Louisa Braun, Appellant, v. Charles A. Vollmer and Charles Ebinger, as Executors, etc., of George Pfeiffer, Deceased, Respondents

Louisa Braun, Appellant, v. Charles A. Vollmer and Charles Ebinger, as Executors, etc., of George Pfeiffer, Deceased, Respondents. Mortgage—conveyance of the equity of redemption to the mortgagee—concurrent option of purchase given by the mortgagee to the mortgagor, the father of the owner of the equity of redemption — merger of the mortgage in the title conveyed by the deed—competency of the owner of the equity of redemption to extinguish that right after suit brought for the foreclosure of the mortgage. -Gabriel J. Wolff, after executing two mortgages, one for §9,000 and one for §4,000 upon premises owned by him, cpnveyed said premises to his daughter Eugenie J. Wolff. Subsequently, Ernst Von -Au, the holder of the $4,100 mortgage, brought an action to foreclose such mortgage.. During the pendency of the action Eugenie J. Wolff conveyed the premises to Von Au by a warranty deed, subject to both mortgages and certain unpaid taxes and water rents. The deed contained a covenant against other incumbrances and for quiet enjoyment. On the same day a stipulation for the discontinuance of the foreclosure action was formally executed. There was also executed on that day between Von Au, as party of the first part, and Gabriel J. Wolff, as party of the second part, an instrument providing: “ Now this- indenture witnesseth, that the party of the first part, for and in consideration of the sum of one dollar to him in hand paid at or before the ensealing and delivery of these presents, by the said party of the second part, the receipt whereof is hereby acknowledged, agrees to and with the said party of the second part, that upon the payment of the said sum of thirteen thousand nine hundred and fifty-seven 31 /dollars, to him the said party of the first part, by the said party of the second part, or his legal representatives, on or at any time before the 31st day of July, Eighteen hundred and eighty; he will convey the said premises, number 351 East 10th Street, New York City, unto the said party of the second part, his heirs, executors or assigns. “And it is understood and agreed that the said Nine thousand dollars, first mortgage or another of that amount in its place, be taken as a part payment of said §13,957.31/onsuch conveyance' aforesaid.” The §13,957.31 mentioned in the agreement represented the incumbrances upon the premises, together with Interest and accumulations thereon, calculated to the time of the making of the agreement and also the costs, disbursements and counsel fees in the foreclosure action.. The instrument was duly recorded, but Wolff did not pay or tender to Von Au the amount specified in the agreement. He died in 1881, and, so far as appears, neither he nor his heirs ever made any claim under the agreement in question. The mortgage held by Von Au was formally discharged of record in 1884. In 1887 Von Au conveyed the premises to a third party. Held, that the agreement made between Yon Au and Gabriel J. Wolff did not render the title to the premises unmarketable; That such agreement simply conferred upon Wolff an option to purchase the ¡premises within the time specified and at the consideration therein mentioned and did not operate to render the deed from Engenie J. Wolff to Yon Au a mortgage to secure the indebtedness specified in the agreement; That the mortgage held by Yon Au merged in the deed to him as soon as he obtained title, and that the fact that it was subsequently formally discharged was of no consequence; That it is competent for the owner of the equity of redemption of mortgaged premises, after suit brought, to convey the premises to the holder of the mortgage and thus cut off any right of redemption. Patterson, J., dissented. Appeal by the plaintiff, Louisa Braun, from a judgment of .the Supreme Court in favor of the defendants, entered in the office of the clerk of the county of New York on the 16th day of July, 1903, upon the decision of the court, rendered after a trial at the New York Special Term, dismissing the plaintiff’s complaint upon the merits and adjudging that defendants are entitled to specific performance of a contract for the purchase and sale of real estate. On the 3d day of May, 1902, the plaintiff and the defendants, as executors of the last will and testament of George Pfeiffer, deceased, . entered into a contract in writing by which the defendants .agreed to sell and the plaintiff agreed to purchase, on the terms therein specified, the house and lot known as No. 251 East Tenth street in the borough of Manhattan, city of New York. The plaintiff refused to perform upon the ground that the title tendered by the defendants was not marketable, and she brings this action to recover the down payment and the costs and expenses of having the title examined. The defendants, in their answer, deny that the title tendered was not marketable, and in a counterclaim demand specific performance of the contract. The trial court decided that the. title was marketable and decreed specific performance. It appears that in November, 1867, the premises were conveyed by the then owner of the record title to one Gabriel J. Wolff. In February, 1875, Wolff and his wife executed a mortgage upon the premises to the Dry Dock Savings Institution to secure the payment of $9,000, and on the 1st day of May, 1875, Wolff and his wife executed another mortgage thereon to Isaac Feldenheimer to sec.ure the payment of $4,000. The $4,000 mortgage was duly assigned to-Ernst Yon An on the 29th day of May, 1875. On the 2d day of January, 1879, Wolff and his wife conveyed the premises to their daughter Eugenie J. Wolff. The grantee, however, did not assume the mortgages. In the month of February thereafter Yon Au commenced an action to foreclose his mortgage, making Gabriel J. Wolff, who was liable on the bond, a party "defendant, and filed a Us pendens therein on the 26th day of February, 1879. Eugenie J. Wolff conveyed the premises to the plaintiff in the foreclosure action by warranty deed dated the sixteenth day of April thereafter, subject to both mortgages and certain unpaid taxes and water rates, and with a covenant against other incumbrances and for quiet enjoyment. The deed was signed on the day of its date and was acknowledged on the day following and duly recorded" on the 18th day of April, 1879. At the time of the signing of this conveyance a stipulation for the discontinuance of the foreclosure action was formally executed and the foreclosure action was discontinued on the 18th day of