Lea v. Fabbri 13 Jones and Spencer's Super. Ct. Rep. 361

JOSEPH TATNALL LEA, Plaintiff, v. ERNESTO G. FABBRI, Defendant.

I. Vendor’s lien.

When does not exist. Where premises are conveyed, “ subject to a certain mortgage on the southerly portion of the same,” made by the vendor, which mortgage the vendee assumes and agrees to pay, by a clause in the conveyance, which states that the amount of the debt has “been deducted from the consideration herein-before expressed, ” there is no equitable lien upon the mortgaged premises in favor of the vendor; this, though the vendee, after paying interest for a certain time, make default, and allow the mortgage to be foreclosed, and the vendor to be thereby charged with a judgment for deficiency. The assumption of the mortgage is, pro tanto, the consideration.

A fortiori, there is no equitable lien upon that portion of the premises not covered by the mortgage.

II. Declaration or trust—construction or.

The declaration in question herein was substantially that the premises conveyed to the grantee were held by him, in trust, to sell for the benefit of the grantor’s creditors, and out of the proceeds, First, to pay to the grantor’s wife certain sums in lieu of dower. “ Second, to pay such liens and incumh'ances upon the premises sold as are not assumed by the buyers thereof. ” Third, to pay, &c., grantor’s creditors generally, &c.

Upon consideration of the scope and intent of the above declaration, it was

Held,

1. That the second subdivision thereof is to be construed as meaning that the liens must be paid out of the net proceeds of the lands upon which they exist, and not out of the net proceeds of other lands sold under the trust.

2. That the subdivision must mean a payment of liens out of proceeds of a sale made by the trustee under the trust.

(a) Sale under moi’tgage foi’eclosure is not such a sale.

8. That such a sale was referrfed to as would permit an assumption of the incumbrance, rather than one made by virtue of the incumbrance, and which merged or canceled it, so far as the buyer was concerned.

(a) Sale under mortgage foreclosure is not such a sale.

*362Before Sedgwick, Speir, and Freedman, JJ.

Decided November 3, 1879.

Case agreed upon in a controversy submitted without action, under section 1279 of the Code of Civil Procedure.

The facts are as follows : The plaintiff conveyed to Sergeant, in consideration of $35,000, a piece of land containing four acres, “subject to a certain mortgage, on the southerly portion of said premises,” made by the plaintiff to one GHlson for $10,000, which amount Sargeant assumed, and agreed to pay, “the same having been deducted from the consideration hereinbefore expressed.” Sergeant went into possession, and after-wards, by deed, conveyed the premises with others, in fee, to the defendant. Simultaneously the defendant executed and delivered to Sergeant a declaration of trust. This declaration recited the conveyance above mentioned of Sergeant to the defendant, and stated that the premises were held by the defendant, in trust “ to sell the same for the benefit of the creditors of said William Sergeant, and out of the net proceeds of said sales, and of rents and other profits and receipts from the premises, after 'deducting payments for interest, taxes, insurance, and repairs—First. If the wife of the said William Sergeant shall join in the conveyance of the land so sold, but not otherwise, to pay her such sums as shall be agreed on between her and the said Ernesto Gr. Fabbri, as compensation for her right of dower. Second. To pay such liens and incumbrances upon the premises as are not assumed by the buyers thereof. Third. To pay, compromise or settle all the just, individual debts of William Sergeant” and for other purposes not material to the controversy. At this time the mortgage was due. Thereupon the defendant entered into possession of the premises, paid interest *363upon the mortgage to Gilson until a certain time, when he made default in its payment. Upon this default, Gilson began an action for the foreclosure of the mortgage, making the plaintiff a party, and obtained judgment of foreclosure and sale, and that the plaintiff pay any deficiency. There was a deficiency reported, and the report being confirmed, the plaintiff here paid the same in the amount of $2,022.53. Simultaneously with the payment, Gilson assigned to the plaintiff ail rights she had, under the bond and mortgage, the judgment, and the declaration in trust.

The case submits to the court these facts, for its judgment as to the rights of the plaintiff.

