property subject to the recording act and related case [***4] law, which expressly
conditions the superiority of the rights of the subsequent grantee on his having purchased "in good faith" (Real
Property Law, 291; Ward v Metropolitan El. Ry. Co., 152 NY 39; Pallone v New York Tel. Co., 34 AD2d 1091, affd
30 NY2d 865). Accordingly, plaintiffs had sufficient facts in their possession to be on inquiry notice to defendants'
interest in the disputed parcel. Their failure to inquire as to defendants' rights removed them from the protection of the
recording act, and defendants' prior title in the property should prevail. Finally, County Court properly exercised
jurisdiction over this action under RPAPL article 15 and its predecessor statute ( Chodikee Lake Farm-Camp v Stuts,
270 App Div 974; Bradley v Condon, 217 NYS2d 821, 822-823; see RPAPL 1501, subds 1, 2). The complaint
adequately, if inartfully, stated a cause of action under article 15, and plaintiffs' failure to refer to the article or to use the
language of the statute was not a fatal defect ( Howard v Murray, 38 NY2d 695, 699-700). Accordingly, since, on these
undisputed facts, plaintiffs were at least on inquiry notice as to defendants' prior interest, the judgment [***5] granted
plaintiffs a 30-foot easement over defendants' land should be reversed, plaintiffs' complaint dismissed, and the matter
remitted to County Court for further proceedings on defendants' counterclaim. Judgment reversed, on the law and the
facts, without costs, plaintiffs' complaint dismissed, and matter remitted to County Court of Rensselaer County for
further proceedings not inconsistent herewith on defendants' counterclaim for damages from plaintiffs' intrusion.
Page 253
96 A.D.2d 970, *971; 466 N.Y.S.2d 848, **849;
1983 N.Y. App. Div. LEXIS 19593, ***3
Caution
As of: May 27, 2014
Basil L. Tehan et al., Respondents, v. Thos. C. Peters Printing Co., Inc., Appellant
Supreme Court of New York, Appellate Division, Fourth Department
November 16, 1979
PRIOR HISTORY: [***1] Appeal from an order of the Oneida County Court (John J. Walsh, J.), entered June 7,
1979, which affirmed a judgment of the City Court of the City of Utica (Harold H. Hymes, J.), entered in a proceeding
pursuant to article 7 of the Real Property Actions and Proceedings Law awarding possession of certain premises to
petitioners. Tehan v Peters Print. Co., 71 AD2d .
DISPOSITION: Order unanimously affirmed, with costs.
CASE SUMMARY:
PROCEDURAL POSTURE: Respondent new owners of a commercial property commenced summary proceedings to
evict appellant tenant. The city court granted the eviction. The Oneida County Court (New York) affirmed the eviction.
The tenant appealed.
OVERVIEW: The new owners served a notice of termination of a written lease on the tenant when the rent which,
under the lease, was to be paid on the first day of the month was not received on that date. The tenant contended that the
new owners were charged with constructive knowledge of and, therefore, bound by, their predecessor's waiver of strict
compliance with the lease terms providing for rent payments on the first of the month. The court held that the eviction
was proper because the new owners did not have the requisite actual knowledge of the predecessor's waiver. The court
refused to allow the tenant to return because the lease was not unconscionable and the parties were not of unequal
bargaining power. Further, the tenant was on notice that the new owners wanted to strictly enforce the terms of the lease
regarding prompt payment.
OUTCOME: The court affirmed the order from the appellate court that affirmed the order of eviction.
Page 254
CORE TERMS: lease, tenant, rent, purchaser's, notice, landlord, constructive notice, rent payments, predecessor,
moot, lease agreement, new owners, successor-in-interest, habit, lease provision, constructive knowledge, strict
compliance, inspection, exploitive, paying, general rule, lease terms, actual notice, notice of termination,
unconscionable conduct, contractual rights, unconscionable, overreaching, deviation, terminate
Contracts Law > Types of Contracts > Lease Agreements > General Overview
Real Property Law > Landlord & Tenant > Lease Agreements > Commercial Leases > General Overview
Real Property Law > Landlord & Tenant > Lease Agreements > Lease Provisions
[HN1] A successor-in-interest to real property takes a premises subject to the conditions as to a tenancy, including any
waiver of rights, that his predecessor in title has established if the successor-in-interest has notice of the existence of a
leasehold and of a waiver. The key to the liability of the successor-in-interest is notice of the relevant lease provision or
waiver thereof. Notice may be actual or constructive. Possession of premises is constructive notice to a purchaser of the
rights of a possessor.
Commercial Law (UCC) > Leases (Article 2A) > Lease Contracts > General Overview
Real Property Law > Landlord & Tenant > Lease Agreements > Residential Leases
[HN2] A purchaser of real property as successor-in-interest has a duty of inquiry only as to those conditions of a
tenant's possession the existence of which might reasonably be indicated by an inspection of the premises.
[HN3] Constructive notice only arises when a purchaser has knowledge of facts which would lead a reasonably
prudent person to make inquiry. It is readily apparent that possession by a tenant is constructive notice of the terms of
a lease agreement and the actual uses to which the property has been put.
[HN4] The duty to pay rent is a primary obligation of a tenant.
[HN5] Where a lease itself provides when the rent is payable and no contrary practice is indicated, a purchaser of the
property without actual notice of a waiver should be able to rely upon the lease without further inquiry. The concept of
waiver is linked to notice. There can be no waiver of a contractual right without notice. Without some form of notice
there is no duty to inquire whether a waiver exists.
Real Property Law > Financing > Mortgages & Other Security Instruments > Transfers > Due-on-Sale Clauses
Real Property Law > Landlord & Tenant > General Overview
Page 255
71 A.D.2d 101, *; 421 N.Y.S.2d 465, **;
1979 N.Y. App. Div. LEXIS 13094, ***1
[HN6] It may be exploitive or even perhaps unconscionable for a landlord to refuse to accept an effort to cure a late rent
payment and instead seek to enforce a lease acceleration clause. Nonetheless, in a routine commercial lease, absent
some element of fraud, exploitive overreaching, or unconscionable conduct on the part of a landlord, a court will not
interfere with the contractual rights and obligations of the parties.
HEADNOTES
Landlord and Tenant -- Lease
1. Respondents, the new owners of a commercial building, are not charged with constructive knowledge of, and
therefore not bound by, their predecessor's waiver of strict compliance with the lease terms concerning timely rent
payments inasmuch as the duty to pay rent is a primary obligation of a tenant and where the lease itself provides when
the rent is payable and no contrary practice is indicated, a purchaser without actual notice should be able to rely upon
the lease without further inquiry; it is of paramount importance that the public policy of unencumbered alienability of
title remains certain and to further this policy the curtailment of a purchaser's rights must be limited to those conditions
of the lease of which it has notice, [***2] i.e., waiver of a purchaser's rights based upon that constructive notice which
arises from possession must be limited to those deviations from the terms of a lease revealed by an inspection of the
premises.
Landlord and Tenant -- Lease
2. Respondents, the new owners of a commercial building, are not charged with constructive knowledge of, and
therefore not bound by, their predecessor's waiver of strict compliance with the lease terms providing for rent payments
on the first of the month and where the lease was not unconscionable, the parties were not of unequal bargaining power
and the tenant was on notice that the respondents wanted to enforce strictly the terms of the lease regarding prompt rent
payments, absent evidence of fraud, exploitive overreaching or unconscionable conduct there is no reason to interfere
with the contractual rights and obligations of the parties and prevent the respondents from commencing summary
proceedings to evict the tenant.
Appeal -- Academic and Moot Questions
3. An appeal by a commercial tenant, evicted pursuant to section 711 of the Real Property Actions and Proceedings
Law for tendering a late rent payment, is not made moot, [***3] despite the fact that the tenant has relocated its
business, where the lease does not expire until some time in the future inasmuch as while a reversal would not
automatically reinstate the lease, the tenant would have the option to do so; furthermore, the tenant also seeks to avoid
any collateral estoppel effect in a possible action for damages and the controversy is, therefore, viable and not moot.
COUNSEL: Julian & Pertz (Richard Pertz of counsel), for appellant.
Lawrence P. George (Earle C. Bastow of counsel), for respondents.
JUDGES: Cardamone, J. P. Schnepp, Doerr, Witmer and Moule, JJ., concur.
OPINION BY: CARDAMONE
OPINION
[*102] OPINION OF THE COURT
[**465] Respondents, the new owners of a commercial building, served a notice of termination [**466] of a
written lease on appellant, a tenant, when the rent which, under the lease, was to be paid on the first day of the month
Page 256
71 A.D.2d 101, *; 421 N.Y.S.2d 465, **;
1979 N.Y. App. Div. LEXIS 13094, ***1
was not received on that date. Throughout the tenancy with the previous owner, appellant had been in the habit of
paying the rent after the first of the month. Are the new owners, concededly without actual knowledge of the waiver of
strict compliance with this term of the lease by their [***4] predecessor, charged with constructive knowledge of it?
We think not.
The facts are essentially undisputed and may be briefly stated. On March 1, 1973 appellant, Thomas C. Peters
Printing Co., Inc. (Peters), entered into a lease agreement with H. J. Brandeles Corporation whereby appellant, as
tenant, was let certain premises located at 637 Eagle Street, Utica, New York, for a period of four years. On December
3, 1976 appellant exercised its option to renew the lease for a second four-year term to expire February 28, 1981. The
lease agreement provided [*103] in pertinent part that rent be paid in equal monthly payments, in advance, on the first
day of each month. Through the years appellant had been in the habit of paying the rent late. During the year 1978 no
rent was paid on the date it became due. Payments were made anywhere from 25 to 40 days late. The landlord,
Brandeles, made no objection to the late payments and accepted appellant's checks when received.
On December 5, 1978 respondents, brothers Basil L., Richard J., Robert J., Frederick J. and Steven A. Tehan
(Tehan), purchased the premises from Brandeles. Respondent Richard J. Tehan visited appellant at its [***5] office on
December 15, 1978 and informed appellant of the purchase from Brandeles and offered to purchase the remaining term
of appellant's lease. The offer was refused. Respondents then formally advised appellant of the change of ownership in
a letter dated December 19, 1978. After advising Peters of the Tehans' purchase of the building which the Peters
Company occupied, the letter continued by stating: "[therefore], I am writing this letter to let you know that beginning
January 1979, the monthly rental which is due on the 1st of each month should now be paid to the undersigned at the
above address, instead of H. J. Brandeles Corporation". The first rent payment to have been made by appellant to
respondents was due January 2, 1979, the first business day of January. Consistent with his prior course of performance
appellant did not pay the rent on that day. Respondents treated this as a default under the lease agreement and pursuant
to its provisions elected to terminate appellant's lease. On January 3, 1979 respondents served on appellant a notice of
termination, termination being effective as of January 8, 1979.
Immediately after it received the notice of termination appellant [***6] tendered a check for the full amount of the
rent due. Respondents refused it. Several days later respondents commenced summary proceedings to evict appellant
under subdivision 1 of section 711 of the Real Property Actions and Proceedings Law.
At the hearing held in the City Court of Utica on January 22, 1979 appellant testified that Brandeles was in the
habit of accepting tardy rent checks; that he conversed with respondent Richard J. Tehan on January 2, 1979, but no
mention of a demand for the rent was made at that time. However, appellant did state that at no time did he inform
respondents [*104] that he was in the habit of paying the rent late. Respondent Richard J. Tehan testified that
respondents never inquired of appellant when he made rent payments; that respondents never inquired of their
predecessor, Brandeles, what the rent paying habits of the appellant were and that respondents were not aware of Peters'
practice of late payment. City Court awarded possession of the premises to respondents by a judgment entered March
12, 1979. On appeal to Oneida County Court the judgment was affirmed on June 7, 1979. This appeal from the order
affirming the City Court judgment [***7] followed.
As a primary matter respondents contend that the issue is moot since appellant concedes that it has relocated its
business. [**467] However, that does not moot the issue. Appellant's lease did not expire until 1981 and while a
reversal by this court will not automatically reinstate the lease, appellant would have the option to do so ( Wolf-Kahn
Realty Corp. v Sussman, 240 App Div 422). Further, appellant seeks to avoid any collateral estoppel effect in a possible
action for damages. This controversy is, therefore, viable and not moot.
The question presented by appellant is a narrow one, i.e., are respondents, the new owners, charged with
constructive knowledge of and, therefore, bound by, their predecessor's waiver of strict compliance with the lease terms
providing for rent payments on the first of the month. This is an issue not previously determined in New York. It is
clearly the law of this State that [HN1] a successor-in-interest to real property takes the premises subject to the
Page 257
71 A.D.2d 101, *102; 421 N.Y.S.2d 465, **466;
1979 N.Y. App. Div. LEXIS 13094, ***3
conditions as to the tenancy, including any waiver of rights, that his predecessor in title has established if the
successor-in-interest has notice of the existence of the leasehold [***8] and of the waiver ( Bank of New York v
Hirschfield, 37 NY2d 501; Radcliffe Assoc. v Greenstein, 274 App Div 277; 33 NY Jur, Landlord and Tenant, 74, p
376). The key to the liability of the successor-in-interest is notice of the relevant lease provision or waiver thereof.
Notice may be actual or constructive ( Bank of New York v Hirschfield, supra). Possession of premises is constructive
notice to a purchaser of the rights of the possessor ( Phelan v Brady, 119 NY 587). The precise issue raised by appellant
is whether possession is also constructive notice of all conditions and waivers of the lease agreement which reasonable
inquiry by the purchaser would reveal. The trial court determined [HN2] there was no duty of inquiry on the part of
the purchaser as successor-in-interest, except as to those conditions the existence [*105] of which might reasonably
be indicated by an inspection of the premises. We agree.
Appellant argues that the general rule in regard to the obligations of a grantee is broad enough to support its
position that a duty of inquiry exists. Support is found for this argument in Phelan v Brady (supra, pp 591-592) where
the Court of Appeals held: [***9] "[actual] possession of real estate is sufficient notice to a person proposing to take a
mortgage on the property, and to all the world of the existence of any right which the person in possession is able to
establish". The rule that emerged is that mere possession is constructive notice of any and all rights the possessor can
establish. It has been recited in numerous cases and treatises as a general rule, not restricted simply to issues of record
notice (see Adelson v Sacred Assoc. Realty Corp., 192 App Div 601; Adams-Flanigan Co. v Kling, 198 App Div 717;
American Exch. Nat. Bank v Smith, 61 Misc 49; 3 Warren's Weed, New York Real Property, Leases and Lettings,
7.05; Rasch, NY Landlord and Tenant, 10.98; 33 NY Jur, Landlord and Tenant, 74). In its application the rule has
been broadly stated where the issue before the court was of the continued viability of the waiver of a lease provision (
Adams-Flanigan Co. v Kling, supra; Radcliffe Assoc. v Greenstein, supra; Vendramis v Frankfurt, 86 NYS2d 715; 215
West 34th St. v Feldman, 105 NYS2d 209; Irbar Realty Corp. v Vallins, 64 NYS2d 843; Natanson v Gavaert Co. of
Amer., 96 NYS2d 774). Appellant [***10] contends, therefore, that a purchaser (here respondents) takes no greater
rights than his vendor, including the seller's right to enforce lease provisions; and that it is inequitable to permit a
purchaser to terminate a tenant's interest when his vendor, the original contracting party, could not have done so. While
this argument is not without merit, we are persuaded that there are sound policy reasons for allowing this
successor-in-interest to terminate the tenant's lease even though their predecessor could not.
We observe initially that the general rule is stated more broadly than the facts of the cases cited warrant. In each of
those cases cited immediately above [**468] there was an added element of actual notice to the purchaser of the
waiver or constructive notice through the fact that the deviation from the lease provision in issue was readily apparent
upon an inspection of the premises. [HN3] Constructive notice only arises when a purchaser has knowledge of facts
which would lead a [*106] reasonably prudent person to make inquiry ( Royce v Rymkevitch, 29 AD2d 1029;
Bierzynski v New York Cent. R. R. Co., 31 AD2d 294). It is readily apparent that possession by a [***11] tenant is
constructive notice of the terms of the lease agreement and the actual uses to which the property has been put.
However, [HN4] the duty to pay rent is a primary obligation of a tenant and it is not apparent from the mere existence of
a leasehold interest that an agreement for the timely payment of rent has been waived. Indeed, such a waiver is in direct
conflict with the terms of the lease. [HN5] Where the lease itself provides when the rent is payable and no contrary
practice is indicated, a purchaser without actual notice should be able to rely upon the lease without further inquiry.
The concept of waiver is linked to notice. There can be no waiver of a contractual right without notice; and, without
some form of notice there is no duty to inquire whether a waiver exists. It is of paramount importance that the public
policy of unencumbered alienability of title remains certain. To further this policy the curtailment of a purchaser's
(here, Tehan) rights must be limited to those conditions of the lease of which it has notice. Waiver of a purchaser's
rights based upon that constructive notice which arises from possession must be limited to those deviations from the
terms of a [***12] lease revealed by an inspection of the premises. To intervene in the circumstances here would
undermine the stability and certainty of a commercial real estate transaction for the unacceptable reason of judicial
sympathy ( Graf v Hope Bldg. Corp., 254 NY 1, 4).
Appellant's final argument is that even assuming a default we should reverse because the law abhors a forfeiture of
Page 258
71 A.D.2d 101, *104; 421 N.Y.S.2d 465, **467;
1979 N.Y. App. Div. LEXIS 13094, ***7
a leasehold (see J.N.A. Realty Corp. v Cross Bay Chelsea, 42 NY2d 392), particularly for nonpayment of rent (57 E. 54
Realty Corp. v Gay Nineties Realty Corp., 71 Misc 2d 353). As the Court of Appeals recently observed, in a somewhat
similar context, [HN6] it may be exploitive or even perhaps unconscionable for a landlord to refuse to accept an effort
to cure a late rent payment and instead seek to enforce a lease acceleration clause. Nonetheless, the court went on to
hold that this was a routine commercial lease and absent some element of fraud, exploitive overreaching or
unconscionable conduct on the part of the landlord, equitable intervention was not justified ( Fifty States Mgt. Corp. v
Pioneer Auto Parks, 46 NY2d 573, 578-579).
We believe that holding apt. Here the lease was not unconscionable [***13] [*107] and the parties were not of
unequal bargaining power. Further, appellant was on notice that the respondents wanted to strictly enforce the terms of
the lease regarding prompt payment on the first. Absent evidence of fraud, exploitive overreaching or unconscionable
conduct we can see no reason to interfere with the contractual rights and obligations of the parties (see First Nat. Stores
v Yellowstone Shopping Center, 21 NY2d 630, 638).
Accordingly, the order should be affirmed.
Order unanimously affirmed, with costs.
Page 259
71 A.D.2d 101, *106; 421 N.Y.S.2d 465, **468;
1979 N.Y. App. Div. LEXIS 13094, ***12
Cited
As of: May 27, 2014
Raymond Wardell et al., Rospondents, v. Elliott J. Older, Jr., et al., Appellants
June 21, 1979
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant purchasers appealed the order of the County Court of Saratoga County (New
York), which granted judgment for plaintiff subsequent claimants on the purchasers' suit to establish ownership of
certain real property.
OVERVIEW: The purchasers bought certain real estate from the grantors. They did not, however, record the deed until
25 years later. Prior to the recording of the deed, the grantors sold additional real estate to the subsequent claimants,
which was recorded the year of the sale. The deed of the subsequent claimants excepted the land bought by the
purchasers. The subsequent claimants erroneously thought that certain land that belonged to the purchasers was theirs.
The purchasers brought suit when the error became apparent. The trial court granted judgment in favor of the
purchasers and the subsequent claimants appealed. The court found that the subsequent claimants had sufficient
notice of the facts to be placed on inquiry notice of the purchasers' interest. The court affirmed the judgment of the
trial court.
OUTCOME: The court affirmed the judgment of the trial court, which granted the purchasers relief on their suit to
determine ownership of certain real estate.
CORE TERMS: deed, creek, parcel of land, conveyed, parcel, Recording Act, purchasing, recorded, notice, died, farm
Page 260
[HN1] The general rule is that actual possession of real estate is notice to all the world of the existence of any right that
the person in possession is able to establish.
JUDGES: [***1] Mahoney, P. J., Greenblott, Main, Mikoll and Herlihy, JJ., concur.
OPINION
[*1008] [**197] Appeal from a judgment of the County Court of Saratoga County in favor of plaintiffs, entered
March 22, 1978, upon a decision of the court at Trial Term, without a jury. Plaintiffs
*
brought the within action
pursuant to article 15 of the Real Property Actions and Proceedings Law to establish ownership in a 20-acre parcel of
land conveyed to them by warranty deed in 1948 by Arthur L. Perry and Grace M. Perry, his wife. This deed, although
delivered to the grantees, was not recorded until December 7, 1972. In 1963, Grace M. Perry (Arthur L. Perry having
died) conveyed two parcels of land, one of which encompassed the parcel described in plaintiffs' deed, to the
defendants. This deed was recorded on October 18, 1963. The 20-acre parcel in dispute is rectangular in shape,
[*1009] bounded on the west by Sand Hill Road, on the south by North Creek [**198] Road, and is roughly bisected
by the Kayaderosseras Creek. Plaintiffs' home is located on that portion north of the creek. The residence purchased by
defendants was located on an adjacent parcel of land south of the creek. [***2] In 1972, plaintiffs discovered that the
defendants possessed a deed encompassing their property and that their own deed was unrecorded. They thereafter
commenced the action which is the subject of this appeal. The judgment should be affirmed. Although the trial court
incorrectly found that the defendants were not purchasers within the meaning of the Recording Act because they did not
know the exact property they were purchasing, the judgment is sustainable on other grounds set forth by the court in its
decision. The trial court properly found, based on the evidence presented, that the defendants had sufficient facts in
their possession to be on inquiry notice of the plaintiffs' interest; that had an inquiry been made, that interest would
have been discovered; and that, thus, the defendants could not take advantage of the Recording Act ( Fidelity & Deposit
Co. of Maryland v Queens County Trust Co., 226 NY 225, 233; cf. Baker v Bliss, 39 NY 70, 74). Furthermore, [HN1]
"The general rule is that actual possession of real estate is notice to all the world of the existence of any right which the
person in possession is able to establish" ( Erlich v Hollingshead, 275 App Div 742; [***3] see, also Phelan v Brady,
119 NY 587, 591-592). It is undisputed that plaintiffs actually and openly occupied their house on the disputed parcel,
north of the creek from 1949 until 1976. Defendants were aware of this fact. The contention of the defendants that they
did not realize that the Wardell house was on their land because they believed their north boundary line was the creek
was properly rejected. The defendants admitted that they had read the deed before purchasing the property. The deed
twice recited that the property line crossed Kayaderosseras Creek. Therefore, as the trial court found, it was
unreasonable for the defendants to conclude that the northern boundary line of their property was the creek. Moreover,
the 1963 deed and defendants' contract to purchase the land referred to as the "Fox Farm" each contained a clause
excepting from the conveyance "so much of said farm as may have heretofore been conveyed to others by Arthur L.
Perry and Grace M. Perry or either of them." Finally, we find no error in the admission of certain property tax bills
showing that taxes were assessed and paid on 20 acres of land assessed to Wardell in the Town of Greenfield.
Judgment [***4] affirmed, without costs.
* Plaintiffs, as used herein, refer to the original plaintiffs, Raymond and Henry Wardell. Subsequent to the
commencement of this action, Henry Wardell died and the administratrix of his estate has been substituted as a
party plaintiff.
Page 261
70 A.D.2d 1008, *; 418 N.Y.S.2d 196, **;
1979 N.Y. App. Div. LEXIS 12643, ***
Caution
As of: May 27, 2014
Robert F. Corning et al., Respondents, v. Lehigh Valley Railroad Company et al.,
Appellants. Paul T. Myers et al., Respondents, v. Lehigh Valley Railroad Company
et al., Appellants. Clayton W. Smith et al., Respondents, v. Lehigh Valley Railroad
Company et al., Appellants. Robert W. Habersaat et al., Respondents, v. Lehigh
Valley Railroad Company et al., Appellants
Supreme Court of New York, Appellate Division, Fourth Department
June 30, 1961
PRIOR HISTORY: [***1] Corning v. Lehigh Val. R. R. Co., 21 Misc 2d 706.
Appeal from a judgment of the Cayuga County Court (Joseph F. X. Iacovino, J.) entered September 21, 1959, in
which it was determined that defendant railroad had an easement for railroad purposes only over certain premises.
DISPOSITION: Judgments unanimously reversed on the law and facts and judgment directed to be entered in
accordance with the opinion, without costs of this appeal to any party. Certain findings of fact and conclusions of law
disapproved and reversed and new findings and conclusions made.
CASE SUMMARY:
PROCEDURAL POSTURE: The Cayuga County Court (New York) held that plaintiff property owners held title to
the fee on land over which defendant railroad operated and that the railroad had an easement for railroad purposes only.
The railroad appealed.
OVERVIEW: The property's original fee owner agreed to convey all the land required by the railroad if the railroad
built a station at a particular location. The railroad constructed its tracks and complied with the conditions, but no deed
was conveyed. The property owners subsequently acquired parcels of land with deeds that excepted the railroad's parcel
of land. The property owners alleged that the railroad had a railroad easement right only and that they had the property's
Page 262
fee title. The trial court held that the railroad's fee was lost by the failure to record the agreement and that the railroad's
continued use of the property gave rise to a railroad easement by adverse possession or prescription. The court reversed
the trial court and held that the railroad held title in fee simple absolute to the land occupied by its right of way. In the
absence of a deed, the railroad's interest was that of an owner with equitable fee because the railroad had met all the
conditions for the issuance of a deed and its agreement was specifically enforceable. The property owners were not
innocent purchasers for value and their conveyance excepted the land occupied by the railroad.
OUTCOME: The court disapproved and reversed certain findings of fact and conclusions of law and made new
findings of fact and conclusions of law. The court reversed the trial court's order holding that the property owners had
title to the fee of the land over which the railroad operated and that the railroad had an easement for railroad purposes
only. The court directed that judgment be ordered for the railroad.
CORE TERMS: railroad, deed, right of way, notice, conveyance, easement, fee simple absolute, land occupied, lake,
built, convey, voluntary grants, grantee, equitable, railroad right of way, shore, farm, railroad line, recording, grantor,
vendee, strip, station, strip of land, purchasers, conveyed, lapse, track, vest, conveying
Real Property Law > Estates > Present Estates > Fee Simple Estates
[HN1] If a grant is a grant in fee simple, without any condition or limitation, the grantee takes a fee simple absolute.
Real Property Law > Limited Use Rights > General Overview
Transportation Law > Rail Transportation > Lands & Rights of Way
[HN2] A railroad "right of way" means the land occupied by the railroad tracks and the strips of land immediately
adjacent to the tracks on each side. The nature of the railroad company's interest in the right of way depends upon the
terms of the conveyance by which it was acquired.
[HN3] A railroad's interest does not depend upon the language of exceptions in subsequent deeds.
Evidence > Judicial Notice > Adjudicative Facts > Public Records
Evidence > Judicial Notice > Domestic Laws
[HN4] The court may properly take judicial notice of those facts appearing as a matter of undisputed and indisputable
public record.
[HN5] Actual possession of real estate is sufficient notice to all the world of the existence of any right which the person
in possession is able to establish.
[HN6] The statute of limitations does not run against the right of a vendee in possession. If all the conditions of the
agreement had been complied with by the vendee, there is a presumption, after the statutory period of limitation has run,
that the vendor had given the vendee a deed in performance of his obligation Under such circumstances, after the lapse
of twenty years, it would probably be the duty of a jury to presume a conveyance in conformity to the agreement.
Page 263
14 A.D.2d 156, *; 217 N.Y.S.2d 874, **;
1961 N.Y. App. Div. LEXIS 9706, ***1
HEADNOTES
Railroads -- title to right of way -- railroad, incorporated in 1867 under Laws of 1850, entered into
agreement with owner of farm whereby said owner agreed to grant and convey to railroad "all the land that said
Company may require for the construction and convenient use of their Railroad, upon and across the lands of
said [grantor], along the Lake Shore, situated in the town of Genoa, County of Cayuga, in the State of New York,
and being part of Lot No. 22, whenever said Company shall have finally built their Railroad * * * and a deed
conveying the same" -- contract was subject to condition that railroad have station [***2] at "Atwater
Landing" -- conditions that railroad and station be built were met -- in absence of deed, interest of railroad was
that of equitable owner in fee simple absolute of land occupied by right of way -- railroad's interest in right of
way is not merely easement.
1. The Cayuga Lake Railroad Company, predecessor of defendant Lehigh Valley Railroad Company, was
incorporated in 1867 under chapter 140 of the Laws of 1850 for the purpose of constructing a railroad from Auburn to
Ithaca, New York. Immediately after its incorporation, it entered into an agreement with one Valentine, the owner of a
farm on the east shore of Cayuga Lake, reading in part as follows: "hereby promises and agrees to and with the said
Railroad Company to grant and convey to said Company, free of encumbrance and by a good and sufficient deed, all the
land that said Company may require for the construction and convenient use of their Railroad, upon and across the lands
of said Daniel Valentine, along the Lake Shore, situated in the town of Genoa, County of Cayuga, in the State of New
York, and being part of Lot No. 22, whenever said Company shall have finally built their Railroad * * * and a deed
conveying [***3] the same." On the back of the agreement there was a notation that "This contract is on condition that
the Rail Road Company shall have a Station at or near what is known as the 'Atwater Landing' for the accommodation
of passengers and freight." The agreement was recorded but apparently no deed was ever given. The language of the
agreement, if incorporated in a deed, would have been sufficient to convey to the railroad company a fee simple
absolute. The railroad company went into possession under the agreement and built the railroad and thus satisfied the
provision requiring the building of a railroad as a condition of the giving of a deed. Also the condition that a station at
Atwater Landing should be constructed was satisfied. The railroad therefore became entitled to a deed conveying to it a
fee simple absolute. It was operated until sometime in the 1950's when the railroad operation was discontinued.
2. The description in the agreement was sufficiently definite to vest in the railroad company ownership of the strip
of land occupied by it under the agreement. Proof upon the trial established the precise width of the strip of land
occupied by the railroad.
3. In the absence [***4] of a deed the interest of the railroad company was that of the owner of an equitable fee
since the agreement was one which was specifically enforcible by the railroad company after it had made expenditures
in reliance thereon and had built the railroad in accordance with the terms of the agreement.
4. The Cayuga Lake Railroad Company was incorporated under the Railroad Law of 1850. Section 28 of that law
enumerated the powers of railroad corporations formed thereunder. Among those powers in subdivision 2, the railroad
company was given the power "To take and hold such voluntary grants of real estate and other property as shall be
made to it, to aid in the construction, maintenance and accommodation of its railroad; but the real estate received by
voluntary grant shall be held and used for the purposes of such grant only". That statute did not mean that a voluntary
grant to a railroad company incorporated under the 1850 Act could convey to the railroad only a railroad easement
regardless of the terms of the grant. It means that the interest of the railroad company depends upon what the grant says
and, if the grant is a grant in fee simple without condition or limitation, the railroad [***5] company takes a fee simple
absolute.
5. Moreover, the subdivision is simply part of an enumeration of the railroad company's powers. Even if the statute
were construed as permitting a railroad company to take only a limited interest by voluntary grant, and in violation of
the statute the railroad company took a deed in fee simple, the most that could be said would be that it was an ultra vires
act which might be attacked by public authorities, but the deed would nevertheless be effective to vest title in the
Page 264
14 A.D.2d 156, *; 217 N.Y.S.2d 874, **;
1961 N.Y. App. Div. LEXIS 9706, ***1
railroad. Moreover, there was no provision for a termination of the railroad's interests or reversion upon cessation of
railroad use and, in the absence of such a provision, an assumed provision limiting the use to which the property could
be put would be at most a covenant, enforcible in equity but not affecting the title of the railroad company.
6. Upon the performance of the condition that a railroad be built, the railroad company became the equitable owner
in fee simple absolute.
7. Said Valentine conveyed his farm to one Lyon in 1875 but the deed contained a provision "excepting and
reserving a right of way in and across the west portion of said above described premises [***6] for the Cayuga Lake
Shore Railroad (so-called)". Through mesne conveyances, various parcels carved out of the land conveyed to Lyon
passed to the plaintiffs. The trial court found that Lyon's recording of his deed gave him superior title under the
Recording Act. Strictly speaking, the Recording Act (Real Property Law, 290, 291) did not have any application
since there was no obligation under that act to record an executory contract for the conveyance of real property and,
under the act as it read at that time, the mere recording of the contract would not be of any value in charging
subsequent purchasers with constructive notice. There is a non-statutory doctrine that a prior equitable right is cut off
by the subsequent acquisition of the legal title by an innocent third party for value, without notice of the pre-existing
equity. However, the deed by Valentine to Lyon expressly excepted the land occupied by the railroad right of way from
the scope of the conveyance. Plaintiffs' predecessor was not a grantee of the land occupied by the right of way. The
subsequent conveyance to Lyon did not convey any interest of the grantor in the land occupied by the railroad right of
way [***7] and there was, therefore, no subsequent conveyance which could have the effect of cutting off the railroad's
equitable fee.
8. Even if the exception in the Lyon deed did not have the effect of completely excluding the railroad strip from the
scope of the conveyance, it constituted express notice of whatever rights the railroad company had in that strip of land
and Lyon and his successors cannot claim to be innocent purchasers without notice of the existing equity.
9. The words "excepting and reserving a right of way" did not give notice only of a prior grant of a railroad
easement. The term "right of way" has a special significance with respect to railroads and the nature of the railroad
company's interest in the right of way depends upon the terms of the conveyance by which is was acquired. The
exception of the railroad right of way in the Lyon deed therefore gave notice to the grantee that the railroad had an
interest which might range from a mere easement to an absolute fee. If the railroad company had a fee simple, Lyon
had notice of it.
10. In any event, the exception in the deed was sufficient to require the grantee to make inquiry of the railroad as
to the nature of its [***8] interest and to charge him with notice of whatever would have been disclosed by such
inquiry.
11. Official records show that the railroad line had been built and that the railroad was in possession of the land
occupied by its right of way in 1875 when the deed from Valentine to Lyon was given. The possession by the railroad
company would have been sufficient of itself to give notice to the grantee of the railroad company's interest even if
there had been no express exception in the deed.
12. Plaintiffs argue that the right to enforce specific performance of the agreement between Valentine and the
railroad company is barred by the lapse of the 10-year Statute of Limitations (Civ. Prac. Act, 53), which they contend
began to run upon the completion of the construction of the railroad. The Statute of Limitations does not run against the
right of a vendee in possession. On the contrary, if all the conditions of the agreement had been complied with by the
vendee, there is a presumption, after the statutory period of limitation has run, that the vendor had given the vendee a
deed in performance of his obligation.
13. In any event, even if it be assumed that the right to specific [***9] performance was barred by the lapse of
time, the railroad company's continued possession for three quarters of a century, in accordance with the terms of the
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1961 N.Y. App. Div. LEXIS 9706, ***5
agreement, constituted adverse possession under a claim of fee ownership and the railroad company acquired a fee by
adverse possession.
COUNSEL: Frederick B. Bryant for appellants.
William S. Elder, Jr., for Robert F. Corning and others, respondents.
Ernest A. Dahman, Jr., for Clayton W. Smith and others, respondents.
JUDGES: Halpern, J. All concur. Williams, P. J., Goldman, Halpern, McClusky and Henry, JJ.
OPINION BY: HALPERN
OPINION
[*158] [**876] The question presented in this case is whether the defendant Lehigh Valley Railroad Company,
as the successor to the Cayuga Lake Railroad Company, owned the land occupied by it as part of its right of way in fee
simple or whether it merely had a railroad easement.
The Cayuga Lake Railroad Company was incorporated on July 1, 1867 under chapter 140 of the Laws of 1850 for
the purpose [*159] of constructing a railroad from the tracks of the New York Central Railroad at Auburn, New York,
to Ithaca, New York. The articles of association stated that the length of the proposed [***10] railroad line was 37
miles. (See Cayuga Lake R. R. Co. v. Kyle, 64 N. Y. 185.)
Immediately after its incorporation, the railroad company entered into an agreement with one Daniel Valentine, the
owner of a farm on the east shore of Cayuga Lake, for the acquisition of the lands needed for the railroad line along the
lake shore, across the Valentine farm. The agreement was dated "July -- 1867;" it was under seal and it read as follows:
[**877] "[The] said Daniel Valentine, in consideration of the sum of one dollar to him in hand paid, the receipt whereof
is hereby acknowledged, hereby promises and agrees to and with the said Railroad Company to grant and convey to said
Company, free of encumbrance and by a good and sufficient deed, all the land that said Company may require for the
construction and convenient use of their Railroad, upon and across the lands of said Daniel Valentine, along the Lake
Shore, situated in the town of Genoa, County of Cayuga, in the State of New York, and being a part of Lot No. 22,
whenever said Company shall have finally built their Railroad . . . . and a deed conveying the same."
On the back of the agreement there was the following notation: [***11] "This contract is on condition that the Rail
Road Company shall have a Station at or near what is known as the 'Atwater Landing' for the accommodation of
passengers and freight."
The agreement was recorded October 11, 1879.
It is undisputed that the language of the agreement is language which, if incorporated in a deed, would have been
sufficient to convey to the railroad company a fee simple. Valentine agreed "to grant and convey * * * by a good and
sufficient deed, all the land" etc. These are the appropriate terms for the conveyance of a fee. There is no reference in
the agreement to a railroad easement.
The railroad company apparently never obtained a deed in accordance with the agreement but it went into
possession under the agreement and built its railroad. This satisfied the provision requiring the building of a railroad as
a condition of the giving of a deed. It is also undisputed that the condition imposed by the memorandum on the back of
the agreement was satisfied by the railroad's establishing a station at Atwater Landing. The railroad company therefore
became entitled to a deed conveying to it a fee simple absolute.
[*160] The railroad was operated until [***12] sometime in the 1950's when the defendant discontinued the
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1961 N.Y. App. Div. LEXIS 9706, ***9
railroad operation.
Through mesne conveyances, the plaintiffs had acquired parcels of land carved out of the Valentine farm. They
brought these actions in 1958, under article 15 of the Real Property Law, seeking an adjudication that they owned the
land occupied by the railroad line. Notwithstanding the language of the Valentine agreement, the trial court held that the
plaintiffs owned the fee, and that the railroad company only had a railroad easement, and gave judgment accordingly.
Upon appeal to this court, the defendant railroad company maintains that it is the owner [**878] in fee simple absolute
of the land occupied by its right of way. We are in agreement with this contention.
The description in the agreement was sufficiently definite to vest in the railroad company ownership of the strip of
land occupied by it under the agreement ( Lipton v. Bruce, 1 N Y 2d 631). The proof upon the trial established the
precise width of the strip of land occupied by the railroad.
As has been stated, it is undisputed that under the language of the agreement, Valentine was bound to convey a fee
to the railroad company. [***13] In the absence of a deed, the interest of the railroad company was that of the owner
of an equitable fee, since the agreement was one which was specifically enforcible by the railroad company, after it had
made expenditures in reliance thereon and had built the railroad in accordance with the terms of the agreement
(Restatement, Contracts, 366, 372; 5 Williston, Contracts [rev. ed.], 1439; cf. Epstein v. Gluckin, 233 N. Y. 490).
However, the plaintiffs argue that, notwithstanding the language of the agreement, the railroad company acquired
only an easement or an equitable right thereto because of the provisions of the Railroad Law of 1850 under which the
Cayuga Lake Shore Railroad Company had been incorporated (L. 1850, ch. 140). The plaintiffs rely upon section 28 of
that law, which enumerated the powers of railroad corporations formed thereunder. Among various powers, the railroad
company was given the power by subdivision 2 of section 28: "To take and hold such voluntary grants of real estate and
other property as shall be made to it, to aid in the construction, maintenance and accommodation of its railroad; but the
real estate received by voluntary grant shall [***14] be held and used for the purposes of such grant only".
It should be noted that in 1869 a special act was passed (L. 1869, ch. 314) to facilitate the construction of the
Cayuga Lake Railroad and that under that special act the railroad company was entitled to receive "any gift or grant of
any land" as an [*161] aid to construction of the railroad ( 13). There was no provision in the 1869 act that the lands
so received should be "held and used for the purposes of such grant only", such as appears in the 1850 act. It is this
provision in the 1850 act upon which the plaintiffs place reliance. They contend that in view of this provision a
voluntary grant to a railroad company incorporated under the 1850 act can convey to the railroad only a railroad
easement, regardless of the terms of the grant. If this were true, it would give railroads incorporated under the 1850
statute a different status from that of railroads incorporated either under earlier or later statutes which did not contain the
special provision with respect to voluntary grants. For example, the grant involved in the case of Nicoll v. New York &
Erie R. R. Co. [**879] (12 N. Y. 121, 122) was a voluntary [***15] grant in the same sense in which the grant in this
case was a voluntary one since it was given "in consideration of the benefits and advantages" to the grantor of the
railroad proposed to be built and of "one dollar" paid by the railroad company. The court held that, under this grant, the
railroad company took a fee. See, also, Matter of City of Buffalo (206 N. Y. 319) in which the court stated (p. 330):
"We can find nothing in the Railroad Law which contravenes or changes this rule [the rule that a railroad company may
take a fee]".
We do not believe that the section of the 1850 Railroad Law was meant to have the drastic effect claimed by the
plaintiffs. First of all, subdivision 2 of section 28, upon which the plaintiffs rely, merely says that the real estate
received by voluntary grant shall be held and used "for the purposes of such grant only". This makes the interest of the
railroad company depend upon what the grant says. [HN1] If the grant is a grant in fee simple, without any condition or
limitation, the railroad company takes a fee simple absolute. Furthermore, it is to be noted that the subdivision relied
upon by the plaintiffs is simply part of an enumeration of [***16] the railroad company's powers. Even if the statute
were construed as permitting a railroad company to take only a limited interest by voluntary grant and, in violation of
the statute, the railroad company took a deed in fee simple, the most that could be said would be that it was an ultra
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1961 N.Y. App. Div. LEXIS 9706, ***12
vires act which might be attacked by the public authorities, but the deed would nevertheless be effective to vest title in
the railroad. The conveyance "is not void, but only voidable, and the sovereign alone can object. It is valid until
assailed in a direct proceeding for that purpose. ( National Bank v. Matthews, 98 U.S. 621, 628.)" ( Burden v. Burden,
159 N. Y. 287, 304; see, also, 51 [*162] C. J., Railroads, p. 508; 74 C. J. S., Railroads, 73.) Finally, even if the
statute were to be given the effect claimed by the plaintiffs and a provision were to be read into every voluntary grant to
a railroad company that the land granted should be held and used for railroad purposes only, it would not follow that the
railroad company's interest would be thereby reduced to a railroad easement. If the assumed provision were followed by
an express provision that the estate of [***17] the railroad should terminate upon the cessation of the railroad use and
that the estate should thereupon revert to the grantor and his heirs, the estate of the railroad company would be a fee
upon special limitation or a base or qualified fee but it would nevertheless be a fee ( Nichols v. Haehn, 8 A D 2d 405).
There was no provision in the agreement in this case for a termination of the railroad's interest or a reversion upon
cessation of the railroad use. In the absence of such a provision, the assumed provision limiting the use to which the
property could be put would be at most a covenant, enforcible in equity but not affecting the title of the railroad
company. The railroad [**880] company would take a fee simple ( Kenney v. Wallace, 24 Hun 478; Allen v. Trustees
of Great Neck Free Church, 240 App. Div. 206; Concklin v. New York Cent. & Hudson Riv. R. R. Co., 149 App. Div.
739, 742, appeal dismissed 207 N. Y. 752; Buttery v. Rome, Watertown & Ogdensburg R. R. Co., 14 N. Y. St. Rep.
131). This would be particularly true in a case in which the deed contained a specific condition requiring the building of
a railroad and the condition [***18] had been fully satisfied, as it was in this case. After satisfying the express
condition, the railroad company's estate would become a fee simple absolute, notwithstanding any general statement in
the deed as to the purposes for which the land should be used in the future.
It must therefore be concluded that the section of the Railroad Law of 1850 relied upon by the plaintiffs does not
support their claim that the railroad company acquired only a railroad easement under the Valentine agreement. Under
the agreement, the railroad company became the equitable owner of a fee interest in the land subject to the condition
that a railroad be built and, upon the performance of that condition, the railroad company became the equitable owner in
fee simple absolute.
The trial court did not rest its decision that the plaintiffs owned the fee and that the defendant only had a railroad
easement upon any disagreement with any part of the reasoning set forth above. On the contrary, the court held that it
was unnecessary for it to decide the nature of the interest acquired by the railroad company under the Valentine
agreement because, [*163] it said, even if the railroad company had acquired [***19] a fee, the fee had been lost by
virtue of its failure to record the agreement and by virtue of the subsequent acquisition of the fee of the whole Valentine
farm by the plaintiffs' predecessor in title for value, without notice of the railroad company's interest. The court further
held that the continued use by the railroad company thereafter gave rise only to a railroad easement by adverse
possession or prescription.
The subsequent conveyance referred to by the trial court was a deed dated March 29, 1875, recorded in the Cayuga
County Clerk's office on June 1, 1875, by which Valentine conveyed his farm to one Lyon. However, there was a
provision in the deed "excepting and reserving a right of way in and across the west portion of said above described
premises for the Cayuga Lake Shore Railroad (so-called)". Through mesne conveyances, various parcels carved out of
the land conveyed to Lyon passed to the plaintiffs. It was found by the trial court that the prior recording of the Lyon
deed gave the grantee thereunder a right superior to that of the railroad under the Recording Act (Real Property Law,
290, 291). Strictly speaking, the Recording Act did not have any application [***20] to the case since there was no
obligation under that act to record an executory contract for the conveyance of real property and, under the [**881] act
as it read at that time, the mere recording of the contract would not have been of any value in charging subsequent
purchasers with constructive notice ( Schultz & Son v. Nelson, 256 N. Y. 473, 476; cf. Real Property Law, 294, as
amd. by L. 1940, ch. 745). The plaintiffs' claim really rests upon the nonstatutory doctrine that a prior equitable right is
cut off by the subsequent acquisition of the legal title by an innocent third party for value, without notice of the
pre-existing equity. (19 Am. Jur., Equity, 488; 55 Am. Jur., Vendor and Purchaser, 651.)
It is difficult to see how that doctrine can be applied in this case so as to vest a superior title in the plaintiffs. First
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1961 N.Y. App. Div. LEXIS 9706, ***16
of all, the deed by Valentine to Lyon expressly excepted the land occupied by the railroad right of way from the scope
of the conveyance. The deed did not convey the whole farm "subject to" the railroad's right of way; it "excepted" the
railroad's right of way from the description of the land conveyed. The plaintiffs' predecessor was, [***21] therefore,
not a grantee of the land occupied by the right of way at all ( West Point Iron Co. v. Reymert, 45 N. Y. 703). Even if
there had been a reversionary interest in the grantor with respect to that strip of land, it would have remained in him and
ultimately passed to his heirs ( Munn v. Worrall, 53 N. Y. 44; Lipetz v. Papish, 283 App. Div. 1065, [*164] affd. 308
N. Y. 787; Hall v. Wabash R. R. Co., 133 Iowa 714; 51 C. J., Railroads, p. 546; 74 C. J. S., Railroads, 88, p. 482).
Even in a case in which a conveyance was made of the entire tract "subject to" a prior conveyance to a railroad
company of a determinable fee in its right of way, this court held that there was a question of fact to be resolved upon a
trial as to whether the subsequent grantee acquired the reversionary interest of the grantor ( Nichols v. Haehn, 8 A D 2d
405, supra). In the present case, by virtue of the express exception, the subsequent conveyance to Lyon did not convey
any interest of the grantor in the land occupied by the railroad right of way, and there was therefore no subsequent
conveyance which could have the effect of cutting off the railroad [***22] company's equitable fee.
Secondly, even if the exception in the Lyon deed did not have the effect of completely excluding the railroad strip
from the scope of the conveyance, it constituted express notice of whatever rights the railroad company had in that strip
of land, and Lyon and his successors cannot claim to be innocent purchasers without notice of the existing equity (
Dingley v. Bon, 130 N. Y. 607; West Point Iron Co. v. Reymert, 45 N. Y. 703, supra). The plaintiffs argue that the words
"excepting and reserving a right of way" gave notice to Lyon, the grantee, only of a prior grant of a railroad easement
and that, without further inquiry, he had the right to accept the deed on the assumption that he was [**882] taking
only subject to an easement. This contention is untenable. The words "right of way" as applied to the land occupied by
a railroad line do not necessarily signify that the railroad only has a railroad easement. The term "right of way" has a
special significance with respect to railroads very different from the meaning of the term as generally used in real
property law. In the latter case, the term "right of way" means an easement giving [***23] one the right to make a
transitory crossing over the land of another. Obviously, this is not applicable to a railroad with a permanently fixed line
of track. [HN2] A railroad "right of way" means the land occupied by the railroad tracks and the strips of land
immediately adjacent to the tracks on each side. The nature of the railroad company's interest in the right of way
depends upon the terms of the conveyance by which it was acquired (74 C. J. S., Railroads, 83). The railroad's
interest may be merely a railroad easement if, in the particular case, the agreement or deed expressly or by implication
limited the railroad's interest to an easement. On the other hand, the railroad's interest in its right of way may be a fee
simple absolute, a fee on special limitation or a fee on condition subsequent, depending upon the terms of the grant
under which the railroad [*165] acquired the right of way and the intention of the grantor, expressed or implied. The
use of the term "right of way" to describe a right of way owned by a railroad in fee is quite common (see 51 C. J.,
Railroads, 201, p. 537; 74 C. J. S., Railroads, 84). See, also, as illustrating the statutory use of the [***24] term, the
definition of "right of way" in subdivision 10 of section 63 of the Conservation Law. A right of way is there defined as
"the land adjacent to the tracks of a railroad * * * owned by them [the railroad company]". (Emphasis added.)
