Dunning v. . Leavitt , 1881 N.Y. LEXIS 52 ( 1881 )

[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] The assumption clause, in the deed from Fuller to Mrs. Leavitt, was in effect a covenant on her part to pay the plaintiffs' mortgage, as part of the purchase-price of the land. Her grantor, Fuller, in his conveyance from the mortgagors, had bound himself by a similar covenant. If the covenant by Mrs. Leavitt to pay the mortgage is still binding upon her, no doubt can be entertained of the right of the plaintiffs in this action to enforce it for their security, and to a judgment over against her for any deficiency which may arise on the sale of the mortgaged premises. (Halsey v. Reed, 9 Paige, 446; Burr v. Beers, 24 N.Y. 178. )

But the consideration for her covenant wholly failed upon her eviction from the premises under paramount title. The grantors of Fuller had no title or estate in the land when they executed the mortgage, or when they conveyed to him, nor did Fuller have any when he conveyed to the defendant. The legal title was in the Howell heirs, and the defendant in 1858 was evicted under judgment founded upon their title. The substantial consideration for the defendant's assumption of the mortgage was the conveyance of a title by Fuller. Fuller covenanted to convey a good title, and the supposed acquisition of such title by his conveyance was the real consideration of her covenant. It is true, she acquired possession with the deed, but of that she has been deprived, and the rents and profits during her possession were in law received to the use of the real owners of the land.

It was said by the chancellor in Tallmadge v. Wallis (25 Wend. 117), that upon an eviction under paramount title, the consideration for a note or bond given by a purchaser for the purchase-money of the land wholly failed, and that covenants of title in the deed of the grantor could not be regarded as a consideration which would support the promise to pay. This doctrine has been held in other cases and is in accordance with the general current of authority. (Knapp v. Lee, 3 Pick. 452;Rice v. Goddard, 14 id. 293; Trask v. Vinson, 20 id. 105; Rawle on Covenants for Title, 607.) In Rice v. Goddard the court say: "The promise is not made for a promise, but for the land; the moving cause is the land; and if that fails to pass, the promise is a mere nudum pactum." The authorities sustain the proposition that if Fuller had paid the mortgage in fulfillment of the covenant in his deed from the Fishers, and had brought an action against Mrs. Leavitt on her covenant to pay the mortgage, or if Mrs. Leavitt had been the mortgagor and the plaintiffs had brought an action on her bond given with the mortgage, neither Fuller in the one case, nor the plaintiffs in the other, could have recovered. The facts found sustain the defense of a total failure of consideration for the defendant's covenant.

On what principle then can it be held that the plaintiffs can recover against Mrs. Leavitt in this action, on a cause of action which could not have been enforced against her by Fuller, her immediate promisee, if he had paid the mortgage debt. The action cannot be sustained on the principle of Halsey v. Reed, because there is no fund in the hands of Mrs. Leavitt which, as between her and Fuller, she is equitably bound to apply to relieve him from his covenant to pay the mortgage. The land has been taken from her by a paramount title, and the land was the only source from which the supposed fund was to arise. The acquisition of the title under the conveyance from Fuller was the consideration for her covenant, and no title was acquired. There can be no subrogation in equity for there is no liability of Mrs. Leavitt to Fuller, to which the right of subrogation can attach. It is said that the action can be sustained upon the doctrine of Lawrence v. Fox (20 N.Y. 268) and kindred cases. But I know of no authority to support the proposition that a person not a party to the promise, but for whose benefit the promise is made, can maintain an action to enforce the promise, where the promise is void as between the promisor and promisee, for fraud, or want of consideration, or failure of consideration. It would be strange, I think, if such an adjudication should be found. The party suing upon the promise, in cases like Lawrence v. Fox, is in truth asserting a derivative right. In Vrooman v. Turner (69 N.Y. 280) it was held that an assumption clause in a deed did not give a right of action to the mortgagee, where the grantor was not himself liable to pay the mortgage debt, although in that case there was ample consideration for the promise of the defendant.

There is no justice in holding, that an action on such a promise is not subject to the equities between the original parties springing out of the transaction or contract between them. It may be true that the promise cannot be released or discharged by the promisee, after the rights of the party for whose benefit it is said to have been made, have attached. But it would be contrary to justice or good sense to hold that one who comes in by what Judge ALLEN, in Vrooman v. Turner, calls "the privity of substitution," should acquire a better right against the promisor than the promisee himself had. This case is an illustration. The plaintiffs, when they took their mortgage, did not rely upon the covenant they now seek to enforce. The covenant was not made until several years afterward. There was no consideration for it passing between the plaintiffs and Mrs. Leavitt. They now seek to avail themselves of it, and insist that although the consideration has failed, this defense is not available to the defendant, and that Mrs. Leavitt, although she has paid $10,000 in cash for property to which her grantor had no title, must pay $15,000 more, if need be, and be remitted for her remedy to the covenants in her deed, which may, from the insolvency of her grantor, or other reasons, be wholly worthless. The plaintiffs have nothing to sell on their mortgage, and if they can hold Mrs. Leavitt for the deficiency, they will be able to shift the burden of a practically unsecured claim, upon a party with whom they have had no dealing whatever.

The case of Thorp v. The Keokuk Coal Co. (48 N.Y. 253) gives no countenance to this claim. The conveyance, which contained the assumption clause, was a quit-claim deed with a covenant by the grantor against his own acts only, and it was not claimed that this covenant had been broken. The defendant, so far as appears, took and retained possession of the granted premises, and was in possession when the action was brought. His defense was that the title to a part of the land conveyed had failed, or was never in the grantor. This was clearly no defense to his agreement to pay the mortgage, for two reasons: first, he got by his deed all he bargained for; and second, he could not detain the purchase-money, or refuse to pay it, so long as he was not evicted, and retained possession of the land. (Abbott v.Allen, 2 Johns. Ch. 519; Leggett v. McCarty, 3 Edw. Ch. 124; Platt v. Gilchrist, 3 Sandf. 118; Rawle on Covenants for Title, 588.)

The principle that a mortgagee who seeks to avail himself of an assumption clause in a subsequent deed of the mortgaged premises, takes under and through the grantor, and is subject to defenses arising out of the contract or transaction between the original parties to the deed is supported by Flagg v. Munger (9 N.Y. 483). In that case, concurrently with the execution of the deed containing an assumption clause, a sealed agreement or bond was executed between the parties to the deed, to the effect, that, in a certain event (which subsequently happened), the grantee should not be bound to pay any part of the mortgage assumed, "any thing contained in the deed to the contrary, notwithstanding;" and it was held, in an action to foreclose the mortgage, that by force of the agreement, the purchaser could not be charged with the deficiency.

I am of opinion that the defense of Mrs. Leavitt was made out. She was not the assignee of the $1,800 mortgage. That mortgage passed, if to any one, to the plaintiffs, upon the execution of the mortgage.

For the reasons herein stated, the order of the General Term should be reversed, and the judgment of the Special Term affirmed.