The questions submitted to the court are as follows :

Is the plaintiff entitled to the payment of the $2,-022.53, with interest from November 30, 1878, in full, out of the moneys realized by said Fabbri out of the trust property generally, the amount of such moneys, after provision for the dower of Mrs. Sergeant, under the first clause of the declaration of trust, being ample to pay the same in full ; or is he entitled to the payment thereof out of the proceeds of the Ewen purchase (being that portion of the premises conveyed by plaintiff to Sergeant, not covered by the mortgage assumed by the latter), so far as such proceeds will pay the same ; or is he only entitled to share pro rata with other creditors of William Sergeant, under the third clause %

If the first question is answered in the affirmative, then judgment is to be rendered in favor of the plaintiff for the payment, by the defendant, out of the-trust fund, of the sum of $2,022.53, with interest from November 30, 1878, with costs to the plaintiff.

If the first question is answered in the negative, and the second in the affirmative, then judgment is to be rendered in favor of the plaintiff for the payment of the amount of said judgment for deficiency, with inter*364est and costs, out of the proceeds of the Bwen purchase, so far as such proceeds will pay the same ; and that as to the amount remaining unpaid after the application of the proceeds of the Bwen purchase, the plaintiff is entitled to share pro rata with the other creditors.

If the first and second questions are both answered in the negative, then judgment is to be rendered in favor of the defendant, that the plaintiff is only entitled to share pro rata with the other creditors of William Sergeant, under the third clause-of the declaration of trust, with costs to the defendant.

George H. Forster, of counsel, for plaintiff, urged:

I. The second clause of the declaration of trust expressly covers this $10,000 mortgage. It was, at that time, a lien and incumbrance upon the premises. The defendant admitted this by his acts in construction of the trust. He paid the interest on this mortgage for eighteen months. The $2,022.53 was not paid by the buyer at the foreclosure sale; the plaintiff was compelled to pay it. This trust was one for his benefit, and he is entitled to enforce it either as a party for whose benefit it was originally made, or as assignee of Mrs. Gilson, under the assignment set forth in the case. The principles established in Lawrence v. Fox (20 N. Y. 268), and in the cases following that, establish .the plaintiff’s right, aside from such assignment (Durand v. Curtis, 57 N. Y. 14; Barlow v. Myers, 64 Id. 43; Arnold v. Nichols, 64 Id. 119; Simson v. Brown, 68 Id. 358; Campbell v. Smith, 71 Id. 28; Johnson v. Morgan, 68 Id. 496; Vrooman v. Turner, 69 Id. 282; Goldenburg v. Hoffman, 69 Id. 326; Miller v. Winchell, 70 Id. 439).

II. The right of Mrs. Gilson was express under the declaration of trust; the second clause was intended to provide for such- incumbrances as this. If there be any • doubt as to the construction, it should be strictly *365against defendant (Ripley v. Larmouth, 56 Barb. 21; Marvin v. Stone, 2 Cow. 781; Griffin v. First Presbyterian Church, 56 Barb. 114).

III. As between the parties to the deed of November, 1873, Lea and Sergeant, the land is the primary fund for the payment of the mortgage, and the grantor, Lea, is entitled to have it so applied as to protect him from the deficiency he paid. Fabbri here stands in no better position as to Lea than Sergeant stood, and as between Lea and Fabbri, the plaintiff is entitled to have the $2,500, realized by Fabbri from the Ewen purchase, applied to relieve Lea from the deficiency which he has been compelled to pay on the mortgage, which was assumed by Sergeant as part of the consideration of' the conveyance of such Ewen property, the same having been deducted from the consideration (Comstock v. Drohan, 71 N. Y. 13, and 15 Supreme Court [8 Hun] 373.) There was a lien on such Ewen purchase, for such unpaid purchase-money. The court of Appeals, in Comstock y. Drohan, says: “ The land was the primary fund for the payment of the mortgage, and as against the defendant, the plaintiff was entitled to have it so applied before being called capon to respond to his liability as her surety, so that he might not be compelled to advance more than the deficiency which should arise on a sale of the mortgaged premises. For this deficiency, paid by him, the defendant was clearly liable to him.” A grantee is bound to fulfill covenants on his part, in a deed executed by the grantor only, and acceptance of the deed and property binds him to pay a mortgage he has assumed therein, and he is liable to the grantor for the deficiency found due on a foreclosure thereof (Spaulding v. Hallenbeck, 35 N. Y. 204; At. Dock Co. v. Leavitt, 54 Id. 35; Trotter v. Hughes, 12 Id. 74; Burr v. Beers, 24 Id. 179; Binsse v. Paige, 1 Abb. Ct. App. Dec. 138, note; Marsh v. Pike, 10 Paige, 595; Halsey v. Reed, 9 Id. 446; Ru*366bens v. Prindle, 44 Barb. 336; Johnson v. Zink, 52 Id. 396; Mills v. Watson, 1 Sweeney, 374; Tillotson v. Boyd, 4 Sandf. 516; Ranson v. Copeland, 2 Sandf. Ch. 251; Thorp v. Keokuk Coal Co., 48 N. Y. 253, 257; Rector v. Higgins, 48 Id. 532; Mauri v. Hefferman, 13 Johns. 58; Ely v. McNight, 30 How. 97; Norman v. Welles, 17 Wend. 136; Hunt v. Amidown, 4 Hill, 345; Ferris v. Crawford, 2 Denio, 595; Jumel v. Jumel, 7 Paige, 591; Barker v. Bucklin, 2 Denio, 45; Trip v. Vincent, 3 Barb. Ch. 613; Garnsey v. Rogers, 47 N. Y. 233; Miller v. Watson, 5 Cow. 195; Baxter v. Ryers, 13 Barb. 267; Machaiwe Bank v. Culver, 30 N. Y. 313; Schweriger v. Hickok, 53 Id. 280; Bartlett v. McNiell, 60 Id. 53).