The exception of the railroad right of way in the Lyon deed therefore gave notice to the grantee that the railroad had
an interest which might range all the way from a mere easement to an absolute fee. If, as has been demonstrated above,
the railroad company had a fee simple, Lyon had notice of it.
In any event, the exception in the deed was sufficient to require the grantee to make inquiry of the railroad as to
the nature of its interest, and to charge him with notice of whatever would have been disclosed by such inquiry (
Dingley v. Bon, supra; West Point Iron Co. v. Reymert, supra). (See 1960 Report of N. Y. Law Rev. Comm.,
McKinney's Session Laws, 1960, p. 1822, for the Law Revision Commission's recognition of the fact that this was the
existing rule of law, which it recommended be modified by the bill which became chapter 688 of Laws of 1960, adding
section 291-e to the Real Property Law.) The railroad's name was specifically [***25] set forth in the exception in the
Lyon deed and Lyon was given notice of the identity of the company of which inquiry should be made, if he wished to
know the exact nature of the interest which the railroad had.
[**883] Each of the deeds in the plaintiffs' chain of title contained an exception similar to that in the Lyon deed,
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1961 N.Y. App. Div. LEXIS 9706, ***20
with some variations and additions.
It should be borne in mind that the phrase "right of way" in the exception in the Lyon deed is being here analyzed
solely from the standpoint of its sufficiency to give notice to the grantee of the nature of the railroad company's interest
in the premises ( West Point Iron Co. v. Reymert, supra, p. 707). [HN3] The railroad's interest does not depend upon the
language of the exception in the deed. As has been pointed out above, the railroad's interest was acquired under an
agreement which used language concededly sufficient to convey a fee.
The proof upon the trial was obscure as to when the railroad company took possession of the strip of land. The trial
court found that the railroad company went into possession at some time between 1867 and 1879 and it noted that there
was no [*166] evidence that the railroad [***26] company was in possession in 1875 when the deed was given by
Valentine to Lyon. However, independent research by this court has produced undisputable record proof that the
railroad line had been built prior to December 1, 1871. The Report of the State Engineer and Surveyor for the year
1871 shows that the Cayuga Lake Railroad Company had built 38 miles of road that year (see Annual Rep. of State
Engineer and Surveyor for 1871, tabulation compiled from the Annual Reports of Railroads, p. 161). The prior report
for the year 1870 (p. 143) showed that no part of the Cayuga Lake Railroad had yet been built. See, also, the Annual
Report of the Cayuga Lake Railroad Company filed in the office of the State Engineer and Surveyor dated December 1,
1871, showing that its railroad line, 38 miles in length, had been completed. (This report is reproduced at pp. 416 to
417 of the Report of the State Engineer and Surveyor for 1871.) All these documents are on file in the office of the
Public Service Commission. "[HN4] We may properly take judicial notice of [these facts] appearing as a matter of
undisputed and indisputable public record" ( Sease v. Central Greyhound Lines, 281 App. Div. [***27] 192, 194, revd.
on other grounds 306 N. Y. 284; see, also, Ripley v. Storer, 309 N. Y. 506). It may also be noted that under the Railroad
Law of 1850 (L. 1850, ch. 140) a railroad incorporated under that act was required to complete construction of its road
within five years of the filing of the articles of association ( 47). That would mean that the construction of the Cayuga
Lake Railroad Company line was required to be completed by July 1, 1872. Since no action or proceeding to annul the
charter of the company was brought, it may be presumed that the railroad line was built within the time specified in the
statute.
Upon the basis of the official records, we have no hesitancy in finding that the railroad line had been built and that
the railroad was in possession of the land occupied by its right of way in 1875, when the deed [**884] from Valentine
to Lyon was given. The possession by the railroad company would have been sufficient of itself to give notice to the
grantee of the railroad company's interest, even if there had been no express exception in the deed. "[HN5] Actual
possession of real estate is sufficient notice * * * to all the world of the existence of any [***28] right which the
person in possession is able to establish" ( Phelan v. Brady, 119 N. Y. 587, 591-592).
It is argued by the plaintiffs (although this was not the ground of the trial court's decision) that the right to enforce
specific performance of the agreement between Valentine and [*167] the railroad company is barred by the lapse of
the 10-year Statute of Limitations (Civ. Prac. Act, 53), which they contend began to run upon the completion of the
construction of the railroad. But [HN6] the Statute of Limitations does not run against the right of a vendee in
possession ( Gifford v. Whittemore, 4 A D 2d 379, 385; cf. Ford v. Clendenin, 215 N. Y. 10, 16-17; Cameron Estates v.
Deering, 308 N. Y. 24). On the contrary, if all the conditions of the agreement had been complied with by the vendee, as
they were here, there is a presumption, after the statutory period of limitation has run, that the vendor had given the
vendee a deed in performance of his obligation ( Cherrington v. South Brooklyn Ry. Co., 180 App. Div. 659, 666).
"Under such circumstances, after the lapse of twenty years, it would probably be the duty of a jury to presume a
conveyance [***29] in conformity to the agreement" ( Miller v. Bear, 3 Paige Ch. 466, 467). That presumption is
applicable here.
In any event, even if it is assumed that the right to specific performance had become barred by lapse of time, the
railroad company's continued possession for three quarters of a century thereafter, in accordance with the terms of the
agreement, constituted adverse possession under a claim of fee ownership and the railroad company acquired a fee by
adverse possession.
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1961 N.Y. App. Div. LEXIS 9706, ***25
It is therefore our conclusion that the railroad company has a fee simple absolute in the land occupied by its right of
way. The judgments declaring that the plaintiffs owned the fee and that the railroad company only had a railroad
easement in the land occupied by the railroad right of way, within the limits of the parcels described in the complaints,
should therefore be reversed and judgment entered declaring that the plaintiffs have no estate or interest in that land and
that the defendant railroad company is the owner thereof in fee simple absolute.
Judgments unanimously reversed on the law and facts and judgment directed to be entered in accordance with the
opinion, without costs of this appeal [***30] to any party. Certain findings of fact and conclusions of law disapproved
and reversed and new findings and conclusions made.
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1961 N.Y. App. Div. LEXIS 9706, ***29
Cited
As of: May 27, 2014
OLEN COVEY et al., Appellants, v. NIAGARA, LOCKPORT AND ONTARIO
POWER COMPANY, Respondent.
Supreme Court of New York, Appellate Division Fourth Department
286 A.D. 341; 143 N.Y.S.2d 421; 1955 N.Y. App. Div. LEXIS 4045
July 15, 1955
PRIOR HISTORY: [***1] APPEAL from a judgment of the Supreme Court in favor of defendant, entered June 24,
1954, in Chautauqua County, upon a verdict directed by the court at a Trial Term (MUNSON, J.), dismissing the
complaint.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff landowners brought an action for damages against defendant power company
for the alleged wrongful act of entering the landowners' premises and cutting trees without permission. The power
company's answer alleged that the landowners' predecessor in title granted an easement to the power company. The
Supreme Court, Chautauqua County (New York), entered a directed verdict and dismissed the landowners' complaint.
The landowners appealed.
OVERVIEW: The landowners purchased the property, which contained about eighty acres. An electric line had been
constructed at the back end of the property and the landowners testified at trial that they did not discover the line until
nearly a year after the purchase. The deed to the landowners from their predecessor in title did not mention the
unrecorded right of way and there was no evidence that the predecessor informed either landowner of its existence. The
landowners' position was that they were purchasers in good faith and for a valuable consideration and that, as to them,
the prior easement was void, pursuant to N.Y. Real Property Law 291. The court reversed the trial court's judgment
and ordered a new trial. The court held that it was error to direct a verdict upon the evidence adduced. No proof was
made that the landowners had knowledge of the existence of the electric line when they took title, and it was error for
the trial court to hold that the mere fact that the line was there constituted knowledge. Whether the landowners had such
knowledge was a question of fact for the jury.
OUTCOME: The court reversed the trial court's decision directing a verdict in favor of the power company and
Page 272
ordered a new trial to determine whether the landowners had knowledge of the power company's unrecorded easement.
CORE TERMS: purchaser, easement, electric, predecessor, grantor, notice, actual knowledge, visible, good faith,
poles, recording act, right to cut, mere fact, question of fact, bad faith, valuable consideration, constructive notice,
constructive, credibility, constructed, permission, acquiring, recorded, omission, cutting, inspect, deed, right of way,
time to time, fact sufficient
[HN1] Knowledge of a fact cannot be constructive. A person either has knowledge of it or he does not.
[HN2] Constructive notice is a legal inference from established facts; and like other legal presumptions, does not admit
of dispute. The true doctrine on this subject is that where a purchaser has knowledge of any fact, sufficient to put him
on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either
to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of
negligence equally fatal to his claim, to be considered as a bona fide purchaser.
[HN3] In the absence of recording, it is always knowledge of facts which gives notice to a purchaser and which puts
him upon inquiry.
[HN4] A conveyance made for a valuable consideration is presumed to be bona fide within the recording acts. Nor does
the mere omission to inspect premises constitute bad faith on the part of the purchaser.
HEADNOTES
Deeds - unrecorded easement - actual knowledge as binding owner of property - (1) action for damages for
wrongful entry of plaintiffs' premises and cutting trees without plaintiff' permission; answer alleged that plaintiffs'
predecessor in title granted defendant easement to maintain electric line on property with right to cut trees, and that
prior to acquiring title plaintiffs examined premises and knew of such easement; such easement not recorded; evidence
that plaintiffs at time of purchase did not know of electric line or easement; on evidence, court erred in directing verdict
in defendant's favor; new trial ordered - (2) trial court erred in holding that mere fact that line was there constituted
knowledge on plaintiffs' part of its existence; such knowledge question of fact for jury, as also was question of
credibility - (3) mere omission to inspect premises does not constitute bad faith on purchasers' part.
1. In an action for damages for allegedly wrongfully entering [***2] plaintiffs' premises and cutting trees without
plaintiffs' permission, defendant alleged that plaintiffs' immediate predecessor in title had granted defendant an
easement to operate and maintain an electric line on the property with the right to cut such trees as defendant might
from time to time deem necessary for the operation of the electric line, that the electric line existed on the premises at
the time plaintiffs acquired title, and that, prior to acquiring such title, plaintiffs examined it in the company of their
grantor and the grantor of defendant's predecessor and were then acquainted with the circumstances of said line and
with the easement given to defendant's predecessor. Such easement given by plaintiffs' predecessor in title was not
Page 273
286 A.D. 341, *; 143 N.Y.S.2d 421, **;
1955 N.Y. App. Div. LEXIS 4045, ***1
recorded. The premises contained about eighty acres on which there was a house and barn, and the electric line was
constructed at the back of the property. One of the plaintiffs testified that he discovered the line nearly a year after his
purchase and that the line was not visible to anybody who walked in the neighborhood. The second plaintiff testified
that, before the purchase, she saw nothing of the premises except the house, and [***3] that there were no poles visible
from the house. Defendant offered the testimony of plaintiffs' grantor who executed the easement agreement to
defendant. He testified that he told one of the plaintiffs the property went back to a fence, but he did not take him to the
rear of the property. The deed to plaintiffs from their grantor did not mention the right of way, and there is no evidence
that plaintiffs' grantor informed either of the plaintiffs of the circumstances. Plaintiffs allege that they purchased in
good faith and for a valuable consideration and that, as to them, the prior easement is void (Real Property Law, 291).
The court erred in directing a verdict in favor of defendant on such evidence. A new trial is ordered.
2. The trial court erred in holding that the mere fact that the line was there constituted knowledge on the part of the
plaintiffs of its existence. The question is whether the purchasers had actual knowledge of some fact which would put
them on notice. The question of knowledge and the question of credibility were improperly taken from the jury by the
court.
3. The mere omission to inspect the premises did not constitute bad faith on the part [***4] of the purchasers.
COUNSEL: John Leo Sullivan for appellants.
Glenn W. Woodin and James A. O'Neill for respondent.
OPINION BY: WHEELER
OPINION
[*342] [**422] WHEELER, J. The action is one for money damages for the alleged wrongful act of entering
plaintiffs' premises and cutting trees without the permission of the plaintiffs. The answer sets forth an affirmative
defense. It is alleged that the plaintiffs' immediate predecessor in title, on May 23, 1932, granted the defendant an
easement to operate and maintain an electric line on the property, "with the right to cut and remove or to trim any trees
as second party may from time to time deem necessary for the operation of the electric line". The answer then alleges
that the electric line existed on the premises at the time the plaintiffs acquired title and that "prior to acquiring title to
said premises, examined it in the company of Harry H. Mosier, their grantor and the grantor of defendant's predecessor
and were then acquainted with the existence of said line and of the right and the easement given therefor to defendant's
predecessor." It is undisputed that the easement given by the plaintiffs' predecessor in title [***5] was not recorded.
At the close of all the evidence, the defendant on the suggestion of the court, moved for a directed verdict in its
favor which was granted by the court on the authority of Barber v. Hudson Riv. Tel. Co. (105 App. Div. 154). We think
it was error to direct a verdict upon the evidence adduced. The parcel of property purchased by the plaintiffs contained
about eighty acres. On the road there was a house and barn. The consideration paid was $2,800. The electric line was
constructed at the back end of the property. The plaintiff, Olen Covey, testified that he discovered the line nearly a year
after his purchase; that about six months after purchase, he first went to the back part of the lot but did not then observe
the poles. He testified that before he bought the property, he did not walk over the land. He bought it "on sight and
unseen". He said the line was not visible "to anybody [who] walked in that neighborhood." The plaintiff, Minnie A.
Covey, testified that before the purchase, she saw nothing of the premises except the house and there were no poles
visible from the house.
[*343] The defendant called Harry H. Mosier, the plaintiffs' [***6] grantor. He had executed the agreement for
the easement to the defendant. He knew that the defendant had constructed the line across the parcel. He testified that
Covey asked him about the extent of the property and he told him it went back to a fence. He did not take him to the
rear of the property. He told Covey he would not walk to the back end of the farm for the whole farm. The deed to the
Page 274
286 A.D. 341, *; 143 N.Y.S.2d 421, **;
1955 N.Y. App. Div. LEXIS 4045, ***2
plaintiffs from Mosier did no mention [**423] the right of way and there is no evidence that Moiser informed either
plaintiff of its existence.
The appellants' position is that they were purchasers in good faith and for a valuable consideration; that as to
them, the prior easement is void, pursuant to section 291 of the Real Property Law. The respondent's affirmative
defense as set forth in the answer was that the plaintiffs, prior to purchase and in company with their grantor, examined
the premises and knew of the existence of the line. Had such examination and knowledge of the line been shown, it
would have constituted notice to the plaintiffs of apparent rights of the defendant and would have placed upon them the
duty of inquiry as to what those rights were. In the absence [***7] of such inquiry where they had knowledge of the
existence of the line, they could not contend they acted in good faith and could not avail themselves of section 291 of
the Real Property Law. The trouble with the defendant's position is that no proof was made that the plaintiffs had
knowledge of the existence of the electric line when they took title. We think that the error of the trial court lay in
holding that the mere fact that the line was there constituted knowledge on the part of the plaintiffs of its existence. The
court said: "the occupation by the defendant of this transmission line was constructive notice to the plaintiffs, these
plaintiffs, whether they went back on the lot and looked at them or not." We know of no rule of law which requires a
purchaser of a tract of land to carefully examine each and every square yard for the purpose of discovering some
evidence of a physical nature which would put him on notice of a hostile claim of right. If that is the law, then the
recording act is of little value and a purchaser relies upon the record at his peril in spite of the plain wording of section
291. As we view it, in a case like this, the question is whether the purchaser [***8] had actual knowledge of some fact
which would put him upon inquiry. The cases of Barber v.. Hudson Riv. Tel. Co. (105 App. Div. 154, supra) and
Rochester Poster Adv. Co. v. Smithers (224 App. Div. 435) are not authority for the rule adopted by the trial court. In
both cases, [*344] there was evidence that the physical objects (power line in one case and advertising sign in the
other) were in plain sight and known to the purchaser. In other words, the evidence was that the purchasers in each case
had knowledge, in fact, of the physical objects upon the land they were about to buy. Such knowledge, of course,
required them to make an inquiry in good faith or be held negligent in failing to do so. The evidence in the instant case
shows, or at least the jury could have so found, that the plaintiffs had no knowledge of the line. Notice of a claim of
right may be constructive. One illustration is the recording act itself. A purchaser may have no knowledge whatever of
a prior lien but, if the instrument is on record, he has constructive notice of it and his lack of knowledge avails him
nothing. [HN1] Knowledge of a fact, however, cannot be constructive. A person [***9] either has knowledge [**424]
of it or he does not. If these plaintiffs are to be charged with constructive notice of the rights of the defendant, it must
be shown that they possessed, as a fact, knowledge of the existence of the line. Whether they had such knowledge was
a question of fact for the jury. If it had been shown that as they came to the house, the poles and wires were in plain and
open view for all to see, a jury might well doubt testimony that the plaintiffs did not see them. Here the question of
knowledge and the question of credibility were taken from the jury.
The law of this case was apparently settled many years ago in Williamson v. Brown (15 N.Y. 354, 359, 362) where
the question was carefully examined. The opinion reads in part: [HN2] "Constructive notice, on the other hand, is a
legal inference from established facts; and like other legal presumptions, does not admit of dispute. * * * the true
doctrine on this subject is, that where a purchaser has knowledge of any fact, sufficient to put him on inquiry as to the
existence of some right or title in conflict with that he is about to purchase, he is presumed either to have made the
inquiry, and [***10] ascertained the extent of such prior right, or to have been guilty of a degree of negligence equally
fatal to his claim, to be considered as a bona fide purchaser." (Italics supplied.) The Williamson case was cited and
followed in Kingsland v. Fuller (157 N.Y. 507). In the Kingsland case, it was undisputed that prior to the sale, the
purchaser went upon the premises and inspected them. It was said in the opinion (p. 512) "He inspected the premises
and looked for himself, and thus acquired actual knowledge of the true situation." Both the Williamson case and the
Kingsland case were cited in Bird v. Salt Hill Corp. (282 App. Div. 1047). [*345] In the Bird case, it was held that the
purchasers, prior to and at the time of taking title, had notice of a restrictive covenant.The notice was based upon
knowledge, since the abstract which they employed in taking title indicated the presence of restrictive covenants and
put the purchasers upon inquiry.
Page 275
286 A.D. 341, *343; 143 N.Y.S.2d 421, **422;
1955 N.Y. App. Div. LEXIS 4045, ***6
In Cassia Corp. v. North Hills Holding Corp. (278 App. Div. 960) the Williamson case (supra) was cited.The
memorandum recites: "The evidence indicates that plaintiff had knowledge, [***11] when it took the mortgage, of
facts sufficient to put it on inquiry as to the existence of rights of others in conflict with the interest which it was
about to acquire." [HN3] In the absence of recording, it is always knowledge of facts which gives notice to a purchaser
and which puts him upon inquiry. In Goldstein v. Hunter (257 N.Y. 401, 406), Judge CRANE quoted from Larsen v.
Peterson (53 N.J. Eq. 88, 94) to the effect that "'The parties should have either actual knowledge of the quasi-easement
or knowledge of such facts as to put them upon inquiry.'" Knowledge or lack of it is for the jury to determine upon the
evidence. (See, also, Goldberg v. Manufacturers Trust Co., 199 Misc. 167, [**425] and Matter of Reinhardt, 202
Misc. 424.) Both of these cases cite and refer to the rule laid down in Williamson v. Brown (15 N.Y. 354, supra).
Moreover, [HN4] a conveyance made for a valuable consideration is presumed to be bona fide within the recording acts.
( Smith v. Pure Strain Farms Co., 180 App. Div. 703.) Nor does the mere omission to inspect premises constitute bad
faith on the part of the purchaser.
The plaintiffs did not move for a [***12] directed verdict but maintained that whether they had knowledge of the
line was a question of fact for the jury. The judgment dismissing the complaint should be reversed and a new trial
ordered.
All concur, except VAUGHAN and PIPER, JJ., who dissent and vote for affirmance on the ground that the
defendant's occupancy of the premises in question was open and visible and constituted notice to plaintiffs at the time
they purchased the premises of the existence of defendant's easement.
Present - McCURN, P.J., VAUGHAN, KIMBALL, PIPER and WHEELER, JJ.
Judgment reversed, on the law, and a new trial granted, with costs to the appellants to abide the event.
Page 276
286 A.D. 341, *345; 143 N.Y.S.2d 421, **424;
1955 N.Y. App. Div. LEXIS 4045, ***10
Caution
As of: May 27, 2014
The Schenectady Savings Bank, Appellant, v. Milton A. Wertheim and Others,
Defendants, Impleaded with Elsie S. Wellman, Respondent
*
* Revg. 143 Misc. 357.
237 A.D. 311; 261 N.Y.S. 193; 1932 N.Y. App. Div. LEXIS 5337
December 30, 1932
PRIOR HISTORY: [***1] Appeal by the plaintiff from a judgment of the Supreme Court, entered in the office of
the clerk of the county of Schenectady on the 12th day of April, 1932.
DISPOSITION: Judgment reversed on the law and facts, with costs, and judgment directed in favor of the plaintiff,
adjudging its mortgage to be superior to the lease of the defendant and a lien upon the entire premises described in the
mortgage.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant bank sought review of a judgment of the Supreme Court, entered in the office
of the clerk of the county of Schenectady (New York), which was in favor of respondent occupant in the bank's
foreclosure action.
OVERVIEW: The bank brought an action to foreclose a mortgage. The trial court determined that the mortgage was
subordinate to a life use by the occupant of the upper flat of the dwelling. The claim to the life use was based on an
occupancy at the time the mortgage was given, which was claimed to be open, visible, and inconsistent with the title of
the record owners, who were the occupant's stepchildren. On appeal, the court noted that the stepchildren applied for the
loan on April 2. The occupant's furniture was moved to the apartment April 23; the deed was dated April 24, which was
the first day that the occupant went to the premises; the mortgage was dated April 25. These two instruments were
recorded on May 8. The stepchildren conveyed on May 10 a life use of the upper flat. Under the occupant's husband's
Page 277
will, she received the right of occupancy of an apartment, which she quitclaimed under an agreement that required the
stepchildren to provide another apartment for her. Nothing put the bank upon inquiry as to the reason for the presence
of the occupant. The stepchildren having just taken title to the premises, the occupancy was presumed to be in
subordination to their title.
OUTCOME: The court reversed the judgment and directed judgment directed in favor of the bank. The court adjudged
the bank's mortgage to be superior to the occupant's lease and a lien upon the entire premises described in the mortgage.
CORE TERMS: mortgage, furniture, occupancy, mortgagors, apartment, remember, sleep, record owners, right of
occupancy, decorators, visible, deed, actual notice, deceased, dwelling, notice, night, lunch, stepchildren, sister's,
personal transactions, inadmissible, uninhabited, foreclose, purchaser, founded, repair, widow, recorded, upper
[HN1] The possession which will be equivalent to actual notice to a subsequent purchaser must be an actual, open
and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal, occasional or for a
special or temporary purpose; neither can it be consistent with the title of the apparent owner by the record.
[HN2] Notice will not be imputed to a purchaser except where it is a reasonable and just inference from the visible
facts. Neither will the principles of constructive notice apply to unimproved lands, nor to cases where the possession is
ambiguous or liable to be misunderstood. It should not apply, within the same principle, to an uninhabited and
unfinished dwelling house; there must be a possession actual and distinct, and manifested by such acts of ownership as
would naturally be observed and known by others.
HEADNOTES
Mortgages -- priority of lien -- action to foreclose mortgage in which respondent claims life use prior to lien
of mortgage -- occupancy by respondent at time mortgage was given was not inconsistent with title of mortgagors
-- mortgage is superior lien -- evidence as to personal transactions between respondent and deceased mortgagors
inadmissible (Civ. Prac. Act, 347).
SYLLABUS
In this action to foreclose a mortgage, a claim by the respondent that the lien of the mortgage is subordinate to a life
use by her of an upper flat in a dwelling house on the premises is not sustained, where it appears that the mortgagors
had conveyed to respondent a life use of the flat, which conveyance had not been recorded or brought to the notice of
the plaintiff; that respondent's furniture was moved [***2] to the apartment and she had been present therein only one
day during the daylight hours, when the mortgage was accepted; that repairs were being made and the inference to be
drawn from the presence of the respondent was nothing more than that she expected to occupy one of the apartments;
and that nothing had been called to plaintiff's attention to put it upon inquiry as to the reason for the presence of the
respondent in the house.
Evidence as to personal transactions between respondent and the deceased mortgagors, through whom the plaintiff
derived its title, was inadmissible, under section 347 of the Civil Practice Act.
COUNSEL: Edwin E. Miller [Harold R. Beyerl of counsel], for the appellant.
Page 278
237 A.D. 311, *; 261 N.Y.S. 193, **;
1932 N.Y. App. Div. LEXIS 5337, ***1
Wemple, Peters & Wemple [W. W. Wemple, Jr., of counsel], for the respondent.
JUDGES: Hill, J. Van Kirk, P. J., Hinman, Rhodes and Crapser, JJ., concur.
OPINION BY: HILL
OPINION
[*311] [**194] The appellant savings bank, the plaintiff in this action brought to foreclose a mortgage which
purports to be a lien upon a city lot occupied by a two-apartment dwelling house, has appealed from a judgment
determining that its mortgage is subordinate to a life use by respondent Elsie [***3] S. Wellman of the upper flat of the
dwelling. The claim to the life use is founded upon an occupancy by respondent at the time the mortgage was given,
which it is claimed was open, visible and inconsistent with the title of the record owners.
The mortgage is dated one day later than the deed to the mortgagors, who were the stepchildren of respondent. The
application [*312] to the plaintiff for the loan was made about twenty days earlier by letter which stated that the
mortgagors had made a contract to purchase the premises. A truckman testified that he delivered the furniture of the
respondent to the premises on a definite date. This was [**195] the day before the deed was dated. The respondent
herself was unable to tell the exact day when the furniture was delivered, her evidence being: "Q. You moved over
there on the 23rd day of April, 1923, to Union Street? A. I don't remember the date. Q. Well, it was the day that Mr.
Rudd moved you over there, was it not? A. Why, yes, he moved me over there." Her testimony as to the nature of her
occupancy is: "Q. You say you moved into this property, when, April, 1923? Mr. Rudd testified he moved your
furniture on the [***4] 23rd day of April, 1923. How soon after that did you move in? A. I was there every day. Q.
No, I mean how many days after did you come over there to sleep and stay there? A. Well, the house was being
decorated and I was there every day, and of course, I didn't get there until two or three weeks later, a couple of weeks
later, you know. Q. So you probably were not finally settled in that house until after the first of May, were you? A.
Why, I was there all the time. Q. Off and on? A. Yes, off and on, I was there every day, looking after the decorators
and my furniture. Q. So that you didn't get finally settled in this place, 864 Union Street, until some time after the first
of May? A. I don't know, I don't remember. I was there every day, but I don't know, I don't remember. Q. Did you
sleep there or did you sleep over at 929 Albany Street? A. No. I stayed with my sister nights. Q. Where did you stay
with your sister -- where did she live? A. She lived on Albany Street. Q. Can you tell us when you first started to
sleep in this place on Union Street, to use it as your own residence? A. No, I couldn't tell you just that. I was there
more or less every [***5] day, over there to the house, looking after the decorators and had my lunch there noontimes.
Q. Would you say it was the first of May? A. Well, I don't remember, that is all. Q. Was it before the 10th of May?
A. I don't remember. * * * Q. Well, do you remember whether or not you went in at the time Mr. Rudd moved your
furniture? A. I was there the next day. [**196] Q. Do you mean that you continued there after that from the next day
right along? A. I was there every day, but I went to my sister's at night to sleep. I was there and had my lunch there,
and looked after the decorators and my furniture and things. I was there to take care of them."
The mortgagors applied for the loan on April second. Respondent's furniture was moved to the apartment April
twenty-third; the deed was dated April twenty-fourth, which was the first day [*313] that respondent went to the
premises; the mortgage was dated April twenty-fifth. These two instruments were recorded on May eighth. The record
owners, the stepchildren of respondent, by an instrument dated May tenth conveyed to respondent a life use of the upper
flat of the premises and of one-half of the cellar and one-half [***6] of the attic, the right of occupancy to commence
on May fifteenth. This instrument was not recorded until nearly a year later. The equities as between the stepchildren,
both now deceased, and the respondent are with her, but no notice to the plaintiff of her right of occupancy is shown,
beyond the use of the premises as stated.
The respondent is the widow of Walter Wellman. At his death there were living Walter F. Wellman and Elizabeth
F. Williams, his son and daughter by a former marriage, the mortgagors in this action. Under his will, among other
legacies and devises, respondent received the right of occupancy of an apartment in a house, which some time prior to
Page 279
237 A.D. 311, *; 261 N.Y.S. 193, **;
1932 N.Y. App. Div. LEXIS 5337, ***2
the events earlier stated in this opinion was sold by the children, she joining in the deed and quitclaiming her life use in
the apartment. A written agreement was made at the time of the transfer, requiring the children to provide another
apartment for respondent, if one was found that pleased all of the parties, respondent having the option of receiving
thirty-five dollars monthly in lieu of the use of an apartment. None of these earlier transactions were known by the
plaintiff.
Evidence as to personal transactions [***7] between respondent and the deceased children, through whom this
plaintiff derived its title, was received. It was inadmissible under section 347 of the Civil Practice Act. (Pope v. Allen,
90 N. Y. 298.)
Respondent to succeed "was bound to show actual notice * * * of the facts upon which her claim was founded, or
such facts and circumstances as would put a prudent man upon his guard, and from which actual notice may be inferred
and found. [HN1] The possession which will be equivalent to actual notice to a subsequent purchaser must be an
actual, open and visible occupation, inconsistent with the title of the apparent owner by the record; not equivocal,
occasional [**197] or for a special or temporary purpose; neither can it be consistent with the title of the apparent
owner by the record." (Holland v. Brown, 140 N. Y. 344, 347, 348.) The occupancy shown by respondent was as
consistent with a contemplated tenancy by the month or year as with a right of occupancy inconsistent with the title of
the record owners. Her furniture had been stored in the house one day, and she was present during the hours the
decorators worked on that day and had her lunch there. It has [***8] been said: "All the cases agree that [HN2] notice
will not be imputed [*314] to a purchaser except where it is a reasonable and just inference from the visible facts.
Neither will the principles of constructive notice apply to unimproved lands, nor to cases where the possession is
ambiguous or liable to be misunderstood. (Patten v. Moore, 32 N. H. 382.) It should not apply within the same
principle to an uninhabited and unfinished dwelling house; there must be a possession actual and distinct, and
manifested by such acts of ownership as would naturally be observed and known by others." (Brown v. Volkening, 64 N.
Y. 76, 83, 84.) At the time plaintiff accepted the mortgage, the record owners had just acquired title. Repairs were being
made; the house was uninhabited at night, and the inference which would be drawn from the presence of the respondent
would be nothing more than that she expected to occupy one of the apartments after the completion of the repair and
redecoration. She had been in the house only one day during the daylight hours, when the mortgage was accepted.
Nothing had been called to plaintiff's attention to put it upon inquiry as to the reason for [***9] the presence of the
respondent in the house under the conditions disclosed by the evidence, and it is not chargeable with knowledge of the
arrangements and contract which had been made by the children of Walter Wellman and the respondent, his widow.
This was necessary if plaintiff is to be bound by the terms of the contract between these parties. (Williamson v. Brown,
15 N. Y. 354.) Walter F. Wellman and Elizabeth F. Williams having just taken title to the premises, the occupancy by
the respondent was presumed to be in subordination to their title. (Pope v. Allen, supra.)
The judgment should be reversed on the law and facts, with costs, and judgment directed in favor of the plaintiff,
adjudging its mortgage to be superior to the lease of the defendant and a lien upon the entire premises described in the
mortgage.
The court reverses findings of fact numbered "sixth" and "eleventh" and makes a new finding of fact, that the
occupancy of Elsie S. Wellman in the premises subject to the lien of said mortgage was [**198] not at the time of the
giving thereof an actual, open and visible occupancy inconsistent with the title of the mortgagors Walter F. Wellman
and [***10] Elizabeth F. Williams, the owners of the record title.
Page 280
237 A.D. 311, *313; 261 N.Y.S. 193, **196;
1932 N.Y. App. Div. LEXIS 5337, ***6
Analysis
As of: May 27, 2014
The Ebling Brewing Company, Appellant, v. Eugenia Gennaro and Others,
Defendants, Impleaded with Isabella Dennison, Respondent
December 12, 1919
PRIOR HISTORY: [**1] Appeal by the plaintiff, The Ebling Brewing Company, from a judgment of the Supreme
Court in favor of the defendants, entered in the office of the clerk of the county of Westchester on the 28th day of
November, 1917, upon the decision of the court after a trial at the Westchester Special Term dismissing the complaint
against the defendant Isabella Dennison.
This action was to foreclose a mortgage for $ 1,500 given by Eugenia Gennaro to the plaintiff on the 15th of
January, 1912, and recorded on the nineteenth of January in that year. On the 14th of July, 1911, Robert Dennison and
his wife conveyed the property in question to Augusto E. Gennaro, who gave back a purchase-money mortgage for $
1,000 to the defendant Dennison. On the same day Augusto E. Gennaro conveyed the premises to Eugenia Gennaro.
The deed from the Dennisons to Augusto E. Gennaro, and the purchase-money mortgage given back to the Dennisons,
and the deed from Augusto E. Gennaro to Eugenia Gennaro, were not recorded until the 23d of January, 1912, which
was subsequent to the date of record of plaintiff's mortgage. The court decided that plaintiff had constructive notice of
the contents of the unrecorded deed [**2] in its own chain of title, which recited the unrecorded mortgage, and,
therefore, was not a mortgagee in good faith and not protected by the Recording Act, and that plaintiff's mortgage was
subject to the lien of the unrecorded purchase-money mortgage held by defendant Dennison. From this decision the
plaintiff appeals.
DISPOSITION: Judgment reversed and new trial granted, with costs to abide the final award of costs.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff company appealed a judgment of the Supreme Court (New York), which
Page 281
dismissed the company's action to foreclose its mortgage against defendant wife's property.
OVERVIEW: Sellers conveyed property to a husband in return for a purchase-money mortgage. The husband
conveyed the property to his wife. Before the sellers recorded the purchase-money mortgage, and before the husband
recorded the conveyance to his wife, the wife took out a mortgage from the company, and the company recorded the
mortgage. The company sought to foreclose its mortgage against the wife. The trial court dismissed the action, holding
that the company had constructive knowledge of the seller's purchase-money mortgage. The trial court reasoned that the
company should have searched the title records, which would have revealed that the conveyance to the wife was not
recorded, and the company should have required the wife to produce title deeds, which would have revealed the
purchase mortgage. On appeal, the court reversed and granted a new trial. The court held that the company was
protected by the Recording Act, N.Y. Real Prop. Law 291, and could not be charged with constructive knowledge of
an unrecorded mortgage unless it had actual knowledge of any fact which would suggest that there was a prior
encumbrance on the property.
OUTCOME: The court reversed the trial court's judgment dismissing the company's foreclosure action against the
wife, and granted a new trial.
CORE TERMS: mortgage, deed, purchaser, recorded, good faith, purchase-money, constructive notice, Recording Act,
notice, mortgagee, unrecorded, conveyance, deposit, recital, chargeable, equitable mortgage, equitable lien, real
property, valuable consideration, unrecorded deed, mortgagor's, duly recorded, constructive, actual notice, bad faith,
incumbrancer, recited, neglect, chain, brewing
[HN1] The English doctrine that an equitable mortgage is created by merely a deposit of title deeds against advances
without words passing does not obtain in New York. The English rule that a purchaser who does not call for the title
deeds acts in bad faith does not obtain here because the reason for it does not exist.
Real Property Law > Deeds > Covenants of Title
Real Property Law > Financing > Mortgages & Other Security Instruments > Purchase-Money Mortgages
[HN2] A purchase-money mortgage is as much subject to the Recording Act, N.Y. Real Prop. Law 291, as any other.
[HN3] N.Y. Real Prop. Law 291 provides that A conveyance of real property, within the State, on being duly
acknowledged by the person executing the same, or proved as required by this chapter, and such acknowledgment or
proof duly certified when required by this chapter, may be recorded in the office of the clerk of the county where such
real property is situated, and such county clerk shall, upon the request of any party, on tender of the lawful fees therefor,
record the same in his said office. Every such conveyance not so recorded is void as against any subsequent purchaser
in good faith and for a valuable consideration, from the same vendor, his heirs or devisees, of the same real property or
any portion thereof, whose conveyance is first duly recorded.
Page 282
189 A.D. 782, *; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **2
[HN4] Constructive notice may be said to be a knowledge by the purchaser of some facts which should put him upon
inquiry, and require him to examine other matters that would generally unfold the true title.
HEADNOTES
Mortgage -- validity of subsequent mortgage recorded before prior mortgage -- good faith of subsequent
mortgagee -- constructive notice -- necessity for mortgagee to search title and demand production of title deeds --
English doctrine as to creation of equitable mortgage by deposit of title deeds -- equitable lien -- application of
recording law to purchase-money mortgage.
SYLLABUS
By virtue of section 291 of the Real Property Law a mortgage given for a valuable consideration subsequent to
but recorded prior to a purchase-money mortgage is a prior lien provided the subsequent mortgagee took his mortgage
in good faith.
A subsequent mortgagee whose mortgage is first recorded is an incumbrancer in good faith and is not chargeable
with constructive notice of the recitals [**3] in an unrecorded deed in the chain of his title, although he does not search
the records and call for the production of the said deed which would have disclosed the existence of a prior mortgage.
It seems, that the English doctrine that an equitable mortgage is created by merely making a deposit of title deeds
against advances, without words passing, does not obtain in this State.
The English rule that a purchaser who does not call for the title deeds acts in bad faith does not obtain here because
the reason for it does not exist.
It seems, that the absence of title deeds does not suggest the existence of an equitable lien, although such lien may
be created by agreement.
The fact that an unrecorded mortgage is a purchase-money mortgage does not change the rule as to the validity of a
subsequent mortgage, first recorded, for a purchase-money mortgage is as much subject to the Recording Act as any
other.
A subsequent mortgagee is not guilty of bad faith by a failure to employ a lawyer to examine the title to the real
property prior to the taking of his mortgage, but he may rely upon the record as to the existence of any prior mortgages,
and, if there was nothing to [**4] suggest that there was any incumbrance on the property, he cannot be said to have
willfully foreborne to make inquiry.
COUNSEL: Bernstein & Quinn, for the appellant.
James Dempsey, for the respondent.
JUDGES: Blackmar, J. Jenks, P. J., and Jaycox, J., concurred; Putnam, J., read for affirmance, with whom Kelly, J.,
concurred, and with a separate memorandum.
OPINION BY: BLACKMAR
OPINION
[*783] The question presented on this appeal is whether a purchaser or mortgagee of real property for a valuable
consideration is chargeable with constructive notice of the recitals of an unrecorded deed in the chain of his title.
Defendants Dennison had a purchase-money mortgage prior in point of time to that of the plaintiff; but plaintiff's
Page 283
189 A.D. 782, *; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **2
mortgage was first recorded. By virtue of the Recording Act (Real Prop. Law, 291) plaintiff's mortgage is a prior lien
provided that plaintiff is a mortgagee in good faith. If plaintiff had notice, actual or constructive, of the prior
unrecorded mortgage, it amounted to a fraud to attempt to supplant it. In the language of some [*784] of the older
decisions, good faith required it to stay its hand. Plaintiff had no actual notice; but the court has [**5] found that it had
constructive notice and, therefore, did not take its mortgage in good faith and is not entitled to the protection of the
Recording Act.
Not only was the purchase-money mortgage to defendant Dennison unrecorded, but the conveyance to plaintiff's
mortgagor was also unrecorded. The conveyance contained a recital that it was subject to a purchase-money mortgage.
If the conveyance had been recorded, plaintiff would, therefore, have had constructive notice of the recital and
consequently that it was subject to a purchase-money mortgage for $ 1,000. This notice would have placed on plaintiff
the duty of investigating and would have led to defendant Dennison's mortgage. Plaintiff then could not have proceeded
in good faith to take his mortgage to the detriment of defendant Dennison and the Recording Act would have afforded
it no protection.
But the conveyance was not on record and the learned court has decided that plaintiff was not an incumbrancer in
good faith because it did not search the record and call for the production of the unrecorded deeds, the reason
necessarily being that good faith required it to search the record, and that when it was disclosed by the [**6] search that
there was no record title in the mortgagor, good faith required it to go further and call for the physical production of
the title deeds, and that the failure so to do charged it with constructive notice of the recital in the unrecorded deed. I
think this is a strange and dangerous doctrine as conveyancing is carried on in this State, and that it rests on no
sufficient authority.
It is suggested that certain decisions in England to the effect that a failure on the part of a purchaser or mortgagee to
call for the title deeds is evidence that the purchase or mortgage is not in good faith, lend support to this doctrine.
(See Worthington v. Morgan, 16 Simon, 547; Whitbread v. Jordan, 1 Younge & Co. [Exch.] 303; Le Neve v. Le Neve, 2
Wh. & Tud. Lead. Cas. 27, 48, n; Finch v. Shaw, 19 Beav. 500; Jones v. Williams, 24 id. 47; Hewitt v. Loosemore, 9
Hare, 449.) These cases hold that a purchaser who does not call for the title deeds is chargeable with notice of an
equitable [*785] mortgage created by the deposit of title deeds. In England the mere deposit of title deeds against an
advance creates an equitable mortgage. [**7] ( Lloyd's Banking Co. v. Jones, L. R. 29 Ch. Div. 221; Matter of
Morgan, 18 id. 93; Ex Parte Coming, 9 Ves. Jr. 115; Ex Parte Langston, 17 id. 227, where it is said by Lord Eldon that
"a mere deposit of title-deeds upon an advance of money, without a word passing, gives an equitable lien.") In Ex Parte
Kensington (2 Ves. & B. 79) Lord Eldon disapproves but accepts the doctrine as established by authority. Under this
doctrine if the title deeds are not in the possession of the grantor it suggests that the possessor other than the grantor
may hold them for an equitable lien, and it follows that a purchaser or a mortgagee is chargeable with knowledge of a
lien that is suggested by their absence. Upon this doctrine rests the rule that a purchaser must call for the title deeds.
But I think that the doctrine with its necessary corollary does not obtain in the State of New York.
The text writers state that the doctrine of equitable mortgage by deposit of title deeds is not usually accepted in the
United States. Among the States that reject the doctrine New York is not named, apparently on account of Rockwell v.
Hobby 2 Sandf. Ch. 10). That case cannot [**8] be held to be authority that the doctrine is adopted in this State. The
case was considered in Bowers v. Johnson (49 N. Y. 432), and, it seems to me, disapproved. In Stoddard v. Hart (23 N.
Y. 556) Comstock, Ch. J., said: "In this State the doctrine is almost unknown, because we have no practice of creating
liens in this manner." I think it may be said with accuracy that the doctrine is entirely unknown in this State. Every day
titles are passed on the evidence furnished by the records, and rarely if ever are title deeds called for. The time has
come, I think, definitely to state that [HN1] the English doctrine that an equitable mortgage is created by merely a
deposit of title deeds against advances without words passing does not obtain in this State. The English rule that a
purchaser who does not call for the title deeds acts in bad faith does not obtain here because the reason for it does not
exist. To avoid misunderstanding, it is well to state that the doctrine that [*786] an equitable lien may be created by
agreement is unquestioned ( Hamilton Trust Co. v. Clemes, 163 N. Y. 423; Chase v. Peck, 21 id. 581), but that the
absence of title deeds [**9] does not suggest the existence of such a lien.
Page 284
189 A.D. 782, *783; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **4
The rule regarding the purchase or payment of a bond and mortgage without requiring that the original be produced
( Assets Realization Co. v. Clark, 205 N. Y. 105; Kellogg v. Smith, 26 id. 18) is akin to the English rule regarding the
purchase of land. As in England an equitable lien may be created by a deposit of title deeds against advances, so in
New York State a bond and mortgage, which is personal property, may be assigned by delivery without a written
instrument. The only safeguard against such an assignment is to require the production of the bond itself. This
doctrine, therefore, has no application to land, which cannot under the statutes be so conveyed.
Reference is made to a rule stated in 39 Cyc. 1715, as follows: "A purchaser is affected with notice of the recitals in
the instruments forming his chain of title and material thereto, whether recorded or not." But in the authority from this
State given as sustaining this rule ( Sweet v. Henry, 175 N. Y. 268) the instruments containing the recitals were recorded,
and it was the instruments recited that were not recorded. It is not doubted that a purchaser [**10] has constructive
knowledge of the recitals of a recorded deed, and, therefore, of the instrument so recited; but that rule has no application
to the case at bar.
The fact that the unrecorded mortgage was a purchase-money mortgage does not affect the problem. [HN2] A
purchase-money mortgage is as much subject to the Recording Act as any other. The case of Dusenbury v. Hulbert (59
N. Y. 541) is not to the contrary. The decision in that case was that the unrecorded purchase-money mortgage was
entitled to priority over the mortgage first recorded because the mortgagee of the mortgage first recorded was not, under
the Recording Act, a purchaser for a valuable consideration, as the mortgage was given to secure an antecedent debt.
The discussion in the Dusenbury case regarding the status of a purchase-money mortgage has no reference to the effect
of the Recording Act, but to the question of priority of right between a purchase-money [*787] mortgage and another
which took effect concurrently therewith and which the mortgagor agreed should be a first lien. It was held that the
purchase-money mortgage representing the vendor's lien was necessarily prior to any other mortgage [**11] placed on
the property by the vendee, for there never had been an instant when the vendee had a title free from the lien of the
purchase-money mortgage. Such priority may be displaced by the Recording Act, and when the effect of the Recording
Act was considered the purchase-money mortgage was given priority only because the other mortgage, first recorded,
was not given for a valuable consideration and, therefore, was not within the statute.
The object of this unduly long analysis of cases is only to clear the ground so that we may not be misled by false
analogies. [HN3] Section 291 of the Real Property Law provides: "A conveyance of real property, within the State, on
being duly acknowledged by the person executing the same, or proved as required by this chapter, and such
acknowledgment or proof duly certified when required by this chapter, may be recorded in the office of the clerk of the
county where such real property is situated, and such county clerk shall, upon the request of any party, on tender of the
lawful fees therefor, record the same in his said office. Every such conveyance not so recorded is void as against any
subsequent purchaser in good faith and for a valuable consideration, [**12] from the same vendor, his heirs or
devisees, of the same real property or any portion thereof, whose conveyance is first duly recorded."
The plaintiff was a purchaser for a valuable consideration. Its mortgage was first duly recorded. The prior
unrecorded purchase-money mortgage was void as to it, provided only that it was a purchaser in good faith. If it had
actual or constructive notice of the prior mortgage it was not a purchaser in good faith. It had no actual notice. It had
no constructive notice of a duly recorded instrument. It seems to me that the respondent's proposition comes down to
this: that one who takes a mortgage of real property acts in bad faith if he does not employ a lawyer or a title company
to examine the title, and if a deed in the chain of title be missing, require its production. I do not know of any authority
for that proposition or of any principle which supports it. If a [*788] purchaser omits such an examination he has
notice of instruments duly recorded, but, I think, of nothing else. Even if the instrument affecting the title was not
legally recorded although actually transcribed on the records, he has not constructive notice of it ( [**13] Bradley v.
Walker, 138 N. Y. 291); but to sustain this judgment it must be held that plaintiff has knowledge of the contents of an
instrument not recorded at all and that because it is not recorded. The evidence is that Gennaro told the plaintiff's
representatives that the mortgage was a first lien. What duty did plaintiff violate in relying on the representation, and to
whom did he owe any such duty? It is written in Jones v. Smith (1 Hare, 43) that "The doctrine of constructive notice
applies in two cases; first, where the party charged has notice that the property in dispute is encumbered, or in some
Page 285
189 A.D. 782, *786; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **9
way affected, in which case he is deemed to have notice of the facts and instruments, to a knowledge whereof he would
have been led by due inquiry after the fact which he actually knew; and, secondly where the conduct of the party
charged evinces that he had a suspicion of the truth, and wilfully or fraudulently determined to avoid receiving actual
notice of it."
If this be a correct statement of the law, and I think it is, plaintiff had no constructive notice. There was nothing to
suggest to it that there was any incumbrance on the property, so it cannot be said [**14] to have willfully forborne to
make inquiry. In Acer v. Westcott (46 N. Y. 384) Judge Peckham said: [HN4] "Constructive notice may be said to be a
knowledge by the purchaser of some facts which should put him upon inquiry, and require him to examine other
matters that would generally unfold the true title." And quoting from the lord chancellor in Ware v. Egmont (4 DeG., M.
& G. 460, 473), he said: "'I must not part with this case without expressing my entire concurrence in what has, on many
occasions of late years, fallen from judges of great eminence on the subject of constructive notice, namely, that it is
highly inexpedient for courts of equity to extend the doctrine.'" Judge Peckham also said: "The purchaser must be
presumed to investigate the title, and to examine every deed or instrument forming a part of it, especially if recorded."
The last three words, "especially if recorded," limit the general statement.
[*789] The plaintiff had no constructive notice under the Recording Act, for by that it is chargeable only with
knowledge of the instruments legally recorded. It had no actual knowledge of any fact which would suggest that there
was a purchase-money mortgage [**15] extant. There was no possession which indicated any outstanding right. The
plaintiff, therefore, acted in good faith and is protected by the Recording Act. The conclusion of law of the learned
court, expressed in the fourteenth finding of fact, that the plaintiff had constructive knowledge of the prior unrecorded
mortgage, is, therefore, not supported by the findings of fact, and the judgment must be reversed.
I think, however, that a new trial should be directed, as the evidence indicates that there may be questions of fact
which should be passed upon directly, viz., whether the deed from Augusto Gennaro to his wife, through which plaintiff
takes title, was delivered, and whether the plaintiff's agent, who acted in accepting the mortgage, had such knowledge of
the unrecorded mortgage as is imputable to plaintiff.
I recommend that the judgment be reversed and a new trial granted, with costs to abide the final award of costs.
DISSENT BY: PUTNAM; KELLY
DISSENT
Putnam, J. (dissenting):
This situation arises from a mortgage loan to Mrs. Gennaro (wife of a retailer of plaintiff's beer in casks and kegs),
made by the plaintiff brewing company on January 15, 1912. She had no record title. [**16] That still remained in the
Dennisons. Mrs. Gennaro had no possession of the property. But at this time there was an unrecorded deed to her from
her husband, contained in his desk, dated July 14, 1911, purporting to be in consideration of one dollar, which recited an
incumbrance by mortgage to secure $ 1,000, which the party of the second part assumed and agreed to pay.
In closing these transactions Mr. Bushnell of Peekskill, now deceased, acted as attorney for the Gennaros, also for
the plaintiff. The plaintiff had written to Bushnell about [*790] this loan, and Bushnell answered that he would take
care of it. Bushnell took the wife's acknowledgment and then sent the bond and mortgage to the brewing company,
which itself sent the mortgage for record and paid the recording charges.
The court has found: "That plaintiff made no inquiry as to the nature and extent of the title or interest in the said
premises of the said defendant, Eugenia Gennaro."
Of course, this was the only way such a mortgage as plaintiff's could be taken as a first lien, since inspection of the
deed to Mrs. Gennaro would disclose the prior $ 1,000 mortgage to the Dennisons.
Page 286
189 A.D. 782, *788; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **13
It is settled in New [**17] York that a junior incumbrancer who first gets on record is not protected by the
Recording Act if the mortgagee had constructive notice of a prior unrecorded instrument. ( Tuttle v. Jackson, 6 Wend.
213; Jackson v. Burgott, 10 Johns. 457.)
The Recording Acts protect only one who is a purchaser in good faith. Such a purchaser or mortgagee,
chargeable with notice of the rights of a prior purchaser or incumbrancer, is not acting in good faith. The degree of
notice required is, in the language of the authorities, such as would lead any honest man, using ordinary caution, to
make further inquiries. ( Moore v. Le Maire, 169 App. Div. 154, 157.)
As was said by Duer, J.: "The principle of the doctrine of constructive notice is, that when a person is about to
perform an act by which he has reason to believe that the rights of a third party may be affected, an inquiry into the
facts is a moral duty, and diligence an act of justice. Hence, he proceeds at his peril when he omits to inquire, and is
then chargeable with a knowledge of all the facts that by a proper inquiry he might have ascertained. This neglect is
followed by all the consequences of bad faith, and [**18] he loses the protection to which his ignorance, had it not
proceeded from neglect, would have entitled him. The cases are innumerable in which this doctrine has been applied in
courts of equity to purchasers and mortgagees of real estate, and there are many in which it has operated to divest the
title of those whose actual good faith was unsuspected. The rule, that it is only purchasers for value and without notice,
who, in certain cases, may oppose their title to that of the true owner, we have always believed [*791] and must still
believe, is the same in courts of law as of equity, and in both, we cannot doubt that the term notice must receive the
same interpretation. It must either be limited to strict knowledge, which is derived from positive information, or must
be extended to that which the law imputes to him, who, having reason to believe or suspect, refuses or neglects to
inquire." ( Pringle v. Phillips, 7 N. Y. Super. Ct. 157, 171.)
I think the finding of no inquiry as to the nature and extent of this mortgagor's title is decisive. Obviously the
brewing company took this mortgage either relying on the credit of a favored customer, the mortgagor's husband,
[**19] or else it willfully shut its eyes, and did not call for the title deed. In either view it was not a bona fide
purchaser, and, therefore, not under the protection of the Recording Acts. (39 Cyc. 1715; 2 Devlin Deeds [3d ed.],
629a.) If it be asked what any honest man, using ordinary caution, would ask for in taking a mortgage from a holder of
an unrecorded deed, or what in these circumstances would be a proper inquiry, I think no real question should arise.
In such case, before consummating the transaction, the deed constituting the basis of the title would be ordinarily called
for and inspected.
Hence I would affirm.
Kelly, J.:
I concur with Putnam, J., and I also think that the evidence shows that Bushnell was more than an attorney
employed to draw the papers for the plaintiff. I think he represented plaintiff generally, and the proof shows that
Bushnell actually prepared the purchase-money mortgage held by Dennison.
Page 287
189 A.D. 782, *790; 179 N.Y.S. 384;
1919 N.Y. App. Div. LEXIS 4759, **16
Analysis
As of: May 27, 2014
Italian Savings Bank of the City of New York, Appellant, v. William Le Grange and
Others, Defendants, Impleaded with Joseph Campomenosi and Mary Campomenosi,
His Wife, Respondents
July 30, 1915
PRIOR HISTORY: [***1] Appeal by the plaintiff, Italian Savings Bank of the City of New York, from a judgment
of the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of Westchester on the
18th day of January, 1915, as modified by an order entered in said clerk's office on the 13th day of February, 1915.
The judgment was entered upon the decision of the court after a trial at the Westchester Special Term.
The Halley Land and Improvement Company, a domestic corporation, was engaged in developing and disposing of
building lots in Harrison, Westchester county. Among its lands under development were two building lots, Nos. 259
and 260, situated at the corner of Halstead avenue and First street. On June 1, 1904, Joseph Campomenosi and wife,
who carried on a small store in Harrison, contracted to buy these lots for $ 900. They paid $ 50 down, with an
agreement to complete the payments by equal monthly installments. A contract was duly executed, by which the land
company agreed on final payment to give a deed with warranty and full covenants for conveying the property, with a
policy insuring the title, which contract, however, was not recorded. The purchasers, [***2] however, entered upon
their new purchase, which lay in low and swampy ground, and began filling in the depressed parts, raising the grade
approximately to that of the street. They put up fences and made other improvements. The vendees also paid the taxes
which were assessed in their names. Meantime they continued their payments until, in August, 1912, they had fully
paid for these lots, when they received a full covenant deed from the Halley Land and Improvement Company, which
was recorded on August 29, 1912. But in July of the previous year, 1911, the Halley Land and Improvement Company
apparently found it necessary to raise money, and requested a loan, the security for which was effected by means of first
conveying its lots (including the two here in question) to an employee, the defendant William Le Grange, who executed
a mortgage to one Gilbert, to secure the sum of $ 10,000. The mortgage covered and enumerated in all about 120 lots,
each described by its lot number upon maps in the county register's office. The usual mortgage bond executed by Mr.
Page 288
Le Grange carried this indorsement by the president of the Halley Company: "In consideration of the Loan of $ 10,000
to the Halley [***3] Land & Imp. Co. at my request, I hereby guarantee punctual payment of the foregoing bond.
Matilda Francolini." This mortgage was recorded July 24, 1911. In September following, Mr. Gilbert assigned this
mortgage to plaintiff by a recorded assignment. The plaintiff also took an estoppel certificate from the Halley
Company. When this mortgage was being foreclosed in August, 1913, the defendants Campomenosi interposed a
counterclaim asserting their equitable ownership under their executory purchase of June, 1904, with an averment that,
since that time, they had been in full possession and had inclosed said lots with a fence, which plaintiff well knew prior
to the assignment of its mortgage. They, therefore, asked a dismissal of the foreclosure complaint, with a cancellation
of the mortgage, so far as it affected these two lots. Upon the plaintiff's reply to this counterclaim, the suit was severed
as to defendants Campomenosi.
As to the other defendants, the suit proceeded to a deficiency judgment for $ 7,111.67. After a trial as to these
respondents, the court at Special Term sustained their equities arising from their possession of the lots, with the general
knowledge of such [***4] ownership, and directed a cancellation of the mortgage so far as it related thereto, and
adjudged that the plaintiff, together with the defendants, other than the Campomenosis, be barred from all lien on these
two lots. From this judgment plaintiff has appealed.
DISPOSITION: Judgment affirmed, with costs.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff bank sought review of the decision of the Supreme Court of Westchester
County (New York), which severed the case as to the two lots of impleaders purchasers, and directed cancellation of the
mortgage as it related to the two lots and barred all liens on those two lots in the bank's action against defendants, land
company and associated individuals, to foreclose on a mortgage secured by 120 lots.
OVERVIEW: Purchasers brought two lots from the land company. The purchasers made improvements on the lots and
paid the note in eight years, receiving a full covenant deed from the land company. Meanwhile, the land company
obtained a mortgage from the bank secured by 120 lots that the land company held. The year after the purchasers
received their deed, the land company defaulted on its loan. The bank brought an action against the land company to
foreclose on the mortgage. The purchasers interposed a counterclaim asserting equitable ownership and sought a
dismissal of the complaint as to them. The trial court granted the counterclaim and severed the action. The trial court
returned a deficiency judgment against the land company. The trial court also directed cancellation of the mortgage as to
the purchasers' lots and barred any liens on them. On the bank's appeal, the court affirmed the decision of the trial court.
The court determined that the purchaser established possession by improvements on the lots, that the bank had
constructive notice of the possession and improvements, and that the bank was chargeable with notice of the land
company's business of selling lots to householders.
OUTCOME: The court affirmed the decision of the trial court, severing the purchasers' two lots from the 120 lots
foreclosed on by the bank and barring any liens on those lots, because the bank was on constructive notice of the
possession and improvements made on the lots as well as being chargeable with notice of the practice of the mortgagor
land company of making sales of such lots to householders.
CORE TERMS: mortgagee, notice, ownership, mortgage, vendee, occupant's, fencing, street, vendor, foundation
stones, purchaser, executory, gradually, filling, grading, evince, cellar, buyer, stones, shrubs, vines, purchaser in
possession, town lots, adverse possession, exclusive possession, unrecorded, manifested, occupation, improving,
corrected
Page 289
169 A.D. 120, *; 154 N.Y.S. 814, **;
1915 N.Y. App. Div. LEXIS 9088, ***2
Real Property Law > Purchase & Sale > Contracts of Sale > Period Between Execution & Closing > Risk of Loss
[HN1] Under an executory contract of purchase of land, a buyer has a right of entry and immediate possession. In equity
he is looked on as the owner, under the doctrine of equitable conversion whereby a vendor becomes the trustee of the
legal title for the vendee, and the vendee, the trustee of the vendor, as to the unpaid purchase money. It has long been
accepted law that when a man is of right and de facto in the possession of land, he is entitled to impute knowledge of
that possession to all who deal for any interest in that property. His possession puts any person so dealing upon
inquiry. When such inquiry becomes a duty, the means of knowledge which it affords are regarded as the equivalent
of actual notice, since by failing to inquire such a purchaser or mortgagee is visited with the consequences of a
knowledge of the title and existing rights of the occupant.
Real Property Law > Torts > Trespass to Real Property
[HN2] Possession generally is taking control and appropriating, so as to set on the lands some mark of ownership, by
acts not casual or for a temporary purpose. To enter lands to cut grass, to pasture the fields, to fell timber, may be
trespasses, and, therefore, hardly suffice to show legal possession. Acts of adverse possession under a written
instrument are: Where land has been usually cultivated or improved, or substantially inclosed; or if not inclosed, has
been used for the supply of fuel, or of fencing timber, either for purposes of husbandry or for the occupant's ordinary
use, N.Y. Code of Civ. Proc. 370.
HEADNOTES
Vendor and purchaser -- purchase of town lots under unrecorded contract -- possession as notice to
subsequent mortgagee.
SYLLABUS
Where a purchaser of town lots from a land development company builds a fence along the street line, the inner
boundaries having been fenced by adjacent owners, grades the lots, brings building stones thereon, plants shrubs and
trees and is often seen thereon, and pays taxes on the lots which are assessed to him, such possession maintained for
seven years amounts to notice to a mortgagee of the lots in question, together with other lots, so that he cannot ignore
the acts of the purchasers and claim to be a bona fide owner, especially where the mortgagee covenanted upon the
payment of a certain amount to release any lot from the mortgage lien, and it was not shown that the land company was
itself engaged in grading or improving any of the lots.
COUNSEL: [***5] Robert W. Bernard, for the appellant.
Judson G. Wells, for the respondents.
JUDGES: Putnam, J. Jenks, P. J., Thomas, Stapleton and Rich, JJ., concurred.
OPINION BY: PUTNAM
OPINION
[*122] [**816] [HN1] Under an executory contract of purchase of land, the buyer has a right of entry and
Page 290
169 A.D. 120, *; 154 N.Y.S. 814, **;
1915 N.Y. App. Div. LEXIS 9088, ***
immediate possession. In equity he is looked on as the owner, under the doctrine of equitable conversion whereby "the
vendor becomes the trustee of the legal title for the vendee, and the vendee, the trustee of the vendor, as to the unpaid
purchase money." ( Moyer v. Hinman, 13 N. Y. 180, 188.) It has long been accepted law that when a man is of right and
de facto in the possession of land, he is entitled to impute knowledge of that possession to all who deal for any interest
in that property. His possession puts any person so dealing upon inquiry. When such inquiry becomes a duty, the
means of knowledge which it affords are regarded as the equivalent of actual notice, since by failing to inquire such a
purchaser or mortgagee is visited with the consequences of a knowledge of the title and existing rights of the occupant.
( Pendleton v. Fay, 2 Paige, 202; Trustees of Union [***6] College v. Wheeler, 61 N. Y. 88; Holmes v. Powell, 8
DeG., M. & G. 572; Hughes v. United States, 4 Wall. 232; Phelan v. Brady, 119 N. Y. 587; City Bank of Bayonne v.
Hocke, 168 App. Div. 83.)
What acts constitute such possession of town lots unbuilt upon of the character here involved?
[HN2] Possession generally is taking control and appropriating, so as to set on the lands some mark of ownership,
by acts not casual or for a temporary purpose. To enter lands to cut grass, to pasture the fields, to fell timber, may be
trespasses, and, therefore, hardly suffice to show legal possession. [*123] Acts of adverse possession under a written
instrument are: Where land has been usually cultivated or improved, or substantially inclosed; or if not inclosed, has
been used for the supply of fuel, or of fencing timber, either for purposes of husbandry or for the occupant's ordinary
use. (Code Civ. Proc. 370.)
Appellant, however, contends that this adverse possession, which ripens into title in twenty years, is essentially
different from the acts of a lot purchaser in possession as against a mortgagee. The acts of a purchaser in possession are
such [***7] as evince a purpose of ownership. Even if such possession has recently begun, it may, to a buyer or
incumbrancer, indicate the occupant's title. If there be any distinction in degree of strictness of proof, greater stringency
may be required in the instance where, by the Statute of Limitations, possession is in the course of becoming the root of
a hostile title, than where acts of occupancy merely serve as notice of an existing title already validly [**817]
obtained. The latter acts are merely such as apprise the public that the land has been appropriated and occupied.
The respondents' acts here were:
In 1906 or 1908 a wire fence was put up along the two street sides. The inner boundaries had been fenced by the
adjacent neighbors. Along the street the respondents put up posts, sometimes pieces of iron pipe, with wire running all
around. This fence was stated to be a foot and a half high. There were also sticks and pieces of branches used. Nearly
every day Mrs. Campomenosi went on the premises. Her husband was also often seen working there. There was also a
filling in the lots originally low and swampy, so as gradually to raise the grade. In 1906 stones were also [***8]
brought on the lots for foundation of a future cellar. When some were removed by a contractor, one Luppinacci, Mrs.
Campomenosi called for them, whereupon he put them back. Later shrubs were planted there, and apple and peach
trees, with some small grape vines. These trees were testified to have been there three years, which, if counted from
date of the trial, would extend back to 1911. In November, 1912, respondents contracted to build a house there, but this
was subsequent to the mortgage in suit. All of this evidence stands uncontradicted.
[*124] It is a fair inference that in July, 1911, when Le Grange gave this mortgage the mortgagee had constructive
notice of the series of improvements; of the process of gradually filling the lots and grading them, fencing along the
street lines, all of which was unmistakably to better the lands and to fit them for residence. The fencing seems to be
quite as substantial as that in Barnes v. Light (116 N. Y. 34). The larger foundation stones grouped for the coming cellar,
with the planting of shrubs, vines and small trees, were other marks of proprietary ownership. An assertion of
ownership appeared in the demand for the [***9] stones, which Luppinacci respected, and caused the foundation stones
to be replaced.
Respondents' title, as distinguished from possession, was also manifested by the lots being always assessed in the
names of respondents, who also paid the taxes.
Page 291
169 A.D. 120, *122; 154 N.Y.S. 814, **816;
1915 N.Y. App. Div. LEXIS 9088, ***5
Such marks of occupation do not stand alone. The mortgage itself showed the name and business of a land
development company, by the recital that the Halley Land and Improvement Company had requested the loan. The lots
were not only mortgaged as distinct units, by lot numbers, but the purpose and fact that such lots are for separate
disposal is brought home to the mortgagee by his covenant, upon the payment of $ 100, to release any lot from the
mortgage lien. The mortgagee, therefore, is chargeable with notice of the practice of making sales of such lots to
householders. Such a lot owner's progress in improvements carries a significance greater than like improvements in a
field, or in a forest remote from the passing view of the public.
This possession, kept up for seven years, amounted to a notice to the mortgagee, so that he could not ignore these
patent facts and claim to be a bona fide owner. In the words of Gibson, C. J.: [***10] "It certainly evinces as much
carelessness to purchase without having viewed the premises, as it does to purchase without having searched the
register." ( Woods v. Farmere, 7 Watts [Penn.], 382. See, also, Garbutt & Donovan v. Mayo, 128 Ga. 269; 13 L. R. A.
[N. S.] 58.)
This meets also the appellant's point that such possession, to be available, must be inconsistent with the title of the
mortgagor. It is not shown that the Halley Land and Improvement [*125] Company was itself engaged in grading or
improving any such sunken lots. The absence of such testimony left in full force the inference by the mortgagee that it
was the vendees who were thus improving under their purchase. The outward appearances, therefore, supported the
exclusive possession of the respondents, which, it has been found, was well known in the community.
Counsel urges that notice of an unrecorded title is not made out by any occupation, short of actual residence. This
would amount to saying that inquiry is never a duty when buying lots that are unbuilt upon -- a doctrine quite beyond
support.
The duty of inquiry seems specially to rest on one lending money to such a land development [***11] company,
whose course of business in executory contracts of sale exposes the vendees to lose both land and improvements
through the lien of such a mortgage; and the courts should not mitigate the enforcement of this duty of the lender as
against innocent vendees.
A clerical error in the sixth finding of fact should be corrected. The plaintiff's assignor was not Le Grange, but
Frederic N. Gilbert. The latter portion of this finding as corrected and amended should read: "That at the time of giving
the mortgage referred to in the complaint, and hereinafter described, the plaintiff's assignor, Frederic N. Gilbert, could
readily have ascertained that the said lots were owned by the defendants Campomenosi under their contract with the
Halley Land and Improvement Company, and that they were claiming ownership thereof, by virtue of said contract,
which ownership was manifested by an open, visible and exclusive possession thereof, as set forth in the two preceding
findings of fact, numbered fourth and fifth."
The twenty-first finding of fact should be stricken out as unnecessary.
The judgment is, therefore, affirmed, with costs.
Page 292
169 A.D. 120, *124; 154 N.Y.S. 814, **817;
1915 N.Y. App. Div. LEXIS 9088, ***9
Analysis
As of: May 27, 2014
City Bank of Bayonne, Plaintiff, v. Julius G. Hocke and Others, Defendants,
Impleaded with West Side Laundry Company, Appellant, and Directors Investment
Company, Respondent
Supreme Court of New York, Appellate Division, First Department
June 4, 1915
PRIOR HISTORY: [***1] Appeal by the defendant, West Side Laundry Company, from an order of the Supreme
Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 12th
day of April, 1915, directing that a writ of assistance issue to the sheriff to eject and remove the appellant from certain
premises.
DISPOSITION: Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant laundry company sought review of an order of the Supreme Court, New York
Special Term (New York), which directed that a writ of assistance issue to the sheriff to eject and remove the laundry
company from its leased premises.
OVERVIEW: Defendant building owner was also president of the laundry company. The laundry company had been
assigned a ten year unrecorded written lease on a portion of the building. The bank brought an action to foreclose the
mortgage on the building, making the laundry company a defendant, but claiming to make no personal claim against the
laundry company. Judgment was entered and the property was sold by the referee to the bank, which continued to
collect rent from the laundry company until it later conveyed the building to respondent investment company. The
investment company made a number of demands upon the laundry company to get out, and finally sought a writ of
assistance, which was granted. On appeal, the court held that the laundry company's possession and occupation of the
building impeached the good faith of the investment company as a subsequent purchaser. The court ruled that the
Page 293
laundry company's rights based upon a prior, though unrecorded, lease and actual possession should not be determined
in a summary proceeding upon affidavits. The court reversed the order granting the writ and denied the motion.
OUTCOME: The court reversed the order granting the writ of assistance to remove the laundry company from its
leased premises, and denied the investment company's motion seeking the writ.
CORE TERMS: mortgage, laundry, notice, lease, conveyance, recorded, unrecorded, deed, subsequent purchaser, writ
of assistance, good faith, occupation, actual notice, foreclosure, foreclosed, occupied, void, exceeding, rental,
foreclosure action, action to foreclose, person in possession, mortgaged premises, sufficient notice, contracts of sale,
duly recorded, valuable consideration, prudent man, constructive, subordinate
Real Property Law > Purchase & Sale > Contracts of Sale > Period Between Execution & Closing > Right of
Possession
[HN1] Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and
to all the world of the existence of any right which the person in possession is able to establish. Actual occupancy by
purchasers under contracts of sale is constructive notice to the mortgagee of their rights. An assignee of one of the
contracts of sale who takes subsequent to the recording of the assignment of the mortgage is not affected thereby, but
stands in the place of his assignor.
[HN2] N.Y. Real Prop. Law 291provides: Every such conveyance not so recorded is void as against any subsequent
purchaser in good faith and for a valuable consideration, from the same vendor, his heirs or devisees, of the same real
property or any portion thereof, whose conveyance is first duly recorded.
Criminal Law & Procedure > Discovery & Inspection > Brady Materials > General Overview
[HN3] When at the time of the execution and delivery of the mortgage to plaintiff, defendant was in the actual
possession of the premises under a perfectly valid but unrecorded deed, her title must prevail as against plaintiff. It
matters not that plaintiff in good faith advanced his money upon an apparently perfect record title. Nor is it of any
consequence, so far as this question is concerned, whether plaintiff was in fact ignorant of any right or claim of
defendant to the premises. It is enough that she was in possession under her deed and the contract of purchase, as that
fact operated in law as notice to plaintiff of all her rights.
[HN4] When a party takes a conveyance of property situated as this was, occupied by numerous tenants, it would be
inconvenient and difficult for him to ascertain the rights or interests that are claimed by all or any of them. But this
circumstance cannot change the rule. Actual possession of real estate is sufficient notice to a person proposing to take a
mortgage on the property, and to all the world of the existence of any right which the person in possession is able to
establish.
Page 294
168 A.D. 83, *; 153 N.Y.S. 731, **;
1915 N.Y. App. Div. LEXIS 8312, ***1
[HN5] The statute makes void a conveyance not recorded only as against a subsequent purchaser in good faith and
for a valuable consideration. 1 N.Y. Rev. Stat. 756, 1. Actual notice of a prior unrecorded conveyance, or of any title,
legal or equitable, to the premises, or knowledge and notice of any facts which should put a prudent man upon
inquiry, impeaches the good faith of the subsequent purchaser. There should be proof of actual notice of prior title,
or prior equities, or circumstances tending to prove such prior rights, which affect the conscience of the subsequent
purchaser. Actual notice, of itself, impeaches the subsequent conveyance.
[HN6] Proof of circumstances, short of actual notice, which should put a prudent man upon inquiry, authorizes the
court or jury to infer and find actual notice. The character of the possession which is sufficient to put a person upon
inquiry, and which will be equivalent to actual notice of rights or equities in persons other than those who have a title
upon record, is very well established by an unbroken current of authority. The possession and occupation must be
actual, open and visible; it must not be equivocal, occasional, or for a special or temporary purpose; neither must it be
consistent with the title of the apparent owner by the record.
HEADNOTES
Real property -- recording acts -- lease for a term exceeding three years -- open possession of lessee under
unrecorded lease -- constructive notice to subsequent incumbrancer -- foreclosure of subsequent mortgage -- writ
of assistance to eject lessee.
SYLLABUS
A lease for a term exceeding three years is a conveyance and must be recorded as required by the Real Property
Law in order to be valid as against subsequent purchasers in good faith and for a valuable consideration.
But where a tenant is in open, visible and continuous possession under a lease for a term exceeding three years, one
taking a subsequent mortgage upon the premises is charged with constructive notice of the prior lease, although it is
not recorded, and is not an incumbrancer [***2] in good faith within the meaning of the Recording Act.
Hence, under such circumstances, although a judgment of foreclosure of the subsequent mortgage, which was
recorded, has been entered on a summons and complaint in which no personal claim was made against the lessee which
was named defendant, the purchaser on foreclosure, or its grantee, is not entitled to a writ of assistance to eject the
lessee from the premises.
Moreover, the rights of the lessee as against the subsequent mortgagee under its prior unrecorded lease will not be
determined upon affidavits in a summary proceeding for a writ of assistance.
COUNSEL: Forrest S. Chilton, for the appellant.
Walter Loewenthal of counsel [Bernheim & Loewenthal, attorneys], for the respondent.
JUDGES: Clarke, J. Ingraham, P. J., Scott, Dowling and Hotchkiss, JJ., concurred.
OPINION BY: CLARKE
OPINION
[*84] [**731] Julius G. Hocke was the owner of premises 509-513 West Fiftieth street. He was also the
Page 295
168 A.D. 83, *; 153 N.Y.S. 731, **;
1915 N.Y. App. Div. LEXIS 8312, ***1
president of the West Side Laundry Company. This company had been openly occupying a portion of this building for
some years, as a laundry, exhibiting its sign thereon, "West Side Laundry Co." On the 1st of May, 1913, Hocke [***3]
made a written lease of the portion of the premises occupied by the laundry to John O'Mara for ten years from said date,
with the privilege of renewal for a further term of ten years, at a yearly rental of $ 6,194. This lease was not recorded.
O'Mara was then the secretary of the West Side Laundry Company, and said lease was made for the benefit of the
corporation. The lease was on the same day, May first, assigned by O'Mara to the laundry company, which accepted
said lease and [**732] remained in possession of said premises and has [*85] still continued therein. On the 3d day
of May, 1913, Hocke made a mortgage to the City Bank of Bayonne of said premises for the sum of $ 82,000. An
action was commenced to foreclose said mortgage and the West Side Laundry Company was made a defendant, but
there were no allegations in the complaint in reference thereto except the prayer that the defendants and all persons
claiming under them or any of them subsequent to the filing of the notice of the pendency of the action may be barred
and forever foreclosed of and from all right, title, interest, claim, lien and equity of redemption in and to the said
mortgaged premises.
There was [***4] also served upon the laundry company a summons with notice that the plaintiff "makes no
personal claim against you in this action."
This action went to judgment which ordered that each of the defendants in this action and all persons claiming
under them or any of them, after the filing of such notice of lis pendens, or after the filing of such amended notice of lis
pendens, be and hereby are forever foreclosed of all right, claim, lien, title, interest and equity of redemption in and to
the aforesaid premises and each and every part thereof.
The property was sold by the referee and bought in by the City Bank of Bayonne, the deed being dated and
recorded on the 19th day of November, 1914. On the 5th of February, 1915, the bank conveyed to the Directors
Investment Company. The bank collected the rental from the laundry company from June, 1914, until the date of the
deed from the referee, and continued, from said date, November 16, 1914, up to and including the 1st of February,
1915, to accept the stipulated rentals from the laundry company. A number of demands were made by the Directors
Investment Company upon the laundry company to get out which were not complied with. [***5] Finally this
proceeding was brought on by order to show cause why a writ of assistance should not issue. From the order granting
the writ this appeal is taken by the laundry company.
The appellant claims that the lease though unrecorded is good as against the mortgage because of its priority in time
and possession under it by the defendant. Phelan v. Brady (119 N. Y. 587) was an action to foreclose a mortgage upon
[*86] certain premises given by M. who held an apparently good title to the same, but who had before the execution of
the mortgage conveyed the premises to B. who was in possession, and, with her husband, occupied two rooms in the
building on the premises. Her deed was not recorded until after the mortgage was given. In affirming a judgment
dismissing the complaint the court said: [HN1] "Actual possession of real estate is sufficient notice to a person
proposing to take a mortgage on the property, and to all the world of the existence of any right which the person in
possession is able to establish." In Trustees of Union College v. Wheeler (61 N. Y. 88) it was held that the "actual
occupancy by the purchasers under the contracts of sale is constructive [***6] notice to the mortgagee of their rights"
and that "an assignee of one of the contracts of sale who takes subsequent to the recording of the assignment of the
mortgage is not affected thereby, but stands in the place of his assignor."
[**733] The respondent claims that the lease from Hocke to O'Mara under which the West Side Laundry
Company claims possession, being for a term exceeding three years, and not having been recorded, was void as against
the mortgagee, whose mortgage was first duly recorded. There is no question but that the lease for a term exceeding
three years is a conveyance.
[HN2] Section 291 of the Real Property Law (Consol. Laws, chap. 50; Laws of 1909, chap. 52) provides: "Every
such conveyance not so recorded is void as against any subsequent purchaser in good faith and for a valuable
consideration, from the same vendor, his heirs or devisees, of the same real property or any portion thereof, whose
Page 296
168 A.D. 83, *84; 153 N.Y.S. 731, **731;
1915 N.Y. App. Div. LEXIS 8312, ***2
conveyance is first duly recorded."
In Phelan v. Brady (supra) the court said: [HN3] "At the time of the execution and delivery of the mortgage to the
plaintiff, the defendant Mrs. Brady was in the actual possession of the premises under a perfectly valid but unrecorded
[***7] deed. Her title must, therefore, prevail as against the plaintiff. It matters not, so far as Mrs. Brady is concerned,
that the plaintiff in good faith advanced his money upon an apparently perfect record title of the defendant John E.
Murphy. Nor is it of any consequence, so far as this question is concerned, whether the plaintiff was in fact ignorant of
any right or claim of Mrs. [*87] Brady to the premises. It is enough that she was in possession under her deed and the
contract of purchase, as that fact operated in law as notice to the plaintiff of all her rights.
"It may be true, as has been argued by the plaintiff's counsel, that [HN4] when a party takes a conveyance of
property situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain
the rights or interests that are claimed by all or any of them. But this circumstance cannot change the rule. Actual
possession of real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the
world of the existence of any right which the person in possession is able to establish. [Citing cases.] * * * The
plaintiff's loss is to be attributed [***8] to his confidence in Murphy, who probably deceived him, and to his failure to
take notice of Mrs. Brady's possession."
In Brown v. Volkening (64 N. Y. 76) the court said: [HN5] "The statute makes void a conveyance not recorded only
as against a subsequent purchaser in good faith and for a valuable consideration. (1 R. S. 756, 1.) Actual notice of a
prior unrecorded conveyance, or of any title, legal or equitable, to the premises, or knowledge and notice of any facts
which should put a prudent man upon inquiry, impeaches the good faith of the subsequent purchaser. There should
be proof of actual notice of prior title, or prior equities, or circumstances tending to prove such prior rights, which affect
the conscience of the subsequent purchaser. Actual notice, of itself, impeaches the subsequent conveyance. [HN6]
Proof of circumstances, short of actual notice, which should put a prudent man upon inquiry, authorizes the court or
jury to infer and find actual notice. The character of the possession which is sufficient to put a person upon inquiry,
and which will be equivalent to actual notice of rights or equities in persons other than those who have a title upon
record, is very [***9] well established by an unbroken current of authority. The possession and occupation must be
actual, open and visible; it must not be equivocal, occasional, or for a special or temporary purpose; neither must it be
consistent with the title of the apparent owner by the record."
The possession and occupation in the case at bar satisfies the [*88] rule as laid down. The respondent is not aided
by the foreclosure judgment. While the laundry company was made a party defendant, the complaint contained no
allegations as to it, no issue was tendered, and the summons served upon it specifically stated that no personal claim
was made against it.
Stillwell v. Hart (40 App. Div. 112) [**734] was an appeal from an order directing the issuance of a writ of
assistance to place the purchaser at the foreclosure sale in possession of the premises. The court said: "The mortgage,
which was the subject of the foreclosure action, bore date December 22, 1890, and Webster, who now claims to be a
prior lienor, was made a party defendant in the action to foreclose the mortgage. * * * The complaint * * * so far as its
averments affect Webster * * * is in the usual form, that the defendants [***10] claim or have some interest in or lien
upon the mortgaged premises, which is subordinate to the lien of the mortgage. It follows, therefore, that Webster's lien
would remain unaffected by any judgment which might have been entered under the complaint, unless his lien was in
fact subordinate thereto. It appears by the affidavit of Webster, and the agreement which is made a part of the same,
that he entered into possession of the premises in pursuance of said agreement; that he has fulfilled the same upon his
part and has paid the purchase price in full, and has been ever since the construction of the building, and prior to the
execution of the mortgage foreclosed, in the open, visible possession and occupation of such premises. It is, therefore,
clear that, if these allegations are true, Webster could not be affected in his right or title to the property under any
judgment entered in the foreclosure action, and it made no difference as to such rights whether he appeared and
answered or made default. ( Jacobie v. Mickle, 144 N. Y. 237.) It follows, therefore, that as to Webster he may not be
disturbed in his possession and occupation by virtue of this judgment, in consequence [***11] of which the writ of
Page 297
168 A.D. 83, *86; 153 N.Y.S. 731, **733;
1915 N.Y. App. Div. LEXIS 8312, ***6
assistance is not authorized."
We are of the opinion, under the circumstances disclosed by this record, that the appellant's rights, based upon a
prior, though unrecorded, lease and actual possession should not be determined in a summary proceeding upon
affidavits.
The order appealed from should be reversed, with ten dollars [*89] costs and disbursements, and the motion
denied, with ten dollars costs to the appellant.
Page 298
168 A.D. 83, *88; 153 N.Y.S. 731, **734;
1915 N.Y. App. Div. LEXIS 8312, ***11
Analysis
As of: May 27, 2014
Samuel T. Shaw and Others, as Executors of and Trustees under the Last Will and
Testament of Julia A. Shaw, Deceased, and Others, Appellants and Respondents, v.
The New York Elevated Railroad Company and The Manhattan Railway Company,
Respondents and Appellants.
SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST
DEPARTMENT
January, 1903, Decided
PRIOR HISTORY: [**1] Cross-appeals by the plaintiffs, Samuel T. Shaw and others, as executors of and trustees
under the last will and testament of Julia A. Shaw, deceased, and others, and by the defendants, The New York Elevated
Railroad Company and another, from a judgment of the Supreme Court, entered in the office of the clerk of the county
of New York on the 10th day of June, 1901, upon the decision of the court rendered after a trial at the New York
Special Term.
The plaintiffs' appeal is taken from so much of the judgment as dismisses the first cause of action, while the
defendants' appeal is taken from all of the judgment, with the exception of that portion thereof which dismisses the first
cause of action contained in the complaint.
DISPOSITION: Judgment reversed, new trial ordered, costs to plaintiffs to abide event.
CASE SUMMARY:
PROCEDURAL POSTURE: Defendant railroads appealed from the judgment of the Supreme Court, county of New
York, New York Special Term (New York), which restrained the railroads from operating their road in front of a
property, except upon payment of a sum as the value of the easement appropriated by them, with an award for rental
damages. Plaintiff executors appealed from the judgment that dismissed their first cause of action based on a separate
part of the property.
Page 299
OVERVIEW: The action was brought to restrain the railroads from maintaining an elevated railroad opposite property
that belonged to the deceased. The second cause of action was based on property on a corner of two streets. The
deceased acquired this property separately from the property along one of the streets, which was the basis of the first
cause of action. The court reversed the action of the lower court in dismissing the complaint as to the first cause of
action. The railroads claimed that an instrument was a consent to the construction and operation of the road in front of
the property in question. The finding that this instrument was sufficient evidence of an intention to abandon the
deceased's easement and to estop the deceased, as grantee of the property, from enforcing her right in the street was not
sustained. The instrument was ambiguous and the deceased did not sign the consent. Also, the railroad did not rely on
the consent. The court also reversed the award for the railroads in the second cause of action. The property should have
been treated as a whole and the amount of damage upon the street should have been considered as applying to the whole
front of the street.
OUTCOME: The court reversed the judgment, which was in favor of the executors and trustees on one cause of action
and which dismissed the other cause of action, and ordered a new trial.
CORE TERMS: street, easement, railroad, consented, elevated railroad, testatrix, annexed, cause of action, signature,
front, elevated, railway, abandon, feet, abutting owner, abandonment, conveyance, built, bounded, hotel, abutting,
property owners, corner, owners of property, consents in writing, constructed, fronting, grantor, erected, build
Real Property Law > Limited Use Rights > Easements > General Overview
Transportation Law > Bridges & Roads > General Overview
[HN1] There is the principle upon which a consent will be deemed to be a relinquishment by the owner of abutting
property to his right in the street. To give a consent this effect it must appear to be a consent that the road as proposed
be built; and to prevent a person giving such consent from withdrawing it, it must appear that the road has acted upon
the faith of it in constructing its road.
HEADNOTES
Consent by an abutting owner to the construction of an elevated railroad -- what is merely an indication of a
willingness to sign one -- when a bona fide purchaser takes a title free therefrom -- effect of a consent duly given.
SYLLABUS
Upon the trial of an action brought to restrain the maintenance and operation of the elevated railroad in front of the
plaintiff's premises upon Forty-second [**2] street, in the city of New York, it appeared that in 1875 the elevated
railroad company presented to the owners of the property abutting upon that street the following blank consent: "We,
the undersigned, owners of land bounded on Forty-second St. (south side), between Lexington & Fourth avenues,
hereby respectively consent to the construction and operation of an Elevated Railway over, through and along said
street," and that in the column headed "signatures" was the following statement: "I am in favour of an elevated road
over the middle of the street, but not on the walk," which was signed by the plaintiff's grantor. The railroad company,
having failed to obtain the consents of the majority of the property owners to the construction of the road, applied to the
court for the appointment of commissioners to determine whether the road should be built. It stated in its petition that
the plaintiff's grantor had either not consented to the construction of the road or that no request had been made to him
for such consent. It further appeared that when the plaintiff acquired title to the property the railroad had not been
constructed; that the alleged consent of her grantor was not recorded, [**3] and that the plaintiff had no notice, so far
as was disclosed, of the existence of such consent.
Page 300
78 A.D. 290, *; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **1
Held, that it was error to dismiss the plaintiff's complaint;
That the statement signed by the plaintiff's grantor was not an absolute consent to the construction of the road, but
was merely an indication of his willingness to consent to a restricted right to build the road, if his consent to such
restricted right was sought;
That, upon the recording of the deed to the plaintiff, before the railroad was in possession of any part of the street,
the plaintiff took the property free from any consent or incumbrance imposed upon the property by her grantor.
The effect of a consent, when duly given, considered.
COUNSEL: William G. Peckham, for the plaintiffs.
Austen G. Fox, for the defendants.
JUDGES: Ingraham, J. Van Brunt, P. J., Patterson, Hatch and Laughlin, JJ., concurred.
OPINION BY: INGRAHAM
OPINION
[*291] Ingraham, J.:
The action was brought to restrain the maintenance and operation of the elevated railroad opposite certain property
which belonged to the plaintiffs' testatrix situated on the southeast corner [*292] of Fourth avenue and Forty-second
street, New [**4] York city. The property includes the whole frontage on Fourth avenue, between Forty-first and
Forty-second streets, with a depth of 130 feet on both streets. The action was originally commenced by Julia A. Shaw,
who died after the commencement of the action, and her executors were substituted in her place. The plaintiffs' testatrix
acquired this property by various conveyances. It is now used, however, as one building for a hotel, and the complaint
originally described the whole property as belonging to the plaintiffs' testatrix, and asked the court to enjoin the
maintenance and operation of the elevated railroad on Forty-second street, upon which the property as a whole abutted.
Although there was but one cause of action alleged in the complaint, by a stipulation between the parties, the case
was tried upon the theory that there were two causes of action; one, based upon the ownership of a piece of property on
Forty-second street, commencing about sixty-four feet east of Fourth avenue and extending on Forty-second street
sixty-six feet; and the other, based upon the ownership of the property on the corner of Fourth avenue and Forty-second
street, about sixty-four feet on Forty-second [**5] street. The first cause of action was dismissed, and the court awarded
judgment restraining the defendants from operating their road in front of the corner property, except upon payment of
the sum of $ 25,000 as the value of the easement appropriated by the defendants, with an award for rental damages. The
plaintiffs appeal from the dismissal of the first cause of action, the defendants from the award made upon the second
cause of action.
The plaintiffs' testatrix acquired title to this property by separate conveyances. She purchased the southeast corner
of Forty-second street and Fourth avenue (for which she has recovered judgment) in July, 1880. Her grantors had
acquired title to the property in 1873. This property had a frontage upon Fourth avenue of about seventy-five feet with a
depth on Forty-second street of about sixty-four feet. Upon this piece of property there was erected prior to the
construction of the elevated railroad a hotel building which was known as the "Westchester House," and which at
sometime seems to have been conducted as an independent hotel. Upon the remainder of this property there was erected
a hotel called "The [*293] Grand Union Hotel." This property [**6] was acquired by the plaintiffs' testatrix on
September 13, 1877, by a conveyance from one Hayes. It was admitted by the parties, however, that in the year 1875
James Shaw was the owner of the property fronting on Forty-second street; that the construction of the elevated railroad
was commenced in Forty-second street in August, 1878, and that Forty-second street in front of the premises in suit was
Page 301
78 A.D. 290, *; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **3
opened under the act of 1813. In relation to what is known as the first cause of action, the land affected by which was
acquired by the plaintiffs' testatrix in the year 1877 and was owned by James Shaw in the year 1875, and as to which the
complaint was dismissed, there was introduced in evidence an instrument which the defendants claimed was a consent
to the construction and operation of this road in front of this property, and the question upon the plaintiffs' appeal was
whether the plaintiffs were estopped by that consent from maintaining this action. This instrument was as follows:
"We, the undersigned, owners of land bounded on Forty-second St. (south side) between Lexington & Fourth
avenues hereby respectively consent to the construction and operation of an Elevated Railway, over, [**7] through and
along said street. The said railway to be constructed and operated by either the New York Elevated Railroad Company
or the Company to be organized under Chapter 606 of the Laws of 1875.
"Dated, New York, October --, 1875."
To this instrument was annexed a list of the owners of property, describing them by block and ward numbers, with
the names of the owners and the valuation of the property. At the bottom of this list, opposite numbers 67, 68 and 68
1/2, was the name of James E. Shaw as the owner, and there was written under the column headed "signatures" and
opposite to this property the following: "I am in favour of an elevated road over the middle of the street, but not on the
walk. James E. Shaw." The court below held that by this instrument Shaw consented to the erection and maintenance of
the railroad and the plaintiffs were thereby estopped from maintaining this action to restrain the elevated railroad from
operating its road in front of this property; and it is the correctness of this decision which is challenged by the plaintiffs
upon their appeal.
[*294] The question as to the effect of this consent, if it had been signed in the form in which it was [**8]
presented for signature, was presented to the Court of Appeals in the case of White v. Manhattan Railway Co. (139 N.Y.
19). The former part of the consent in that case was the same as in this, and there the owner of the property signed the
consent. It had in that case been held in the court below that this consent, being obtained to comply with the provisions
of the Constitution and law which required the owners of property abutting on a street to consent to the construction and
operation of a railroad before the same could be constructed and operated, did not have the effect of divesting the
abutting owners of their easement of light, air and access in the street; and that view was disapproved by the Court of
Appeals. Judge Peckham, after discussing the nature of the easement that an abutting owner has in the streets, says:
"Whatever the means by which the easements were created they are in their nature the same as if they had been created
by grant. The owners thereof cannot be divested of them without their consent unless they are compensated therefor.
Although it may generally be said, under the authority of the cases already cited, that an easement in the nature of an
[**9] interest in the land of another can only be created by a grant, yet after it has been created and while it is in
existence, it may be abandoned and thus extinguished by acts showing an intention to abandon and extinguish the same.
* * * They had an easement in it only, and their consent purported to carry no title to land. There can be no question that
they had the right to release, abandon or otherwise extinguish that easement, and upon such terms as they should think
fit. The question before us is, whether they have done so and to what extent by the execution of the paper proved upon
the trial;" and it was held that the unrestricted execution of this instrument was such an extinguishment of their
easement. Upon that question the court say: "When, therefore, an abutting owner consents in writing to the construction
and operation of an elevated railroad in the street fronting his property, what other possible meaning can be placed upon
such act than that he voluntarily abandons his easement of light, etc., in the street to the extent to which it will
necessarily be affected by the building of the road? The act is capable of but one construction as it seems to me. He
might have [*295] [**10] consented conditionally, as, for instance, that a majority should also execute such consent,
or upon payment of a certain sum, or upon condition of the payment of such damages as he might prove he would
sustain from the existence of the road. In this case, however, there is absolutely no condition stated or claimed. There is
the unconditional consent to the building of the road, and upon the assumption that it was signed by all the owners or
duly authorized by them, it must be regarded as an abandonment pro tanto of the easement in that street as already
described, especially after the consent has been acted upon by the company, with the possible limitation hereinafter to
be mentioned. Perhaps the consenting party might withdraw his consent if he had given it without any valuable
consideration, and if the other party had done nothing under it so that its position would not be unfavorably affected by
Page 302
78 A.D. 290, *293; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **6
such withdrawal. This is not such a case, because the company have proceeded to build their road and they would be
unfavorably affected by just the amount they must pay if the consent be regarded as withdrawn." The validity of such
consent, it will be seen, was placed upon the voluntary [**11] abandonment by an owner of his easement so far as the
same would be affected by the construction of the road, and, although voluntary and without consideration, which
would entitle the owner to withdraw it, it becomes binding when the railroad has acted upon it and constructed the road.
Although this case has been followed in several cases to which attention will be called, it is the only case which has
discussed [HN1] the principle upon which such a consent will be deemed to be a relinquishment by the owner of
abutting property to his right in the street. And to give this consent this effect it must appear to be, it seems to me, what
the consent in the White case was, a consent that the road as proposed be built; and to prevent a person giving such
consent from withdrawing it, it must appear that the road has acted upon the faith of it in constructing its road. This
consent, as presented to Shaw for signature, was a consent to the construction and operation of an elevated railroad
over, through and along Forty-second street. There is here no distinction between the sidewalk and the roadway of the
street, and undoubtedly such a consent would authorize the construction of the railroad [**12] upon the sidewalk as
well as in the middle of the street. Was this consent signed by Shaw? Did he, [*296] by what he put upon that paper,
consent to the erection and operation of an elevated railroad over, through and along said street? None of the other
property owners had signed this instrument. When or under what circumstances it was presented to Shaw for signature
does not appear. We simply have the paper, which in form was a consent to construct this road over, through and along
this street, upon which Shaw had written these words: "I am in favour of an elevated road over the middle of the street,
but not on the walk. James E. Shaw." Was this signing the consent, or, by the execution of this statement of his views,
did he indicate an intention to consent that the road should occupy the whole of the roadway with the structure?