Porter, Lowrey, Soren & Stone, attorneys, and George S. Hamlin, of counsel, for defendant, urged:

I. The statements in regard to the Ewen purchase are immaterial. The deed from Lea to Sergeant did not, by including the Ewen purchase, render it subject to a mortgage upon other premises conveyed by the same deed. But if the premises were not subject to the lien of the mortgage, neither were the proceeds ; and if not subject to the lien of the mortgage then neither under the mortgage, nor the declaration of trust, were the proceeds applicable to the payment of this deficiency in preference to any other debt.

II. The only question presented in this case, therefore, depends upon the construction of the second provision of the declaration of trust, viz. : “To pay such liens and incumbrances upon the premises as are not assumed by the buyers thereof.” The argument of the plaintiff, of course, is : The mortgage in question was an incumbrance upon the premises. It was not assumed' by the buyer thereof. It is, therefore, within this provision, and there is an express trust to pay this, in preference to general debts referred *367to in the third provision of the declaration. But this reasoning disregards very elementary principles in the construction of written instruments. 1. This provision must be construed in connection with the other portions of the instrument. The construction contended for by the plaintiff can be sustained only by taking the provision in its most literal signification and entirely dissevered from its proper connections. “It is a true rule of construction that the sense and meaning of the parties, in any particular part of an instrument, may be collected, ex antecedent-ibus et consequentibus. Every part of it may be brought into action in order to collect from the whole one uniform and consistent sense, if that may be done” (Per Lord Ellenborough, in Barton v. Fitzgerald, 15 East, 541). 2. The general words of this provision must be limited and controlled by the scheme and purpose of the whole instrument. The provision is for the payment of “suchliens and incumbrances as are not assumed by the buyers.” But the buyers here referred to are not all buyers, but buyers upon a sale such as is pz’ovided for in the declaration of trust; that is, a sale by the trustee for the benefit of cz’editors. There is no mention or intimation of any other kind of sale, and this provision can properly extend only to incumbrances not assumed by the buyers on such a sale. “The matter in hand is always presumed to be in the mind and thoughts of the speaker, thoughhis words seem to admit a larger sense, and therefore the generality of the woz’ds used shall be restrained by the particular occasion” (Powell on Cont. 389; Van Hagen v. Van Rensselaer, 18 Johns. 423). “ All woz’ds, whether they be in deeds or statutes or otherwise, if they be general, and not express and precise, shall be restrained unto the fitness of the matter and the person” (Bacon's Law Maxims, Reg. 10. See also, Decker v. Furness, 14 N. Y. 615). “ Where a release acknowledged the receipt of $1, in full of a certain judgment. *368(describing it), and also in full of all debts, demands, judgments, executions, and accounts whatsoever, held, that it was restrained by the particular words, to the judgment only ; and did not operate upon a mortgage between the parties” (Jackson v. Stackhouse, 1 Cow. 122; See also McIntyre v. Williamson, 1 Ed. Chan. 34; Browning v. Wright, 2 B. & P. 13).