Whether this signature was or was not such a consent must be determined by the intention of the parties to it and the
intention of Shaw when he signed it.
Upon that question we have evidence of the acts of the railroad company. The railroad company having failed to
acquire the consent to the construction of the road of a majority of the property owners, [**13] made an application to
the General Term of the Supreme Court for the appointment of commissioners to determine whether or not the road
should be built, notwithstanding the objection of the property owners. They were required to base that application upon
evidence that the property owners had refused their consent, and the railroad company presented to the General Term of
the Supreme Court a petition verified by the president of the company, which stated that an application had been made
to the owners of the property bounded on the portions of the streets and avenues through which the road was to run, for
their consent to the construction and operation thereof, over, through and along the route so designated; "and the
consent of such owners to the extent of one-half in value of such property cannot be obtained, neither of the owners of
property bounded on the whole line aforesaid, nor of such owners of the property bounded on any one of said streets,
and such consent was refused by the owners of more than one-half in value of the property bounded on each of said
streets, and portions of streets, as appears by the proofs hereto annexed." Annexed to that petition was an affidavit of
one [**14] Taylor, who swore that he had made diligent inquiries of the persons in possession, and claiming to own
the several lots or parcels of land on both sides of [*297] Third avenue, between the Bowery and Forty-second street,
and on both sides of Forty-second street, between Third and Madison avenues; and that the Schedule A annexed to the
affidavit includes and accurately states all the property on said portion of Third avenue and on said portion of
Forty-second street; that "I requested each of the owners of said lots and property on said portion of Third avenue,
opposite to whose names is written in said Schedule 'A' annexed hereto, the words 'consented' or 'declined to consent' to
sign a certain paper of which a copy is hereto annexed, marked Schedule 'B,' and to consent to the construction and
operation of an elevated railway over, through and along said avenue, and each of the owners of said lots and property
on said portion of said Forty-second street, opposite to whose names is written in said Schedule 'A' hereto annexed the
words 'consented' or 'declined to consent' to sign a certain paper of which a copy is hereto annexed marked 'C,' and to
consent to the construction and [**15] operation of an elevated railway over, through and along said street. * * * Each
of such owners and persons, excepting those opposite to whose names in Schedule 'A' is written the word 'consented'
refused to consent to the construction or operation of said railway or to sign said paper so presented." Annexed to this
affidavit is a schedule which contains a proposed consent in the same form as that to which is affixed Shaw's name to
Page 303
78 A.D. 290, *295; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **10
which attention has been called. In that schedule Shaw is put down as the owner of lots 67, 68 and 69, block 335, but
there is no indication that Shaw had consented to the construction of the road; and it is upon this petition and affidavit
that the court acted in appointing commissioners under whose authority the road was subsequently built.
We have, therefore, the fact that, although a consent to the construction of the road was presented to Shaw, upon
which he indicated that he was in favor of the construction of a road over the roadway or middle of the street, the
defendants, when they made their application for the appointment of commissioners, stated to the court that Shaw had
either not consented to the construction of the road, or that no request [**16] had been made to him for such consent.
This would seem to show that neither Shaw nor Taylor, who was engaged in getting consents for the construction of this
road in Forty-second street, understood that Shaw consented to the construction [*298] of the road as requested. The
paper itself is certainly ambiguous. The consent is not signed. Shaw had annexed to it a statement of what he favored,
but I do not think that such a statement could be considered a consent to the construction and operation of the road,
especially where it appears that the writing was not acted upon as a consent, or that the defendants had considered that
the owner of the property had consented thereto. The effect of the indorsement of Shaw was an indication of his
willingness to consent to a restricted right to build the road if his consent for such a restricted right was asked for. There
is not in this, as there was in the White case, a consent in writing to the construction and operation of an elevated
railroad in the street fronting his property. There is no formal consent to do what the road wanted to do; and what Shaw
signed did not purport to be such a consent, but only purported to be an expression [**17] of what he favored; and the
utmost that could be claimed for it, it seems to me, is an expression of willingness to sign a consent much more
restricted than they then asked for if such a consent was presented to him for signature. And we have further in this case
the evidence that the railroad company never acted upon this consent and never built its road relying in any sense upon
it. In this case, when the plaintiffs' testatrix acquired the title to this property, there was no railroad in this street. This
instrument, claimed to have been signed by Shaw, was not recorded and plaintiffs' testatrix had no notice, so far as
appears, that Shaw had ever signed any instrument affecting her easements in the street. The railroad was not in
possession of any part of the street, and upon the record of the deed to her under the Recording Act she took the
property free from any consent or incumbrance imposed upon the property by Shaw.
The White case has been followed by several other cases in the Court of Appeals to which it is proper to call
attention. In Foote v. Elevated Railroad (147 N.Y. 367) the abandonment of the easement claimed by the plaintiff was
claimed to have been [**18] effected as the result of certain agreements entered into between the railroad company and
a prior owner of the land. The court, in discussing the White case, stated: "The peculiar features in the White and Snell
*
cases, which have been referred to, were, in the [*299] one, an express authorization to build the elevated railroad, and,
in the other, an express relinquishment of an easement to conduct water, upon both of which agreements the parties
favorably affected thereby had acted;" and after describing the agreements under which it was sought to effect such an
abandonment in the case then under consideration, it was held that nothing there could effect such an abandonment.
What was said by the court in that case is, I think, quite applicable to the case at bar. "I think the plaintiff was under no
obligation to look beyond the records for anything affecting his title to the land he was about to purchase. As matter of
fact, the defendants were trespassers, with no right as yet to occupy the easements of the abutting owner. The argument
that Lathrop's demand in the action, however irrevocable, was equivalent to an election to abandon the easements does
not commend [**19] itself. At most, it could be regarded as amounting to a conditional declaration of an intention to
abandon. That would be insufficient, * * * and it cannot be said that the defendants had seasonably acted upon it.
Moreover, the importance of discovering from the circumstances the intention of the person who is claimed to have
abandoned his rights is in its explaining and determining the significance of the act."
* Snell v. Levitt (110 N.Y. 595).
In Ward v. Metropolitan Elevated R. Co. (152 N.Y. 39) it appeared that the plaintiff's grantor, in consideration of $
3,300 paid to her by the defendants, released to them the easements or rights belonging to the premises which had been
taken and were affected by the maintenance and operation of their road, and all causes of action therefor, past and
future, and consented to a perpetual maintenance and operation of such road in front of the premises. It was held that
this instrument was sufficient within the White case, based upon a valuable consideration, [**20] to convey the
Page 304
78 A.D. 290, *297; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **15
easement in the street; and although this instrument was not recorded, as the railroad was in actual possession of the
easements, that possession was notice to all persons purchasing the abutting property as to the rights that the railroad
actually had. But as the railroad was not in actual possession of this street when the plaintiffs' testatrix acquired her title,
this does not apply.
In Heimburg v. Manhattan Ry. Co. (162 N.Y. 352) it is stated in the opinion that it was admitted that in October,
1875, the plaintiff [*300] executed and delivered an instrument, appearing in the record, which in terms expressed his
consent to the construction and operation of the railroad in front of the premises which were involved in this action. In
that case it appeared that the plaintiff had inserted in the paper before his signature these words: "If the road must be on
3d Avenue, I prefer the middle," and it was held that if that was to be treated as a condition, which is the most favorable
view for the plaintiff, then it was undisputed that it was complied with by the company in the construction of the road.
In Herzog v. N.Y. Elevated R. R. Co. (76 Hun [**21] 486; affd. on opinion below, 151 N.Y. 665) it appeared that
when the road was built, and prior thereto, the premises in question were owned by the mayor, aldermen and
commonalty of the city of New York, and subsequently were conveyed to the plaintiff's grantor; that prior to such
conveyance the defendant had erected its road along Third avenue in front of the premises which were subsequently
conveyed to the plaintiff; that the consent in writing of the corporation of the city of New York was duly given to the
construction of said road, and at the time of the conveyance by the city of New York the defendants were operating the
road. The presiding justice, in delivering the opinion of the court, said: "In other words, that the corporation of the city
of New York, being the owner of the premises now claimed by the plaintiff, and also of the fee of the street (impressed,
it is true, with a public use), when it consented to the construction of this railway upon said street, it parted with all
claim to compensation for the use of easements in said street by the railroad company, which affected its property
abutting thereon."
These are the only cases in which such a consent has been presented [**22] to which our attention has been called,
and in all there appeared, what does not appear here, that the owners of the property did actually consent to the
construction and operation of the road, and upon that consent the road acted, and was in actual occupation of the street
when the plaintiff acquired title. In this case, as I have before pointed out, the proof fails to show that Shaw did actually
sign the consent, but what he did write was a mere indication of what he would be willing to consent to if an application
for such consent was made, with the further proof that the instrument was never treated by the company as a consent,
but, on the contrary, [*301] when the application was made to the court for the appointment of commissioners, it was
made under such circumstances as to justify the inference that Shaw, with the other property owners upon this street,
had not consented.
I think, therefore, that the action of the learned judge in dismissing this complaint as to the first cause of action, and
holding that this instrument was sufficient evidence of an intention to abandon this easement and to estop the plaintiffs'
testatrix, a subsequent grantee of the property, from [**23] enforcing her right in the street, cannot be sustained, and for
that reason the judgment should be reversed.
Upon the second cause of action there are questions presented which are not free from doubt, but as we think this
property should be treated as a whole, and the amount of damage sustained in consequence of the erection of this road
upon this street should be considered as applying to the whole frontage of the street, the proper course in this case is to
order a new trial of the whole action without discussing the other question presented.
The judgment appealed from is, therefore, reversed and a new trial ordered, with costs to the plaintiffs to abide the
event.
Van Brunt, P. J., Patterson, Hatch and Laughlin, JJ., concurred.
Judgment reversed, new trial ordered, costs to plaintiffs to abide event.
Page 305
78 A.D. 290, *299; 79 N.Y.S. 915;
1903 N.Y. App. Div. LEXIS 36, **20
ATN Fulton, LLC, Petitioner(s) against Deep Dale Grocery, Inc. dba STOP &
SHOP, XYZ Corp., Respondent(s)
LT-006376-11
DISTRICT COURT OF NEW YORK, FIRST DISTRICT, NASSAU COUNTY
50268(U)
REPORTS.
CORE TERMS: lease, tenant, unconscionable, rent, purchaser, tenancy, landlord, void, contract of sale, real estate,
conveyance, eviction, seller, nonpayment of rent, recover possession, actual possession, sufficient notice, person in
possession, ascertain, recorded, mortgage, occupied, notice, closing date, contingent, warranties
HEADNOTES
[**801] [*1225A] Vendor and Purchaser--Contract for Sale of Real Property--Purchaser of commercial property
was bound by existing long-term lease due to its failure to obtain lease prior to closing of title, but lease provision in
effect prohibiting landlord from evicting for nonpayment of rent was void as unconscionable. Landlord and
Tenant--Lease--Unconscionable Provision Barring Eviction for Nonpayment of Rent.
COUNSEL: [***1] For Petitioner: Michael L. Cirrito, Esq., White, Cirrito & Nally, LLP, Hempstead, New York.
For Respondent: Ezratty, Ezratty & Levine, LLP, Mineola, New York.
For Respondent: Horing, Welikson & Rosen, P.C., Williston Park, New York.
JUDGES: Scott Fairgrieve, DISTRICT COURT JUDGE.
OPINION BY: Scott Fairgrieve
OPINION
Scott Fairgrieve, J.
Page 306
Petitioner ATN Fulton, LLC (hereinafter referred to as ATN) has commenced this commercial holdover proceeding
against Deep Dale Grocery, Inc. d/b/a Stop & Shop (hereinafter referred to as Deep Dale) located at 618 Fulton Avenue,
Hempstead, New York. ATN alleges that Deep Dale is a month to month tenant pursuant to an oral tenancy. ATN
contends that it properly terminated Deep Dale's tenancy on October 31, 2011 by the notice dated September 16, 2011.
Deep Dale contends that it is not a month to month tenant. Deep Dale claims that it has a valid lease dated February
26, 2010, entered into between Mohammed Malik (prior owner) and Deep Dale (tenant). The lease runs for a ten year
term with two 5 year options to renew through February 28, 2030. The February 26th lease was executed by Mr. Malik
and his brother Nicholas Galafano, the President and owner of Deep Dale.
ATN attacks the validity [***2] of the February 26th lease on numerous grounds concerning its onerous clauses.
ATN draws considerable attention to paragraph 14 of the lease which states in full that:
Owner shall have no right to terminate this Agreement of Lease for any reason whatsoever, including but not
limited to nonpayment of rent and additional rent or for breach of any covenant of this Agreement of Lease, and shall
have no reason to recover possession of the Premises until such time as this Agreement of Lease expires by its own
terms, and Owner expressly waives any and all right to regain possession of the Premises, whether by self-help,
summary or other special proceeding, dispossess proceeding, ejectment, eviction, or other action or remedy. Owner's
sole remedy against Tenant shall be to commence a plenary action to recover damages or unpaid rent and additional rent
and to enforce any judgment so obtained, but nothing contained herein shall be deemed to give Owner the right to levy
on this Agreement of Lease, the Premises or any portion thereof, or on Tenant's interest therein in Owner's efforts to
enforce or collect any such judgment. It is expressly understood and agreed Owner is prohibited, among other [***3]
things, from resorting to summary proceedings under Article 7 of the New York Real Property Actions and Proceedings
Law (or any successor statute) to recover possession of the Premises for any purpose.
In addition to said paragraph 14, the lease has the following significant provisions which ATN contends are part of
the fraudulent scheme agreed to between Mr. Malik and his brother Nicholas Galafano to defraud ATN:
1.rent remains the same at the rate of $44,000 from 3/01/10 to 2/28/15
2.rent remains the same at the annual rate of $48,000 from 3/1/15 to 2/29/20
3.paragraph 4 allows Deep Dale to make any alterations or improvements to the interior of the premises without
landlord's consent
4.paragraph 6 makes the landlord responsible for maintenance and repair both structural and nonstructural for the
building
5.the landlord has unlimited liability to the tenant for loss of income, diminution in the value of the leasehold to
tenant, consequential damages, loss of profits and injunctive relief
6.paragraph 16 allows tenant to assign or sublet without consent of landlord
The lease was never recorded with the Nassau County Clerk.
In the fall of 2010, ATN's principals Mahfuzur Rahman and Mohammed Siddiqui [***4] spoke with Mr. Malik
about purchasing the property located at 626 Fulton Avenue, Hempstead; 618 Fulton Avenue, Hempstead, New York is
the address of Deep Dale located within the strip mall known as 626 Fulton Avenue, Hempstead, New York. ATN
planned to build a hotel or possible housing for college students. ATN claims that Mr. Malik was told about the plans,
but Mr. Malik denies being told about the plans of ATN.
Mahfuzur Rahman entered into a contract of sale with Mohammed Malik, dated November 11, 2010, for the
Page 307
38 Misc. 3d 1225(A), *1225A; 969 N.Y.S.2d 801, **801;
purchase of 618 Fulton Avenue, Hempstead, NY The purchase price was $2,400,000. The sum of $150,000 was
deposited as down payment. The purchaser agreed to purchase the property subject to a purchase money note and
mortgage of $1,650,000. The balance of $600,000 was to be paid at closing. The name of Mahfuzur Rahman was
crossed out and substituted with the name of ATN Fulton LLC. Mohammed Malik executed the contract for the seller.
Stanley Kalathara, Esq. represented Mahfazur Rahman/ATN. Mr. Kalathara executed the contract of sale as
attorney-in-fact for Mahfuzur Rahman.
The said contract contains the following key provisions concerning the purchase of the premises:
1.Rider paragraph [***5] 2 states:
The purchasers represent that they have examined the premises and that the seller has made no representations or
warranties and that the purchasers agree to accept the premises in as [sic] "AS IS" condition in all respects, normal wear
and tear, between now and closing expected.
2.Rider paragraph 17 states:
Premises are subject to the following tenancies. PREMISES TO BE DELIVERED IN ITS "AS IS" CONDITION,
SUBJECT TO ALL TENANCIES, CONTENTS AND NOT BROOM CLEAN AT CLOSING.
3.Printed form paragraph 28(a) states:
(a)All prior understandings, agreements, representations and warranties, oral or written, between Seller and
Purchaser are merged in this contract; it completely expresses their full agreement and has been entered into after full
investigation, neither party relying upon any statement made by anyone else that is not set forth in this contract.
The contract of sale did not require Malik to provide copies of any leases regarding the commercial tenants nor did
the real estate contract make the closing contingent on providing said leases. Instead, ATN purchased the property "AS
IS" subject to the tenancies.
ATN introduced two rent schedules during trial which Mr. Malik allegedly [***6] gave to ATN concerning the
tenancies. Exhibit 15 states that Stop & Shop has 1 year and 3 months left on its lease. Stop & Shop is also known as
Deep Dale. Mr. Malik denies giving the two rent rolls to ATN. Based upon the testimony and the court's examination of
the documents, the court disregards the exhibits as unreliable.
In January of 2011, the parties extended the closing date until February of 2011 because ATN was unable to close.
A writing extending the closing date was introduced. This agreement states that an additional $90,000 was put into
escrow with Asaf Dror, Mr. Malik's attorney. This agreement is not signed by Mr. Malik. The agreement makes no
mention of the leases or having the closing contingent upon the leases being provided.
ATN's attorney, Stanley Kalathara, testified that it was not his responsibility to ascertain the leases but that of ATN.
Mr. Rahman testified that it was attorney Kalathara's responsibility to obtain the leases.
The evidence demonstrates that both Mr. Rahman and Mr. Siddiqui knew of the tenants at the premises but never
inquired with Deep Dale (Stop & Shop) about its lease. The evidence further demonstrates that Mr. Galafano never
dealt with ATN [***7] or its principals at any time before the closing of title in February of 2011.
This court is constrained under the facts of this case to hold that ATN failed to exercise due diligence by not
obtaining the lease held by Deep Dale. ATN entered into a contract of sale without requiring production of the leases.
ATN agreed to take the property "AS IS" subject to existing tenancies. ATN and its principals never made proper
inquiry concerning Deep Dale's lease even though it knew that Deep Dale (Stop & Shop) occupied the premises. Thus,
ATN is estopped from trying to void the Deep Dale lease. See 1426 46 St., LLC v. Klein, 60 AD3d 740, 876 N.Y.S.2d
Page 308
38 Misc. 3d 1225(A), *1225A; 969 N.Y.S.2d 801, **801;
425 (2nd Dep't 2009), wherein the court stated:
Although a lease for a term exceeding three years is a conveyance which may be recorded (see Real Property Law
290[2]), an unrecorded conveyance is void only as against a subsequent good faith purchaser for value (see Real
Property Law 291). Moreover, "[a]ctual possession of real estate is sufficient notice . . . to all the world, of the
existence of any right which the person in possession is able to establish" (Phelan v. Brady, 119 NY 587, 591-592, 23
N.E. 1109; see Ward v. Ward, 52 AD3d 919, 921, 859 N.Y.S.2d 774; [***8] Nethaway v. Bosch, 199 AD2d 654, 605
N.Y.S.2d 135).
The Court of Appeals held in Phelan v. Brady, 119 NY 587, 23 N.E. 1109 that actual possession is notice to the
world of the tenant's rights in the real estate:
It may be true, as has been argued by the plaintiff's counsel, that when a party takes a conveyance of property
situated as this was, occupied by numerous tenants, it would be inconvenient and difficult for him to ascertain the rights
or interests that are claimed by all or any of them. But this circumstance cannot change the rule. Actual possession of
real estate is sufficient notice to a person proposing to take a mortgage on the property, and to all the world of the
existence of any right which the person in possession is able to establish. (Governeur v. Lynch, 2 Paige, 300; Bank of
Orleans v. Flagg, 3 Barb. 318; Moyer v. Hinman, 13 NY 180, 184; Tuttle v. Jackson, 6 Wend. 213; Trustees of Union
College v. Wheeler, 61 NY 88, 98; Cavalli v. Allen, 57 N.Y. 508, 517).
Thus, ATN took the premises subject to the said Deep Dale lease. Failure to provide leases is not fraud.
Although this court has held that petitioner is subject to the lease of Deep Dale, this court is convinced that the
Deep Dale lease was [***9] contrived to provide an unfair advantage for Deep Dale. Paragraph 14, which blocks any
eviction of Deep Dale and restricts ATN's rights against Deep Dale, is unconscionable. This court has the power to void
this clause as unconscionable. See 74 NY Jur. 2d, Sec. 57, Landlord and Tenant, wherein the following is stated:
Upon finding, as a matter of law, that a lease or any clause of a lease was unconscionable at the time it
was made, a court may choose one of three options: refuse to enforce the lease enforce the remainder of
the lease without the unconscionable clause so limit the application of any unconscionable clause as to
avoid any unconscionable result Paragraph 14 of the lease is declared unconscionable and void.
Conclusion
1.ATN cannot evict Deep Dale as a month to month tenant. ATN took the premsies subject to the Deep Dale lease
when it purchased the property. That lease remains in effect in accordance with its terms.
2.Paragraph 14 of the lease is declared unconscionable and not enforceable.
So Ordered:
/s/ Hon. Scott Fairgrieve
DISTRICT COURT JUDGE
Dated: February 21, 2013
Page 309
38 Misc. 3d 1225(A), *1225A; 969 N.Y.S.2d 801, **801;
Tami-Anne Barber, Plaintiff, against Cornell University Cooperative Extension of
Orange County, ORANGE COUNTY AGRICULTURAL SOCIETY and ORANGE
COUNTY FAIR, INC., Defendants.
4504/2011
SUPREME COURT OF NEW YORK, ORANGE COUNTY
52067(U)
REPORTS.
CORE TERMS: summary judgment, notice, constructive notice, cross-motion, tripped, safe, comparative negligence,
citations omitted, inspection, landowner, matter of law, issues of fact, assumption of risk, trivial, floor, culpable
conduct, lighting, hazard, trap, prima facie, safe condition, dangerous condition, moving party, question of fact,
inherently dangerous, constructive, manager, snare, trip, stall
HEADNOTES
[**356] [*1217A] Judgments--Summary Judgment. Negligence--Maintenance of Premises--Hazardous
Condition--Notice--Comparative Negligence.
JUDGES: [***1] HON. CATHERINE M. BARTLETT, A.J.S.C.
OPINION BY: CATHERINE M. BARTLETT
OPINION
Catherine M. Bartlett, J.
This is an action in personal injury stemming from an alleged trip and fall accident which occurred on July 26,
2010 in a barn/stall located on the Orange County Fairgrounds in Middletown, New York. Defendant Orange County
Agricultural Society ("OCAS") owns the property. Said defendant entered into a 99 year lease with the predecessor of
defendant Cornell University Cooperative Extension of Orange County ("Cornell") where Cornell was leased 1 acre of
Page 310
the 90 acre parcel. The lease encompassed two buildings, Buildings 1 and 2, and it was in Building 2 in which plaintiff
allegedly tripped and fell. It is uncontroverted that the public was allowed in Building 2 to view the animals in the stalls
contained in that building. The stalls contained pieces of wood on the floor extending 2-4 inches above the floor surface
to contain hay placed in the stalls. While chasing after one of her children who entered one of the stalls to view the
animals, the plaintiff tripped and fell over the wood containment boards extending up from the floor. Plaintiff testified
that the lighting was poor at the time and in fact that [***2] there were only two lights that she recalled being on in
Building 2. Plaintiff further stated that she did not see the board over which she tripped prior to the accident. Plaintiff
stated that after the accident, she noticed the board and it was an ordinary wood color.
Cornell's witness testified that the board over which plaintiff allegedly tripped and fell was painted white to alert
pedestrians of its existence, that the lighting was more than adequate and that there was nothing wrong with the board
itself. Cornell takes that position that it was plaintiff who failed to watch where she was going, focused on retrieving her
child, which caused her to trip and fall. In support of its motion, Cornell submits the affidavit of an expert engineer who
opines that there were no code violations in Building 2, the lighting itself was more than adequate based upon light
measurements he took almost 2 years after the accident, and essentially that plaintiff was the proximate cause of her
own accident by not looking where she was going at the time.
OCAS cross-moves for summary judgment as against plaintiff and further moves for summary judgment as against
Cornell on the cross-claims. With respect [***3] to OCAS's cross-motion as against plaintiff, that portion of the motion
itself must be denied. CPLR 3212(b) states in pertinent part that "a motion for summary judgment shall be supported
by affidavit, by a copy of the pleadings and by other available proof, such as depositions and written admissions." The
pleadings are a required part of the proof submitted in support of a motion for summary judgment. S.J. Capelin Assoc.,
Inc. v Globe Manufacturing Corp., 34 NY2d 338, 341, 313 N.E.2d 776, 357 N.Y.S.2d 478 (1974). Failure to include
pleadings in support of a motion for summary judgment requires that said motion be denied, regardless of the merits of
the motion. Niles v County of Chautauqua, 285 AD2d 988, 727 N.Y.S.2d 679 (4th Dept. 2001); Deer Park Assocs. v.
Robbins Store, Inc., 243 AD2d 443, 665 N.Y.S.2d 286 (2nd Dept. 1997); Lawlor v County of Nassau, 166 AD2d 692,
561 N.Y.S.2d 644 (2nd Dept. 1990); Somers Realty Corp., v Big "V" Properties, Inc., 149 AD2d 581, 540 N.Y.S.2d 677
(2nd Dept. 1989); Freeman v Easy Glider Roller Rink, Inc., 114 AD2d 436, 436-437, 494 N.Y.S.2d 351 (2nd Dept.
1985).
In Williams v County of Genesee, 289 AD2d 1026, 735 N.Y.S.2d 453 (4th Dept. 2001), the Court held that the
failure of a party to include a copy of the pleadings filed in the action in support of its cross-motion requires that
summary [***4] judgment be denied regardless of the merits of the cross-motion. In DiSano v KBH Construction Co.,
Inc., 280 AD2d 951, 721 N.Y.S.2d 200 (4th Dept. 2001), the Court explicitly held that defendant's failure to include a
copy of its answer in its papers in support of its cross-motion was fatally defective and required denial of the
cross-motion as a matter of law. Id. at 952; See, Nationwide Mutual Insurance Co. v Piper, 286 AD2d 903, 731
N.Y.S.2d 409 (4th Dept. 2001); Gallagher v TDS Telecom, 280 AD2d 991, 720 N.Y.S.2d 422 (4th Dept. 2001).
OCAS's cross-motion, if for no other reason, must be denied in its entirety for failure to comply with the CPLR's
specific requirement that a such a motion for summary judgment be supported by the pleadings. Whether a cross-motion
or a motion in chief, the requirement that pleadings be included in support thereof exists, and failure to do so is fatal.
Moreover, OCAS improperly cross-moved for summary judgment against plaintiff. The plaintiff was not the
original moving party (Cornell was the original moving party). A cross-motion is deficient if it seeks affirmative relief,
i.e. summary judgment, as against a nonmoving party. CPLR 2215 states in pertinent part that "At least three days prior
to the time [***5] at which the motion is noticed to be heard, a party may serve upon the moving party a notice of
cross-motion demanding relief . . ." (emphasis supplied). In Mango v Long Island Jewish-Hillside Medical Center, 123
AD2d 843, 507 N.Y.S.2d 456 (2nd Dept. 1986), the Court held "A cross motion is an improper vehicle for seeking
affirmative relief from a nonmoving party . . ." Id. at 844. Thus, OCAS's cross- motion as against plaintiff is
procedurally defective and is denied.
Page 311
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
OCAS's cross-motion for summary judgment seeking dismissal of the cross-claims of its co-defendants is granted
without opposition. Cornell submitted no opposition whatsoever to OCAS's cross-motion on the cross-claims, and
therefore OCAS's cross-motion is granted only as to the co-defendant's cross-claims.
The Court next turns its attention to Cornell's motion for summary judgment as against plaintiff. As a preliminary
matter with respect to Cornell's expert, the Court will not consider his affidavit. The expert affidavit is replete with
conclusory allegations and speculative opinions of an expert based upon an examination of the premises approximately
two-years post-accident and photographs which themselves have not been authenticated. [***6] Therefore, there is no
evidentiary predicate to demonstrate that the photographs are a fair and accurate representation of the premises as they
existed on the date the accident occurred. As such, the photographs are without evidentiary value (see generally, Pirie v
Krasinski, 18 AD3d 848, 850, 796 N.Y.S.2d 671 (2nd Dept. 2005); Fitzgerald v Sears, Roebuck & Co., 17 AD3d 522,
793 N.Y.S.2d 164 (2nd Dept. 2005)).
Moreover, plaintiff's expert failed to indicate whether the lighting conditions he observed were the same as they
were at the time of plaintiff's accident. Plaintiff testified that only two lights were working at the time. Plaintiff's
expert's conclusions are based upon all of the lights working. There is no indication that the expert's inspection mirrored
the conditions at the time of plaintiff's accident and therefore the affidavit lacks any evidentiary value.
Summary judgment is a drastic remedy that "should not be granted where there is any doubt as to the existence of a
triable issue" (citations omitted). In its analysis of such a motion, a court must construe the facts in a light most
favorable to the nonmoving party so as not to deprive that person his or her day in court (citations omitted). Russell v A.
Barton Hepburn Hosp., 154 AD2d 796, 797, 546 N.Y.S.2d 239 (3rd Dept. 1989); [***7] See also, Moskowitz v
Garlock, 23 AD2d 943, 944, 259 N.Y.S.2d 1003 (3rd Dept., 1965).
While summary judgment is an available remedy in some cases, its dire effects preclude its use except in
"unusually clear" instances. Stone v Aetna Life Ins. Co., 178 Misc. 23, 25, 31 N.Y.S.2d 615 (Sup. Ct., New York County,
1941). "A remedy which precludes a litigant from presenting his evidence for consideration by a jury, or even a judge,
is necessarily one which should be used sparingly, for its mere existence tends to alter our jurisprudential concept of a
day in court.'" Wanger v. Zeh, 45 Misc 2d 93, 94, 256 N.Y.S.2d 227, (Sup. Ct., Albany County, 1965), aff'd 26 AD2d 729
(3rd Dept.1966). Given the fact that summary judgment is the procedural equivalent of a trial, granting summary
judgment requires that no material or triable issues of fact exist. When doubt exists or where an issue is arguable, or
"fairly debatable," summary judgment must be denied. Bakerian v. Horn, 21 AD2d 714, 249 N.Y.S.2d 646 (1st Dept.
1964); Jones v County of Herkimer, 51 Misc 2d 130, 135, 272 N.Y.S.2d 925 (Sup. Ct., Herkimer County, 1966); Town of
Preble v Song Mountain, Inc., 62 Misc 2d 353, 355, 308 N.Y.S.2d 1001 (Sup. Ct., Courtland County, 1970); See also,
Sillman v Twentieth Century-Fox Film Corporation, 3 NY2d 395, 404, 144 N.E.2d 387, 165 N.Y.S.2d 498 (1957).
[***8] The drastic remedy of summary judgment is rarely granted in negligence cases since the very question of
whether the defendant's conduct was indeed negligent is a jury question except in the most glaring cases. See,
Johannsdottir v Kohn, 90 AD2d 842, 456 N.Y.S.2d 86 (2nd Dept. 1982).
Courts are not authorized to try issues in a case, but rather to determine whether there is an issue to be tried. Esteve
v Abad, 271 AD 725, 727, 68 N.Y.S.2d 322 (1st Dept. 1947). "Issue-finding, rather than issue-determination, is the key
to the procedure. If and when the court reaches the conclusion that a genuine and substantial issue of fact is presented,
such determination requires the denial of the application for summary judgment." Id.; Sillman, 3 NY2d at 404.
According to the Court of Appeals, "the proponent of a summary judgment motion must make a prima facie
showing of entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of
fact from the case [citations omitted]. Failure to make such a showing requires the denial of the motion, regardless of
the sufficiency of the opposing papers [citations omitted]." Winegrad v New York University Medical Center, 64 NY2d
851, 853, 476 N.E.2d 642, 487 N.Y.S.2d 316 (1985); Ayotte v Gervasio, 81 NY2d 1062, 1063, 619 N.E.2d 400, 601
N.Y.S.2d 463 (1993); [***9] Finkelstein v Cornell University Medical College, 269 AD2d 114, 117, 702 N.Y.S.2d 285
(1st Dept. 2000).
Page 312
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
It is well established that "[t]he proponent of a summary judgment motion must make a prima facie showing of
entitlement to judgment as a matter of law, tendering sufficient evidence to eliminate any material issues of fact from
the case." Winegrad v New York University Medical Center, 64 NY2d 851, 853, 476 N.E.2d 642, 487 N.Y.S.2d 316
(1985); Ayotte v Gervasio, 81 NY2d 1062, 1063, 619 N.E.2d 400, 601 N.Y.S.2d 463 (1993); Finkelstein v Cornell
University Medical College, 269 AD2d 114, 117, 702 N.Y.S.2d 285 (1st Dept. 2000). The moving party must
affirmatively demonstrate the merits of its claim or defense, and cannot obtain summary judgment merely by "pointing
to gaps in its opponent's proof." Kajfasz v Wal-Mart Stores, Inc., 288 AD2d 902, 902, 732 N.Y.S.2d 494 (4th Dept.
2001); Dodge v City of Hornell Industrial Development Agency, 286 AD2d 902, 903, 730 N.Y.S.2d 902 (4th Dept.
2001); Frank v Price Chopper Operating Co., Inc., 275 AD2d 940, 713 N.Y.S.2d 614 (4th Dept. 2000).
A party moving for summary judgment has the burden of submitting evidence, in admissible form, to support his
motion. Zuckerman v City of New York, 49 NY2d 557, 562, 404 N.E.2d 718, 427 N.Y.S.2d 595 (1980). Unsworn
documents are inadmissible evidence and thus a party's reliance thereon in support of [***10] a motion for summary
judgment is improper. See, Huntington Crescent Country Club v M & M Auto & Marine Upholstery, Inc., 256 AD2d
551, 551, 682 N.Y.S.2d 876 (2nd Dept. 1998).
"In moving for summary judgment, the defendant [bears] the initial burden of establishing that it maintained its
premises in a reasonably safe condition, had no actual or constructive knowledge of the [condition] and did not create
the allegedly dangerous condition." Petrell v Victory Markets, Inc., 283 AD2d 955, 725 N.Y.S.2d 244 (4th Dept. 2001);
Grant v Radamar Meat, 294 AD2d 398, 398, 742 N.Y.S.2d 349 (2nd Dept. 2002); Atkinson v Golub Corporation
Company, 278 AD2d 905, 906, 718 N.Y.S.2d 546 (4th Dept. 2000).
The moving party's failure to meet this burden of proof "requires denial of the motion, regardless of the sufficiency
of the opposing papers", for the burden in that event never shifts to the opponent to demonstrate the existence of a
material issue of fact. Winegrad v New York University Medical Center, supra, 64 NY2d at 853. The Second
Department has repeatedly affirmed that the movant's failure in the first instance to demonstrate entitlement to the
drastic relief of summary judgment mandates denial of the motion regardless of the sufficiency of the opposing papers.
See, [***11] e.g., Miccoli v Kotz, 278 AD2d 460, 461, 717 N.Y.S.2d 661 (2nd Dept. 2000); Karras v County of
Westchester, 272 AD2d 377, 378, 707 N.Y.S.2d 910 (2nd Dept. 2000); Fox v Kamal Corporation, 271 AD2d 485, 706
N.Y.S.2d 142 (2nd Dept. 2000); Gstalder v State of New York, 240 AD2d 541, 542, 658 N.Y.S.2d 680 (2nd Dept. 1997);
Lamberta v Long Island Railroad, 51 AD2d 730, 730-731, 379 N.Y.S.2d 139 (2nd Dept. 1976); Greenberg v Manlon
Realty, Inc., 43 AD2d 968, 969, 352 N.Y.S.2d 494 (2nd Dept. 1974).
A landowner's responsibility is to assure that the conditions on his property are reasonably safe. Basso v Miller, 40
NY2d 233, 241, 352 N.E.2d 868, 386 N.Y.S.2d 564 (1976); Comeau v Wray, 241 AD2d 602, 603, 659 N.Y.S.2d 347 (3rd
Dept. 1997); White v Gabrielli, 272 AD2d 469, 469, 707 N.Y.S.2d 505 (2nd Dept. 2000); Rovegno v Church of the
Assumption, 268 AD2d 576, 576, 703 N.Y.S.2d 496 (2nd Dept. 2000); Kurshals v Connetquot Central School District,
227 AD2d 593, 593, 643 N.Y.S.2d 622 (2nd Dept. 1996). Specifically, the Basso Court stated that
[i]ndeed as the duty was so clearly stated in Smith v. Arbaugh's Rest. [152 U.S. App. D.C. 86, 469 F.2d 97, 100
[D.C. Cir. 1972]]: "A landowner must act as a reasonable man in maintaining his property in a reasonably safe
condition in view of all the circumstances, including the likelihood of injury to others, the seriousness of the injury, and
the burden of avoiding [***12] the risk". Application of the single rule in the instant case exemplifies its good sense,
for the duty of keeping the roads of Ice Caves Mountain in repair should not vary with the status of the person who uses
them but, rather, with the foreseeability of their use and the possibility of injury resulting therefrom.
Basso, 40 NY2d at 241; Kurshals, 227 AD2d at 593 (2nd Dept. 1996); Rovegno, 268 AD2d at 576 (2nd Dept.
2000).
As expressed in Cupo v Karfunkel, 1 AD3d 48, 767 N.Y.S.2d 40 (2nd Dept. 2003), once a plaintiff presents
evidence of a dangerous condition, the burden shifts to the landowner to demonstrate that he acted with reasonable care
Page 313
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
to make the property safe based upon the likelihood of injury to others and the burden of avoiding the risk. See, Id. at
52.
In Comeau, supra, a deliveryman sued the property owners after falling on stairs leading to a root cellar.
Landowners are under a duty to maintain their premises in a reasonably safe condition in view of the circumstances,
including the likelihood of injury to others. See, Id. at 603. This duty encompasses warning others of the danger,
including obvious ones, or take reasonable steps to protect others from the dangers. See, Id. Moreover, [***13] where
members of the public frequent a location, a landowner owes a "nondelegable duty to provide members of the general
public with a reasonably safe premises, including a safe means of ingress and egress.' (Thomassen v. J & K Diner, 152
AD2d 421, 424, 549 N.Y.S.2d 416; see, Richardson v. David Schwager Assocs.., 249 AD2d 531, 531-532, 672 N.Y.S.2d
114).". Arabian v Benenson, 284 AD2d 422, 422, 726 N.Y.S.2d 447 (2nd Dept. 2001); see, Reynolds v Sead
Development Group, 257 AD2d 940, 940, 684 N.Y.S.2d 361 (3rd Dept. 1999); June v Bill Zikakis Chevrolet, Inc., 199
AD2d 907, 909, 606 N.Y.S.2d 390 (3rd Dept. 1993). This duty includes a duty to provide adequate lighting for such
persons frequenting the locations. See, Tarrazi v 2025 Richmond Avenue Associates, Inc., 296 AD2d 542, 544, 745
N.Y.S.2d 222 (2nd Dept. 2002); Shirman v New York City Transit Authority, 264 AD2d 832, 833, 695 N.Y.S.2d 582 (2nd
Dept. 1999); Gallagher v St. Raymond's Roman Catholic Church, 21 NY2d 554, 558, 236 N.E.2d 632, 289 N.Y.S.2d 401
(1968). Plaintiff testified as to inadequate lighting which caused her not to see the board over which she tripped and fell.
Defendants proffered no admissible evidence to contradict that assertion.
Where a property owner has a nondelegable duty to keep the premises safe, the duty may not be delegated to
agents, [***14] employees or independent contractors. See, Backiel v Citibank, N.A., 299 AD2d 504, 751 N.Y.S.2d 492
(2nd Dept. 2002). The property owner is in the best position to assume the risks associated with conditions existing on
its property since it is consistent with the general responsibility of owners to maintain their premises in a reasonably
safe condition under all circumstances. See Basso, 40 NY2d 233, 352 N.E.2d 868, 386 N.Y.S.2d 564.
An out of possession landlord is liable for injuries which occur on the subject premises so long as it either retains
control over the leased premises, it reserves the right to repair or maintain the property, or it retains control over the
operation of the business conducted on the property (Emphasis suppled). See, Borelli v 1051 Realty Corp., 242 AD2d
517, 518, 661 N.Y.S.2d 290 (2nd Dept. 1997); Pastor v R.A.K. Tennis Corp., 278 AD2d 395, 395, 718 N.Y.S.2d 633 (2nd
Dept. 2000); Gallo v Apollon City Corp., 278 AD2d 363, 363-364, 718 N.Y.S.2d 621 (2nd Dept. 2000); Gordon v.
Foster Apts. Group., 260 AD2d 540, 541, 688 N.Y.S.2d 234, (2nd Dept. 1999); De Cristofaro v Joann Enterprises Inc.,
243 AD2d 1015, 1017, 663 N.Y.S.2d 689 (3rd Dept. 1997); Downey v R.W. Garraghan, Inc., 198 AD2d 570, 571, 603
N.Y.S.2d 222 (3rd Dept. 1993); Young v J.M. Moran Properties, Inc., 259 AD2d 1037, 1038, 688 N.Y.S.2d 354 (4th
Dept. 1999); Mikolajczyk v M.C. Morgan Contractors, Inc., 273 AD2d 864, 865, 709 N.Y.S.2d 283 (4th Dept. 2000);
[***15] Henness v Lusins, 229 AD2d 873, 873-874, 645 N.Y.S.2d 937 (3rd Dept. 1996). This axiom further extends to
owners/lessors and lessees/sublessees. See, Baker v Getty Oil Co., 242 AD2d 644, 645, 663 N.Y.S.2d 40 (2nd Dept.
1997). Specifically, the lease agreement requires OCAS's approval in construction of any buildings, and the lease only
covers 1 acre of over a 90 acre parcel. OCAS oversaw the entirety of the Orange County Fair, provided security for the
entire event and even contracted with an ambulance company to provide medical support for patrons. By retaining such
control OCAS is not entitled to the protections given to out of possession landlords.
Furthermore, Cornell claims an absence of any actual or constructive notice of the condition. As the initial
proponent of summary judgment, Cornell was obligated to demonstrate that it lacked actual or constructive notice of the
precipitating condition or that it did not create the condition. See generally, Gordon v American Museum of Natural
History, 67 NY2d 836, 492 N.E.2d 774, 501 N.Y.S.2d 646 (1986); Gloria v MGM Emerald Enterprises, Inc., 298 AD2d
355, 751 N.Y.S.2d 213 (2nd Dept., 2002); Van Steenburg v Great Atlantic & Pacific Tea Company Inc., supra, 235
AD2d 1001 (3rd Dept. 1997). See, Curzio v Tancredi, 8 AD3d 608, 778 N.Y.S.2d 910 (2nd Dept. 2004); [***16] Petrell
v Victory Markets, Inc., 283 AD2d 955, 725 N.Y.S.2d 244 (4th Dept. 2001); Atkinson v Golub Corporation Company,
278 AD2d 905, 906, 718 N.Y.S.2d 546 (4th Dept. 2000); Frank v Price Chopper Operating Co., Inc., supra, 275 AD2d
940 (4th Dept. 2000).
Page 314
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
There is no evidence whatsoever that Cornell did not create the alleged defect. As such, summary judgment is
denied on the issue of a condition created.
Cornell, as movant for summary judgment, had the initial burden of establishing the lack of actual or constructive
notice. See, Lowe v Olympia & York Companies, 238 AD2d 317, 656 N.Y.S.2d 930 (2nd Dept. 1997); Alvarez v
Compass Retail, Inc., 237 AD2d 473, 655 N.Y.S.2d 979 (2nd Dept. 1997); see also, Lesocovich v 180 Madison Ave.
Corp., 81 NY2d 982, 615 N.E.2d 1010, 599 N.Y.S.2d 526 (1993). There is no evidence that Cornell did not receive any
complaints concerning the condition at issue. Cornell proffered no evidence of an absence of actual notice and therefore
failed to make out a prima facie case on that issue.
Proof of lack of actual notice alone is insufficient. See, Reinemann v Stewart's Ice Cream Co., Inc., 238 AD2d 845,
656 N.Y.S.2d 546 (3rd Dept. 1997). It was also incumbent on Cornell, as movant, to show lack of constructive notice, in
that the condition which caused the accident was not visible or [***17] apparent for a sufficient length of time to
permit defendant, in the exercise of reasonable care, to remedy the defect. See, Reinemann, supra; Cobrin v County of
Monroe, 212 AD2d 1011, 623 N.Y.S.2d 680 (4th Dept. 1995).
Defendant was obligated to demonstrate that they made reasonable efforts to inspect the subject premises in order
to ascertain whether there were hazardous or defective conditions about which they would receive actual or constructive
notice. See, Zuckerman v State of New York, 209 AD2d 510, 512, 618 N.Y.S.2d 917 (2nd Dept. 1994).
As the Court stated in Haleemeh M.S. ex rel. Mohammad S.F. v MRMS Realty Corp., 28 Misc 3d 443, 904 N.Y.S.2d
862 (Sup. Kings, 2010):
"Constructive notice" is described both as a legal inference and a duty of inquiry. "Constructive notice is a legal
inference from established facts." (Bierzynski v. New York C. R. Co.., 31 AD2d 294, 297, 297 N.Y.S.2d 457 [4th Dept
1969], aff'd 29 NY2d 804, 277 N.E.2d 412, 327 N.Y.S.2d 365 [1971] [quoting Birdsall v. Russell, 29 NY 220, 248
(1864)].) "Constructive notice ordinarily means that a person should be held to have knowledge of certain facts because
he knows other facts from which it is concluded that he actually knew, or ought to have known, the fact in question."
(Id. [quoting 42 NY [***18] Jur., Notice and Notices, 3.)
"Constructive notice also exists whenever it is shown that reasonable diligence would have produced actual notice."
(Id.) "A person is chargeable with constructive notice of any fact which would have been disclosed by a reasonably
diligent inquiry if circumstances are such as to indicate to a person of reasonable prudence and caution the necessity
of making inquiry to ascertain the true facts and he or she avoids such inquiry." (Majer v. Schmidt, 169 AD2d 501, 503,
564 N.Y.S.2d 722 [1st Dept 1991].) "One who has reasonable grounds for suspecting or inquiring ought to suspect,
ought to inquire, and the law charges him with the knowledge which the proper inquiry would disclose." (Fidelity &
Deposit Co. v. Queens County Trust Co., 226 NY 225, 233, 123 N.E. 370 [1919].)
In Wynn v T.R.I.P. Redevelopment Associates, 296 AD2d 176, 181, 745 N.Y.S.2d 97 (3rd Dept. 2002), the Court
held that a "landlord is generally chargeable with notice of the dangerous conditions which a reasonable inspection
would have discovered -- the adequacy of the inspections usually being a question for the jury [cit. om.]."(emphasis
supplied). It should also be noted that so long as "a defendant has a duty to conduct [***19] reasonable inspections
of the premises, the issue of actual or constructive notice is irrelevant." (Emphasis supplied) Weller v Colleges of
the Senecas, 217 AD2d 280, 285, 635 N.Y.S.2d 990 (4th Dept. 1995); Watson v City of New York, 184 AD2d 690, 690,
585 N.Y.S.2d 100 (2nd Dept. 1992). Moreover, defendant adduced no evidence whatsoever concerning a specific
maintenance protocol for the subject premises. Cornell's witness specifically stated that he only engages in an initial
inspection in April or May preceding the opening of the fair. The accident occurred in July. This glaring deficiency in
the defendant's proof precludes a finding that the defendants lacked constructive notice as a matter of law and further
that defendant even made out a prima face case for summary judgment. See, Mancini v Quality Markets, Inc., 256 AD2d
1177, 684 N.Y.S.2d 391 (4th Dept. 1998); Edwards v Wal-Mart Stores Inc., 243 AD2d 803, 662 N.Y.S.2d 855 (3rd Dept.
1997); Van Steenburg v Great Atlantic & Pacific Tea Company Inc., 235 AD2d 1001, 652 N.Y.S.2d 893 (3rd Dept.
Page 315
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
1997). In all of these cases, the defendants proffered testimony on this score and still failed to meet its initial burden of
proof on the motion for summary judgment.
In Mancini, supra, the Court wrote:
Although plaintiff will bear [***20] the burden at trial of proving that defendant had actual or constructive notice
of the dangerous condition, on a motion for summary judgment defendant bears the burden of establishing lack of
notice as a matter of law [cit.om.]. The affidavit of the store manager and the deposition testimony of the front end
manager are not sufficient to sustain defendant's burden. Neither was able to state when the area had last been inspected,
or which employee was responsible for inspection or clean up in the produce area. Plaintiff's accident occurred after
9:30 p.m., and both witnesses indicated that the produce manager, who is responsible for the produce area, left at 5:00
p.m. at the latest. Although both witnesses indicated that the store had a policy of inspection of the entire store every
hour, no documentation was provided to establish that the policy was followed on the day of plaintiff's accident, nor
could either witness recall having performed such inspections. Consequently, defendant failed to establish that the
grapes had not been on the floor for a sufficient length of time to permit an employee to discover and remedy the
condition.
Id., 256 AD2d at 1177-78.
In Edwards, supra, where [***21] the plaintiff fell in a puddle of dirty water at around 8:30 p.m., the Court wrote:
In support of the motion [for summary judgment], defendant submitted the examination before trial of its
comanager who testified that, although there was no set schedule, the "general practice" of the store was to inspect the
area around the restrooms every half hour to an hour. However, in response to plaintiff's interrogatories, defendant
admitted that it was unknown "what maintenance, inspection or cleaning was done in the area of the ladies' room" on
the day of plaintiff's accident. The only pertinent evidence on this point was the testimony from a courtesy desk
employee who stated that the last time she inspected the area that day was prior to 7:00 p.m., at which time she did not
notice water on the floor.
In our view, this evidence was insufficient to meet defendant's burden of showing that it did not have constructive
notice of the dangerous condition [cit.om.].
Id., 243 AD2d at 803.
Finally, in Van Steenburg, supra, the Court wrote:
[T]he store manager testified that there was no janitorial staff for the store; instead, all department heads and
employees were instructed to clean during their idle [***22] time. Additionally, the store manager could not recall if a
specific sweeping or mapping schedule was in place at the time of plaintiff's fall, nor was he able to state when the floor
in the produce area was last cleaned prior to plaintiff's accident. Such proof falls far short of satisfying defendant's
burden on its motion for summary judgment (compare, McClarren v. Price Chopper Supermarkets, 226 AD2d 982, 640
N.Y.S.2d 702...[proof establishing that the aisle where the plaintiff fell was inspected 3 to 5 minutes prior to the accident
and found to be clean and dry]; Maiorano v. Price Chopper Operating Co., 221 AD2d 698, 699, 633 N.Y.S.2d
413...[record demonstrated that the area in which the plaintiff fell had been swept 5 to 10 minutes prior to accident]).
Thus,...the sufficiency of plaintiff's proof in opposition need not detain us, as defendant failed to meet its evidentiary
burden in the first instance...
Id., 235 AD2d at 1001.
Conspicuously absent from defendant's moving papers is any admissible evidence to the absence of defendant's
constructive notice.
Page 316
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
It should also be noted that so long as "a defendant has a duty to conduct reasonable inspections of the premises,
the issue of actual or constructive notice is irrelevant." [***23] (Emphasis supplied) Weller v. Colleges of the Senecas,
217 AD2d 280, 285, 635 N.Y.S.2d 990, 994 (4th Dept. 1995); Watson v. City of New York, 184 AD2d 690, 690, 585
N.Y.S.2d 100, 101 (2nd Dept. 1992).
Moreover, where members of the public frequent a location, a landowner owes a "nondelegable duty to provide
members of the general public with a reasonably safe premises, including a safe means of ingress and egress.'
(Thomassen v. J & K Diner, 152 AD2d 421, 424, 549 N.Y.S.2d 416; see, Richardson v. David Schwager Assocs.., 249
AD2d 531, 531-532, 672 N.Y.S.2d 114).". Arabian v Benenson, 284 AD2d 422, 422, 726 N.Y.S.2d 447 (2nd Dept. 2001);
see, Reynolds v Sead Development Group, 257 AD2d 940, 940, 684 N.Y.S.2d 361 (3rd Dept. 1999); June v Bill Zikakis
Chevrolet, Inc., 199 AD2d 907, 909, 606 N.Y.S.2d 390 (3rd Dept. 1993). Where a property owner has a nondelegable
duty to keep the premises safe, the duty may not be delegated to agents, employees or independent contractors. See,
Backiel v Citibank, N.A., 299 AD2d 504, 751 N.Y.S.2d 492 (2nd Dept. 2002). The property owner is in the best position
to assume the risks associated with conditions existing on its property since it is consistent with the general
responsibility of owners to maintain their premises in a reasonably [***24] safe condition under all circumstances. See
Basso, 40 NY2d 233, 352 N.E.2d 868, 386 N.Y.S.2d 564. This obligation owed to the general public encompasses all
persons who come upon the premises. See, Backiel, 299 AD2d at 507. In the instant case, the accident occurred in a
building specifically open to the public. As such, defendants owed a non-delegable duty to people such as plaintiff to
properly maintain the subject premises. Given the submissions, questions of fact remain as to whether the defendants
fulfilled such an obligation, and such questions must be resolved by a jury, not the Court.
Cornell further asserts that the condition about which plaintiff complains was open and obvious and not inherently
dangerous and therefore absolved defendants from any responsibilities to plaintiff. The defendant in Zimkind v Costco
Wholesale Corp., 12 AD3d 593, 785 N.Y.S.2d 108 (2nd Dept. 2004) submitted photographic evidence of the subject
condition and affirmatively demonstrated that it was not inherently dangerous. The plaintiff in that case tripped over a
concrete wheel stop in the defendant's parking lot. The Court held that based upon the evidence submitted, there was
considerable proof that the condition itself was not inherently dangerous [***25] and it was open and obvious as well.
As such, the defendant owed no duty to that particular plaintiff. In this case, as in Zimkind, the Court is obligated to
search defendants' motions to ascertain whether it demonstrated affirmatively that the condition was both open and
obvious under the circumstances, and if so, further demonstrate that it was not inherently dangerous. In the instant case,
defendants did neither thing. Defendant's counsel's affirmation that the condition was open and obvious proved nothing
See, Salas v Town of Lake Luzerne, 265 AD2d 770, 770, 696 N.Y.S.2d 314 (3rd Dept. 1999); see also, Wright v Rite-Aid
of NY, Inc., 249 AD2d 931, 932, 672 N.Y.S.2d 548 (4th Dept. 1998); Hodgson, Russ, Andrews, Woods & Goodyear v
Roth, 186 AD2d 1001, 1002, 590 N.Y.S.2d 817 (4th Dept.1992). In brief, the motion must be supported by an affidavit
of a person having knowledge of the facts, together with a copy of the pleadings and other available proof." S.J. Capelin
Associates, Inc. v Globe Manufacturing Corp., 34 NY2d 338, 341, 313 N.E.2d 776, 357 N.Y.S.2d 478 (1974). None of
the testimony specifically demonstrated either that the condition at issue was an open and obvious one, and that even if
open and obvious, that it was not inherently dangerous. Therefore defendant [***26] defaulted upon its obligation to
affirmatively demonstrate its prima facie case.
Whether or not the condition itself was open and obvious, that does not absolve the defendants from their duty to
reasonably maintain the premises. As expressed in Cupo v Karfunkel, 1 AD3d 48, 767 N.Y.S.2d 40 (2nd Dept. 2003),
once a plaintiff presents evidence of a dangerous condition, the burden shifts to the landowner to demonstrate that he
acted with reasonable care to make the property safe based upon the likelihood of injury to others and the burden of
avoiding the risk. See, Id. at 52. Whether a condition is open and obvious has nothing to do with this duty. The duty is
not abrogated by the characterization of the hazard as open and obvious since by doing so leads to the ridiculous result
of encouraging landowners to make hazards on their properties as dangerous as possible to avoid liability if someone is
injured as a result of that hazard. See, Id. In Stern v Ofori-Okai, 246 AD2d 807, 808, 668 N.Y.S.2d 68 (3rd Dept. 1998),
the Court held that even awareness of a hazardous condition does not absolve a landowner from liability in maintaining
its premises, but is relevant only on the issue of comparative negligence. In Morgan v Genrich, 239 AD2d 919, 659
Page 317
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
N.Y.S.2d 638 (4th Dept. 1997), [***27] the Court held that the fact that a hazard is readily observable "may be relevant
on the issue of plaintiff's comparative negligence, but it does not negate the duty of the defendants to keep their
premises reasonably safe." Id. at 920; see, Chambers v Maury Povich Show, 285 AD2d 440, 440, 726 N.Y.S.2d 725 (2nd
Dept. 2001); Acevedo v Camac, 293 AD2d 430, 431, 740 N.Y.S.2d 380 (2nd Dept., 2002); Tuttle v Anne LeConey, Inc.,
258 AD2d 334, 335, 685 N.Y.S.2d 204 (1st Dept. 1999); Crawford v Marcello, 247 AD2d 907, 907, 668 N.Y.S.2d 852
(4th Dept. 1998); Tenebruso v Toys "R" Us -- Nytex, Inc., 256 AD2d 1236, 1237, 682 N.Y.S.2d 785 (4th Dept. 1998);
Vereerstraeten v Cook, 266 AD2d 901, 901, 697 N.Y.S.2d 421 (4th Dept. 1999); Orellana v Merola Associates, Inc., 287
AD2d 412, 413, 731 N.Y.S.2d 726 (1st Dept. 2001).
As the First Department expressed in Westbrook v WR Activities-Cabrera Markets, 5 AD3d 69, 773 N.Y.S.2d 38
(1st Dept. 2004), the issue of whether a condition is open and obvious is generally a jury question and should only be
resolved as a matter of law when the facts compel such a conclusion. See, Id. at 72. For a condition to be open and
obvious as a matter of law requires that it could not be overlooked by anyone making a reasonable uses of his senses.
See, Garrido v City of New York, 9 AD3d 267, 268, 779 N.Y.S.2d 208 (1st Dept. 2004).
Furthermore, [***28] the extent to which a defect is open and obvious addresses the issue of plaintiff's
comparative negligence, not the defendant's overall duty to maintain its premises in a reasonably safe condition. See,
Acevedo, 293 AD2d at 431.
An example given by the Westbrook Court included a case (Thornhill v Toys "R" Us NYTEX, 183 AD2d 1071, 583
N.Y.S.2d 644) where summary judgment was denied to a defendant when a plaintiff tripped over a raised platform in a
department store, despite the fact that the plaintiff initially noticed the platform and avoided it, given that the
photographs demonstrated that the platform itself was not readily discernible.
In Juoniene v HRH Construction Corp., 6 AD3d 199, 774 N.Y.S.2d 525 (1st Dept. 2004), the Court found that
plaintiff's striking her head on a standpipe which extended horizontally from a building was not an open and obvious
hazard since the sun glare prevented her from seeing the object, since some hazards due to their nature of location, are
likely to be overlooked. See, Id. at 200-201.
In Garrido, supra, plaintiff tripped over a broken and fallen construction sign which was on the sidewalk. The sign
was 6' long and 4' high lying on the ground. The Court reversed the trial court's decision [***29] to grant summary
judgment noting that while the sign itself was clearly visible, the plaintiff's failure to observe it was relevant only to the
issue of plaintiff's comparative negligence, and not the defendant's overall duty to reasonably maintain the sidewalk.
See, Garrido, 9 AD3d at 268.
In Moloney v Wal-Mart Stores, Inc., 2 AD3d 508, 767 N.Y.S.2d 897 (2nd Dept. 2003), plaintiff was injured when
she tripped over a wooden pallet placed by defendant on the floor between two tables displaying merchandise. The
Court held, in reversing the lower court's decision to grant defendant a judgment on the law at the close of plaintiff's
case, even if a jury found the pallet to have been open and obvious, it was relevant only to comparative negligence and a
rational jury may not completely absolve the defendant from liability. See, Id. at 508. In the instant case, the issue of
whether the stacked box was open and obvious is a jury question, and even an affirmative determination that it was
open and obvious (a question which this court does not reach) does not absolve defendant from liability.
In Monge v Home Depot, Inc., 307 AD2d 501, 761 N.Y.S.2d 886 (3rd Dept. 2003), plaintiff attempted to maneuver
around a plant display placed [***30] by defendant, and in so doing, her shopping cart's wheel went off the curb and
caused her to fall and be injured. The Court held that defendant created the condition by placing and arranging the plant
display and the issue of whether the perils of the aisle were open and obvious was best left for jury determination. See,
Id. at 502; See also, De Conno v Golub Corp., 255 AD2d 734, 735, 680 N.Y.S.2d 727 (3rd Dept. 1998) (plaintiff, who
tripped on a cone placed by defendant in an aisle of one of its stores, was entitled to a jury trial and denial of summary
judgment by defendants since the placement of the cone and its obscuring by customers and other merchandise stacked
nearby, created an issue of fact).
Page 318
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
Moreover, even if the condition was open and obvious, the question remains whether it was inherently dangerous
and whether plaintiff bears any responsibility for the accident's occurrence. NYC.P.L.R. 1411 states as follows:
In any action to recover damages for personal injury, injury to property, or wrongful death, the culpable conduct
attributable to the claimant or to the decedent, including contributory negligence or assumption of risk, shall not bar
recovery, but the amount of damages otherwise recoverable [***31] shall be diminished in the proportion which the
culpable conduct attributable to the claimant or decedent bears to the culpable conduct which caused the damages.
In New York, it is well settled that the issue of comparative negligence is a question of fact proper for the jury's
determination. Louise B.G. v New York City Bd. of Educ., 143 AD2d 728, 730, 533 N.Y.S.2d 293 (2nd Dept. 1988)
(citing Willis v. Young Men's Christian Ass'n of Amsterdam, 28 NY2d 375, 270 NE2d 717, 321 NYS2d 895 (1971)). A
determination of whether plaintiff is contributorily negligent is almost invariably question of fact, and is for jury to
determine in all but clearest cases. See, Williams v City of New York, 101 AD2d 835, 836, 475 N.Y.S.2d 495 (2nd Dept.
1984); See, also, Weber v City of New York, 101 AD2d 757, 757, 475 N.Y.S.2d 401 (1st Dept. 1984), affirmed 63 NY2d
886, 472 N.E.2d 1028, 483 N.Y.S.2d 200 (1984); Snyder v Moore, 72 AD2d 580, 581, 421 N.Y.S.2d 25 (2nd Dept.
1979).
According to Alexander, Practice Commentaries (7B McKinney's Cons Laws of NY, CPLR C1411:1 (1997)),
"Under the statute, in any action to recover damages for personal injury, injury to property or wrongful death, the
culpable conduct of the plaintiff (or decedent) generally does not bar recovery; rather, such conduct diminishes
plaintiff's [***32] recovery in proportion to the culpable conduct of the defendants. CPLR 1411 adopts a rule of pure
comparative fault, so that in theory a plaintiff who is 99% responsible for his own injuries may still recover 1% of his
damages."
In negligence actions, New York has abandoned contributory negligence and assumption of risk for a form of
comparative negligence, the purpose of which is to ameliorate the harsh results when a plaintiff is slightly negligent
and fairly to apportion damages among the parties. Knieriemen v Bache Halsey Stuart Shields Inc., 74 AD2d 290, 295,
427 N.Y.S.2d 10 (1st Dept. 1980), appeal dismissed 50 NY2d 1021, 410 N.E.2d 745, 431 N.Y.S.2d 812 (1980), appeal
dismissed 51 NY2d 970, 416 N.E.2d 1055, 435 N.Y.S.2d 720 (1980)
According to Alexander, Practice Commentaries (7B McKinney's Cons Laws of NY, CPLR C1411:1 (1997)), there
are only four primary situations
. . . in which the plaintiff's culpable conduct will completely bar recovery against the defendant. First, plaintiff's
conduct may be the sole cause of the injuries. See, e.g., Howard v. Poseidon Pools, Inc., 1988, 72 NY2d 972, 534
N.Y.S.2d 360, 530 N.E.2d 1280 (experienced swimmer's diving head first into shallow, above-ground pool was sole
proximate cause of injury; defendant manufacturer's failure [***33] to warn of danger was irrelevant).
Second, no recovery whatsoever is available to a plaintiff "whose injuries are the direct result of his commission of
... serious criminal or illegal conduct." Barker v. Kallash, 1984, 63 NY2d 19, 26, 479 N.Y.S.2d 201, 204, 468 N.E.2d 39,
42 (plaintiff injured by explosion while constructing pipe bomb). See also La Page v. Smith, 1990, 166 AD2d 831, 563
N.Y.S.2d 174 (3d Dep't), appeal denied 78 NY2d 855, 573 N.Y.S.2d 645, 578 N.E.2d 443 (intoxicated plaintiff injured
while participating in illegal auto race at speeds in excess of 100 m.p.h.). This principle is based on the public policy
that denies judicial relief to persons injured in the course of serious criminal activity, and it exists independently of, and
supersedes, the doctrine of comparative fault.
Third, an "express" assumption of risk by the plaintiff precludes any recovery. Arbegast v. Board of Education of
South New Berlin Central School, 1985, 65 NY2d 161, 490 N.Y.S.2d 751, 480 N.E.2d 365. A plaintiff "expressly"
assumes the risk of her injuries when she agrees, in advance, that the defendant "need not use reasonable care for the
benefit of plaintiff." Id. at 169, 490 N.Y.S.2d at 757, 480 N.E.2d at 371. [***34] In effect, the plaintiff's express
consent to the risks involved in the activity eliminates the defendant's duty of care. Id. at 170, 490 N.Y.S.2d at 757, 480
Page 319
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
N.E.2d at 372. In Arbegast, express assumption of risk was found where the plaintiff participated in a fund-raising
basketball game in which the players rode on the backs of donkeys after having been informed beforehand that they
participated at their own risk.
Fourth, and closely related to express assumption of risk, is "primary" assumption of risk. Turcotte v. Fell, 1986, 68
NY2d 432, 510 N.Y.S.2d 49, 502 N.E.2d 964. This doctrine has most often been invoked in connection with voluntary
participation in competitive athletics--professional, amateur, interscholastic and even informal. See, e.g., Strauss v.
Town of Oyster Bay, 1994, 201 AD2d 553, 607 N.Y.S.2d 730 (2d Dep't) (Little League baseball); Sutfin v. Scheuer,
1988, 145 AD2d 946, 536 N.Y.S.2d 320 (4th Dep't), affirmed 74 NY2d 697, 543 N.Y.S.2d 379, 541 N.E.2d 408 (game of
catch). By electing to participate, the plaintiff is deemed to have consented "to those injury-causing events which are
known, apparent or reasonably foreseeable consequences of the participation." Turcotte v. Fell, supra, 68 NY2d at 439,
510 N.Y.S.2d at 53, 502 N.E.2d at 968. [***35] Such "primary" assumption of risk eliminates the defendant's duty of
care to the plaintiff, thus rendering the concept of comparative fault irrelevant and completely barring any recovery
against the defendant. Id. at 437-39, 510 N.Y.S.2d at 52-53, 502 N.E.2d at 967-68. "The policy underlying this tort rule
is intended to facilitate free and vigorous participation in athletic activities." Benitez v. New York City Board of
Education, 1989, 73 NY2d 650, 657, 543 N.Y.S.2d 29, 33, 541 N.E.2d 29, 33.
The doctrine of primary assumption of risk, of course, has certain qualifications. Participants do not consent to
reckless or intentional acts, nor do they assume risks that are concealed or "unreasonably increased" beyond those
normally associated with the activity. Id. at 657-58, 543 N.Y.S.2d at 33, 541 N.E.2d at 33. "The applicability of the
doctrine depends on the nature and scope of the participant's awareness and consent.... Whether it can be concluded that
a plaintiff made an informed estimate of the risks involved in an activity before deciding to participate depends on the
openness and obviousness of the risk, plaintiff's background, skill and experience, plaintiff's own conduct under
[***36] the circumstances and the nature of defendant's conduct.... Perhaps the most important factor ... is whether the
risk is inherent in the activity." Lamey v. Foley, 1993, 188 AD2d 157, 163-64, 594 N.Y.S.2d 490, 495 (4th Dep't).
In Patterson v Troyer Potato Products, Inc., 273 AD2d 865, 709 N.Y.S.2d 731 (3rd Dept. 2000), plaintiff tripped
and fell when her lower right leg struck a shelf protruding into an aisle of defendant Food Mart as she was passing an
employee of defendant food supplier who was stocking merchandise on the store's shelves. Defendants moved for
summary judgment, and the trial court denied the motion as to both defendants. The Court affirmed regarding defendant
Food Mart but modified as to defendant Troyer. Food Mart had asserted that the condition was open and obvious, but
the Court found that the shelf that had allegedly caused plaintiff to trip was near floor-level and protruded only three to
four inches. Both plaintiff and defendants' employees also stated that they did not see what plaintiff had tripped on. The
Court said even if the shelf was readily observable, such a fact would go to the issue of comparative negligence and
would not negate the duty of defendants to keep their [***37] premises reasonably safe. Summary judgment as to these
defendants was thus improper.
In Tirella v American Properties Team, Inc., 145 AD2d 724, 535 N.Y.S.2d 252 (3rd Dept. 1988), plaintiff attempted
to take her first bath in an apartment. She turned on the bath water without first checking the water temperature and left
the room until the tub was filled. Plaintiff returned to the tub and placed her feet in the water without first testing the
water temperature. The water was extremely hot and she sustained second and third degree burns. The defendants
moved for summary judgment. The trial court denied defendants' motions and the Third Department affirmed. In so
holding, the Third Department stated that plaintiff's culpable conduct in failing to test the water prior to placing her feet
in the tub was not a superceding intervening cause of the accident sufficient to negate the defendants' duty of care and
bar recovery by plaintiff as a matter of law. Id. at 725. The Court considered plaintiff's failure to check the water
temperature before immersing her feet a normal and reasonably foreseeable consequence of the situation created by
defendants' negligence in permitting the water to become too hot. Id. Moreover, [***38] any failure by plaintiff may be
considered by the jury on the issue of comparative negligence and plaintiff's conduct does not break the causal nexus
chain. Id.
Nothing submitted herewith demonstrates that plaintiff was the sole proximate cause of her accident and therefore it
Page 320
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
is a question of fact for the jury to resolve. Given the absence of defendant's prima facie case for summary judgment,
the burden never shifted to the plaintiff to demonstrate the existence of a triable issue of fact.
Cornell then asserts that the defect alleged was trivial in nature. "[W]hether a dangerous or defective condition
exists on the property of another so as to create liability "depends on the peculiar facts and circumstances of each case"
and is generally a question of fact for the jury' [citation omitted]." Trincere v County of Suffolk, 90 NY2d 976, 977, 688
N.E.2d 489, 665 N.Y.S.2d 615 (1997); Argenio v Metropolitan Transportation Authority, 277 AD2d 165, 166, 716
N.Y.S.2d 657 (1st Dept. 2000); Nin v Bernard, 257 AD2d 417, 683 N.Y.S.2d 237 (1st Dept. 1999); Walters v County of
Rensselaer, 282 AD2d 944, 724 N.Y.S.2d 97 (3rd Dept. 2001); Adsmond v City of Poughkeepsie, 283 AD2d 598, 725
N.Y.S.2d 80 (2nd Dept. 2001); Tesak v Marine Midland Bank, N.A., 254 AD2d 717, 718, 678 N.Y.S.2d 226 (4th Dept.
1998).
The evidence submitted [***39] demonstrates the kickplate at issue was at least 2-4 inches above the floor. Cornell
submits no admissible evidence that it did not constituted a trap or snare. See, Trionfero v Vanderhorn, 6 AD3d 903, 774
N.Y.S.2d 612 (3rd Dept. 2004).
"The precise dimensions of the defect, be they in feet or inches, are not dispositive [Trincere, supra] at 977-978, 90
N.Y.2d 976, 665 N.Y.S.2d 615, 688 N.E.2d 489) . . . [A] motion court must examine all the facts presented including the
width, depth elevation, irregularity and appearance of the defect along with the "time place and circumstance" of the
injury." [citations omitted]." Nin, 257 AD2d at 417. The Nin Court further concluded that an uneven platform created by
the depression and its location at the top step of a stairwell created a question of fact for jury consideration whether the
depression constituted a dangerous or defective condition. Id. at 418.
In Pagano v Rite-Aid Corp., 266 AD2d 854, 854-855, 698 N.Y.S.2d 129 (4th Dept. 1999), the Court stated that
"[e]ven a small difference in height is actionable if the alleged defect has the characteristics of a trap, snare or nuisance
[citation omitted]." Moreover, as the Court held in Slate v Fredonia Central School District, 256 AD2d 1210, 1210, 682
N.Y.S.2d 507 (4th Dept. 1998), [***40] "[a]lthough slight differences in elevation have been held to be nonactionable
(see, Morales v. Riverbay Corp., 226 AD2d 271, 641 N.Y.S.2d 276 [1st Dept. 1996]; see also, Julian v. Sementelli, 234
AD2d 866, 651 N.Y.S.2d 678 [3rd Dept. 1996]; Guerrieri v. Summa, 193 AD2d 647, 598 N.Y.S.2d 4 [2nd Dept. 1993]),
the same cases hold that even a trivial height differential may be actionable where the defect constitutes a trap, snare, or
nuisance."
In Argenio, 277 AD2d at 166, the First Department held that "[t]here is no per se rule with respect to the
dimensions of a defect that will give rise to liability on the part of a landowner or other party in control of premises
[citations omitted], and even a trivial defect may constitute a snare or trap." Furthermore, "the presence of an edge with
poses a tripping hazard renders the defect nontrivial." The Argenio Court further held that even a defect as small as 1/4"
deep is a sufficient size to trap a plaintiff. See, Id. In the instant case, the defect in question was at least 2 inches high.
In denying summary judgment, the Argenio Court held that "The location of the depression in a heavily traveled
pedestrian walkway renders observation of the [***41] defect less likely [citations omitted]." Argenio, 277 AD2d at
166. In this case, the alleged defect bordered the pedestrian walkway. That coupled with the discrepancy in lighting
conditions as advanced by the parties warrants denial of summary judgment.
Although the minimal nature of an alleged height differential on a walkway is not in and of itself
determinative, "in some instances, the trivial nature of the defect may loom larger than another element"
(Trincere v. County of Suffolk, supra at 977, 665 N.Y.S.2d 615, 688 N.E.2d 489). "Not every injury
allegedly caused by an elevated brick or slab need be submitted to a jury" (id. at 977, 665 N.Y.S.2d 615,
688 N.E.2d 489 [citation omitted]).
Indeed, it is well established that " [t]he owner of a public passageway may not be cast in damages
for negligent maintenance by reason of trivial defects on a walkway, not constituting a trap or nuisance,
Page 321
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
as a consequence of which a pedestrian might merely stumble, stub his [or her] toes, or trip over a raised
projection'*904 " (Guerrieri v. Summa, 193 AD2d 647, 647, 598 N.Y.S.2d 4 [1993], quoting Liebl v.
Metropolitan Jockey Club, 10 AD2d 1006, 1006, 204 N.Y.S.2d 670 [1960]). According to plaintiff's
[***42] deposition testimony, she was walking on the sidewalk when the toe of her sneaker came in
contact with the edge of a concrete sidewalk slab, causing her to trip. The record evidence establishes
that the slab in question was raised only a trivial amount above the adjacent slab-somewhere between 5/8
and 7/8 of an inch. Thus, it was plaintiffs' burden to " raise a triable issue of fact whether the alleged
defect has the characteristics of a trap, snare or nuisance'" (Leverton v. Peters Groceries, 267 AD2d
1014, 1015, 700 N.Y.S.2d 316 [1999], quoting Gigliotti v. St. Stanislaus Kostka R.C. Church, 261 AD2d
951, 952, 689 N.Y.S.2d 806 [1999]).
Trionfero, 6 AD3d at 903-904. There is nothing to indicate in any case law that a defect exceeding 2 inches in height is
trivial as a matter of law. Defendant failed to make out a prima facie case of a trivial defect and therefore its motion
must be denied as a matter of law.
The sufficiency of plaintiff's opposition is unavailing since the defendants failed to meet their burden of
demonstrating the absence thereof. Therefore Cornell's motion is denied in its entirety.
The foregoing constitutes the decision and order of this Court.
Dated: September 27, [***43] 2012 ENTER
Goshen, New York
HON. CATHERINE M. BARTLETT,
A.J.S.C.
Page 322
37 Misc. 3d 1217(A), *1217A; 961 N.Y.S.2d 356, **356;
Positive
As of: May 27, 2014
[**1] RUBY WILLIAMS, Plaintiff, - against - ESDEL MENTORE, et al.,
Defendants. Index No. 13135 2011
13135/2011
SUPREME COURT OF NEW YORK, QUEENS COUNTY
2012 N.Y. Misc. LEXIS 3548; 2012 NY Slip Op 31965(U)
July 9, 2012, Decided
REPORTS.
SUBSEQUENT HISTORY: Affirmed by Williams v. Mentore, 2014 N.Y. App. Div. LEXIS 1412 (N.Y. App. Div. 2d
Dep't, Mar. 5, 2014)
CORE TERMS: mortgage, summary judgment, deed, declaration, finance, notice, mortgage loans, ownership interest,
equitable subrogation, issues of fact, prima facie, encumbrancer, counterclaim, purportedly, fraudulent, ownership,
defraud, abetted, triable, aided, deed dated, transferred, real estate, subject property, causes of action, bona fide,
transferring, perpetrated, entitlement, conditional
JUDGES: [*1] Present: HONORABLE DAVID ELLIOT, Justice.
OPINION BY: DAVID ELLIOT
OPINION
Upon the foregoing papers it is ordered that the motion is determined as follows:
In the verified complaint, plaintiff, an elderly woman, claims that she is the true owner of the real property known
as 187-15 Keeseville Avenue, St. Albans, New York, and was the victim of a scheme perpetrated by defendant Esdel
Mentore, an alleged real estate broker, and others, to defraud her of her title to her property and strip her of her equity in
her home. Plaintiff alleges that in late 2002, at a time when she was unable to keep up with payments of her medical
Page 323
bills and repairs on her home, she sought to refinance the then-existing [**2] mortgage on the property (the Indymac
mortgage), and her daughter-in-law, Grace Haye Williams, agreed to assist her. Title was transferred to Grace Haye
Williams by deed dated December 5, 2002, and Grace Haye Williams obtained a mortgage from Security American
Mortgage Co. Inc. (Security American mortgage) against the property.
It is alleged that Grace Haye Williams thereafter sought to have her name removed from the mortgage, and plaintiff
was referred to defendant Mentore for assistance in obtaining a reverse mortgage. [*2] Plaintiff alleges that he indicated
a reverse mortgage would not be an appropriate option, falsely advising her that the "government" would only give her
a few dollars and then would take her home away. She also alleges that defendant Mentore ingratiated himself to her,
assured her that he would assist her in arranging the transfer of the mortgage from Grace Haye Williams, and convinced
plaintiff to refinance the mortgage instead. Plaintiff further alleges that unbeknownst to her, title had already been
transferred from Grace Haye Williams back to plaintiff by deed dated March 28, 2006.
Plaintiff further alleges that defendant Mentore sent a car to bring plaintiff to his office at 8:00 P.M. on January 5,
2007, purportedly for the closing of the mortgage transaction. At the closing, defendant Mentore allegedly falsely
claimed to assist plaintiff and promised never to allow her to do anything to put her or her house at risk, and in doing so,
induced her to sign documents purportedly to allow defendant Aman Bindra to "take over the mortgage" for one year,
and to give her daughter Hope Jackson, an opportunity to take the mortgage over thereafter. Plaintiff alleges she did not
understand [*3] the papers, including that she was conveying her home to defendant Aman Bindra or that defendant
Bindra's name would be on the deed. She also alleges she asked defendant Mentore what was going on, and expressed
concern that she was signing her house away, but relied upon the assurances of defendant Mentore that she should not
worry, and to trust him and sign the documents. She also alleges that during the closing, there was no discussion of her
surrendering the premises, turning over keys to the house, or paying any use or occupancy until her vacatur of the
property, or when defendant Bindra would perform a final inspection or move in.
It is alleged that two mortgage loans from Fremont Investment & Loan were issued to defendant Bindra on January
5, 2007, and the Security American mortgage was allegedly discharged, and then Bindra, in turn, transferred the subject
property to defendant London by deed dated October 16, 2008. To finance that purchase, defendant London allegedly
obtained a mortgage loan from defendant Wells Fargo, and when defendant London defaulted, a foreclosure action
entitled Wells Fargo Bank, N.A. v London (Supreme Court, Queens County, Index No. 12555/2011) was commenced
[*4] against London.
Plaintiff alleges that the individual defendants conspired to defraud her of her property, and that she did not
knowingly sign the deed into defendant Bindra or convey her [**3] title to the property. Plaintiff also alleges that
defendant Mentore used defendants Bindra and London as "straw buyers" to conceal his ownership interest in the
targeted property, and obtain fraudulent mortgages. Plaintiff further alleges that defendant Bindra allegedly aided and
abetted defendant Mentore by providing his name to finance the sham purchase with the Bindra mortgages, and
transferring title to the property to defendant London, who also aided and abetted defendant Mentore, by providing his
name to finance his purported sham purchase with the Wells Fargo mortgage. Defendant Parmanand Ramdass allegedly
aided and abetted defendant Mentore by serving as the buyers' attorney and settlement/closing agent in connection with
the fraudulent deed transactions, while aware the transactions were arranged by defendant Mentore to enrich himself.
Plaintiff claims that defendant Wells Fargo failed to exercise due diligence when making the mortgage loan to
defendant London. It is alleged that plaintiff [*5] continually resided at the premises since 1976, and as a consequence,
defendant Wells Fargo should have made further inquiries about defendant Bindra's ownership of the property prior to
making the loan. Plaintiff asserts causes of action pursuant to article 15 of the Real Property Actions and Proceedings
Law and General Business Law 349, and sounding in fraud, conspiracy to commit, and aiding and abetting, fraud and
conversion. Plaintiff seeks declaratory, injunctive, and monetary relief, including a declaration setting aside as null and
void the transactions purportedly transferring title and ownership from herself to Bindra and from Bindra to London,
and the Wells Fargo mortgage recorded against the property.
Defendant Wells Fargo previously moved to dismiss the complaint asserted against it in lieu of serving an answer.
Page 324
2012 N.Y. Misc. LEXIS 3548, *1; 2012 NY Slip Op 31965(U), **1
The motion was denied by order dated October 12, 2011. The court determined the complaint stated a cause of action
pursuant to article 15 of the RPAPL (see order dated October 12, 2011), and defendant Wells Fargo failed to submit
evidence flatly contradicting plaintiff's claims. Defendant Wells Fargo thereafter served an answer, including various
affirmative defenses, [*6] including, that it is a good faith encumbrancer for value and without notice of any claims
by plaintiff with respect to the property, and a counterclaim based upon equitable subrogation and cross claims against
its codefendants.
Plaintiff previously moved to consolidate this action with the Wells Fargo foreclosure action (Index No.
12555/2011). That motion was granted to the extent of joining the actions for trial (see order dated February 29, 2012).
Defendant Wells Fargo moves for summary judgment dismissing the complaint asserted against it and, in the
alternative, for summary judgment in its favor on its counterclaim for equitable subrogation. Defendant Wells Fargo
asserts that it is a bona fide good faith encumbrancer for value and protected in its title pursuant to Real Property Law
266, and the conveyances to defendants Bindra and London are not voidable, insofar [**4] as plaintiff cannot
establish they are the product of fraud. Defendant Wells Fargo alternatively asserts that, even in the event plaintiff
secures a judgment setting aside the Bindra and London deed transfers and its mortgage, it is entitled to an equitable
mortgage lien against the property to the degree the proceeds [*7] of its loan were used to discharge prior liens against
the property.
Plaintiff opposes the motion, asserting that it is premature because discovery is incomplete, since no party has yet
been deposed. Plaintiff also asserts that defendant Wells Fargo has failed to demonstrate it is entitled to bona fide
encumbrancer status, and there are triable issues of fact as to whether the deeds into defendants Bindra and London are
the product of fraud.
It is well settled that the proponent of a summary judgment motion "must make a prima facie showing of
entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material
issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324, 501 N.E.2d 572, 508 N.Y.S.2d 923 [1986]; Zuckerman v
City of New York, 49 NY2d 557, 404 N.E.2d 718, 427 N.Y.S.2d 595 [1980]). Furthermore, the court's function on a
motion for summary judgment is issue finding, not issue determination (see Sillman v Twentieth Century-Fox Film
Corp., 3 NY2d 395, 404, 144 N.E.2d 387, 165 N.Y.S.2d 498 [1957]). If there is any doubt as to the existence of a triable
fact, the motion for summary judgment must be denied (see Rotuba Extruders v Ceppos, 46 NY2d 223, 231, 385 N.E.2d
1068, 413 N.Y.S.2d 141 [1978]).
A mortgagee's interest in the property is protected unless it has notice [*8] of a previous fraud affecting the title of
its grantor (see Real Property Law 266; Thomas v Lasalle Bank Nat. Assn., 79 AD3d 1015, 913 N.Y.S.2d 742 [2010];
Mathurin v Lost & Found Recovery, LLC, 65 AD3d 617, 884 N.Y.S.2d 462 [2009]). In addition, as the Appellate
Division, Second Department, in Stracham v Bresnick, (76 AD3d 1009, 908 N.Y.S.2d 95 [2010]) explained:
"'"[w]here a purchaser has knowledge of any fact, sufficient to put him [or her] on inquiry as to the
existence of some right or title in conflict with that he [or she] is about to purchase, he [or she] is
presumed either to have made the inquiry, and ascertained the extent of such prior right, or to have
been guilty of a degree of negligence equally fatal to his [or her] claim, to be considered as a bona fide
purchaser"' (Maiorano v Garson, 65 AD3d 1300, 1303, 886 N.Y.S.2d 190 [2009], quoting Williamson v
Brown, 15 NY 354, 362 [1857]). Similarly, a mortgagee is under a duty to make an inquiry where it is
aware of facts 'that would lead a reasonable, prudent lender to make inquiries of the circumstances of
the transaction at issue' (LaSalle Bank Natl. Assn. v Ally, 39 AD3d 597, 600, 835 N.Y.S.2d 264 [2007]).
'Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the [*9]
property, and to all the [**5] world of the existence of any right which the person in possession is able
to establish' (Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109 [1890]; see 1426 46 St., LLC v Klein,
60 AD3d 740, 743, 876 N.Y.S.2d 425 [2009])."
Page 325
Summary judgment is not warranted here, particularly on the limited facts presented in the papers submitted and
since no parties have been deposed. Furthermore, defendant Wells Fargo has failed to make a prima facie showing that
it is protected in its title because it lacked notice of any fraud affecting the title of defendant London, and that plaintiff
was not the victim of a fraudulent scheme by the individual defendants to deprive her of her ownership interest in the
property. Plaintiff has raised triable issues of fact as to whether she is the victim of a scheme to defraud her of her
property and equity therein, and whether her actual possession of the subject premises should have led defendant Wells
Fargo to inquire further about defendant Bindra's ownership thereof and become alerted to the fraud allegedly
perpetrated against her by the individual defendants (see Phelan v Brady, 119 NY 587, 591-592, 23 N.E. 1109 [1890],
supra; Maiorano v Garson, 65 AD3d 1300, 886 N.Y.S.2d 190 [2009], supra; but [*10] see Fleming-Jackson v Fleming,
41 AD3d 175, 838 N.Y.S.2d 506 [2007]).
Defendant Wells Fargo offers the affidavit of its employee, Christen J. Beckman, indicating Wells Fargo obtained a
title search relative to the subject property prior to the execution of the mortgage, and that the title search did not reveal
any conflicts in title with defendant Bindra. Defendant Wells Fargo, however, has failed to present a copy of that title
search in support of its motion (CPLR 4523; Maiorano v Garson, 65 AD3d 1300, 886 N.Y.S.2d 190 [2009], supra; see
also Commandment Keepers Ethiopian Hebrew Congregation of the Living God, Pillar & Ground of Truth, Inc. v 31
Mount Morris Park, LLC, 76 AD3d 465, 908 N.Y.S.2d 1 [2009]). Instead, it offers a copy of the computer printout from
Automated City Register Information System website of the Office of the City Register, New York City Department of
Finance, which is not evidence in admissible form (CPLR 3212 [b]; see Alvarez v Prospect Hosp., 68 NY2d 320, 501
N.E.2d 572, 508 N.Y.S.2d 923 [1986], supra). Defendant Wells Fargo, furthermore, has failed to establish a prima facie
showing that the deed from plaintiff into Bindra was not the product of fraud in the inducement or factum (cf. Cash v
Titan Financial Services, Inc., 58 AD3d 785, 873 N.Y.S.2d 642 [2009]).
Moreover, [*11] plaintiff, in her affidavit in opposition to the motion, states among other things, that she has lived
at the property for over 30 years, and indicated she never intended to sell her property, and always wanted it to remain
in her family. Ms. Beckman, whose claimed knowledge of the relevant facts is based upon her review of the mortgage
and closing documents, asserts that Wells Fargo did not become aware of any facts which raised suspicion of fraud or
wrongdoing, and did not know plaintiff claimed to reside in the property at the time of the execution of the mortgage.
She states the title search failed to reveal that plaintiff resided at the property. Again, no copy of the title search has
been provided to the court. More importantly, Ms. Beckman admits that no representative of Wells [**6] Fargo visited
the property prior to the execution of the mortgage. Defendant London, in his affidavit offered in support of the motion
by defendant Wells Fargo, indicates that plaintiff has been in physical possession and occupancy of the premises "since
it was sold to [him] in October 2008." He too has failed to explain whether he inquired as to whether plaintiff had any
right or title to the property [*12] which was in conflict with that which he was to purchase.
With respect to that branch of the motion by defendant Wells Fargo which seeks, in effect, conditional summary
judgment on its counterclaim for a declaration of entitlement to equitable subrogation, a conditional declaration is
appropriate only in those instances where the interests of justice and judicial economy are served by affording the
parties with the earliest possible determination as to the extent a party may be expected to be reimbursed (see McCabe v
Queensboro Farm Products, Inc., 22 NY2d 204, 239 N.E.2d 340, 292 N.Y.S.2d 400 [1968]; Lowe v Dollar Tree Stores,
Inc., 40 AD3d 264, 835 N.Y.S.2d 161 [2007]). In this case, a declaration that defendant Wells Fargo is entitled to
equitable subrogation is premature given that the dispute concerning whether plaintiff has any ownership interest in the
premises has not yet been resolved (see Bernard-Cadet v Lee, [Supreme Court, Queens County, Index No. 8807/2006,
order dated February 19, 2008, Satterfield, J.]; Scott v Doyle, 12 Misc 3d 1163[A], 819 N.Y.S.2d 213, 2006 NY Slip Op
51012[U] [2006]; see also Cain v Bethea, 2007 WL 2859681, 2007 US Dist LEXIS 75824 [ED NY, August 17, 2007],
adopted in part and rejected in part on other grounds, 2007 WL 2846914, 2007 US Dist LEXIS 71585 [ED NY,
September 26, 2007]).
Accordingly, [*13] the motion is denied.
Dated: July 9, 2012
Page 326
Positive
As of: May 27, 2014
[***1] HSBC Mortgage Services, Inc., Plaintiff, against Kenyon J. Alphonso a/k/a
KENYON ALPHONSO, POINT HOLDING ALPHA, LLC, B & B ASSOCIATES,
EQUICREDIT CORPORATION OF AMERICA f/k/a OLD STONE CREDIT
CORPORATION, MORTGAGE ELECTRONIC REGISTRATIONS SYSTEMS,
INC. AS NOMINEE FOR ENCORE CREDIT CORP., NEW YORK CITY
ENVIRONMENTAL CONTROL BOARD, NEW YORK CITY PARKING
VIOLATIONS BUREAU, NEW YORK CITY TRANSIT ADJUDICATION
BUREAU, OPTION ONE MORTGAGE CORPORATION, PEOPLE OF THE
STATE OF NEW YORK, Defendants.
18890/06
16 Misc. 3d 1131(A); 2007 N.Y. Misc. LEXIS 6034; 2007 NY Slip Op 51657(U); 238
N.Y.L.J. 56
August 20, 2007, Decided
REPORTS.
SUBSEQUENT HISTORY: Affirmed by HSBC Mtge. Servs., Inc. v. Alphonso, 58 A.D.3d 598, 874 N.Y.S.2d 131,
2009 N.Y. App. Div. LEXIS 220 (N.Y. App. Div. 2d Dep't, Jan. 13, 2009)
CORE TERMS: mortgage, recorded, summary judgment, issue of fact, valuable consideration, deed, purchaser,
assigned, referee, notice, public record, evidentiary, unrecorded, recording, bona fide purchaser, default judgment,
default, compute, good faith, deed dated, conveyance, mortgaged, foreclose, appointed, triable, repairs, facie, mortgages
executed, holder, matter of law
HEADNOTES
[*1131A] Deeds--Recording--Bona Fide Purchaser. Real Property Law-- 291 (Recording of Conveyances).
Page 327
COUNSEL: [**1] Plaintiff's Atty: Steven J. Baum.
Defendant's Atty: Andrew Cuomo,Stephen David Fink, Esq.
JUDGES: Yvonne Lewis, J.S.C.
OPINION BY: Yvonne Lewis
OPINION
Yvonne Lewis, J.
The plaintiff, HSBC Mortgage Services, Inc., (hereinafter, HSBC) seeks [***2] summary judgment, pursuant to
CPLR 3212, striking the Answer of defendant, Point Alpha Holding, LLC (hereinafter, Point); alternatively, if Point's
Answer is not stricken, then pursuant to CPLR 3025(b) granting leave to HSBC to file and serve an amended complaint
based upon the doctrine of equitable subrogation; pursuant to CPLR 3215, a judgment of default against the remaining
defendants named herein; and, pursuant to RPAPL 1321, the appointment of a referee to compute the amounts due to
HSBC under the mortgage documents, and to examine and report how the mortgaged premises should be sold.
Civil Practice Law and Rules 3212(b) states that summary judgment "shall be granted if, upon all the papers and
proof submitted, the cause of action... shall be established sufficiently to warrant the court as a matter of law in directing
judgment in favor of any party...(T)he motion shall be denied if any party shall show facts sufficient to require a trial of
any issue of fact." Movants have a [**2] prima facie burden of submitting proof, in evidentiary form, sufficient to
demonstrate that there is an absence of any material issue of fact. see Davenport v. County of Nassau, 279 A.D.2d 497,
719 N.Y.S.2d 126 (N.Y.A.D., 2001); Winegrad v. New York Univ. Med. Ctr., 64 N.Y.2d 851, 476 N.E.2d 642, 487
N.Y.S.2d 316 (1985); Zuckerman v. City of New York 49 N.Y.2d 557, 404 N.E.2d 718, 427 N.Y.S.2d 595 (1980). If the
movant meets his or her prima facie burden then the burden shifts to the opponent to produce evidentiary proof to
demonstrate the existence of a triable issue of fact. see Davenport v. County of Nassau, supra .
The facts, as presented by HSBC, are that on January 6, 2004, Chaim Parnes (hereinafter, Parnes) acquired title to a
two family dwelling, commonly known as 47 Vernon Avenue, Brooklyn, New York (hereinafter, premises). In
consideration therefor, Parnes paid $ 600,000. On the same day, Parnes mortgaged the premises to Florida Bank, N.A.,
d/b/a Florida Bank Mortgage (with Mortgage Electronic Registration Systems, Inc., "Mers", as Nominee) (hereinafter,
Florida Bank) in the principal amount of $ 420,000 (hereinafter, Parnes mortgage). Both the Parnes deed and the $
420,000 Parnes mortgage were recorded in the Kings County Office of the New York City Register [**3] (hereinafter,
Register) on August 10, 2004.
An appraisal of the premises, signed on September 28, 2005, estimated the value of the premises to be $ 600,000.
On October 11, 2005, defendant, Kenyon J. Alphonso a/k/a Kenyon Alphonso (hereinafter, Alphonso) acquired title to
the premises from Parnes, for consideration in the amount of $ 600,000. On the same day, Alphonso obtained a loan
from Encore Credit Corp., d/b/a ECC Encore Credit (hereinafter, Encore) in the amount of $ 480,000 and executed a
mortgage encumbering the premises in this amount. (This $ 480,000 mortgage is the one which HSBC moved to
foreclose on.) At the closing of this $ 480,000 mortgage, $ 416,627.11 was paid to satisfy the $ 420,000 Parnes
mortgage (dated January 6, [***3] 2004). Also that day, Alphonso obtained a second loan from Encore in the amount
of $ 120,000, which is secured by a second mortgage from Alphonso to Encore. (This $ 120,000 mortgage HSBC seeks
to extinguish by default judgment.)
HSBC also claims that on November 7, 2005, Point acquired title to the premises from Alphonso, in exchange for $
20,000. The Point deed (dated November 7, 2005) was recorded in the Register on November 10, 2005. On November
21, [**4] 2005, the Alphonso deed (dated October 11, 2005) and both mortgages executed by Alphonso (dated October
11, 2005, in the amounts of $ 480,000 and $ 120,000) were recorded in the Register. On December 9, 2005, the
Page 328
16 Misc. 3d 1131(A), *1131A; 2007 N.Y. Misc. LEXIS 6034, **;
2007 NY Slip Op 51657(U), ***1; 238 N.Y.L.J. 56
satisfaction of the $ 420,000 Parnes mortgage (dated January 6, 2004, satisfied October 11, 2005) was recorded in the
Register. Finally, on June 30, 2006, the $ 480,000 mortgage executed by Alphonso (dated October 11, 2005) was
assigned to HSBC (hereinafter HSBC mortgage), and on July 20, 2006 was recorded in the Register. Due to Alphonso's
failure to make payments since November 1, 2005 on the $ 480,000 HSBC mortgage (dated October 11, 2005), HSBC
initiated these proceedings to foreclose on the premises.