III. The declaration of trust did not contemplate nor provide for, and has no application to, a case like the present. 1. The declaration of trust provided for the payment only of incumbrances upon the premises not assumed by the buyers thereof. It therefore presupposed a sale as a condition of such payment, and a sale upon which the assumption of the incumbrance by the buyer was possible. But here there was no opportunity for the buyer to assume the incumbrance. The sale was of necessity, by virtue of, and not subject to, the incumbrance. Its assumption by the buyer was impossible. 2. The declaration contemplated a sale by the trustee, and by him only. This was the essence of the trust, that the trustee should “sell the same for the benefit of the creditors of William Sergeant.” Ho other sale is mentioned or referred to in the declaration. Any other sale was outside and independent of the trust, and created a case not contemplated or provided for by it. The incumbrancer had his election. He might allow the trustee to execute the trust and sell the property, whenever he could sell for the benefit of' the creditors. He then became entitled to the benefit of the second provision of the declaration, that is, either to the assumption of the incumbrance by the buyer, or its payment by the trustee. He might, on the other hand, for his own individual benefit, enforce his lien and sell the property under it; but in so doing he withdrew the premises from the control of the trustee, and rendered the operation of this clause of the trust impossible (See Hoffman v. Ætna Ins. Co., 32 N. Y. 412).

*369IV. A sale by the trustee for the benefit of creditors was a condition precedent to the operation of the first and second provisions of the trust. It is so expressed in the first provision. The payments are to be made to Mrs. Sergeant, if she shall join in the conveyance of the lands “so sold,” that is, sold by the trustee, “but not otherwise.” Can there be any question that the application of the phrase “ so sold” is. continued, and that when it says : “To pay such liens and incumbrances upon the premises as are or are not assumed by the buyers,” it means upon the premises so sold ?

V. The payments under the first and second provis-. ions of the declaration were not of the essence of the trust, but were subsidiary to its proper administration, and the accomplishment of its main purpose. The trust was, in substance, to sell the premises “ for the benefit of the creditors of William Sergeant,” that is, the creditors generally ; and then, as indicated by the third provision, “to pay, compromise or settle all the just individual debts of William Sergeant,” not all, after the payment of those previously provided for. This embraced the entire general purpose of the trust. The previous payments were subsidiary and contingent upon their becoming necessary to the advantageous disposition of the property, and conveying a perfect title. This was obviously true in regard to payments to Mrs. Sergeant, for they were to be made only in case the amounts were agreed upon between her and the trustee, and she joined in the conveyance of the lands “ so sold.” And so of the payment of liens and incumbrances. If, upon a sale for the benefit of creditors, the buyer was unwilling to assume an incumbrance, and insisted upon a clear title, then, as in the case of the dower right, the trustee was authorized to pay it, in order to facilitate such a sale, and carry out the general purpose of the trust.

*370VI. The construction contended for by- the plaintiff is inconsistent with any presumable intent of the parties. 1. The result of this construction is to add to the security of the existing lien or incumbrance the further security of a preference, under the declaration of trust. The payment of the secured creditors, it is obvious, may, and in fact will, exhaust the entire fund, leaving nothing whatever for the unsecured creditors. There is nothing in the circumstances or in the instrument itself to explain so unusual a provision. There is no conceivable motive for such a gratuity to the incumbrancer. It is clear that, if understood in this way by the unsecured creditors, they would never have acquiesced in it, if they had the power to defeat it. And vat that,time they had such power. 2. Such a preference was forbidden by the bankruptcy act, which was in force at the time of the execution of the conveyance and declaration of trust. But the court will not adopt a construction which renders an instrument unlawful or invalid, when its language admits of an interpretation entirely consistent with its legality and validity. “ If the language of a deed or will is susceptible of two constructions, and by adopting one of them it would be unlawful, while if the other were followed it would be valid, the latter interpretation should be given, ut res magis valeat quam per eat” (Post v. Hover, 33 N. Y. 601; Townsend v. Stearns, 32 Id. 214; Benedict v. Huntington, Id. 219).

VII. It is not enough to entitle the plaintiff to payment in full, even upon his own construction of the trust, for him to show that the moneys realized are ample, after provision for the dower of Mrs. Sergeant, to pay his claim in full. There were other liens and incumbrances, and it was incumbent upon him to show either that they were assumed by the buyers, or, if not, that the moneys realized were sufficient to pay those incumbrances in full, as well as his own.