In its answer, Point asserted the affirmative defense that its deed was filed and recorded (dated November 7, 2005,
recorded November 10, 2005) prior to HSBC's mortgage (dated October 11, 2005, recorded November 21, 2005,
assigned June 30, 2006 and recorded July 20, 2006). HSBC then motioned this court for summary judgment to strike
Point's Answer, pursuant to CPLR 3212. HSBC claims that it is entitled to summary judgment because Point's deed is
subsequent and subordinate [**5] to the HSBC mortgage. HSBC argues that Point not only took the deed to the
premises with constructive/inquiry notice, if not actual knowledge of the HSBC mortgage, but with lack of valuable
consideration. HSBC also asserts that, in its Answer, Point does not dispute that Alphonso is in default under its
mortgage documents, nor does it dispute that its mortgage documents are valid and enforceable according to their terms.
Thus, HSBC reasons that Point is not a bona fide purchaser, Point's subsequently dated deed (dated November 7,
2005) is not entitled to priority, and HSBC is entitled to foreclose under its $ 480,000 mortgage (dated October 11,
2005, recorded November 21, 2005, assigned June 30, 2006) and the underlying note.
The defendant, Point, counters that HSBC's motion for summary judgment should be denied because issues of fact
exist as to whether it paid valuable consideration for the premises, if it knew of a previous $ 480,000 mortgage on the
premises, and/or that the house needed major repairs costing over $ 100,000. Furthermore, Point argues that since its
deed (dated November 7, 2005, recorded November 10, 2005) was recorded prior to the recording of the $ 480,000
HSBC [***4] [**6] mortgage (dated October 11, 2005, recorded November 21, 2005, assigned June 30, 2006), there
is an issue of fact as to whether Point is entitled to the protection of the recording statutes.
An unrecorded conveyance of real property is void against the interests of subsequent purchasers when the
subsequent purchaser obtains the interest for a valuable consideration, in good faith, and is first to record. See NYRPL
291. (Conveyance includes a mortgage. NYRPL 290) HSBC posits that because only $ 80 was paid in transfer taxes to
record the Point deed, only $ 20,000 in consideration could have been paid. NY Tax 1402. HSBC also argues that since
the premises were appraised for $ 600,000 on September 28, 2005 and Point only paid Alphonso $ 20,000 for the
premises less than a month and a half later, it is demonstrated that there was a lack of valuable consideration. These
arguments set forth a valid basis for summary judgment. Thus the burden switches to Point to demonstrate that there is a
triable issue of fact. Point asserts that the premises required serious repairs, costing over $ 100,000, and recited an
Appellate Division decision in which the price constituted valuable consideration based [**7] upon the fact that the
property was in a state of disrepair and was purchased "as is." Berger v. Polizzotto, 148 A.D.2d 651, 539 N.Y.S.2d 401
(N.Y.A.D., 1989). Yet, in the Berger case the determination that the payment constituted valuable consideration was
made when compared to the price agreed to by the plaintiffs who were suing for specific performance of their contract.
In addition, there was an appraiser in the Berger case who testified to the diminished value. Berger v. Polizzotto, supra .
Point also claims that there was valid consideration due to the fact that Point believed they were taking the premises
with the prior mortgage. In his Affidavit, Eli Maor (hereinafter, Maor), the principal of Point, states, "I was only aware
of a mortgage in the amount of $ 480,000 on the property at 47 Vernon Avenue. This was public record which was easy
for me to find. It was my understanding that Alphonso was experiencing serious financial problems so that he can no
longer pay for the mortgage or other expenses on the property. In fact I expected that a foreclosure would be started by
the prior mortgage holder." Aff, Maor, 4-5. Maor puts forth that the premises cost Point,
"Payment $ 20,000.00
Encore Mortgage [**8] 480,000.00 (plus arrears)
Repairs 135,000.00
Page 329
16 Misc. 3d 1131(A), *1131A; 2007 N.Y. Misc. LEXIS 6034, **4;
2007 NY Slip Op 51657(U), ***3; 238 N.Y.L.J. 56
TOTAL$ 635,000.00
As for knowledge of the unrecorded HSBC mortgage, there was no way that I could know about it. ALPHONSO
certainly did not tell anyone about it. Nor could I imagine how he could even get a new mortgage with such poor
[***5] credit and no job." Aff, Maor, 7-8. Similarly, the Attorney for Point states, "In sum, although only $ 20,000 was
paid by POINT HOLDING, as far as it knew, a mortgage of $ 480,000 remained on the property. At least that is what
POINT HOLDING (by MAOR) believed." Aff. In Opp., Fink, 9. Interestingly however, the mortgage that was in the
public record at the time of Point's purchase of the premises (November 7, 2005), is the Parnes mortgage in the amount
of $ 420,000, (dated January 6, 2004, recorded August 10, 2004, and satisfied October 11, 2005, but recorded December
9, 2005) and not $ 480,000, which is the amount of the "unrecorded" HSBC mortgage (dated October 11, 2005,
recorded November 21, 2005, assigned to HSBC on June 30, 2006) that Maor denies knowledge of. Secondly, in Maor's
calculation he includes an Encore Mortgage, but the Parnes mortgage (dated January 6, 2004, recorded August 10,
2004, satisfied [**9] October 11, 2005), which was the one in the public record, was held by Florida Bank, and Encore
was the holder of the "unrecorded" $ 480,000 mortgage executed by Alphonso (dated October 11, 2005, recorded
November 21, 2005, assigned to HSBC on June 30, 2006) that Maor denies knowledge of. Even assuming the Attorney
and Maor's reference to a $ 480,000 mortgage, as opposed to a $ 420,000 mortgage, and Maor's reference to the Encore
mortgage, were honest mistakes, Maor claims that he believed that he took the premises subject to the ($ 420,000)
Parnes mortgage, but makes no mention that he attempted to contact the mortgage holder, nor that he attempted to make
any payments on the ($ 420,000) Parnes mortgage.
Although while determining whether to grant summary judgment a court should "draw all reasonable inferences in
favor of the nonmoving party and should not pass on issues of credibility," Torres v. Jeremias, 283 A.D.2d 484, 484,
724 N.Y.S.2d 461 (N.Y.A.D., 2001), the fact is that Point has failed to establish that it gave valuable consideration for the
premises. Point has not produced any evidentiary proof that it reasonably believed that it took the premises only subject
to a prior mortgage or that [**10] the premises had diminished in value. (see, Dolphin v. Marocik, 222 A.D.2d 549, 635
N.Y.S.2d 84 [N.Y.A.D., 1995] Did not establish that valuable consideration was paid due to failure to submit sufficient
documentation of the claims) As such, Point has neither offered any proof in evidentiary form sufficient to rebut
HSBC's argument, nor to prove that there exists any triable issue of fact with regards to valuable consideration.
HSBC has demonstrated that Point acquired the deed under circumstances giving rise to constructive/inquiry
notice. HSBC argues that upon searching the public records, Point would have found Parnes to be the record owner of
the premises even though Alphonso may have been in possession. "A reasonable [***6] purchaser, faced with title and
possession apparently resting in two different people, would certainly investigate the matter further, rather than simply
assume that the possessor of the property held an unrecorded and unencumbered title." In re Rodriguez, 261 B.R. 92, 94
(E.D.N.Y 2001); also see, Tompkins County Trust Co. v. Talandis, 261 A.D.2d 808, 690 N.Y.S.2d 330 (N.Y.A.D. 3rd
Dept., 1999) (purchaser has a duty to examine where person in open and notorious possession of the property is
inconsistent [**11] with the title owner of record). Since Parnes was the record owner and Alphonso was in possession
and the seller of the premises, Point was on notice to investigate further. Such an investigation would have revealed that
the Parnes mortgage (dated January 6, 2004, recorded August 10, 2004) was already satisfied by proceeds from the
HSBC mortgage (satisfied October 11, 2005). "Where a purchaser has knowledge of any fact, sufficient to put him on
inquiry as to the existence of some right or title in conflict with that [which] he is about to purchase, he is presumed
either to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of
negligence equally fatal to his claim, to be considered as a bona fide purchaser." Williamson v. Brown, 15 N.Y 354,
354 (1857); Vitale v. Pinto, 118 A.D.2d 774, 776, 500 N.Y.S.2d 283 (N.Y.A.D., 1986). Once HSBC established that
Point was on notice, and thus not a purchaser in good faith, the burden switched to Point to prove that there remained
any issue of fact. see Davenport v. County of Nassau, supra . However, Point failed to provide any evidentiary proof to
rebut the plaintiff's arguments. Maor states that he knew of the [**12] Parnes mortgage (in the amount of $ 420,000,
dated January 6, 2004, recorded August 10, 2005) because it was in the public records but provides no evidence or
claims of a further investigation as to the title or status of the property and/or mortgage. Hence, Point does not meet its
burden of showing that there are issues of fact, rather, its principal, Maor, actually admitted to having knowledge that
Page 330
2007 NY Slip Op 51657(U), ***4; 238 N.Y.L.J. 56
would lead a reasonable person to inquire further (see In re Rodriguez, supra), but provided no reason or explanation
as to why no further inquiry was ever undertaken.
Consequently, HSBC has demonstrated that, as a matter of law, Point was not a bona fide purchaser for valuable
consideration and in good faith, and thus cannot invoke the protection of the recording statute although they had won
the race to record. Barrett v. Littles, 201 A.D.2d 444, 607 N.Y.S.2d 134 (N.Y.A.D., 1994); see Real Property Law 291.
Furthermore, since Point has failed to raise any issue of fact requiring a trial, HSBC's motion for summary judgment to
strike the Answer of the defendant, Point, should be granted pursuant to CPLR 3212.
As summary judgment has been granted striking the Answer of Point, there is no need for discussion [**13] of
HSBC's request, in the alternative, for leave to file and [***7] serve an amended complaint based upon the doctrine of
equitable subrogation.
Civil Practice Law and Rules 3215 states, "When a defendant has failed to appear, plead or proceed to trial of an
action reached and called for trial... the plaintiff may seek a default judgment against him." NY CPLR 3215. The only
defendant to answer HSBC's complaint in this action was Point. Another defendant, People of the State of New York,
appeared but waived notice of all proceedings except notice of an application for discontinuance of the action, the
referee's report of the sale, and all proceedings to obtain surplus money. In support of this branch of its motion, and as
required by CPLR 3215, HSBC has filed proof of service of the summons and complaint to the defendants, and proof of
the facts constituting the claim and the default. NY CPLR 3215(f). Affidavits of service indicate that Kenyon J.
Alphonso was personally served on July 3, 2006; B & B Associates and Equicredit Corporation of America f/k/a Old
Stone Credit Corporation were served by service on Amy Lesch, an authorized agent of the Secretary of the State, on
June 27, 2006; Mortgage [**14] Electronic Registrations Systems, Inc., as nominee for Encore Credit Corp. was served
by service on Dan McLaughlin, an authorized agent of the corporation, on June 28, 2006; New York City
Environmental Control Board, New York City Parking Violations Bureau, and New York City Transit Adjudication
Bureau were served by service on the clerks on June 27, 2006; Option One Mortgage Corp. was served by service on
Nora Dindyal, a process specialist, on June 27, 2006; and People of the State of New York were served by service on
Marilyn Hartley, an Assistant Attorney General, on June 23, 2006. As the rest of the defendants have neither appeared
nor submitted an answer to the complaint, and HSBC has made a prima facie showing of entitlement to judgment,
default judgment against the remaining defendants is granted. Beneficial Homeowner Service Corp. v. Butler, 836
N.Y.S.2d 491, 14 Misc. 3d 1233[A], 2007 NY Slip Op 50278[U] (N.Y.Sup., 2007).
According to RPAPL 1321, "if [**15] the defendant fails to answer within the time allowed or the right of the
plaintiff is admitted by the answer, upon motion of the plaintiff, the court shall ascertain and determine the amount due,
or direct a referee to compute the amount due to the plaintiff... and to examine and report whether the mortgaged
premises can be sold in parcels and, if the whole amount secured by the mortgage has not become due, to report the
amount thereafter to become due." RPAPL 1321. Since HSBC's motion for summary judgment to strike Point's Answer
has been granted, and the remaining defendants have failed to answer within the time allowed, pursuant to RPAPL
1321, a referee should be appointed to calculate the amount due to HSBC, and to determine how the premises should be
sold. Bank of East Asia v. Smith, 201 A.D.2d 522, 607 N.Y.S.2d 431 (N.Y.A.D., 1994) (No [***8] inconsistency in the
granting of summary judgment and the order of reference); also see, Vermont Federal Bank v. Chase, 226 A.D.2d 1034,
641 N.Y.S.2d 440 (N.Y.A.D. 3 Dept., 1996) (Mortgagor's default in foreclosure action entitled mortgagee to summary
judgment in its favor and a referee to compute should have been appointed).
WHEREFORE, on the basis of the foregoing, (1) HSBC's [**16] motion for summary judgment, striking Point's
Answer, is granted; (2) default judgment against the defendants, with the exclusion of Point and People of the State of
New York; is granted; and (3) a referee to compute the amount due to HSBC, and to determine how the premises should
be sold, shall be appointed by a separate order. This constitutes the decision and order of this court.
JSC
Page 331
2007 NY Slip Op 51657(U), ***6; 238 N.Y.L.J. 56
Positive
As of: May 27, 2014
Washington Temple Church of God In Christ, Inc., Plaintiff, against Global
Properties and Associates, Inc., Henry Spitzer and City of New York, Defendants.
Ticor Title Insurance Company a/s/o Henry Spitzer, Third-Party Plaintiff, Global
Properties and Associates, Inc., Third-Party Defendant,
29690/05
51114(U)
REPORTS.
SUBSEQUENT HISTORY: Affirmed by, in part Washington Temple Church of God in Christ, Inc. v. Global Props.
& Assoc., Inc., 55 A.D.3d 727, 865 N.Y.S.2d 641, 2008 N.Y. App. Div. LEXIS 7718 (N.Y. App. Div. 2d Dep't, 2008)
Subsequent appeal at Washington Temple Church of God in Christ, Inc. v. Global Props. & Assoc., Inc., 84 A.D.3d
1066, 923 N.Y.S.2d 854, 2011 N.Y. App. Div. LEXIS 4156 (N.Y. App. Div. 2d Dep't, 2011)
CORE TERMS: cross-claim, deed, summary judgment, laches, causes of action, affirmation, recorded, notice, unjust
enrichment, real property, conveyance, cross-motion, purchaser, equitable, calendar, public records, transferred,
severance, block, matter of law, action to quiet, declaratory relief, declaratory judgment, prima facie, declaratory,
inequitable, enriched, subject matter, issue of liability, leave to file
HEADNOTES
[*1142A] [**824] Equity--Laches--Unjust Enrichment--Sale of Same Real Property to Different Purchasers.
COUNSEL: [***1] Plaintiff was represented by Rachel J. Yosevitz, Esq. of counsel to Misrok & Misrok.
Defendant/ Third-Party Defendant Global Properties and Associates, Inc. was represented by Anil K. Prabhu, Esq. of
Page 332
Max Markus Katz, P.C.
Defendant Henry Spitzer was represented by Maria Sideris, Esq.
Defendant the City of New York was represented by Paul A. Goetz, Esq. of the New York City Law Department.
Third-Party Plaintiff Ticor Title Insurance Company was represented by Andrew Paul Cooper, Esq. and Jonathan M.
Cader, Esq. of Hession, Bekoff & Cooper, LLP.
JUDGES: Jack M. Battaglia, Justice, Supreme Court
OPINION BY: Jack M. Battaglia
OPINION
Jack M. Battaglia, J.
"[T]he king cannot grant the same thing in possession to one which he or his progenitors have granted to
another." (Townsend v Trustees of the Freeholders and Commonalty of the Town of Brookhaven, 97 AD 316, 89 N.Y.S.
982 [2d Dept 1904].)
With a deed dated September 27, 1976 and recorded October 21, 1976, defendant City of New York transferred to
plaintiff Washington Temple Church of God in Christ, Inc. title to real property designated on the tax map as Block
1212 Lot 4 (the "Subject Property.") The stated consideration for the transfer was $ 850.00.
With a deed dated March 22, 1977 [***2] and recorded June 16, 1977, the City of New York transferred title to
the Subject Property to non-party Darrell A. Shavers. The stated consideration for the transfer was $ 250.00.
With deeds dated December 24, 2004 and January 7, 2005, both recorded April 1, 2005, the Estate of Darrell A.
Shavers and Mr. Shavers's hiers transferred title to the Subject Property to defendant Global Properties and Associates,
Inc. The stated consideration for the transfer was
$ 180,000.00.
With a deed dated June 1, 2005 and recorded June 13, 2005, Global Properties transferred title to the Subject
Property to defendant Henry Spitzer. The stated consideration was $ 400,000.00. Mr. Spitzer's title was insured by
third-party plaintiff Ticor Title Insurance Company.
In its Complaint filed September 27, 2005, Plaintiff alleges three "causes of action" designated "Action for
Declaratory Judgment," "Temporary Restraining Order and Permanent Injunction," and "Legal Fees." In its cause of
action for a declaratory judgment, which is immediately implicated on the pending motions, Plaintiff seeks a judgment
"awarding . . . ownership of the [Subject] Property to Plaintiff . . . and . . . an order directing the New York [***3] City
Office of the City Register to correct the public records." (Complaint, P 28.) The prayer for relief is supported by a
recitation of the transactional history of the Subject Property and the allegation that the City "wrongfully attempted to
again transfer title to the [Subject] Property by improperly, and without authority, issuing a deed" to Mr. Shavers.
(Complaint, P 13.)
In its Answer, the City of New York essentially admits that it sold the Subject Property to Plaintiff in 1976, and
then sold it again to Mr. Shavers in 1997. (See Answer of City of New York, PP 8, 10, 13.) Defendant Global Properties
has asserted a cross-claim against the City, alleging that, if Global is found to be liable to Plaintiff, "such liability is the
direct responsibility and incurred through the fault or acts" of the City, and that, if the sale of the Subject Property from
Global to Spitzer is "found to be invalid, defendant The City of New York has been unjustly enriched." (See Global's
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15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
Cross-Claims and Verified Reply to Spitzer's Cross-Claims, PP 19, 22.) Defendant Spitzer has also asserted a
cross-claim against the City, and cross-claims against Global Properties; the allegations of the cross-claim [***4]
against the City are virtually identical to the allegations of Global's cross-claim. (See Spitzer's Verified Answer with
Affirmative Defenses and Cross-Claims, PP 24, 27.) In addition, Spitzer's title insurer, having satisfied a claim by its
insured, instituted a third-party action against Spitzer's seller, Global Properties.
Now before the Court are six motions: Plaintiff moves for an order, pursuant to CPLR 3212, granting summary
judgement on its cause of action for declaratory relief, and moves for severance of Defendants' respective cross-claims;
the City moves for an order, pursuant to CPLR 3212, granting summary judgment dismissing the cross-claims asserted
against it by Global Properties and Spitzer; Global Properties moves for an order, among other things, pursuant to CPLR
3212, granting summary judgment against the City "on the issue of liability"; Global Properties moves for an order,
pursuant to CPLR 3211 (a) (1) and (7), dismissing the third-party complaint of Ticor Title Insurance Company; and
Ticor moves for leave to file an amended Complaint.
Plaintiff Washington Temple's Motion for Summary Judgment
Plaintiff's cause of action for declaratory judgement will be deemed based [***5] upon Article 15 of the Real
Property Actions and Proceedings Law, which provides for an action to compel the determination of a claim to real
property (see RPAPL 1501 et seq), even though Plaintiff does not technically comply with the pleading requirements
of the statute. (See Howard v Murray, 38 N.Y.2d 695, 699-700, 346 N.E.2d 238, 382 N.Y.S.2d 470 [1976]; Sunshine v
Danbury, 181 A.D.2d 961, 963, 581 N.Y.S.2d 476 [3d Dept 1992]; Knocklong Corp. v Long Island State Park
Commission, 284 AD 973, 974, 134 N.Y.S.2d 785 [2d Dept 1954]; Andrew v Lorrainey, 14 Misc 3d 1219 [A], 836
N.Y.S.2d 483, 2007 NY Slip Op 50090 [U], * 6 [Sup Ct, Kings County].) "While an action under RPAPL Article 15 . . .
is a statutory action, it has been described as a hybrid one in which the relief awarded is in large measure equitable in
nature." (See Dowd v Ahr, 168 A.D.2d 763, 765, 563 N.Y.S.2d 917 [3d Dept 1990], rev'd on other grounds 78 N.Y.2d
469, 583 N.E.2d 911, 577 N.Y.S.2d 198 [1991]; see also Lewis v Rodriguez, 155 Misc 2d 12, 13-15, 587 N.Y.S.2d 121
[Sup Ct, Bronx County [1992] .) Its equitable characteristics derive from the common law action to quiet title. (See,
generally, 90 NY Jurisprudence 2d, 509 et seq.)
As a threshold matter, Global Properties contends that "the Estate of Darrell Shavers, as the entity which obtained
title in the Subject Property [***6] from defendant CITY, and thereafter transferred title in the Subject Property to
defendant GLOBAL, is a necessary and indispensable party to this action." (See Global's Affirmation in Opposition to
Plaintiff's Motion for Summary Judgment and in Support of Cross-Motion,P 29; see also CPLR 1001 [a].) Although
Global is free to attempt to make the Estate a party to this action, Plaintiff need not do so. "Predecessors in title who
claim no interest in the property are neither necessary nor proper parties to an action to quiet title." (McGahey v
Topping, 255 A.D.2d 562, 563, 682 N.Y.S.2d 223 [2d Dept 1998]; Brothers v Wall, 84 A.D.2d 923, 925, 447 N.Y.S.2d
64 [4th Dept 1981]; see also Hitchcock v Abbott, 9 AD3d 563, 566, 780 N.Y.S.2d 398 [3d Dept 2004].)
It is undisputed that the City's conveyance of the Subject Property to plaintiff Washington Temple was both made
and properly recorded before the conveyance to Darrell A. Shavers was either made or recorded. Under New York's
race-notice statute, "when two or more prospective purchasers contract for a certain property, . . . priority is given to the
buyer whose conveyance or contract is first duly recorded." (See Avila v Arsada Corp., 34 AD3d 609, 610, 826 N.Y.S.2d
322 [2d Dept 2006]; see also Real Property Law 291, [***7] 294; CPLR 6501; Transland Assets, Inc. v Davis, 29
AD3d 679, 679, 813 N.Y.S.2d 675 [2d Dept 2006]; Jenkins-Watson v Golabi Holdings, LLC, 26 AD3d 467, 468, 809
N.Y.S.2d 460 [2d Dept 2006]; Rivas v McDonnell, 308 A.D.2d 572, 573, 764 N.Y.S.2d 870 [2d Dept 2003].)
No Defendant challenges this clear and fundamental proposition. Indeed, the City of New York "does not oppose
plaintiff's summary judgement motion seeking a declaratory judgment declaring plaintiff owner of Brooklyn, Block
1212, Lot 4." (See Affirmation in Response to Washington Temple's Motion for Summary Judgement, P 5.) Plaintiff is
entitled, therefore, to the declaratory relief it seeks, unless there is some defense that would avoid Plaintiff's prima facie
showing. Defendants Global Properties and Spitzer contend that the equitable doctrine of laches provides such a
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15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
defense. Third-party plaintiff Ticor Title Insurance Company also opposes Plaintiff's motion on this ground, but it is not
at all clear that it has standing to do so. In light of the Court's ruling on the laches defense, however, it is not necessary
to resolve the question.
Defendants' laches defense is based upon evidence that Plaintiff became aware of the deed to Darrell A. Shavers in
1989 and its recordation, [***8] but took no action to address it. Plaintiff's files contain copies of letters to Plaintiff
dated August 9, 1989 and October 2, 1989 from the City's Department of General Services, in which the City
acknowledged its error in executing the deed to Mr. Shavers, advised Plaintiff that "the second deed to Mr. Shavers
appears to be a nullity," and urged Plaintiff to consult its legal counsel "to determine the appropriate method for dealing
with this issue." (See Exhibit P to Affirmation in Support of Plaintiff's Motion for Summary Judgment; Affidavit of
Robert L. Madison, President and Pastor of Washington Temple, P P 33, 34.)
There is no evidence of any steps taken by Plaintiff to address the Shavers deed. The Subject Property is a vacant
lot, and has been used for parking since it was acquired. (See id., P P 14, 19.) This action was prompted by the posting
of a sign on the premises in February 2005, threatening that any vehicles parked there would be subject to tow. (See id.,
P 25.) As stated by Plaintiff, "it is undisputed that Plaintiff had unfettered access to the Property and was undisturbed in
the use of the Property from and following its successful bid and purchase of the Property [***9] in 1976 through and
including 2005, when this action was commenced, only a few months after Defendant Global made claim to
ownership." (See Reply Affirmation in Further Support of Plaintiff's Motion for Summary Judgment, P 11.)
Plaintiff's cause of action for declaratory judgement is not barred by a statute of limitations. (See Orange &
Rockland Utils. v Philwold Estates, 52 N.Y.2d 253, 261, 418 N.E.2d 1310, 437 N.Y.S.2d 291 [1981]; Schoener v
Lissauer, 107 NY 111, 116-17, 13 N.E. 741 [1887]; Gold v New York State Business Group, Inc., 255 A.D.2d 628, 630,
679 N.Y.S.2d 476 [3d Dept 1998]; Piedra v Vanover, 174 A.D.2d 191, 196, 579 N.Y.S.2d 675 [2d Dept 1992].) "The
cause of action [to remove clouds upon the title to land] is not the creation of the cloud, but its existence, its effect upon
the title of the owner, and his right to have it removed." (Schoener v Lissauer, 107 NY at 117.) "That is a continuing
right which endures as long as the occasion for its exercise." (Id.) "The requirement of prompt action is imposed as a
policy matter upon persons who would challenge title to property rather than those who seek to quiet title in their land."
(Orange & Rockland Utils. v Philwold Estates, 52 N.Y.2d at 261 [emphasis in original].)
This Court has found no authority that [***10] holds that the laches doctrine applies to an action to quiet title or
to determine a claim to real property. The only authority cited in opposition to Plaintiff's motion, Delamater v
Rybaltowski (161 A.D.2d 1001, 557 N.Y.S.2d 574 [3d Dept 1990]), was an action to enforce restrictive covenants in a
deed, and is inapposite. In Orange & Rockland Utils. v Philwold Estates (70 A.D.2d 338, 421 N.Y.S.2d 640 [3d Dept
1979], mod. 52 N.Y.2d 253, 418 N.E.2d 1310, 437 N.Y.S.2d 291 [1981]), an action for a declaration that a clause
restricting the use of certain realty expired upon the death of the grantor, the Appellate Division "assum[ed] arguendo
that laches [was] applicable to [the] action," but concluded that the doctrine was not applicable on the facts. (See id., 70
A.D.2d at 343.) The Court of Appeals agreed, "for the reason stated by the Appellate Division, that laches could not bar
the action." (See id., 52 N.Y.2d at 261-62.)
Here, too, assuming that the doctrine is applicable to an action like Plaintiff's for declaratory relief, it does not bar
the relief on the uncontested facts. "The defense of laches consists of an unreasonable delay by a plaintiff to the
prejudice of the defendant." (Weiss v Mayflower Doughnut Corp., 1 N.Y.2d 310, 318, 135 N.E.2d 208, 152 N.Y.S.2d 471
[1956].) "But mere [***11] delay, however long, without the necessary elements to create an equitable estoppel, does
not preclude the granting of equitable relief." (Id.; see also Kraker v Roll, 100 A.D.2d 424, 433, 474 N.Y.S.2d 527 [2d
Dept 1984].)
In turn, "the doctrine of equitable estoppel . . . should be applied with great caution when dealing with realty."
(Huggins v Castle Estates, 36 N.Y.2d 427, 427, 330 N.E.2d 48, 369 N.Y.S.2d 80 [1975]; see also Lyon v Morgan, 143
NY 505, 509, 38 N.E. 960 [1894]; F.B. Transit Road Corp. v DRT Construction Corp., 241 A.D.2d 930, 931, 661
N.Y.S.2d 367 [4th Dept 1997]; Kraker v Roll, 100 A.D.2d at 433.) The doctrine "should not be applied unless the
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15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
grounds upon which it rests are clearly and satisfactorily established, and not then except in support of a clear equity or
to prevent fraud." (Lyon v Morgan, 143 NY at 509.) Mere "inaction" does not constitute the "inequitable conduct" that
would support a laches defense. (See Kraker v Roll, 100 A.D.2d at 435; see also Zaccaro v Congregation Tifereth Israel
of Forest Hills, 20 N.Y.2d 77, 80, 228 N.E.2d 772, 281 N.Y.S.2d 773 [1967] [delay not "unconscionable"].)
The Court cannot say here, assuming that laches may ever serve as a defense to a possessor's proceeding to quiet
title, that Plaintiff's failure to seek that relief sooner is the [***12] kind of inequitable conduct that would warrant
application of the doctrine. This conclusion is confirmed by a review of the "four elements" of laches, all of which "are
necessary for the proper invocation of the doctrine." (See Cohen v Krantz, 227 A.D.2d 581, 582, 643 N.Y.S.2d 612 [2d
Dept 1996].)
"To establish laches, a party must show: (1) conduct by the offending party giving rise to the situation complained
of, (2) delay by the complainant in asserting his or her claim for relief despite the opportunity to do so, (3) lack of
knowledge or notice on the part of the offending party that the complainant would assert his or her claim for relief, and
(4) injury or prejudice to the offending party in the event that relief is accorded the complainant." (Id.)
Defendants Global Properties and Spitzer (and his insurer Ticor) invoke the laches doctrine on the unarticulated and
unsupported assumption that, for purposes of an action against them, the period of "delay" in taking action should be
measured from the time Plaintiff became aware of a potential cloud on its title by reason of a conveyance to a
non-party, Darrell A. Shavers. There can be no fair contention that Plaintiff did not act promptly in response [***13]
to Global Properties's assertion of a right to possession of the Subject Property, or to Spitzer's subsequent putative
purchase from Global. No authority is cited for the proposition that it would be inequitable to allow Plaintiff relief
against them because it might have been inequitable to allow relief against Mr. Shavers if he had not sold it.
More importantly, however, neither Global Properties nor Spitzer can contend that it did not have notice that
Plaintiff would not assert a claim to the Subject Property. "A purchaser of an interest in land . . . has no cause for
complaint under the [recording] statute when its interest is upset as a result of a prior claim against the land the
existence of which was apparent on the face of the public record at the time it was purchased." (Andy Assoc. v Bankers
Trust Co., 49 N.Y.2d 13, 20, 399 N.E.2d 1160, 424 N.Y.S.2d 139 [1979]; see also Trust Company of New Jersey v
Genser, 271 A.D.2d 524, 526, 705 N.Y.S.2d 405 [2d Dept 2000].) "In counties using a block and lot' indexing system, a
purchaser is charged with record notice of all matters indexed under the block and lot numbers corresponding to the
purchaser's property, regardless of whether such information also appears in his or her direct chain [***14] of title."
(Farrell v Sitaras, 22 AD3d 518, 520, 803 N.Y.S.2d 659 [2d Dept 2005].) "Kings County . . . has used a block and lot'
system since July 1, 1964." (Id.)
"If the purchaser fails to use due diligence in examining the title, he or she is chargeable, as a matter of law, with
notice of the facts which a proper inquiry would have disclosed." (Fairmont Funding, Ltd. v Stefansky, 301 A.D.2d
562, 564, 754 N.Y.S.2d 54 [2d Dept 2003]; see also Astoria Federal Savings & Loan Assoc. v June, 190 A.D.2d 644,
645, 593 N.Y.S.2d 250 [2d Dept 1993].) Plaintiff's recorded deed provided notice that Plaintiff could assert a claim for
relief against Defendants, so as to preclude a viable defense of laches. (See Stassou v Casini & Huang Construction,
Inc., 241 A.D.2d 448, 448, 660 N.Y.S.2d 59 [2d Dept 1997].)
Neither Global Properties, Spitzer, nor Ticor disputes Washington Temple's affidavit evidence that the Subject
Property has been used as a parking lot from 1976, when it was acquired, until 2005, nor does anyone explain how that
use could have escaped their attention as they proceeded with purchase transactions, respectively, of $ 180,000.00 and $
400,000.00. "Actual possession of land is sufficient notice to all the world of the existence of any right which the
[***15] person so in possession is or may be able to establish." (Holland v Brown, 140 NY 344, 347, 35 N.E. 577
[1893]; see also Miles v De Sapio, 96 A.D.2d 970, 970, 466 N.Y.S.2d 848 [3d Dept 1983]; Diamond v Wasserman, 8
A.D.2d 623, 624, 185 N.Y.S.2d 411 [2d Dept 1959].)
It may be that Plaintiff would have been better advised to take action earlier to deal with the recorded Shavers deed,
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15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
even though Mr. Shavers apparently made no claim to ownership or possession of the property. Under the
circumstances presented, however, equity hardly demands, or even allows, that it be deprived of either legal title or full
beneficial use of the Subject Property.
Plaintiff is entitled, therefore, to the declaratory relief requested. To the extent that Plaintiff's declaratory judgment
cause of action and its motion for summary judgement seek an order directing the County Clerk "to correct the public
records" (see Complaint, P 28; Notice of Motion), it is not supported by any citation to authority. The Court notes,
however, Real Property Law 329, which provides for an action by an owner of real property "to have any recorded
instrument in writing relating to such real property . . . declared void or invalid, or to have the same canceled of record
as to [***16] said real property." Plaintiff has established prima facie that it is entitled to that relief, and Defendants
have failed to raise an issue of fact with respect thereto. (See Mason v Stokes, 300 A.D.2d 370, 370-71, 751 N.Y.S.2d
854 [2d Dept 2002].)
The City's and Global Properties's Respective Motions for Summary Judgement
Both defendant Global Properties and defendant Henry Spitzer have asserted cross-claims against the City that,
generously interpreted, purport to allege causes of action for unjust enrichment and negligence. Global now moves "for
partial summary judgment on the issue of liability" on its cross-claim, while the City moves for dismissal of Global's
cross-claim, as well as Spitzer's, which is identical in terms. Spitzer has not opposed the City's motion, but third-party
plaintiff Ticor as his subrogee has opposed. The Court will assume that Ticor has standing to do so, but, as will appear,
it makes no difference.
Global's motion is easily disposed of. No mention is made of "unjust enrichment"; there is only a statement that
"defendant CITY received consideration from both plaintiff and Darrell Shavers." (See Global's Affirmation in
Opposition to Plaintiff's Motion for Summary Judgement [***17] and in Support of Cross-Motion, P 38.) There are
numerous allegations that the City was negligent in purporting to convey the same property twice, and in not correcting
the problem when it was discovered; and that Global and its title insurer justifiably relied on the deed to Darrell A.
Shavers in purchasing the Subject Property. (See id., at PP 35, 38, 41, 42, 43, 44.) Not a single authority is cited in
support of a right to recovery on such allegations, and there is no affirmation or affidavit by a person with personal
knowledge to provide the evidentiary foundation for any such recovery. In short, Global does not make a prima facie
showing in its papers that it is entitled to judgment as a matter of law, nor, as will appear, does it do so in opposition to
the City's motion.
The City's motion is supported by the affirmation and argument of its counsel and three affidavits: The affidavit of
James Montefinise, Director of Research, Division of Real Estate Services, Department of Citiwide Administrative
Services; the affidavit of Chi Chan, Principal Title Examiner in the Title Bureau of the Tax and Bankruptcy Litigation
Division of the New York City Law Department; and James Cox, Chief [***18] of the Law Claims Division in the
Office of the Comptroller of the City of New York.
With respect to the alleged claim for unjust enrichment, the City makes two arguments. First, "the City did not
receive funds from either Global or Spitzer at the times they received conveyances of the Property"; rather, "the City
received consideration from Washington Temple and Shavers, the parties to whom it conveyed the property in 1976 and
1977, respectively." (Affirmation in Support of the City's Motion and Cross-Motion for Summary Judgment and in
Opposition to Global's Motion for Summary Judgment, P 22.) Second, "the contracts of sale between Shavers and
Global, and, Global and Spitzer preclude Global and Spitzer from recovery (sic) damages based on the doctrine of
unjust enrichment." (Id., P 23.)
Taking the second argument first, the City cites Goldman v Metropolitan Life Insurance Co. (5 NY3d 561, 841
N.E.2d 742, 807 N.Y.S.2d 583 [2005]) for the proposition that, because (presumably) there were contracts of sale
between Shavers and Global, and between Global and Spitzer, Defendants can assert no claim for unjust enrichment
against the City. Specifically, the Court of Appeals in Goldman quoted an earlier decision stating that [***19] "the
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15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
existence of a valid and enforceable written contract governing the particular subject matter ordinarily precludes
recovery in quasi contract for events arising out of the same subject matter." (Id., at 572 [quoting Clark-Fitzpatrick, Inc.
v Long Is. R.R. Co., 70 N.Y.2d 382, 388, 516 N.E.2d 190, 521 N.Y.S.2d 653 (1987)].)
The City provides no evidence that Shavers and Global, and then Global and Spitzer, were parties to a "valid and
enforceable written contract governing the particular subject matter" (id.), and points to nothing in the parties' pleadings
or other papers to support the existence of such contracts. Assuming, however, the existence of such contracts, the cited
authorities might preclude an unjust enrichment claim between the parties to the respective contracts, but neither those
authorities, nor any other cited by the City, address the viability of the claim against someone not a party to the contract,
here the City.
An absence of such authority may, however, suggest legitimacy to the City's first argument, that a claim for unjust
enrichment does not lie when the party allegedly enriched has received nothing from the claimant. Here the City relies
on the Court of Appeals's often-cited opinion in Miller v Schloss (218 NY 400, 113 N.E. 337 [1916].) [***20]
Specifically, "if one man has obtained money from another, through the medium of oppression, imposition, extortion, or
deceit, or by the commission of a trespass, such money may be recovered back, for the law implies a promise from the
wrongdoer to restore it to the rightful owner." (Id., at 408 [emphasis in original].) "It is an obligation which the law
creates . . . when and because the acts of the parties or others have placed in the possession of one person money, or its
equivalent, under such circumstances that in equity and good conscience he ought not to retain it, and whichex oequo et
bono belongs to another." (Id., at 407.)
The City's contention is simple: if it was unjustly enriched by the conveyance to Shavers, it came at the expense of
Shavers, and not Global Properties or Spitzer. The contention is consistent with the principle that "an injured party who
has not conferred a benefit may not obtain restitution." (See Farash v Sykes Datatronics, Inc., 59 N.Y.2d 500, 504, 452
N.E.2d 1245, 465 N.Y.S.2d 917 [1983].) Global contends in response only that, by reason of the deed it received from
Shavers's estate and hiers, it has succeeded to any claim Shavers might have had against the City. (See Global's
Affirmation [***21] in Opposition to the City's Motion and Cross-Motion for Summary Judgment and Reply to the
City's Opposition to Global's Cross-Motion for Summary Judgment, P P 9, 10.) But Global provides no factual or legal
support for its contention, and neither Spitzer nor Ticor as its subrogee makes any showing in opposition to the City on
this issue. Nor do any of these parties address the rather obvious circumstance that, if the City was enriched by its
conveyance to Shavers, unjustly or not, it was in the amount of the $ 250.00 consideration.
The City also argues that it owed no duty to Global Properties or Spitzer that was breached when it "sold" the
Subject Property to Shavers, and that any loss suffered by Global or Spitzer was the consequence of a lack of diligence
in searching the public record, which would have revealed the deed to Plaintiff. On the duty point, the City relies on
general negligence cases in which recovery was sought for economic loss (see 532 Madison Ave. Gourmet Foods v
Finlandia Ctr., 96 N.Y.2d 280, 750 N.E.2d 1097, 727 N.Y.S.2d 49 [2001]; Bernstein v L. & H. Meat Co., Inc., 115
N.Y.S.2d 175 [Sup Ct, New York County 1951], aff'd 280 AD 914, 115 N.Y.S.2d 823 [1st Dept 1952]), as well as those
styled actions for negligent [***22] misrepresentation (see Ossining Union Free School Dist. v Anderson LaRocca
Anderson, 73 N.Y.2d 417, 539 N.E.2d 91, 541 N.Y.S.2d 335 [1989]; Calamari v Grace, 98 A.D.2d 74, 469 N.Y.S.2d 942
[2d Dept 1983].)
The central message of these and many other authorities is that no duty of care is owed, such as to allow recovery
for economic loss, unless "the underlying relationship between the parties be one of contract or the bond between them
so close as to be the functional equivalent of privity." (See Ossining Union Free School Dist. v Anderson LaRocca
Anderson, 73 N.Y.2d at 419; see also 532 Madison Ave. Gourmet Foods v Finlandia Ctr., 96 N.Y.2d at 289-90; Sabo v
Alan B. Brill, P.C., 25 AD3d 420, 421, 808 N.Y.S.2d 194 [1st Dept 2006]; Chambers v Executive Mortgage Corp., 229
A.D.2d 416, 417, 645 N.Y.S.2d 91[2d Dept 1996]
; Calamari v Grace, 98 A.D.2d at 77-82.)
Page 338
15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
In the negligent misrepresentation context, the relationship akin to privity has been described by the following
characteristics: "(1) an awareness by the maker of the statement that it is to be used for a particular purpose; (2) reliance
by a known party on the statement in furtherance of that purpose; and (3) some conduct by the maker of the statement
linking it to the relying party and evincing its understanding [***23] of that reliance." (See Prudential Ins. Co. v
Dewey, Ballantine, Bushby, Palmer & Wood, 80 N.Y.2d 377, 384, 605 N.E.2d 318, 590 N.Y.S.2d 831 [1992]; see also
Parrott v Coopers & Lybrand, L.L.P., 95 N.Y.2d 479, 484, 741 N.E.2d 506, 718 N.Y.S.2d 709 [2000].)
The City probably makes a prima facie showing on the duty issue, although it does not specifically address the
characteristics of a privity-like relationship in the context of this case, nor does it address the more general factors
considered by courts in determining the existence of duty (see 532 Madison Ave. Gourmet Foods v Finlandia Ctr., 96
N.Y.2d at 288-89.) Neither Global Properties, Spitzer, nor Ticor as Spitzer's subrogee, makes any showing that the City
owed a duty of care to any of them. Assertions and arguments that the City could have and should have done more to
correct its error after it was discovered, although relevant to assessing whether there was a lack of due care, do not
establish the duty to exercise due care for the party's benefit.
The Court is reluctant, however, on this record to suggest that negligence in connection with the recording of deeds
and other instruments affecting real property can never lead to liability to those who justifiably rely on the recordation
system. [***24] It is not at all clear that a determination of duty in that context will "expose defendants to unlimited
liability to an indeterminate class of persons" (see id, at 289), or will create liability "vast and unbounded, wholly
disproportionate to the defendant's undertaking or wrongdoing" (see Ossining Union Free School Dist. v Anderson
LaRocca Anderson, 73 N.Y.2d at 421.)
The Court concludes instead that there can be no recovery here by Global Properties, Spitzer, or Ticor, because a
diligent search of the public record would have revealed the successive deeds to Plaintiff and Shavers, without an
intervening conveyance from Plaintiff to the City. At the least, any diligent searcher would have been put to a duty to
investigate whether Shavers's estate and hiers held any interest in the Subject Property to convey. Whether considered
the absence of proximate cause on a general negligence claim, or the absence of "reasonable reliance" on a negligent
representation claim (see J.A.O. Acquisition Corp. v Stavitsky, 8 NY3d 144, 148, 863 N.E.2d 585, 831 N.Y.S.2d 364
[2007]), the result is the same. Ticor's contention that there was no obligation to search or investigate outside the chain
of title (see Affirmation of Andrew Paul [***25] Cooper, Esq. in Opposition to Motion of Washington Temple Church
of God in Christ, Inc. and Motion and Cross-Motion of the City of New York for Summary Judgment, P P 54-56) does
not reflect the controlling law, as is demonstrated above in the context of the laches defense.
Global Properties's Motion to Dismiss the Third-Party Complaint and Ticor Title's Motion for Leave to File an
Amended Complaint
Third-party defendant Global Properties moves pre-answer to dismiss the third-party complaint of Ticor Title
Insurance Company a/s/o Henry Spitzer pursuant to CPLR 3211 (a)(1), contending that it has "a defense . . . founded
upon documentary evidence," and pursuant to CPLR 3211 (a)(7), contending that "the pleading fails to state a cause of
action."
Global fails to attach a copy of the pleading that it seeks to have dismissed, and its motion must be denied for that
reason alone. The Court notes, however, that the third-party action arises out of facts and circumstances that must be
characterized as at least unusual, involving a recorded title that provided Global, Spitzer, and Ticor with constructive
notice that any interest Global or Spitzer might claim in the Subject Property derived from [***26] someone who was
not the owner, as well as open and obvious possession of the Subject Property by the owner at all times during the
transactional history. The Court reminds Global that, in order that a motion to dismiss be granted pursuant to CPLR
3211 (a)(1), the "documentary evidence submitted [must] conclusively establish [] a defense to the asserted claims as a
matter of law" (see Beal Savings Bank v Sommer, 8 NY3d 318, 324, 865 N.E.2d 1210, 834 N.Y.S.2d 44 [2007] [internal
quotation marks and citations omitted]); and that, when assessing a complaint in light of CPLR 3211 (a)(7), the court
must give the pleading a "liberal construction" and the plaintiff "the benefit of every possible favorable inference" (see
Page 339
15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
AG Capital Funding Partners, L.P. v State St. Bank & Trust Co., 5 NY3d 582, 591, 842 N.E.2d 471, 808 N.Y.S.2d 573
[2005].)
Third-party plaintiff Ticor seeks leave to file and serve an amended complaint that would allege a cause of action
for "Rescission" in addition to causes of action alleged for "Breach of Contract," "Breach of Covenant," "Breach of
Warranty," and "Unjust Enrichment." "Leave to amend or supplement pleadings should be freely granted unless the
amendment sought is palpably improper or insufficient as a matter of law, or unless [***27] prejudice and surprise
directly result from the delay in seeking the amendment." (Maloney Carpentry, Inc. v Budnik, 37 AD3d 558, 558, 830
N.Y.S.2d 262 [2d Dept 2007].) Global has not shown that any basis exists to deny Ticor leave, particularly when no
answer has yet been made to the third-party complaint.
Although styled a "third-party complaint," Ticor's complaint against Global Properties does not constitute
"third-party practice" as described in CPLR 1007. Ticor is not a "defendant" in the main action (although its subrogor
Spitzer is); it is not proceeding "against a person not a party," since Global is a party; and Ticor is not claiming that
Global "is or may be liable" to it "for all or part of the plaintiff's claim" against it. (See CPLR 1007.) Even as a
third-party action, the Court could dismiss it without prejudice, or sever it from the main action. (See CPLR 1010.)
In a consent order dated January 17, 2007, all of the parties agreed that Ticor could intervene in the main action
(see CPLR 1012 et seq.) "Once let in, the intervenor becomes a party for all purposes." (Kruger v Bloomberg, 1 Misc 3d
192, 195, 768 N.Y.S.2d 76 [Sup Ct, New York County 2003] [quoting Siegel, NY Prac 178, at 295 (3d ed)].)
Specifically, [***28] Ticor could assert a cross-claim against Global for recovery of the amount it paid its
insured/subrogor, even though that amount does not represent "all or part of a claim asserted in the action against"
Ticor. (See CPLR 3019 [b].)
It may be that the order allowing Ticor to intervene was not appropriate, even on consent of all the parties, because
the Court was not then presented with " a proposed pleading setting forth the claim or defense" that Ticor wished to
assert. (See CPLR 1014; see also Farfan v Rivera, 33 AD3d 755, 823 N.Y.S.2d 199 [2d Dept 2006]; Matter of Carriage
Hill v Lane, 20 A.D.2d 914, 249 N.Y.S.2d 455 [2d Dept 1964].) As previously noted, Ticor's participation on the
pending motions has not prejudiced the results on the Plaintiff's motion or Global's and the City's respective motions
against the other. As between Global and Ticor, Global did not answer Ticor's complaint, and its time will run anew to
respond to the amended complaint. The question becomes, however, particularly in light of the determinations on these
motions, whether that claim should proceed apart from the remaining claims in Plaintiff's action.
Plaintiff's Motion to Sever
Plaintiff moves for an order "directing the severance of [its] motion [***29] for summary judgment and its claims
from both the cross-claims of the Defendants and the third-party action." (Notice of Motion to Sever Cross-Claims and
Third-Party Action.) Plaintiff's motion must be granted to the extent of allowing Plaintiff to enter judgment on its cause
of action to quiet title to the Subject Property. There is nothing to be gained, and only confusion or worse to result, by
withholding that relief from Plaintiff until the remaining claims are resolved.
Plaintiff has alleged a second cause of action, denominated "Temporary Restraining Order and Permanent
Injunction" that appears to be asserted only against Global Properties and Spitzer; and a third cause of action,
denominated "Legal Fees," that appears to be asserted against all Defendants, including the City. Plaintiff has not
articulated the legal theories underlying these respective claims, nor shown how the factual and legal issues will differ
from those that will arise on the remaining claims between other parties. In short, Plaintiff has not shown how severance
will "further[ ] . . . convenience or . . . avoid prejudice." (See CPLR 603.)
The Court's determinations on the pending motions have certainly narrowed [***30] the matters yet to be
litigated. But, other than by speculation, the Court cannot know how considerations of convenience or prejudice would
be affected by severance. Factors such as the preservation or "waste" of judicial resources, the "risk of inconsistent
Page 340
15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
verdicts," "common nucleus of facts," and the same or different witnesses (see Williams v Property Services, LLC, 6
AD3d 255, 256, 774 N.Y.S.2d 698 [1st Dept 2004]) cannot be assessed on the basis of only scant and conclusory
allegations in a complaint.
Plaintiff's motion for severance (motion calendar no. 23) is GRANTED only to the extent that the First Cause of
Action alleged in the complaint, denominated "Action for Declaratory Judgment," is severed from the Complaint and
from any remaining cross-claim and third-party action;
Plaintiff's motion for summary judgment on its cause of action for declaratory and related relief (motion calendar
no. 20) is GRANTED; Plaintiff shall settle an order and judgment in accordance with Uniform Rule 202.48 (see
CPLR 5012);
The City's motion and cross-motion for summary judgment dismissing the cross-claims of Global Properties and
Henry Spitzer (motion calendar no. 21) are GRANTED;
Global Properties's motion for [***31] summary judgment "on the issue of liability" against the City (motion
calendar no. 22) is DENIED;
Global Properties's motion to dismiss the third-party complaint of Ticor Title (motion calendar no. 24) is DENIED;
and
Ticor Title's motion for leave to file an amended Complaint (motion calendar no. 25) is GRANTED; the First
Amended Third Party Complaint attached as Exhibit L to the Affirmation in Support of Ticor's Motion, shall be served
on Global Properties in accordance with CPLR 2103 (b), together with a copy of this order with notice of entry, and
Global shall answer within 20 days after service.
May 31, 2007
Jack M. Battaglia
Justice, Supreme Court
Page 341
15 Misc. 3d 1142(A), *1142A; 841 N.Y.S.2d 824, **824;
Cited
As of: May 27, 2014
Michael Mazza, Jr., Individually and as Executor of Michael Mazza, Deceased,
Plaintiff, v. Realty Quest Brokerage Corp. et al., Defendants.
Index No. 7232/96
CIVIL COURT OF THE CITY OF NEW YORK, KINGS COUNTY
185 Misc. 2d 162; 712 N.Y.S.2d 288; 2000 N.Y. Misc. LEXIS 298
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff moved for summary judgment of mortgage foreclosure and to strike defendant's
defenses based on her life estate in the subject property; plaintiff cross-moved for summary judgment to the extent of a
determination that any foreclosure was subject to her life estate.
OVERVIEW: Decedent left defendant a life estate in real property. She lived in one apartment and received the rent
from the other. Decedent's administratrix contracted to sell the property and purchase was financed by two mortgages,
one of which was held by plaintiff. Before taking the mortgage, plaintiff's appraiser visited the property but had no
conversation with defendant. Shortly thereafter defendant recorded her interest. The court held that the appraiser's visit,
in which he discovered defendant in possession and noted that she was not paying rent, and the low sale price
suggestive of a cloud on the title, put plaintiff on inquiry notice regarding a possible interest of another in the property.
Since he failed to inquire further, plaintiff could not claim the status of bona fide purchaser or mortgagee for value.
Therefore, the judgment of foreclosure was subject to defendant's prior life estate.
OUTCOME: The court granted a foreclosure judgment subordinate to defendant's life estate, because plaintiff was on
inquiry notice regarding defendant's interest even though her interest was not recorded until after plaintiff took his
mortgage.
CORE TERMS: mortgage, life estate, tenant, mortgagee, subject premises, apartment, appraisal report, rent, duty to
inquire, tenancy, notice, occupant's, inquire, administratrix, possessory interest, constructive notice, foreclosure,
summary judgment, recollection, appraisal, probate, inspect, visited, bona fide purchasers, real estate, purchaser,
Page 342
judgment of foreclosure, sufficient to put, adverse claim, unknown persons
[HN1] Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the property and
to all the world of the existence of any right that the person in possession is able to establish.
[HN2] Where a tenant is in possession of the property at the time of purchase or at the time the mortgage is executed,
the purchaser or mortgagee is required to inquire about the title.
the extent of such prior right, or to have been guilty of a degree of negligence equally fatal to his claim to be considered
as a bona fide purchaser.
HEADNOTES
Mortgages - Foreclosure - Priority of Tenant's Life Estate
In a mortgage foreclosure action, plaintiff mortgagee is entitled to a judgment of foreclosure subordinate to
defendant tenant's life estate, notwithstanding that the mortgage was entered into prior to the filing for probate of the
will through which defendant claims her interest. Where a tenant is in possession of the property at the time a mortgage
is executed, the mortgagee is required to inquire about the title. Here, the appraisal report listing "owner" as one of the
two tenants was sufficient to put plaintiff on inquiry as to the existence of some right or claim of title, at which point
plaintiff had a duty to inquire to decipher the extent of the adverse claim. The fact that the tenant may not have told
people who came to inspect the apartment about her life estate is of no consequence. Plaintiff has failed to show that
the tenant had a duty to impart this information to these unknown persons. Furthermore, the title record indicated that
the property, which was valued at over $ 100,000, had been purchased from the life estate grantor's administratrix for
less than $ 40,000. This would have put plaintiff on notice that there might be a cloud on the title.
COUNSEL: [***1] DeVagno, Borchert, Levine & LaSpina, P. C., Whitestone, for plaintiff. Gershberg & Greenberg,
New York City, for Ludie Perkinson, defendant. Eliot Spitzer, Attorney General, New York City, for New York State
Department of Finance, defendant. Michael D. Hess, Corporation Counsel, Brooklyn (Devora B. Cohen of counsel),
for New York City Commissioner of Finance, defendant.
JUDGES: Eric I. Prus, Judge, Civil Court.
OPINION BY: Eric I. Prus
OPINION
[*163] [**289] Eric I. Prus, J.
Page 343
185 Misc. 2d 162, *; 712 N.Y.S.2d 288, **;
2000 N.Y. Misc. LEXIS 298, ***
Plaintiff Michael Mazza, Jr., individually and as executor of Michael Mazza, deceased, moves for an order
dismissing defendant Ludie Perkinson's affirmative defenses and granting him summary judgment against defendant
Perkinson; and for an order appointing a Referee to compute the sums due under the note and mortgage.
Defendant Perkinson cross-moves for an order denying plaintiff's motion for summary judgment; and granting her
summary judgment to the extent of finding that any foreclosure is subject to her life estate in the subject premises.
This is an action to foreclose on a second mortgage dated May 10, 1991, executed by defendant Realty Quest
Brokerage Corp. [***2] to the plaintiff to secure the payment of $ 25,000. The premises is a two-family house known
as 819 Hopkins Avenue, Brooklyn, New York.
A first mortgage was given to Al Reich on April 16, 1991. The foreclosure action brought by Reich, in which
plaintiff was named as defendant but did not appear, has previously been concluded. Justice Herbert J. Lipp of Supreme
Court, Kings County, by decision dated November 19, 1997, determined that the first mortgage was subject to the life
estate of defendant Perkinson.
Justice Lipp made the following findings of fact:
1. Eric Pedlar executed a last will and testament on May 31, 1988, in which he devised and bequeathed a life estate
interest in premises located at 819 Hopkins Avenue, County of Kings, State of New York, to Ludie Perkinson, including
the right for her to collect all rents as they become due for her own use and benefit;
2. Eric Pedlar died on November 25, 1988;
3. Letters of administratrion of the estate of Eric Pedlar were issued to Sadie Pedlar on March 17, 1989;
4. Sadie Pedlar, as administratrix, entered into a contract to sell the subject premises to Realty Quest Brokerage
Corp.;
5. An order of the Surrogate's [***3] Court, Kings County, dated January 29, 1991, authorized Sadie Pedlar, as
administratrix, [**290] to proceed with the sale of premises at 819 Hopkins Avenue, Brooklyn, New York;
6. The defendant, Ludie Perkinson, has continuously resided at 819 Hopkins Avenue from sometime in 1975 to the
present [*164] date. Since the death of Eric Pedlar she has collected rent from the occupant of the other apartment in
the subject premises;
7. On or about March 15, 1991, Ron Swaby, an officer of Realty Quest Brokerage Corp., visited the subject
premises and endeavored to speak to Ludie Perkinson. He gave her his business card. He also spoke to the tenant on
the second floor, Uriah Higgins, who informed Swaby that he was paying his rent directly to Ludie Perkinson;
8. On or about March 15, 1991, Ron Swaby received a telephone call from Lawrence Gershberg, Esq. Mr.
Gershberg advised Mr. Swaby that he represented Ludie Perkinson and that Eric Pedlar had executed a will prior to his
death in November of 1988 in which Mr. Pedlar gave Ludie Perkinson a life estate interest in the subject premises;
9. The plaintiff, Al Reich, was verbally informed by Ron Swaby, at least two days prior [***4] to the closing of
title, that there were some problems in the transaction. Mr. Reich did not make any further inquires as to the specific
nature of the problems;
10. On April 16, 1991, title to the subject premises was conveyed by Sadie Pedlar, as administratrix, to Realty
Quest Brokerage Corp.;
11. The plaintiff, Al Reich, advanced all funds that were required for the purchase of the subject premises, a total
exceeding $ 38,000. Despite the fact of the actual amounts outlaid, the mortgage note and mortgage delivered to the
Page 344
185 Misc. 2d 162, *163; 712 N.Y.S.2d 288, **289;
2000 N.Y. Misc. LEXIS 298, ***1
lender plaintiff were in the amount of only $ 28,000. No payments on the note and mortgage have been made;
12. Al Reich and Ron Swaby, acting on behalf of Realty Quest Brokerage Corp., agreed that upon the resale of the
premises Reich would be paid the monies he advanced at the original closing. Swaby also agreed to pay Reich
approximately 43% of the expected "profits" from the resale;
13. The last will and testament of Eric Pedlar was filed in the Probate Department of the Kings County Surrogate's
Court on October 21, 1991. Letters of administration c. t. a. were thereafter issued to Ludie Perkinson.
Justice Lipp found that Al Reich, the first [***5] mortgagee, had both actual and constructive notice of the life
estate.
In this case the subject mortgage was entered into prior to the will through which defendant Perkinson claims her
interest was made part of the public record. The mortgage was executed on May 10, 1991, and the will, as previously
noted, was filed for probate in October 1991.
[*165] Plaintiff Michael Mazza, Jr., claims that neither he nor his deceased father had either actual or constructive
notice of defendant Perkinson's interest in the property. In addition, under the facts herein, there was no duty to
inquire about the tenancy of Perkinson at the time the mortgage was executed. Accordingly, he argues that he and his
father were bona fide purchasers and that their mortgage has priority over the later recorded life estate of defendant
Perkinson.
In addition, plaintiff Michael Mazza, Jr., points to the appraisal report which does not indicate that defendant
Perkinson had a life estate. He further points to the affidavit of Joseph S. Birrell, a certified real estate appraiser, who
claims that he conducted the appraisal of the subject premises; that he visited the subject premises and inspected the
[***6] interior and exterior of the subject premises; and that at no time did Perkinson or anyone else inform him that
Perkinson had a life estate.
Defendant Perkinson argues that plaintiff had constructive notice of her life estate. [**291] In addition, she claims
that plaintiff had a duty to inquire about her tenancy.
The affidavit submitted by Birrell is not probative. Birrell testified at an examination before trial that he had no
recollection of visiting the premises or who he saw at the premises; that since the appraisal report signed by him is
written in somebody else's handwriting, he might not have been the person who inspected the premises; that the bank
requires him to inspect both apartments in a two-family house; that if he cannot obtain access to the second apartment
he might ask the tenant of the apartment he gained access to about the second apartment, or assume that the second
apartment is similar to the first apartment; that there is no way of telling from the report whether access was gained to
the second apartment, since he would not list this information in the report because the bank would give him problems;
that he generally does not interview the people who [***7] provide him with access; that the report was prepared for an
entity known as Gelt Funding, and not plaintiff; that he refused to sign the first affidavit that was prepared for him
because it listed details that he had no recollection of; and that he should have not signed the second affidavit because
he had no recollection if he ever spoke to anybody at the subject premises.
Defendant Perkinson testified at her examination before trial that several people came to see the house, but she
never let them in.
[HN1] "Actual possession of real estate is sufficient notice to a person proposing to take a mortgage on the
property, and to all [*166] the world, of the existence of any right which the person in possession is able to establish."
( Phelan v Brady, 119 NY 587, 591-592 [1890]; Miles v De Sapio, 96 AD2d 970 [3d Dept 1983]; Nethaway v Bosch,
199 AD2d 654 [3d Dept 1993].)
In addition, plaintiff and his father had sufficient facts to impose on them a duty to inquire as to defendant
Page 345
185 Misc. 2d 162, *164; 712 N.Y.S.2d 288, **290;
2000 N.Y. Misc. LEXIS 298, ***4
Perkinson's tenancy. [HN2] [***8] Where a tenant is in possession of the property at the time of purchase, or in this
case, at the time the mortgage was executed, the purchaser or mortgagee is required to inquire about the title. (
Williamson v Brown, 15 NY 354 [1857].) [HN3] "[W]here a purchaser has knowledge of any fact, sufficient to put him
on inquiry as to the existence of some right or title in conflict with that he is about to purchase, he is presumed either
to have made the inquiry, and ascertained the extent of such prior right, or to have been guilty of a degree of
negligence equally fatal to his claim, to be considered as a bona fide purchaser." ( Williamson v Brown, supra, at 362;
Vitale v Pinto, 118 AD2d 774 [2d Dept 1986].)
In the prior action, Justice Lipp found that defendant Perkinson was in "actual, visible, open and notorious
possession of the property."
Plaintiff Michael Mazza, Jr., argues that Judge Lipp's decision has no bearing on this case, because in that case the
first mortgagee had actual notice [***9] of defendant Perkinson's life estate.
Judge Lipp found that the first mortgagee had both actual and constructive notice. In addition, the first mortgagee's
actual knowledge of the life estate has no bearing on the finding with respect to defendant Perkinson's possession of the
premises.
Plaintiff Michael Mazza, Jr., in his affidavit annexed to plaintiff's motion papers, page three, paragraph seven,
asserts that "defendant Perkinson's possession of the Premises did not give us notice of her alleged interest in the
Premises. Joseph S. Birrell and Associates, the appraisal company who appraised the Premises upon which we relied
prior to us taking back the mortgage, visited the Premises. As set forth in an affidavit in support of this motion it was
never told by defendant Perkinson or anyone else, that defendant [**292] Perkinson claimed to have a life estate or
that she was anything more than a normal tenant." However, the information listed on page three in Birrell's appraisal
report, on which plaintiff admits reliance, indicates otherwise. The report lists each unit of the premise, rent paid at the
time of the appraisal and the [*167] estimated rents. The first unit [***10] occupant is listed as "owner" with "0"
lease, and "0" rent paid. The second unit occupant is listed as "tenant" with "no lease" total rent "$ 775." In order for
Birrell to have listed the interest of the first unit as "owner" Birrell had to have knowledge of some possessory interest
in the premises by defendant Perkinson as that other than as tenant.
The appraisal report is sufficient to put plaintiff on inquiry as to the existence of some right or claim of title, and
at such time the duty to inquire is imposed on plaintiff to decipher the extent, if any, of the adverse claim.
Plaintiff Michael Mazza, Jr., asserts that only possession which is inconsistent with the title of the apparent owner
imposes a duty of inquiry, and that in this case, defendant Perkinson's possession was not on its face inconsistent with
that title. Although the appraisal report indicates otherwise, taking plaintiff's argument to its logical conclusion, a
mortgagee would never have to inquire about the tenant's interest in a property, since the mere possession by a tenant of
an apartment in a house would not by itself indicate that the tenant has an interest in the estate. A mortgagee cannot
enter into [***11] a mortgage with blinders on. A mortgagee has to inquire about the possessory interest of the
tenants of the subject premises. In this case, plaintiff has failed to show that he made any inquiry at all. Plaintiff has
failed to demonstrate any affirmative steps taken in an effort to determine the validity of title at the time of this
transaction. Rather, it appears that plaintiff simply relied on the appraisal report which was conducted in relation to the
initial purchase by Realty Quest one month prior to the second mortgage.
Plaintiff cannot avoid the operation of the rule that defendant Perkinson's occupancy of the premises and the
appraisal report listing "owner" as one of the two occupants put him on notice as to her interest in the property.
In addition, the fact that defendant Perkinson may not have told people who came to inspect the apartment about
her life estate is of no consequence. Plaintiff has failed to show that defendant Perkinson had a duty to impart this
information to these "unknown persons." Rather, plaintiff had a duty to inquire as to defendant Perkinson's interest in
the property.
Page 346
185 Misc. 2d 162, *166; 712 N.Y.S.2d 288, **291;
2000 N.Y. Misc. LEXIS 298, ***7
Furthermore, a search of the title record would have indicated that the [***12] subject property, with a value of
over $ 100,000, had been purchased from Sadie Pedlar, the administratrix of Eric Pedlar's estate, for less than $ 40,000.
This would [*168] have put plaintiff on notice that there might be a cloud on the title.
The cases cited by plaintiff in support of his contentions are distinguishable from this case.
In Fekishazy v Thomson (204 AD2d 959 [3d Dept 1994], appeal dismissed 84 NY2d 844), the record owner
provided in the contract of sale that it was subject to a month-to-month tenancy. Such a tenancy is not inconsistent with
the title of the apparent owner. In this case, the plaintiff had no information with respect to defendant Perkinson's
tenancy, and failed to make any inquiry.
In Tompkins County Trust Co. v Talandis (261 AD2d 808 [3d Dept 1999], lv dismissed 93 NY2d 1041), the Court
found that the mortgagee had priority over the defendant occupant's claim to the property. In that case, defendant had
been present during the negotiations to arrange consolidated refinancing for the property and had not [**293] imparted
her possessory interest to plaintiff. The [***13] Court found that defendant's silence, coupled with her consent to the
subordination of her four prior judgment liens against her ex-husband, belied her future claim to a possessory interest in
the property superior to plaintiff. In this case, defendant Perkinson did not take part in the mortgage process.
Accordingly, under the facts presented herein, plaintiff is not a bona fide mortgagee and defendant Perkinson's life
estate has priority over the second mortgage.
Accordingly, plaintiff's motion for an order striking the affirmative defenses of defendant Perkinson is denied.
Defendant Perkinson's cross motion is granted to the extent of finding that her life estate has priority over plaintiff's
mortgage. Plaintiff is granted a judgment of foreclosure subordinate to the life estate of defendant Perkinson.
Page 347
185 Misc. 2d 162, *167; 712 N.Y.S.2d 288, **292;
2000 N.Y. Misc. LEXIS 298, ***11
Citywide Capital LLC v. Villanueva
1999 N.Y. Misc. LEXIS 690; 221 N.Y.L.J. 45
CORE TERMS: lease, conveyance, good faith, tenant's, good faith purchasers, constructive notice, valuable
consideration, purchaser's, void, subsequent purchasers, possessory interests, foreclosure, foreclosure action, real
property, unrecorded, former owner, actual notice, subject premises, continuous possession, real estate, recorded,
visible, prior right, summary judgment, judgment of foreclosure, duly recorded, equitable defenses, inappropriate,
definitively, cross-motion
JUDGES: [*1] Justice Baynes
OPINION BY: Baynes
OPINION
TENANT ENTERED a 10-year lease with the former owner. After foreclosure, the property was sold at public
auction. Petitioner acquired the premises and now commenced this holdover proceeding, arguing that the lease was void
because tenant admittedly failed to record it. The court said that prior unrecorded leases in excess of three years were
presumed void, as opposed to merely voidable, against good faith purchasers. However, where the conveyance holder
proffers evidence that subsequent buyer was on constructive notice of the conveyance, a rebuttable presumption is
created in favor of conveyance holder. The burden of proof then shifts to the buyer to prove actual good faith. The
court found that the buyer to prove actual good faith. The court found that the good faith issue was inappropriate for
summary judgment.
The Respondent/tenant in this Article 7 Holdover proceeding entered into a lease with the former owner of the
subject premises on or about December of 1992. Said lease set the rent at $ 400 per month for ten (10) years in
consideration for Respondent's agreement to repair and maintain the premises. It is uncontested that Respondent
invested approximately [*2] thirty thousand ($ 30,000.00) dollars into the apartment in this regard. On or abut October
of 1996, a judgment of foreclosure was entered against the former owner and the property was sold at a public auction.
Petitioner apparently acquired the premises at some unspecified point and commenced the instant proceeding.
Respondent interposed an Answer which asserts various affirmative defenses based upon the lease.
Petitioner now moves this Court for an Order striking all of Respondent's defenses pertaining to the sold lease. In
Page 348
essence, Petitioner proffers two alternate theories in this regard. First, Petitioner argues that the lease is subordinate to
the previous owner's mortgage and should be deemed to have been terminated by the foreclosure judgment.
Alternatively, Petitioner argues that the lease is void in view of Respondent's failure to record it pursuant to Sections
290 and 291 of the New York State Real Property Law (the "Recording Statute"). Respondent has interposed a
cross-motion seeking an Order denying Petitioner's application and dismissing the proceeding. Respondent argues that
since he was not made a party to the foreclosure action and has been in open, visible and continuous [*3] possession of
the remises, his possessory rights are not affected by the foreclosure even though his ten-year lease was not recorded.
Addressing first Petitioner's argument that the lease is subordinate to the former owner's mortgage, Respondent
correctly notes that such claim is inapplicable where, as here, the tenant was not named in the foreclosure action. As a
general rule, the "possessory" interests of a rent paying tenant who was not made a party to a foreclosure action may not
be affected by a judgment of foreclosure, and the purchaser takes title subject to any rights or interest which the tenant
may establish. See, e.g., In re Comcoach Corp., 698 F.2d 571 (2d Cir. 1983); Empire Savings Bank v. Towers Co., 54
A.D.2d 574, 387 N.Y.S.2d 138 (2d Dept. 1976); Krochta v. Green, 121 Misc.2d 471, 467 N.Y.S.2d 995 (2d Dept. 1983);
Douglas v. Kohart, 196 App. Div. 84, 187 N.Y.S. 102 (1921); Genuth v. First Div. Ave. Realty Corp., 88 Misc.2d 586,
387 N.Y.S.2d 793 (1976). When the tenant is not cut off by a judgment of foreclosure, subsequent purchasers also are
not entitled to possession until termination to the tenancy. See, e.g., [*4] Metropolitan Life Ins. Co. v. Childs Co., 230
N.Y. 285, 130 N.E. 295 (1921) reh den 231 N.Y. 551, 132 N.E. 885 (1921); Harvey v. Mooney, 168 App. Div. 169, 153
N.Y.S. 268 (1915). Thus, in view of the fact that respondent was not named in the above-referenced foreclosure action,
Petitioner took title to the premises subject to Respondent's possessory interests.
While it is clear that Petitioner ownership is subject to Respondent's possessory interests, the fundamental question
of what those possessory interests are remains. While Respondent argues that his possessory interests are those of a
tenant under a ten-year lease, Petitioner submits that Respondent's only possessory interests are those of a licensee in
view of the fact that he admittedly has not recorded the lease. In Wright v. King, NYLJ 11/8/95 p.29 c.1 (Baynes, J.)
this Court noted that the Recording Statute provides that with the one exception of a lease for a term of three years or
less, every other written instrument which affects or even may affect title to real property is defined as a conveyance,
1
and as such is void against subsequent "good faith" purchasers who has purchased for "valuable consideration,"
unless they are duly recorded.
2
Thus, [*5] for example, in Todd v. Krolick, 62 N.Y.2d 836, 477 N.Y.S.2d 609, 466
N.E.2d 149 (1984), a plaintiff was barred from enforcing a written agreement with his landlord's predecessor-in-interest,
which permitted the use an on-site washing machine for ten years in view of his failure to duly record such agreement.
In upholding Appellate Division's reversal of the trial court's ruling which enforced the agreement, the Court of Appeals
noted that foregoing rule applies to all interests affecting real estate for more than three years whether a license, as in
that case, a lease, an easement, or a covenant running with the land, and voids such agreements against good faith
purchasers, who acquired the property for valuable consideration, unless they have been duly recorded. Id.
1 A conveyance is a real property interest as opposed to a leasehold of three or less years which is classified as
personalty. See Bowery, Infra.
2 Specifically, Section 290.3 of the Real Property Law (the "RPL") states in pertinent part:
"The term 'conveyance' includes every written instrument, by which any estate or interest in
real property is created, transferred, mortgaged or assigned, or by which the title to any real [*6]
property may be affected . . . except . . . a lease for a term not exceeding three years . . . " Id.
RPL 291 provides in pertinent part:
"A conveyance of real property, within the state . . . may be recorded in the office of the clerk
of the county where such real property is situated. . . . Every such conveyance not so recorded is
void as against any person who subsequently purchases or acquires by exchange or contracts to
purchase or acquire by exchange, the same real property or any portion thereof, or acquires by
Page 349
1999 N.Y. Misc. LEXIS 690, *2; 221 N.Y.L.J. 45
assignment the rent to accrue therefrom . . . in good faith an for valuable consideration, from the
same vendor . . . and whose conveyance, contract or assignment is first duly recorded, . . ." Id.
(Emphasis added).
Respondent argues, however, that such rulings are inconsistent with the long standing rule that where a tenant is in
open, visible and continuous possession under a lease for a term exceeding three years, a subsequent purchaser is
bound by the prior lease, even where it is unrecorded. A closer reading of the applicable cases and statutes, however,
reveals that all are in accord.
In a series of early turn of the century decisions cited by Respondent, The Courts ruled, [*7] in essence, that where
a tenant is in open visible and continuous possession of real estate, such occupancy can be deemed to put a subsequent
purchaser on "constructive notice" of the need to investigate and accordingly, on constructive notice of any rights
which the tenant may thereafter establish. See, e.g., City Bank of Bayonne v. Hocke, 168 A.D. 83, 153 N.Y.S. 731. The
doctrine of constructive notice is that if a purchaser has knowledge of any facts sufficient to notify him of the need ton
inquiry as to the existence of some right or title in conflict with that which he is about to purchase, he should be
presumed either to have made such inquiry and ascertained the extent of such prior right, or to have be guilty of a
degree of negligence equally fatal to his claim of being deemed to have purchased in good faith for valuable
consideration.
3
Williamson v. Brown, 15 N.Y. 354 (1857) (cites). This presumption of constructive notice, however, is a
mere inference of fact and may be repelled by proof that the purchaser failed to discover the prior right, notwithstanding
the exercise of proper diligence on his part. Williamson v. Brown, supra.; Reynolds v. Springer Service Station Inc., 151
A.D.2d 466, 542 N.Y.S.2d 256 (2d Dept. 1989). [*8]
3 I.e., to be a "bona fide purchaser." A bona fide purchaser of real estate is defined as one who purchases
the property with an honest purpose and for a valuable consideration, without knowledge or notice of
outstanding interest or of facts or circumstances from which his knowledge of outstanding interest should be
implied.
By contrast, in the more recent case of Sam & Mary Housing Corp. Jo/Sal Market Corp., 121 Misc.2d 434, 468
N.Y.S.2d 294 (Sup. Ct. Queens County), also cited by Respondent, the Court found, as a matter of fact, that the
purchaser therein had "actual," as opposed to "constructive" notice of the prior unrecorded conveyance therein. This
decision went on to rule that such finding of actual notice definitively impeached the "good faith" requirement for the
Recording Statutes applicability.
None of the cases cited by Respondent, however, suggest that constructive notice definitively impeaches a finding
that the purchase was made in good faith as opposed to merely creating a rebuttable presumption.
In the instant case, Respondent alleges that Petitioner was on actual notice of his conveyance after purchasing the
subject premises,
4
however, there has been [*9] no allegation that Petitioner was on actual notice of the conveyance
prior to the purchase. Accordingly, this Court can not conclude that Petitioner's good faith is definitively impeached as
in Sam & Mary Housing Corp., Id. Unlike the tenant in Wright v. King, supra, however, the Respondent herein has at
least tacitly raised the issue of whether or not Petitioner was on notice of his conveyance and accordingly should not be
deemed to have purchased in 'good faith'.
4 Such claim of actual notice after purchasing is irrelevant to the issue of good faith.
* * *
Summarizing the foregoing rules, there is a presumption that a person who purchases real estate does so in good
faith, and proof that the purchaser paid a valuable consideration for his or her deed constitutes prima facie evidence of
such good faith until it is overcome by other proof.
5
By contrast, the presumption with respect to an unrecorded
conveyance is that it is "void," as opposed to merely "voidable," against subsequent purchasers, who are again
Page 350
presumed to have purchased in good faith if they purchased for valuable consideration. The conveyance holder's
proof that he or she is in open, visible and continuous possession of [*10] the subject premises, however, constitutes
prima facie evidence that the subsequent purchaser was on constructive notice of the unrecorded deed and therefore
that the purchase was not made in good faith. Accordingly, the burden of proof shifts to the subsequent purchaser to
prove,
6
by a fair preponderance of the evidence,
7
that he or she was in fact a good faith purchaser, i.e., that he or she
failed to discover the prior right, notwithstanding the exercise to proper diligence on their part.
8
5 Ochenkowski v. Dunaj, 232 A.D. 441, 251 N.Y.S. 589.
6 O'Brien v. Fleckenstein, 180 N.Y. 350, 73 N.E. 30, reh den 181 N.Y. 504, 73 N.E. 1127.
7 Hood v. Webster, 271 N.Y. 57, 2 N.E.2d 43.
8 Fox v. Sizeland, 170 Misc. 390, 9 N.Y.S.2d 350.
. . .
The determination of whether of not a purchase was actually made in good faith is fact specific and therefore
inappropriate for summary judgment. See e.g., White Rose Food v. Mustafa, 251 A.D.2d 653, 674 N.Y.S.2d 438 (2d
Dept 1998). Accordingly, both the motion and the cross-motion are denied. Either party may move this Court for an
Order restoring it for a hearing and/or trial at which it can be determined whether or not Petitioner acquired the subject
premises in good faith, [*11] and any other remaining issues. Alternatively, either party could more appropriately seek
a stay of these proceedings and vacatur of the foreclosure judgment in Supreme Court, based upon the judgment
creditor's alleged failure to include necessary party.
9
9 It is noted that the failure to name persons in the foreclosure action with real interests in the land may
constitute such an irregularity in the foreclosure action as to render the title defective. Timmermann v. Cohn, 204
N.Y. 614, 97 N.E. 589. If the defect consists of the failure to foreclose the interest of a necessary party, the
purchaser at the foreclosure sale sometimes may be relieved from his purchase. Downes v. Wenninger, 207 N.Y.
286, 100 N.E. 814. This Court, however, clearly has no jurisdiction over this matter. Relief of this nature would
have to be sought in Supreme Court.
Finally, it is noted that while the determination if whether or not a purchase is made in good faith would appear to
fall squarely within this Court's jurisdiction to the extent that such status bears upon a tenant's occupancy rights, a
finding by this Court to that effect arguably would be, either directly or indirectly, a form of equitable relief.
10
While
this Court lacks [*12] general equitable jurisdiction, Article 6, Section 15(b) of the New York State Constitution does
grant it "such equity jurisdiction as may be provided by law," and the legislature subsequently authorized this Court to
hear equitable defenses.
11
Nevertheless, this Court's authority to apply equitable defenses may not span beyond the
scope of that which is cognizable by this Court in the first place. Garrie v. Schmidt, 25 Misc. 753, 55 N.Y.S. 703 (App.
Term 1899). A finding that this Court lacks jurisdiction to hear a tenant's applicable equitable defense, in turn would in
the opinion of this court, necessarily lead to the conclusion that it either must or should decline to retain jurisdiction
over the entire matter so that the entire matter may be resolved in a Court of general jurisdiction. These observations,
however, go well beyond that which is currently before this Court. Accordingly, for the moment, this Court's ruling is
limited to a finding that the dispute is inappropriate for summary judgment and a denial of same. Resolution to the
larger issue as to jurisdiction may ultimately lie solely within the province of the higher Courts or this State's legislature.
10 Even if this [*13] Court could limit its finding that the purchaser lacked good faith to the tenant's
occupancy rights under the conveyance without directly affecting the purchaser's ownership rights, there would
still exist the potential for a future claim of res judicata or equitable estoppel effect form said decision affecting
any future dispute as to ownership.
11 Section 905 of the Civil Court Act.
Motion and cross-motion denied. So Ordered.
Page 351
Cited
As of: May 27, 2014
Stonybrook Realty, L. L. C., Respondent, v. Cremktco Inc., Appellant.
NO. 97-894 S C
SUPREME COURT OF NEW YORK, APPELLATE TERM, SECOND
DEPARTMENT
NOTICE: [***1] EDITED FOR PUBLICATION
PRIOR HISTORY: Appeal from a judgment of the Suffolk County District Court (Rockwell D. Colaneri, J.),
entered March 6, 1997, which, in a nonpayment summary proceeding, awarded petitioner landlord the sum of $ 19,082.
DISPOSITION: The judgment appealed from should be affirmed.
CASE SUMMARY:
PROCEDURAL POSTURE: Appellant tenant sought review of an order from the Suffolk County District Court (New
York), which found that the tenant failed to demonstrate that there was an agreement, either express or implied, to have
weekly or other forms of payment of the rent not called for under the lease in respondent landlord's action for
nonpayment of rent.
OVERVIEW: The tenant had alleged that it had orally modified the terms of the written lease with the prior owner to
provide for payment of rent in a manner that differed from the written terms of the lease. The tenant argued that the
conduct of the parties had modified the lease and that the landlord was estopped from bringing the nonpayment
proceeding. On review, the court found that the landlord, as a new owner, was not charged with constructive notice of
its predecessor's waiver of strict compliance with the lease terms providing for rent payments on the first of the month,
as the landlord did not have knowledge of facts that gave rise to a duty to inquiry. The court stated that as the terms of
the lease provided when rent was payable and no contrary practice was indicated, the landlord was without actual notice
and should have been able to rely on the lease. The court observed that there could be no waiver of a contractual right
Page 352
without notice, and without some form of notice, there was no duty to inquire whether a waiver existed.
OUTCOME: The court affirmed the judgment, which found that the tenant had failed to demonstrate that there was an
agreement, either express or implied, to have weekly or other forms of the payment of the rent that was not called for
under the lease in the landlord's action for nonpayment of rent.
CORE TERMS: lease, oral modification, tenant, notice, rent, modification, landlord, payment of rent, purchaser,
written agreement, new owner, constructive notice, successor-in-interest, oral agreement, prior owner, partial
performance, constructive, leasehold, executory', waived, modify, unequivocally, contractual, predecessor, equitable,
referable, estopped, estoppel, tenancy, lease provision
Contracts Law > Contract Modifications > Oral Modifications
Contracts Law > Types of Contracts > Oral Agreements
[HN1] Partial performance of an oral agreement to modify a written contract, if unequivocally referable to the
modification, avoids the statutory requirement of a writing. Moreover, when a party's conduct induces another's
significant and substantial reliance on the agreement to modify, albeit oral, that party may be estopped from disputing
the modification notwithstanding N.Y. Gen. Oblig. Law 15-301.
Contracts Law > Formation > Execution
Contracts Law > Statutes of Frauds > General Overview
[HN2] Parties to a written agreement who include a proscription against oral modification are protected by N.Y. Gen.
Oblig. Law 15-301(1). Any contract containing such a clause cannot be changed by an executory agreement unless
such executory agreement is in writing and signed by the party against whom enforcement is sought. Put otherwise, if
the only proof of an alleged agreement to deviate from a written contract is the oral exchanges between the parties, the
writing controls. Thus, the authenticity of any amendment, is ensured.
Contracts Law > Types of Contracts > Oral Agreements
[HN3] When the oral agreement to modify has in fact been acted upon to completion, the same need to protect the
integrity of the written agreement from false claims of modification does not arise. In such case, not only may past oral
discussions be relied upon to test the alleged modification, but the actions taken may demonstrate, objectively, the
nature and extent of the modification. Moreover, apart from statute, a contract once made can be unmade, and a
contractual prohibition against oral modification may itself be waived. Thus, N.Y. Gen. Oblig. Law 15-301 nullifies
only "executory" oral modification. Once executed, the oral modification may be proved.
Contracts Law > Contract Modifications > General Overview
Contracts Law > Statutes of Frauds > General Overview
[HN4] Where there is partial performance of the oral modification sought to be enforced, the likelihood that false claims
would go undetected is similarly diminished. The court may consider not only past oral exchanges, but also the conduct
of the parties. But only if the partial performance be unequivocally referable to the oral modification is the requirement
of a writing under N.Y. Gen. Oblig. Law 15-301.
Page 353
176 Misc. 2d 589, *; 675 N.Y.S.2d 749, **;
1998 N.Y. Misc. LEXIS 221, ***1
Contracts Law > Performance > Partial Performance > General Overview
[HN5] Once a party to a written agreement has induced another's significant and substantial reliance upon an oral
modification, the first party may be estopped from invoking N.Y. Gen. Oblig. Law 15-301 to bar proof of that oral
modification. Comparable to the requirement that partial performance be unequivocally referable to the oral
modification, so, too, conduct relied upon to establish estoppel must not otherwise be compatible with the agreement as
written.
[HN6] A successor-in-interest to real property takes the premises subject to the conditions as to the tenancy, including
any waiver of rights, that his predecessor in title has established if the successor-in-interest has notice of the existence of
the leasehold and of the waiver. The key to the liability of the successor-in-interest is notice of the relevant lease
provision or waiver thereof. Notice may be actual or constructive. Possession of premises is constructive notice to a
purchaser of the rights of possessor.
[HN7] There is no duty of inquiry on the part of the purchaser as successor-in-interest, except as to those conditions
the existence of which might reasonably be indicated by an inspection of the premises.
Real Property Law > Landlord & Tenant > Tenant's Remedies & Rights > General Overview
[HN8] Constructive notice only arises when a purchaser has knowledge of facts which would lead a reasonably
prudent person to make inquiry. It is readily apparent that possession by a tenant is constructive notice of the terms of
the lease agreement and the actual uses to which the property has been put. However, the duty to pay rent is a primary
obligation of a tenant and it is not apparent from the mere existence of a leasehold interest that an agreement for the
timely payment of rent has been waived. Indeed, such a waiver is in direct conflict with the terms of the lease. Where
the lease itself provides when the rent is payable and no contrary practice is indicated, a purchaser without actual notice
should be able to rely upon the lease without further inquiry. The concept of waiver is linked to notice. There can be
no waiver of a contractual right without notice; and, without some form of notice there is no duty to inquire whether a
waiver exists.
HEADNOTES
Landlord and Tenant - Lease - Effect of Oral Modification on Subsequent Landlord
In a nonpayment summary proceeding, an oral agreement between the tenant and prior owner to provide for
payment of rent in a manner differing from the written terms of the lease is not binding on the new landlord where the
tenant failed to demonstrate that there was an agreement, either express or implied, to have other forms of payment of
the rent not called for under the lease. A successor-in-interest to real property takes the premises subject to conditions as
to the tenancy, including any waiver of rights, that the predecessor-in-title has established if the successor has either
actual or constructive notice of the existence of the leasehold and the waiver. The duty to pay rent is a primary
obligation of a tenant and it is not apparent from the mere existence of a leasehold interest that an agreement for the
timely payment of rent has been waived. Here, the lease prohibited any change unless in writing, provided that the
landlord may accept a less than full payment of rent without prejudice to its rights to recover the balance due, and
Page 354
176 Misc. 2d 589, *; 675 N.Y.S.2d 749, **;
1998 N.Y. Misc. LEXIS 221, ***1
provided that the landlord's waiver of any breach of the lease is not a continuing waiver. Also, the landlord took
possession at a time when the tenant was not in default in rent and promptly rejected the first written notice of the
requested modification.
COUNSEL: Samuel Rutter, Huntington, for appellant. Long, Tuminello, Besso, Seligman, Quinlan & Werner, Bay
Shore (David H. Besso of counsel), for respondent.
JUDGES: Ingrassia, J. P., Floyd and Levitt, JJ., concur.
OPINION
[*590] [**749] Final judgment unanimously affirmed without costs.
[**750] In this nonpayment proceeding, tenant contended that it had orally modified the terms of the written lease
with the prior owner to provide for payment of rent in a manner differing from the written terms of the lease. It argued
in the court below that the conduct of the parties herein amounted to a modification of the lease and that, in any event,
petitioner should be estopped from bringing this proceeding.
The case cited by tenant in support of its position is that of Rose v Spa Realty Assocs. (42 NY2d 338), for the
proposition that contracts can be "unmade, and a contractual prohibition against [***2] oral modification may itself be
waived." In that case, plaintiffs sought specific performance from defendants of an oral agreement to modify the written
agreement of sale. The Court phrased the issues as being (at 340): "There are two issues of law arising under
subdivision 1 of section 15-301 of the General Obligations Law. The statute provides that written agreements expressly
proscribing oral modification cannot be changed by oral executory agreement. The first issue is whether partial
performance of an oral modification suffices to take the modification out of the statutory requirement of a writing. The
second, and alternative, issue is whether equitable estoppel may be invoked to bar a party from relying on the statute.
Also at issue, if the oral modification [is] effective, is the payment term for the modified transaction." The Court then
stated (at 341): [HN1] "Partial performance of an oral agreement to modify a written contract, if unequivocally referable
to the modification, avoids the statutory requirement of a writing. Moreover, when a party's conduct induces another's
significant and substantial reliance on the agreement to modify, albeit oral, that party may be estopped [***3] from
disputing the modification notwithstanding the statute." In discussing the effect of the General Obligations Law, the
Court stated (at 343-344):
[HN2] "Parties to a written agreement who include a proscription against oral modification are protected by
subdivision 1 of section 15-301 of the General Obligations Law. Any contract containing such a clause 'cannot be
changed by an executory agreement unless such executory agreement is in writing and signed by the party against
whom enforcement ... is sought'. Put otherwise, if the only proof of an alleged agreement to deviate from a written
contract is the oral exchanges between [*591] the parties, the writing controls. Thus, the authenticity of any
amendment, is ensured ...
"On the other hand, [HN3] when the oral agreement to modify has in fact been acted upon to completion, the same
need to protect the integrity of the written agreement from false claims of modification does not arise. In such case, not
only may past oral discussions be relied upon to test the alleged modification, but the actions taken may demonstrate,
objectively, the nature and extent of the modification. Moreover, apart from statute, a contract once made can [***4] be
unmade, and a contractual prohibition against oral modification may itself be waived ... Thus, section 15-301 nullifies
only 'executory' oral modification. Once executed, the oral modification may be proved ...
[HN4] "Where there is partial performance of the oral modification sought to be enforced, the likelihood that false
claims would go undetected is similarly diminished. Here, too, the court may consider not only past oral exchanges, but
also the conduct of the parties. But only if the partial performance be unequivocally referable to the oral modification is
the requirement of a writing under section 15-301 avoided ...
Page 355
176 Misc. 2d 589, *; 675 N.Y.S.2d 749, **;
1998 N.Y. Misc. LEXIS 221, ***1
"There is, however, another qualification to the mandates of section 15-301. Analytically distinct from the doctrine
of partial performance, there is the principle of equitable estoppel. [HN5] Once a party to a written agreement has
induced another's significant and substantial reliance upon an oral modification, the first party may be estopped from
invoking the statute to bar [**751] proof of that oral modification ... Comparable to the requirement that partial
performance be unequivocally referable to the oral modification, so, too, conduct relied upon to establish [***5]
estoppel must not otherwise be compatible with the agreement as written."
The case just cited dealt with two parties to the original contract. The issue before this court is whether that rule
changes when there is a new owner and whether this owner is bound by the conduct of the prior owner in his dealings
with the tenant. In Tehan v Peters Print. Co. (71 AD2d 101), decided two years after the Rose case (supra), the Court
phrased the issue as being (at 102): "Respondents, the new owners of a commercial building, served a notice of
termination of a written lease on appellant, a tenant, when the rent which, under the lease, was to be paid on the first day
of the month was not received on that date. Throughout the tenancy with the previous owner, appellant had been in the
habit of paying the rent after the first of the month. Are the new owners, concededly [*592] without actual knowledge
of the waiver of strict compliance with this term of the lease by their predecessor, charged with constructive knowledge
of it? We think not." The Court went on to state (at 104-106):
"The question presented by appellant is a narrow one, i.e., are respondents, the new owners, [***6] charged with
constructive knowledge of and, therefore, bound by, their predecessor's waiver of strict compliance with the lease terms
providing for rent payments on the first of the month. This is an issue not previously determined in New York. It is
clearly the law of this State that [HN6] a successor-in-interest to real property takes the premises subject to the
conditions as to the tenancy, including any waiver of rights, that his predecessor in title has established if the
successor-in-interest has notice of the existence of the leasehold and of the waiver ... The key to the liability of the
successor-in-interest is notice of the relevant lease provision or waiver thereof. Notice may be actual or constructive
(Bank of New York v Hirschfield, supra). Possession of premises is constructive notice to a purchaser of the rights of
possessor ( Phelan v Brady, 119 NY 587). The precise issue raised by appellant is whether possession is also
constructive notice of all conditions and waivers of the lease agreement which reasonable inquiry by the purchaser
would reveal. The trial court determined [HN7] there was no duty of inquiry on the part of the purchaser as
successor-in-interest, except [***7] as to those conditions the existence of which might reasonably be indicated by an
inspection of the premises. We agree ...
"We observe initially that the general rule is stated more broadly than the facts of the cases cited warrant. In each
of those cases cited immediately above there was an added element of actual notice to the purchaser of the waiver or
constructive notice through the fact that the deviation from the lease provision in issue was readily apparent upon an
inspection of the premises. [HN8] Constructive notice only arises when a purchaser has knowledge of facts which
would lead a reasonably prudent person to make inquiry ... It is readily apparent that possession by a tenant is
constructive notice of the terms of the lease agreement and the actual uses to which the property has been put.
However, the duty to pay rent is a primary obligation of a tenant and it is not apparent from the mere existence of a
leasehold interest that an agreement for the timely payment of rent has been waived. Indeed, such a waiver is in direct
conflict with the terms of the lease. Where the lease itself provides when the rent is payable and no contrary [*593]
practice is indicated, [***8] a purchaser without actual notice should be able to rely upon the lease without further
inquiry. The concept of waiver is linked to notice. There can be no waiver of a contractual right without notice; and,
without some form of notice there is no duty to inquire whether a waiver exists."
[**752] In Matter of Estate of Birnbaum v Yankee Whaler (75 AD2d 708, affd 51 NY2d 935), the Court cited the
Tehan case (supra) with approval.
In the case at bar, there had been a waiver by the prior owner of strict adherence to the time for payment of rent.
However, the new owner pursued its rights under the lease as soon as a breach occurred. The lower court held that "The
lease was entered into between two commercial parties of equal bargaining strength ... and that in the absence of fraud
or overreaching, equitable relief should not be granted to the defaulting party." Section 21.3 of the lease herein prohibits
Page 356
176 Misc. 2d 589, *591; 675 N.Y.S.2d 749, **750;
1998 N.Y. Misc. LEXIS 221, ***4
any change unless it is in writing. Section 21.2 of the lease provides that the landlord may accept a less than full
payment of rent without prejudice to its rights to recover the balance due. As opposed to the case of Brook Shopping
Ctrs. v Woolworth Co. (215 AD2d [***9] 620), where the landlord knew that tenant had been paying rent under the
modification for 15-20 years, the landlord herein took possession at a time when tenant was not in default in rent and
promptly rejected the first written notice of the requested modification. In addition, section 21.1 of the lease provided
that should the landlord waive any breach of the provisions of the lease, it should not be construed to be a continuing
waiver. Under the circumstances, appellant failed to demonstrate that there was an agreement, either express or
implied, to have weekly or other forms of payment of the rent not called for under the lease. Consequently, the
judgment appealed from should be affirmed.
Ingrassia, J. P., Floyd and Levitt, JJ., concur.
Page 357
176 Misc. 2d 589, *593; 675 N.Y.S.2d 749, **752;
1998 N.Y. Misc. LEXIS 221, ***8
Cited
As of: May 27, 2014
Maynard H. Peloke et al., Plaintiffs, v. John W. Scheid et al., Defendants
County Court of New York, Greene County
May 26, 1987
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff property owners filed a motion for summary judgment in their action against
defendant neighbors claiming adverse possession of a portion of the neighbors' property pursuant to N.Y. Real Prop.
Acts. Law arts. 5 and 15. The neighbors filed a cross-motion for summary judgment seeking dismissal of the owners'
complaint.
OVERVIEW: The neighbors' grantors deeded a strip of their land to the owners who erected a wood rail fence along
the new boundary line and maintained the strip as a portion of their residential yard. The grantors then conveyed their
entire property to the neighbors, without excepting or reserving the conveyance to the owners. The neighbors believed
that the wood rail fence was the boundary line and did not measure or survey the proposed deed description or inquire
as to the owners' rights. The court held that the owners were entitled to summary judgment vesting them with fee
simple title in the strip of land. The owners acquired title by adverse possession, pursuant to N.Y. Real Prop. Acts. Law
511 and 512 and N.Y. C.P.L.R. 212(a), because they maintained a lawn protected by a wood rail fence that
constituted a substantial enclosure for a period far in excess of 10 years. The owners' prior unrecorded deed prevailed
because the neighbors were not "good faith" purchasers protected by the recording statute, N.Y. Real Prop. Law 291.
The owners' possession of the strip of land charged the neighbors with knowledge of the unrecorded conveyance, which
could have been discovered by inquiring.
OUTCOME: The court granted the owners' motion for summary judgment, holding that the owners were vested with
fee simple title in the disputed strip of land.
CORE TERMS: deed, strip of land, summary judgment, rail fence, recording act, recorded, residential property,
Page 358
boundary line, conveyance, adjoining, conveyed, actual notice, lawful owners, fee simple, residential lot, subsequent
purchaser, adverse possession, residential, unrecorded, adjudging, grantor, grantee, vested, strip, possession of property,
grass trees, bona fide purchasers, good faith, issue of fact, superiority
Civil Procedure > Summary Judgment > Standards > General Overview
[HN1] To obtain summary judgment, it is necessary that movant establish his cause of action sufficiently to warrant the
court as a matter of law in directing judgment in his favor. N.Y. C.P.L.R. 3212(b).
Civil Procedure > Summary Judgment > Burdens of Production & Proof > General Overview
Civil Procedure > Summary Judgment > Opposition > General Overview
[HN2] In order to defeat a motion for summary judgment, the opponent must present evidentiary facts sufficient to raise
a triable issue, and averments merely stating conclusions are insufficient. A party opposing summary judgment must
assemble, lay bare, and reveal his evidentiary proof in admissible form to establish a triable issue of fact.
[HN3] Where plaintiffs claim title founded upon an unrecorded deed, and the land in question is possessed and
occupied by the plaintiffs cultivating and maintaining a lawn protected by a wood rail fence which constitutes a
substantial enclosure, N.Y. Real Prop. Acts. Law 511, 512, for a period far in excess of 10 years, N.Y. C.P.L.R.
212(a), plaintiffs clearly establish title by adverse possession.
[HN4] The recording act and related case law expressly condition the superiority of the rights of the subsequent grantee
upon his having purchased "in good faith." N.Y. Real Prop. Law 291. Actual notice of a prior unrecorded
conveyance or other instrument, or any title, whether legal or equitable, to the premises, or knowledge and notice of any
facts which should put a prudent man upon inquiry, impeaches the good faith of the subsequent purchaser. When
actual notice exists, the recording act loses all pertinence. Open, actual, and visible possession of property by one other
than the supposed grantor constitutes the equivalent of actual notice to a subsequent purchaser. The possession of
real estate by a third person charges a purchaser with knowledge of such facts as he might have ascertained had he made
actual inquiry of the person in possession. The purchaser's failure to inquire as to the person in possession's rights
removes him from the protection of the recording act, and the person in possession's prior title in the property prevails.
HEADNOTES
[***1] Adverse Possession -- Actual Possession of Disputed Property
Plaintiffs are entitled to summary judgment adjudging them lawful owners vested with absolute title in fee simple
of the 10-foot-wide strip of land adjoining their residential lot, which land was conveyed to them in 1965, and the deed
recorded in 1986. Plaintiffs in 1965 erected a wood rail fence along the boundary line and remaining residential
property of defendants' grantors, and have planted grass, trees and shrubs and maintained such strip as a portion of
residential yard. In 1979, the same premises and adjoining residential property were conveyed to defendants without
excepting and reserving the 1965 conveyance to plaintiffs. Defendants in 1979 were not bona fide purchasers of the
10-foot-wide strip in question, since the recording act conditions the superiority of the rights of the subsequent grantee
Page 359
135 Misc. 2d 606, *; 515 N.Y.S.2d 1000, **;
1987 N.Y. Misc. LEXIS 2274, ***
upon his having purchased "in good faith" ( Real Property Law 291). Open, actual, and visible possession of
property by one other than the supposed grantee constitutes the equivalent of actual notice to a subsequent purchaser.
Defendants' failure to inquire as to plaintiffs' rights removes them from the [***2] protection of the recording act, and
plaintiffs' prior title in the property shall prevail.
COUNSEL: Maynard S. Peloke, plaintiff pro se, and for Theo H. Peloke, plaintiff.
Steenbergh & Cloke (Edward G. Cloke of counsel), for defendants.
JUDGES: Dan Lamont, J.
OPINION BY: LAMONT
OPINION
[*607] OPINION OF THE COURT
[**1001] Plaintiffs move for summary judgment in this action brought pursuant to RPAPL articles 5 and 15
claiming adverse possession of and seeking a determination of claims to real property. Defendants cross-move for
summary judgment dismissing the complaint.
For the reasons which follow, this court holds and determines that plaintiffs are entitled to summary judgment
adjudging them lawful owners vested with absolute title in fee simple of the 10-foot by 127.42-foot strip of land
described in paragraph 9 of the amended complaint herein.
[HN1] To obtain summary judgment, it is necessary that movant establish his cause of action "'sufficiently to
warrant the court as a matter of law in directing judgment'" in his favor ( Friends of Animals v Associated Fur Mfrs., 46
NY2d 1065, 1067 [1979]; CPLR 3212 [b]).
[HN2] In order to defeat a motion for summary judgment, [***3] the opponent must present evidentiary facts
sufficient to raise a triable issue, and averments merely stating conclusions are insufficient ( Bethlehem Steel Corp. v
Solow, 51 NY2d 870 [1980]; Capelin Assocs. v Globe Mfg. Corp., 34 NY2d 338 [1974]; Ehrlich v American Moninger
Greenhouse Mfg. Corp., 26 NY2d 255 [1970]). A party opposing summary judgment must assemble, lay bare, and
reveal his evidentiary proof in admissible form to establish a triable issue of fact ( Zuckerman v City of New York, 49
NY2d 557 [1980]; Castro v Liberty Bus Co., 79 AD2d 1014 [2d Dept 1981]).
This court upon reading the motion papers, supporting affidavits, and examinations before trial, and examining the
exhibits submitted finds no substantial issue of fact in this case and therefore no necessity for a trial. The court finds the
following undisputed facts:
FACTS
The plaintiffs and defendants own adjoining residential property in the Town of Catskill, Greene County.
Plaintiffs acquired title to their residential lot by deed dated and recorded in February 1950. By warranty deed
dated and acknowledged on April 25, 1965, Charles M. Link and Bertha S. Link (defendants' grantors) [***4]
conveyed to plaintiffs a strip of land 10 feet wide and 127.42 feet long adjoining plaintiffs' [*608] residential lot.
Plaintiffs did not record their deed to such strip of land until July 1, 1986.
Plaintiffs in 1965 erected a wood rail fence along the boundary line between their newly acquired strip of land and
the remaining residential property of Link. Thereafter, plaintiffs have continually maintained the wood rail fence along
Page 360
135 Misc. 2d 606, *; 515 N.Y.S.2d 1000, **;
1987 N.Y. Misc. LEXIS 2274, ***1
such boundary line, and have planted grass, trees and shrubs and maintained such 10-foot-wide strip as a portion of their
residential yard.
By executor's deed dated and acknowledged June 19, 1979, Charles W. Link (son of Charles M. and Bertha Link,
deceased) conveyed to defendants the same described premises and residential property acquired by the Links by deed
recorded in 1959, without excepting and reserving the 1965 conveyance to plaintiffs. When defendants purchased their
residence in 1979, they observed the wood rail fence which they then believed was the boundary line between their
residence and plaintiffs' residence. Based upon their observations of the property, defendants did not believe they
purchased or owned land beyond the [***5] wood rail fence.
CONCLUSIONS OF LAW
[HN3] Plaintiffs claim title founded upon a written instrument, to wit: an unrecorded deed. The 10-foot-wide strip
of land in question has been possessed and occupied by the plaintiffs cultivating and maintaining a lawn protected by a
wood rail fence which constitutes a substantial enclosure (see, RPAPL 511, 512) -- for a period far [**1002] in
excess of 10 years (see, CPLR 212 [a]). Thus, plaintiffs clearly establish title by adverse possession.
However, this court's determination in plaintiffs' favor rests even more squarely and firmly upon the recording
statute ( Real Property Law 291) from which defendants in this case can derive no benefit. Simply stated, this court
holds and determines that defendants in 1979 were not "bona fide purchasers" of the 10-foot- wide strip of land in
question. [HN4] The recording act and related case law expressly condition the superiority of the rights of the
subsequent grantee upon his having purchased "in good faith" ( Real Property Law 291; Ward v Metropolitan El.
Ry. Co., 152 NY 39; Pallone v New York Tel. Co., 34 AD2d 1091 [4th Dept 1970], affd 30 NY2d 865 [1972]).
"Actual [***6] notice of a prior unrecorded conveyance or other [*609] instrument, or any title, whether legal or
equitable, to the premises, or knowledge and notice of any facts which should put a prudent man upon inquiry,
impeaches the good faith of the subsequent purchaser. Stated another way, when actual notice exists, the Recording
Act loses all pertinence. Open, actual, and visible possession of property by one other than the supposed grantor has
been held to constitute the equivalent of actual notice to a subsequent purchaser. The possession of real estate by a
third person merely charges a purchaser with knowledge of such facts as he might have ascertained had he made actual
inquiry of the person in possession." (49 NY Jur, Records and Recording Acts, 63; emphasis supplied.)
Defendants in 1979 believed they did not purchase land beyond the wood rail fence, and had they measured or
surveyed the proposed deed description in 1979 and made actual inquiry of plaintiffs, defendants would have learned of
plaintiffs' unrecorded conveyance. Defendants' failure to inquire as to plaintiffs' rights removes them from the
protection of the recording act, and plaintiffs' prior title [***7] in the property should prevail. (see, Miles v De Sapio,
96 AD2d 970, 971 [3d Dept 1983].)
Defendants' bare assertion that a deed acknowledged in 1965 before a practicing attorney as a notary public and not
recorded until 1986 is inherently suspect does not even deserve comment.
Plaintiffs are entitled to summary judgment adjudging them lawful owners vested with absolute title in fee simple
of the 10-foot by 127.42-foot strip of land described in paragraph 9 of the amended complaint and described in a deed
recorded in the Greene County Clerk's office on July 1, 1986 in Book 608 of Deeds at 191.
Page 361
135 Misc. 2d 606, *608; 515 N.Y.S.2d 1000, **1001;
1987 N.Y. Misc. LEXIS 2274, ***4
Analysis
As of: May 27, 2014
Joseph Sanzone et al., Plaintiffs, v. Niagara Mohawk Power Corporation, Defendant
Supreme Court of New York, Oneida County
July 29, 1965
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff landowners filed a motion for partial summary judgment pursuant to N.Y.
C.P.L.R. 3212 in their action against defendant power company that alleged trespass on the landowners' property. The
landowners asked that the question of damages be the only issue determined by a trial.
OVERVIEW: The landowners owned certain real property, upon which premises the power company had placed
several electrical transmission poles and transmission lines. The power company had taken possession of a strip of land
and placed the poles and lines on it after obtaining a written instrument from a prior owner of the property. The
landowners subsequently purchased the property. The court held that actual possession of real estate was sufficient
notice to all the world of the existence of any right which the person in possession was able to establish. However,
easements could only be acquired by grant, express or implied, or by prescription or by necessity. Thus, summary
judgment would have been improper because the landowners were on notice as to the rights of the power company and
its possible interest in the real property which was visible and clearly observable to them. They could not be considered
bona fide purchasers for the purpose of obtaining summary judgment. The court further ordered the landowners to
execute and acknowledge a grant and easement over the portion of the property that was occupied by the power
company.
OUTCOME: The court denied the landowners' motion for summary judgment.
CORE TERMS: summary judgment, cause of action, easement, notice, ejectment, stone wall, destruction, directing,
realty, poles, purchaser, transmission, execute, severed, previous action, bona fide purchaser', recorded, partial, deed,
grant of easement, agreed to pay, prior owner, written instrument, plus interest, strip of land, unrecorded, recording,
Page 362
presently, trespass, erected
Real Property Law > Limited Use Rights > Easements > Creation > General Overview
[HN1] An easement to do some act of a permanent nature on the land of another can be created only by a deed or
conveyance in writing, operating as a grant, and a consent in writing on the part of the landowner is no more valid than
if it were by parol.
Real Property Law > Adverse Possession > Elements of Adverse Claims
Real Property Law > Limited Use Rights > Easements > Creation > Easement by Prescription
[HN3] Actual possession of real estate is sufficient notice to all the world of the existence of any right which the person
in possession is able to establish. Easements can only be acquired by grant, express or implied, or by prescription or by
necessity.
HEADNOTES
[***1] Easements -- public utilities -- pursuant to unrecorded instrument, utility company erected poles and
wires; subsequent purchasers of realty sued utility company in ejectment; action was dismissed after trial; now
they sue utility company for damages for trespass; said defendant is granted summary judgment directing them
to execute grant of easement and directing it to pay them $ 400 which it had agreed to pay prior owner --
plaintiffs' cause of action for $ 500 damages for alleged destruction of stone wall is severed for trial.
1. Pursuant to an unrecorded written instrument from the owner of realty, a utility company erected transmission
poles and lines on a portion of said realty. A subsequent ejectment action by the subsequent owners of the realty against
the utility company was dismissed on the merits, after trial. This is the law of the case. The same plaintiffs are now
suing the utility company for damages for trespass. They move for summary judgment and for such other and further
relief as may seem just and proper, and the utility company cross-moves for summary judgment declaring its easement.
The court grants summary judgment directing the plaintiffs to execute [***2] and acknowledge a grant of easement to
the utility company, and directing the utility company, on the recording of such grant, to pay plaintiffs $ 400, which is
the sum it originally agreed to pay the prior owner, plus interest.
2. Plaintiffs' second cause of action against the utility company, for $ 500 damages for the alleged destruction of a
stone wall, is severed for trial.
COUNSEL: Francis P. Valone for plaintiffs.
Dunk, Conboy, McKay & Bachman for defendant.
JUDGES: Richard J. Cardamone, J.
Page 363
47 Misc. 2d 237, *; 262 N.Y.S.2d 138, **;
1965 N.Y. Misc. LEXIS 1625, ***
OPINION BY: CARDAMONE
OPINION
[*238] [**138] The plaintiffs move for partial summary judgment pursuant to CPLR 3212.
The plaintiffs are the owners of certain real property located in the Town of Hounsfield, Jefferson County, New
York, upon which premises defendant has placed six electrical transmission poles and two guys as well as transmission
lines. The defendant is presently transmitting electricity [**139] through this equipment. The defendant took
possession of a strip of land 50 by 195 feet and placed these poles and lines on it after obtaining a written instrument
from one Vito Carambia, dated January 21, 1955. Actual construction on the land commenced on March 8, 1960,
[***3] and all of the work was completed and the line was energized on April 22, 1960. Vito Carambia died intestate
on April 21, 1959, leaving as his only heirs at law and distributees two sons and one daughter, all three of whom deeded
their interest to the wife of one of the sons, one Carmella June Carambia, who, in turn, deeded the premises (which
included the strip along which the defendant's power lines were located) to the plaintiffs on April 23, 1960.
These facts and other details concerning this matter, are set forth in a previous action for ejectment instituted in this
court by the same plaintiffs against the same defendant. That matter resulted, after a trial, in a judgment for the
defendant, the plaintiffs demand for ejectment being denied. ( Sanzone v. Niagara Mohawk Power Corp., 36 Misc 2d
279, 284, affd. without opn. 19 A D 2d 861, mot. for lv. to app. den. 13 N Y 2d 601.)
The present action is based upon the same facts as those litigated in the previous action except that the plaintiffs are
seeking partial summary judgment based on the theory that the defendant is a trespasser on the plaintiffs' land; and
requesting that the question of damages only be determined [***4] by a trial. The defendant also demands summary
judgment that this court declare that it has an easement on the strip of land which it is presently occupying. As to the
first cause of action, both parties concede that there are no factual questions to be determined. The plaintiffs have also,
in a second cause of action, sought damages for the destruction of a stone wall allegedly torn down and demolished by
the defendant when it entered upon the plaintiffs' [*239] lands. The plaintiffs seek $ 500 damages in this cause of
action. The defendant has denied the allegations of that cause of action.
"It has been the law in this state for a number of years, that [HN1] an easement to do some act of a permanent
nature on the land of another can be created only by a deed or conveyance in writing, operating as a grant, and that a
consent in writing on the part of the landowner is no more valid than if it were by parol". ( White v. Manhattan Ry. Co.,
139 N. Y. 19, 24.) Concededly, here, the instrument which Vito Carambia executed and which the defendant used as its
authority for entering upon his lands was unacknowledged and, therefore, not able to be recorded as a grant. While this
[***5] instrument did not create an easement, it did establish certain rights enforcible between the parties to it and
against a purchaser with notice. ( Historic Estates v. United Paper Bd. Co., 260 App. Div. 344, 348, affd. 285 N. Y.
658.) Here, as in the Historic case (supra), the issue of notice determines the case.
"The applicable principle of law was well stated more than 100 years ago in Williamson v. Brown (15 N. Y. 354) in
the following quotation from page 362: 'the true doctrine on this subject is, that [HN2] where a purchaser has
knowledge of any fact, sufficient to put him on inquiry as to the existence of some right or title in conflict with that he
is about to purchase, he is presumed either to have made the inquiry, and ascertained the extent of such prior right, or
to have been guilty of a degree of negligence equally fatal to his claim, to be considered as a bona fide purchaser'". (
Lubelle v. Rochester Gas & Elec. Corp., 21 A D 2d 369, 371.)
[HN3] "Actual possession of real estate is sufficient notice * * * to all the world of the existence of any right which
the person in possession is able to establish". ( Phelan v. Brady, 119 N. Y. 587, [***6] 591-592.) Easements can only
be acquired by grant, express or implied, or by prescription or by necessity. ( Smith v. New York Cent. R. R. Co., 235
App. Div. 262, 266; see Corning v. Lehigh Val. R. R. Co., 14 A D 2d 156.)
Page 364
47 Misc. 2d 237, *; 262 N.Y.S.2d 138, **;
1965 N.Y. Misc. LEXIS 1625, ***2
The previous litigation between the parties establishes the law of the case. The plaintiffs, being on notice as to the
rights of the defendant and its possible interest in the real property which was visible and clearly observable to them,
cannot be considered bona fide purchasers for the purpose of obtaining summary judgment against the defendant. The
plaintiffs having asked in their notice of motion, dated June 21, 1965, in addition to the relief of summary judgment,
"for such other and further relief as may seem just and proper", this court will exercise its equitable powers and direct
the plaintiffs to execute and [*240] acknowledge a grant and easement over the premises now occupied by the
defendant. This grant and easement shall be similar to that executed by Philip, Anthony and Carmella June Carambia
and Catherine Smith, dated November 25, 1964, and recorded in the Jefferson County Clerk's office in Book 762 of
Deeds at page 152. Upon [***7] the execution, acknowledgement and recording of the said grant and easement, the
defendant is directed to pay to the plaintiffs the sum of $ 400, originally agreed upon by the defendant and Vito
Carambia, plus interest from August, 1960, the date when the defendant first offered to pay this sum to the plaintiffs.
There being a disputed issue of fact as to the alleged destruction of a stone wall, as set forth in the second cause of
action of the plaintiffs' complaint, summary judgment will be denied as to this cause of action. That cause of action
should be severed and separately tried, the first cause of action having been determined as a matter of law herein.
Page 365
47 Misc. 2d 237, *239; 262 N.Y.S.2d 138, **139;
1965 N.Y. Misc. LEXIS 1625, ***6
Positive
As of: May 27, 2014
Jan Ochenkowsky and Another, Plaintiffs, v. Kaziniez Dunaj and Others,
Defendants
Supreme Court of New York, Montgomery County
137 Misc. 674; 244 N.Y.S. 267; 1930 N.Y. Misc. LEXIS 1468
August 6, 1930
PRIOR HISTORY: [***1] Action to foreclose purchase-money mortgage.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff mortgagees brought an action against defendant purchaser and defendant
mortgagors, seeking to foreclose a purchase-money mortgage issued to the mortgagors. The mortgagors did not defend
the action.
OVERVIEW: On August 6, 1928, the mortgagees conveyed their property, a farm, to the mortgagors, subject to two
mortgages upon which there was unpaid the sum of $ 2,600. Concurrently therewith and as part payment of the
purchase price, the mortgagors executed and delivered to mortgagees a purchase-money mortgage in the sum of $
5,300. The purchase money mortgage was not recorded until the following year. In the meantime, the mortgagors
conveyed the property to the purchaser and his conveyance was recorded. The consideration expressed in the
purchaser's deed was one dollar and other good and valuable considerations. The purchaser also assumed and promised
to pay the prior mortgages of $ 2,600. Subsequently, the mortgagees filed suit to foreclose. In response, the purchaser
argued he was a purchaser for value, and thus, the lien of the mortgagees based upon the unpaid purchase money
mortgage was not valid against him. The court held the mortgagees were entitled to a judgment of foreclosure because
their mortgage was a prior lien, and the purchaser failed to sustain his burden of proving good faith in the transaction
with the mortgagors.
OUTCOME: The court directed the entry of a foreclosure judgment in favor of the mortgagees against the purchaser,
containing appropriate provisions for a deficiency judgment against the mortgagors, in the event of a deficiency,
Page 366
together with taxable costs.
CORE TERMS: mortgage, good faith, purchaser, deed, valuable consideration, recorded, conveyance, notice,
subsequent purchaser, bona fide purchaser, grantee, recital, farm, conveyed, innocent purchaser, codefendant,
negotiation, inadequacy, mortgagors, grantor, prior mortgages, foreclosure, burden of proof, written contract, suspicious
circumstances, nominal consideration, probability, evidential, positively, mortgagees
[HN1] N.Y. Real Prop. Law 291 makes void a conveyance not recorded only as against a subsequent purchaser in
good faith and for a valuable consideration.
[HN2] The consideration must not only be good but valuable in the sense that a fair equivalent is given for the property
granted in order to constitute the grantee a purchaser for value.
[HN3] The recital of a valuable consideration in a deed is prima facie evidence of the grantee's status as a purchaser in
good faith. Where a consideration is so expressed, no proof of actual payment is requisite. The recital of a purely
nominal consideration, however, is insufficient to protect a subsequent purchaser.
[HN4] If a claim can be sustained only upon the ground that the person asserting it is an innocent bona fide purchaser,
he must positively deny notice even though it be not charged; and he must deny it positively, not evasively; he must
even deny fully and in the most precise terms every circumstance from which notice could be inferred.
[HN5] If the sum which the seller is willing to take is grossly disproportionate to the value of the thing which is the
subject of the negotiation, it is strong proof of a defective title and sufficient to put a prudent man upon inquiry, and if
the buyer neglects to diligently prosecute such inquiry, he may not be awarded the standing of a bona fide purchaser.
HEADNOTES
Mortgages -- priority of lien -- plaintiffs conveyed property to defendants subject to prior mortgages and
took back purchase-money mortgage which was not recorded until Feb. 18, 1929 -- mortgagors conveyed
property by deed to third party, codefendant, which deed was recorded on Dec. 19, 1928 -- deed did not recite
plaintiffs' lien, but third party assumed prior mortgages -- plaintiffs' failure promptly to record their mortgage
Page 367
137 Misc. 674, *; 244 N.Y.S. 267, **;
1930 N.Y. Misc. LEXIS 1468, ***1
did not destroy validity where proof shows subsequent purchaser was not one in good faith and for valuable
consideration -- burden was on subsequent purchaser to allege and prove he took security for value and without
notice -- testimony indicates circumstances evidential of fraud and that transfer was not made in good faith --
plaintiffs' mortgage is prior lien -- judgment of foreclosure granted.
SYLLABUS
In this action to foreclose a mortgage, it appears that plaintiffs, in conveying the property to defendants subject to
two unpaid mortgages totalling $ 2,600, accepted a purchase-money mortgage from defendants for $ 5,300, which
mortgage is subject of this action. Plaintiffs' mortgage was not recorded [***2] until February 18, 1929, but meanwhile
defendants conveyed the same premises to another party, a codefendant herein, and the conveyance was recorded on
December 19, 1928. The consideration expressed in the deed was one dollar and other good and valuable consideration.
The subsequent purchaser assumed to pay the prior mortgages, but the deed made no mention of plaintiffs' lien. The
mortgagors did not defend in this action and it is clear from the evidence that they deliberately schemed to cheat the
plaintiffs, mortgagees.
Plaintiffs' failure to promptly record their mortgage does not affect its validity, for the statute makes void a
conveyance not recorded only as against a subsequent purchaser in good faith and for a valuable consideration, which
is not the case here. The consideration must not only be good, but valuable in the sense that a fair equivalent is given
for the property. The mere recital of a purely nominal consideration is not sufficient to protect a subsequent
purchaser.
The burden was on defendant, the subsequent purchaser, to allege and prove that he took the security for value
and without notice. That burden is not sustained where his testimony not only indicates [***3] circumstances
evidential of fraud but also completely negatives the probability of good faith and that he was an innocent subsequent
purchaser.
Plaintiffs' mortgage, therefore, must be regarded as a prior lien and they are entitled to the usual judgment of
foreclosure, including provisions for a deficiency judgment.
COUNSEL: Thaddeus S. Ogonowski, for the plaintiffs.
Harry V. Borst, for the defendants Soroko.
JUDGES: Heffernan, J.
OPINION BY: HEFFERNAN
OPINION
[*675] [**269] This action is for the foreclosure of a mortgage upon farm lands located in the county of
Montgomery. On August 6, 1928, plaintiffs conveyed the property to defendants Dunaj, husband and wife, subject to
two mortgages upon which there was unpaid the sum of $ 2,600. Concurrently therewith and as part payment of the
purchase price, the grantees executed and delivered to plaintiffs a purchase-money mortgage in the sum of $ 5,300
which is the subject of this suit. Concededly no payments have been made on this mortgage except the [**270] sum of
$ 116. For some reason not disclosed by the evidence, plaintiffs' mortgage was not recorded until February 18, 1929.
Meanwhile and on December 17, 1928, defendants [***4] Dunaj conveyed these premises to defendant Dmytro Soroko
and his conveyance was recorded on December 19, 1928. The consideration expressed in Soroko's deed is "One Dollar
($ 1.00), lawful money of the United States, and other good and valuable considerations." Soroko also assumed and
promised to pay the prior mortgages of $ 2,600. No mention is made in Soroko's deed of plaintiffs' lien. It is obvious
that the mortgagors deliberately schemed to cheat the mortgagees. They have not defended this suit.
Page 368
137 Misc. 674, *; 244 N.Y.S. 267, **;
1930 N.Y. Misc. LEXIS 1468, ***1
The failure of plaintiffs to promptly record their mortgage does not affect its validity. [HN1] The statute makes
void a conveyance not recorded only as against a subsequent purchaser in good faith and for a valuable consideration.
(Real Prop. Law, 291.) The plaintiffs' lien as unpaid mortgagees is good against the mortgagors and against the whole
world unless defeated by alienation of the property by the owners to a purchaser in good faith and without notice. (
Seymour v. McKinstry, 106 N. Y. 230.)
The plaintiffs' mortgage is prior in date. Soroko's deed is prior in registry. In the race of diligence in recording
defendant has succeeded. The plaintiffs' conveyance is, therefore, [***5] declared by statute to be void as against
Soroko providing he is a purchaser in good faith and for a valuable consideration. [HN2] The consideration must not
only be good but valuable in the sense that a fair equivalent is given for the property granted in order to constitute the
grantee a purchaser for value. ( Ten Eyck v. Witbeck, 135 N. Y. 40.) As was written by Judge Maynard in the case cited,
the phrase "a purchaser in good faith and for a valuable consideration" is an expression which has been borrowed from
the language of courts [*676] of equity and should be interpreted in the sense in which it is there understood. This rule
of judicial construction was incorporated by the Legislature into the lex scripta in almost the identical words in which it
had been phrased by courts of equity. ( Ten Eyck v. Witbeck, supra.) The words valuable consideration found in the
statute are used in contradistinction from a mere valid or sufficient consideration as between grantor and grantee. (
Stalker v. McDonald, 6 Hill, 93.) Therefore, in order to give a recorded conveyance a preference [**271] from that fact
alone, it must be to a bona fide purchaser. [***6] It must be a purchaser for a valuable consideration paid or parted
with, and in the belief that the vendor had the right to sell and without any suspicious circumstances to put him upon
inquiry.
Soroko insists that in this litigation he must be treated as a purchaser for value. He rests his claim largely upon the
presumption arising from the recital in his deed of the receipt by his grantors of a valuable consideration. It is true that
[HN3] the recital of a valuable consideration in a deed is prima facie evidence that the grantee is a purchaser in good
faith and where a consideration is so expressed, no proof of actual payment is requisite. The recital of a purely nominal
consideration, however, is insufficient to protect a subsequent purchaser. ( Turner v. Howard, 10 App. Div. 555.) The
recital in the deed in this case imports nothing more than a mere nominal consideration and consequently defendant is
not entitled to the presumption of good faith which arises from the payment of a valuable consideration. He also
strenuously urges that because his conveyance was first recorded he is protected. In a court of equity the race is not
always to the swift nor the battle to [***7] the strong. The fatal difficulty with his proposition is to establish that he
was a subsequent purchaser in good faith and for a valuable consideration as the statute requires he should be in order
to be protected against an unrecorded conveyance. In order to place himself in a position to assail plaintiffs' mortgage
on the ground that it was not recorded, it was incumbent on him to show not only that his conveyance was first recorded
but also that he was a bona fide purchaser for a valuable consideration and without notice.
A question of pleading is also involved. Plaintiffs' counsel insists that the burden of proof is on defendant to show
that he is a purchaser for value and that he took his conveyance without knowledge of plaintiffs' mortgage. The learned
counsel for defendant asserts that plaintiffs must establish by a preponderance of the evidence that his client is not a
purchaser for value and that he took his deed with notice of plaintiffs' claim. Apparently, since [*677] the preparation
of the pleadings, each counsel has reversed his position. The complaint alleges that Soroko is not an innocent
purchaser and that he had knowledge of plaintiffs' mortgage. As [***8] a separate defense in his answer, Soroko
alleges that he is a purchaser in good faith and for value. It seems to me that the burden of proof is on defendant. The
law requires him to allege and prove that he took his security for value [**272] and without notice. It is a defense
founded upon new matter. ( Seymour v. McKinstry, supra; Flickinger v. Glass, 222 N. Y. 404.) It was not necessary for
plaintiffs to plead or prove that defendant was not a purchaser in good faith or that he took title with notice of their
claims. Their case was made out when their mortgage was established against their grantees unless Soroko was a bona
fide purchaser. If Soroko relied on that fact, it was incumbent upon him to allege and prove it. Evidently his counsel
so believed when he drew the answer. The rule is well settled that [HN4] if a claim can be sustained only upon the
ground that the person asserting it is an innocent bona fide purchaser, he must positively deny notice even though it be
not charged; and he must deny it positively, not evasively; he must even deny fully and in the most precise terms every
Page 369
137 Misc. 674, *675; 244 N.Y.S. 267, **270;
1930 N.Y. Misc. LEXIS 1468, ***4
circumstance from which notice could be inferred. ( Denning v. [***9] Smith, 3 Johns. Ch. 332.)
The burden of proving good faith in this transaction is on the defendant. That burden he has not sustained. Not
only has he failed in this respect but in my judgment the evidence clearly negatives the idea that he is an innocent
purchaser. The circumstances are evidential of fraud. He was the only witness on his own behalf. His wife, a
codefendant, did not avail herself of the opportunity to corroborate him although it is claimed she was present during
the negotiations. His story not only strains credulity but also suggests perjury. He testified that he is a resident of New
York city with no practical experience as a farmer. Apparently he is a stranger in the locality where the farm is located.
He is unable to give any satisfactory explanation of how, when or from whom he learned that the premises were for
sale. He made only a hasty inspection before he purchased. No written contract of purchase and sale was entered into
nor was any abstract of the title ever procured. The deed was drawn by an Amsterdam attorney but was executed
several days later in New York city. Soroko claims that when the deed was prepared, he made a cash deposit of $
[***10] 1,000, which sum he brought with him from his home. According to his claim, the money was not kept on
deposit in any banking institution but carried on his person so that it would be instantly available for the purchase of a
farm. At the time of the delivery of the deed, he claims that the balance of $ 500 in [*678] cash was then paid. Neither
the attorney who drew the deed nor the one in whose office the transaction is said to have been completed was called as
a witness. Defendant has never [**273] been in the actual possession of the property. He permitted his grantors to
occupy it, apparently without rent for a number of months. Later, on his behalf, they leased it to third parties for the
first year. Defendant has paid no taxes on the land and has failed to pay any installment of principal or interest on the
mortgages which he claims he assumed. These facts suggest their own significance. He contends that he purchased this
property for the sum of $ 1,500 in addition to the mortgages of $ 2,600. If his evidence is true, then he acquired the
property for about one-half its value. This in itself is a suspicious circumstance. The transfer of the farm for the sum
[***11] claimed is singularly inconsistent with the probability of good faith. The inadequacy of the consideration is
always a factor to be considered in determining the good faith of the purchaser. ( Tiedemann v. Tiedemann, 115 Misc.
462; affd., 201 App. Div. 614.) The good faith of a purchaser may be seriously impaired, if not destroyed, by the
inadequacy of the price at which the property is offered by a person claiming to be its owner. [HN5] If the sum which
the seller is willing to take is grossly disproportionate to the value of the thing which is the subject of the negotiation, it
is strong proof of a defective title and sufficient to put a prudent man upon inquiry, and if the buyer neglects to
diligently prosecute such inquiry, he may not be awarded the standing of a bona fide purchaser. ( Ten Eyck v.
Witbeck, supra.)
The circumstances surrounding this transaction all tend to negative the probability of good faith. The failure to
secure an abstract of title, the omission of a written contract, the lack of all formality in the negotiations, the inadequacy
of the purchase price, taken in connection with the other circumstances, establish that defendant is not an innocent
[***12] purchaser. In my judgment he not only is not an innocent purchaser but is an active participant in an attempt
to cheat and defraud these plaintiffs. It is apparent that he and his codefendants had a common purpose.
Plaintiffs' mortgage is, therefore, a prior lien and they are entitled to the usual judgment of foreclosure which
should contain appropriate provisions for a deficiency judgment against the defendants Dunaj, in the event that there is
a deficiency, together with taxable costs.
Page 370
137 Misc. 674, *677; 244 N.Y.S. 267, **272;
1930 N.Y. Misc. LEXIS 1468, ***8
Positive
As of: May 27, 2014
Josephine L. Maybeck, Plaintiff, v. New York Municipal Railway Corporation and
New York Consolidated Railroad Company, Defendants
Supreme Court of New York, Special Term, Kings County
104 Misc. 330; 171 N.Y.S. 848; 1918 N.Y. Misc. LEXIS 686
August, 1918
PRIOR HISTORY: [***1] Action for an injunction.
CASE SUMMARY:
PROCEDURAL POSTURE: Plaintiff landowner instituted an action against defendant railroad companies to enjoin
the railroad companies from maintaining and operating an elevated railroad in front of the premises of the landowner, or
in the alternative for the damages sustained by the landowner by reason of the construction and operation of such
railroad.
OVERVIEW: The landowner's predecessor agreed with the railroad companies to a consent to the construction,
maintenance, and operation of an elevated railroad. After the predecessor executed the agreement but before the
agreement was filed with the county clerk, the landowner acquired title to the property. After the landowner acquired
her title to the property, she instituted an action to enjoin the railroad companies from maintaining and operating the
elevated railroad in front of her premises, or in the alternative for the damages sustained by the landowner by reason of
the construction and operation of such railroad. The railroad companies asserted that the consent signed by the
predecessor waived any claim for damages for subsequent purchasers. The court determined that the consent was a
conveyance within the meaning of N.Y. Real Prop. Law 290 that had to be recorded in order to bind a subsequent
bona fide purchaser. The court granted money damages to the landowner for damage to the fee and lost rentals after it
determined that the landowner was a bona fide purchaser without actual or constructive notice of the predecessor's
consent.
Page 371
OUTCOME: The court determined that the landowner had been injured by the loss of her easement and assessed
damages as a fee damage of $ 1,200, and a loss of rents from the date of the reconveyance of the premises to the
landowner up to the date of the trial of $ 80.
CORE TERMS: recorded, notice, conveyance, railroad, grantor, street, front, elevated railroad, bona fide purchasers,
certificate, revocation, binding, real property, county clerk's office, bind, failure to record, easements of light, recording,
revoke, admit, deed, urge, air, owner of real property, construction work, subsequent purchasers, action to enjoin,
valuable consideration, certificate issued, public service commission
[HN1] See N.Y Real Prop. Law 290.
Transportation Law > Rail Transportation > Abandonment
Transportation Law > Rail Transportation > Routes & Services
[HN2] If, a consent permit an elevated railroad constitutes an abandonment to a certain extent of the easements of light,
air and access, it would seem very clearly to be an instrument by which the title to real property may be affected, and
hence to be a statutory conveyance which is required to be recorded.
[HN3] The doctrine that the record of a conveyance is notice to subsequent purchasers is subject to the limitation, that
it is notice only, to those claiming under the same grantor, or through one who is the common source of title.
Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Affirmative Defenses > General
Overview
Civil Procedure > Pleading & Practice > Defenses, Demurrers & Objections > Denials
[HN4] The allegations of an affirmative defense requires no reply and are deemed controverted by traverse or
avoidance, as the case requires. N.Y. Code Civ. Pro. 522.
Contracts Law > Types of Contracts > Option Contracts
[HN5] The attempt to revoke an act cannot be regarded as an admission of its validity or binding effect, since one may
very properly seek to revoke an act as to the validity of which he is in doubt.
HEADNOTES
Consent -- by owner of real property to construction of elevated railroad in front of premises is a
"conveyance" and must be recorded in order to bind subsequent purchasers -- injunctions -- title -- statutes --
pleading -- Real Property Law, 290 -- Code Civ. Pro. 522.
A consent executed by an owner of real property to the construction, maintenance and operation of an
elevated railroad in front of her premises is a "conveyance" within the meaning of section 290 of the Real
Page 372
104 Misc. 330, *; 171 N.Y.S. 848, **;
1918 N.Y. Misc. LEXIS 686, ***1
Property Law and must be recorded in order to bind subsequent bona fide purchasers of the property.
The plaintiff in an action to enjoin the maintenance and operation of defendant's railroad in front of
her premises is not bound by a consent to such railroad executed by her predecessor in title but not
recorded until her deed was recorded, she having paid a valuable consideration for the premises and
having no knowledge of such consent until long after she had acquired title.
At the time plaintiff acquired title to her property there was on file in the proper county clerk's office
a certificate issued by the public service commission [***2] to the defendant containing a description of
the route of the proposed railroad and providing, among other things, for the obtaining of the consents of
the owners of one-half in value of the property bounded on the streets through which the railroad was to
be constructed. Held, that in the absence of a statute making said certificate constructive notice of its
contents it was insufficient to put plaintiff on inquiry as to whether her grantor had given such consent.
The fact of such consent was purely a matter of defense, and allegations of the complaint
anticipating such a defense, not being inconsistent with plaintiff's claim on the trial that she was not
bound by the consent because of the failure to record it nor with the evidence given in support of such
claim, may be treated as surplusage.
The consent having been pleaded as a part of the affirmative defense, the allegations thereof, no
reply having been required, are deemed controverted under section 522 of the Code of Civil Procedure,
and any evidence to show that the consent was not binding on plaintiff was available to her.
While the allegations of the complaint, plaintiff's conduct on the trial and her attempt to secure
[***3] the revocation of the consent by signing a revocation and by procuring one from her grantor
might be admissions that the consent was given, they did not, in the absence of facts constituting an
estoppel, admit its validity or legal effect.
An attempt to revoke an act cannot be regarded as an admission of its validity or binding effect.
COUNSEL: Stern & Gilleaudeau (Arthur J. Stern, of counsel), for plaintiff.
George D. Yeomans (Charles L. Woody and Trabue Carswell, of counsel), for defendants.
JUDGES: Benedict, J.
OPINION BY: BENEDICT
OPINION
[**848] [*331] This is an action to enjoin the defendants from maintaining and operating an elevated railroad in
Jamaica avenue, in the borough of Queens, in front of the premises of the plaintiff, or [**849] in the alternative for the
damages sustained by the plaintiff by reason of the construction and operation of such railroad.
[*332] The principal ground of defense is that one Sophia C. E. Isler, who was plaintiff's predecessor in the title,
had, prior to the conveyance to plaintiff, executed a consent to the construction, maintenance and operation of the road,
thereby waiving, as defendants urge, any claim for damages by reason of [***4] the invasion by defendants of the
easements of light, air and access appurtenant to plaintiff's premises. White v. Manhattan R. Co., 139 N. Y. 19.
This consent was acknowledged September 22, 1913, and was recorded in the Queens county clerk's office on
September 1, 1914. Plaintiff acquired title to the premises in question between the two dates last mentioned by deed
Page 373
104 Misc. 330, *; 171 N.Y.S. 848, **;
1918 N.Y. Misc. LEXIS 686, ***1
from said Sophia C. E. Isler, dated January 27, 1914, and recorded on the same day in the Queens county clerk's office.
It was shown by uncontradicted testimony that plaintiff paid a valuable consideration for the premises and that she did
not know of the giving of the consent aforesaid until long after she had acquired title. The construction work of
defendants in front of plaintiff's premises did not begin until June, 1915, and work was not begun on the Jamaica avenue
extension until January, 1915, about a year after plaintiff acquired her title.
The principal question in the case is, therefore, whether plaintiff is bound by this consent, in view of the fact that it
was not recorded until after her deed was recorded, and that she was a purchaser for value and without notice of the
consent.
I have not been [***5] referred to, nor have I been able to find, any statutory provision specially requiring or
providing for the recording of the consents of property owners in the case of an elevated railroad, such as exists in the
case of street surface railroads. Railroad Law, 171. We are, therefore, thrown back upon the general statutory
provisions relative to the recording [*333] of instruments affecting the title to real property (Real Prop. Law, art. 9) in
the attempt to determine whether such a consent as is here under consideration must be recorded in order to bind a
subsequent bona fide transferee of the abutting property. In section 290 of the Real Property Law [HN1] the term
"conveyance" is defined as "every written instrument, by which any estate or interest in real property is created,
transferred, mortgaged or assigned, or by which the title to any real property may be affected," including and excepting
certain instruments not here involved. [HN2] If, as has been held by the Court of Appeals, such a consent constitutes an
abandonment to a certain extent of the easements of light, air and access (White v. Manhattan R. Co., supra; Heimberg
v. Manhattan R. Co., 162 N. Y. [***6] 352), it would seem very clearly to be an instrument by which the title to real
property may be affected, and hence to be a statutory conveyance which is required to be recorded. Upon the authorities
the question does not seem to have been fully determined. In Ward v. Metropolitan El. R. Co., 152 N. Y. 39, the Court
of Appeals expressly refrained from deciding it, holding that [**850] "as the defendants [when plaintiff acquired title]
were in open, visible and notorious possession of all the rights acquired by or released to them and their possession
was inconsistent with the title in plaintiff's grantor to a full right to the easements of light, air and access afforded by
the street, it operated as a notice to the plaintiff of the defendants' rights therein." In the subsequent case of Shaw v. New
York El. R. R. Co., 187 N. Y. 186, where the plaintiff had acquired the property without notice of an unrecorded consent,
and there was at that time no occupation of the street by the defendants, it was held that the plaintiff "took her title
unaffected and unimpaired by the act of her husband independent of any [*334] other consideration." There were other
grounds [***7] upon which the court held that the consent did not constitute a defense to the action, to which other
grounds the words "independent of any other consideration" were evidently intended to refer. So that it may be urged
that the point here at issue was not finally decided by the Court of Appeals. However that may be, I think the decision
was right. See, also Adee v. Nassau Electric R. R. Co., 65 App. Div. 529, 538; affd., 173 N. Y. 580.
I hold, therefore, that the consent here in question was a "conveyance" within the meaning of section 290 of the
Real Property Law, and, therefore, an instrument necessary to be recorded in order to bind subsequent bona fide
purchasers.
Defendants urge that the plaintiff was not a bona fide purchaser, because, although there was no actual occupation
of the street in front of her premises by any construction work until long after she acquired title to her property, yet
there was at that time a certificate issued by the public service commission to the defendant New York Municipal
Railway Corporation, which was on file in the Queens county clerk's office, as required by the Rapid Transit Act of
1891 (Laws of 1891, chap. 4, 24, subd. [***8] 3), which certificate contained a description of the route of the
proposed elevated railroad and provided, among other things, for the obtaining of the consents of the owners of one-half
in value of the property bounded on the streets through which the railroad was to be constructed. This, it is claimed,
was sufficient to put the plaintiff on inquiry as to whether her grantor had given a consent. I cannot accede to this
contention. Plaintiff, before she purchased, had the title to the premises examined by one of the leading title insurance
corporations, and nothing appeared on the report to advise her in any [*335] way of the existence of such certificate.
Our records are so indexed that it is practicable to search only against prior owners of record of the property to be
acquired, and the Court of Appeals has held that such a search is all that is required. Thus in Tarbell v. West, 86 N. Y.
Page 374
104 Misc. 330, *332; 171 N.Y.S. 848, **849;
1918 N.Y. Misc. LEXIS 686, ***4
280, where the record title to partnership property stood in the name of one member of the firm, it was held that the
recording of a mortgage given by another member of the firm of his interest was not notice to a bona fide purchaser
from the holder of the record title, the [***9] court saying that [HN3] the doctrine that the record of a conveyance is
notice to subsequent purchasers "is subject to the limitation, that it is notice only, to those claiming under the same
grantor, or through one who is the common source of title." And this construction has since [**851] been incorporated
in the statute by amendment. Real Property Law, 291; Hatcher v. Brunt, 89 Misc. Rep. 530. It should be noted in
passing that the consents of only the owners of one-half in value of the abutting real property were required, so that, for
all the plaintiff knew, the certificate might have been fully complied with in this respect without the consent of
plaintiff's grantor. I have not been referred to any provision of statute making the certificate, when filed, constructive
notice of its contents, and in the absence of such a statute it is not notice. Dunn v. City of New York, 205 N. Y. 342, 353.
It is also urged that plaintiff is not in a position to assert in this action that she is not bound by the consent on
account of the failure to record it until after she acquired title, because her complaint is not framed on that theory, but
upon the theory that a valid [***10] consent was given and subsequently revoked. The answer to this is that there was
no occasion to say anything at all about the consent in the complaint. No relief is asked with respect thereto, as that it
be set aside or [*336] declared void. The consent was purely matter of defense, and the allegations of paragraphs 12 to
15, inclusive, of the complaint, which appear to have been inserted in anticipation of such defense, may be treated as
surplusage. These allegations of the complaint are in no way inconsistent with the claim now made by plaintiff that she
was not bound by the consent because of the failure to record it, nor with the evidence given in support of such claim.
The consent is set up in the answer as part of [HN4] the affirmative defense, the allegations of which, no reply having
been required, are deemed controverted by traverse or avoidance, as the case requires. Code Civ. Pro. 522. Hence
any evidence to show that the consent was not binding on the plaintiff was available to her. After the case was closed, it
was reopened and both parties were afforded an opportunity, on ample notice, to offer any evidence on this question
which they might desire. The proceedings [***11] upon such hearing are as much a part of the trial as if the question
had been raised and the evidence concerning the same had been given before the case was originally closed.
Defendants did not claim surprise nor request any adjournment.
Defendants also urge that plaintiff has admitted the validity of the consent, both by the allegations of her complaint,
by her conduct on the trial, and by her attempt to secure the revocation thereof, both by signing a revocation herself and
by procuring a revocation from her grantor. These acts may admit the fact of the giving of the consent, but they do not,
in the absence of facts constituting an estoppel, admit its validity or legal effect. [HN5] The attempt to revoke an act
cannot be regarded as an admission of its validity or binding effect, since one may very properly seek to revoke an act
as to the validity of which he is in doubt.
The conclusion thus reached, that the consent is not [*337] binding on the plaintiff, renders it unnecessary to
consider the other questions of law raised on the trial, and it remains only to determine the amount of the plaintiff's
damages.
I have not had the benefit of a view to aid me in fixing the damages, [***12] because the counsel for the
defendant have refused [**852] to consent that I should view the premises. I have therefore determined the question of
damages on the evidence. I find a fee damage of $ 1,200, and a loss of rents from the date of the reconveyance of the
premises to the plaintiff up to the date of the trial of $ 80.
Page 375
104 Misc. 330, *335; 171 N.Y.S. 848, **850;
1918 N.Y. Misc. LEXIS 686, ***8

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