April, 1879, but the notice of pendency was not canceled until the month of April, 1884, at which time Yon Au satisfied the mortgage of record. On the day the stipulation of discontinuance and deed to Yon Au were signed, Yon Au signed and sealed an instrument in writing as follows: “Agreement made this sixteenth day of April, 1879, between Ernst Yon Au, of the City of New York, and Gabriel J. Wolff of the same place, party of the second part: “ Wii/nesseth, whereas, the said party of the first part holds a second mortgage on premises number 251 East Tenth Street, New York City of $4,000 for the foreclosure of which an action is pending in the Supreme Court of the State of New York for the County of New York, between Ernst Yon An, plaintiff, and Gabriel J. Wolff, Eugenie J. Wolff and ano., defendants. “And whereas, Eugenie J. Wolff the daughter of Gabriel J. Wolff, is the present owner of redemption of said mortgaged premises, and “Whereas, the parties to said action have determined upon a settlement thereof, by which settlement Eugenie J. Wolff is to give a warranty deed to Ernst Yon Au, subject to the following incumbrances: A first mortgage of $9,000, interest thereon from Feby. 1, 1879, to May, 1879, 6%, $135; a 2d mortgage of $4,000, interest thereon fr. Novbr; 1, 1878, to May, 1879, at 7/ $140; unpaid-taxes. for 1877, $198 75/, interest thereon from Oct. 9, 1877 to May' 1, 1879, $37.21/; unpaid, taxes for 1878, $191 25/, int. thereon from Oct. 11, 1878 to-May 1, 1879, 12 50/; unpaid Croton water fr. May, 1878 to May, 1879, $13.00/; do do for 1877" & int. $4.50/; total $13,732 21/. : f “ And whereas the cost and disbursements and plaintiff’s attorney’s counsel fee in said foreclosure action have been fixed at the-sum of $225 00 which added to the $13,732 21/, makes a total of $13,957 21/100. “ Now this indenture witnesseth, that the party of the first part,, fot and in consideration of the sum of one dollar to him in hand paid at or before the ensealing and delivery of these presents, by' the said party of the second part, the receipt whereof is hereby acknowledged, agrees to and with the said party of the second part, that upon the payment of the said sum of thirteen thousand nine-hundred and fifty-seven 21 / dollars, to him the said party of the-first part, by the said party of the second part, or his legal representatives, on or at any time before the '31st day of July, Eighteen, hundred and eighty, he will convey the said premises, number 251 East 10th Street, New York City, unto the said party of the second part, his heirs, executors or assigns. ' “ And it is understood and agreed that the said Nine thousand dollars, first mortgage or another of that amount in its place, betaken as a part payment of said $13,957.21/on such conveyance-aforesaid. “In witness whereofy the parties hereto have, hereunto set their hand's and seals the day and year aforesaid.” This instrument was acknowledged and recorded on the 18th day of April, 1879, and shortly after the recording of the deed to Yon-Au. ‘No facts are shown with reference to the possession, except that it appears-that Wolff died on the premises on the 18th day of" March, 1881. The defendants offered to show that he remained in possession under a lease and paid rent to Yon Au who paid the taxes, but this was excluded on plaintiff’s objection. Wolff did not. pay or tender the amount specified in the agreement executed tollina by Yon An, and, so far as appears, no claim by virtue of said agreement was made by him or has been made by his heirs since-his decease. Yon Au retained title to the premises until the 25th day of November, 1887, when he conveyed the same to the testator of the defendants. It appears that the executors have authority to convey and no question is raised with reference to the sufficiency of the title, except concerning the effect upon the deed to Yon Au of the agreement executed by him to Wolff. B. M. Martin, for the appellant. Isidor JBuxbaum, for the respondents. [MAJORITY — Laughlin, J.:] Laughlin, J.: The plaintiff contends that the settlement of the foreclosure suit was a mere extension of time for payment of the mortgage indebtedness and that, therefore, the deed from Eugenie J. Wolff to Yon Au was in effect a mortgage, under- which there is an outstanding right to redeem in the heirs of Gabriel J. Wolff. This may be so, but it does not appear from the facts disclosed by the record. Of course it is competent to show by parol evidence that a deed absolute upon its face was intended as security for a debt which renders it in effect a mortgage. But the burden of showing these facts dehors the record rests upon the'plaintiff, provided the record title as tendered appears to be marketable. The plaintiff has refused to perform and he presents no facts in justification excepting those set forth in the statement of facts. Therefore, his contention must fail if it does not appear from the documents themselves that the deed was intended as a mortgage. Facts may exist dehors the record which will defeat a good record title ; but this does not impose upon the vendor the burden of negativing their existence. It is suggested that Gabriel J. Wolff was the owner of the equity of redemption and that his daughter merely held the nominal title ; but this is disproved by the record. It appears that she held the absolute title prior to the commencement of the foreclosure suit and there is nothing to show that her father was the equitable owner. Furthermore, the agreement running from Yon Au to Wolff expressly recites that the daughter was the owner of the equity of redemption. We are of opinion that the agreement was merely intended as an option to Wolff to purchase the premises within the time specified at the consideration therein mentioned. Attention is drawn to the fact that the consideration equaled the gross amount of the items of incumbrances upon the property, together with the interest and accumulations thereon to the date of the agreement; but it will be observed that Yon Au agreed to convey the premises to Wolff for this specific sum, without interest, one year three months and a half thereafter. There is nothing to indicate that there was any defense to the foreclosure suit or to Wolff’s liability for the deficiency. The fair inference is that the parties anticipated that if there should be a foreclosure sale at that time there would be a judgment of deficiency against Gabriel J. Wolff which would have been of doubtful value, for otherwise it is difBcult'to understand how the holder 'of the mortgage would be willing to take title and sell the premises, more than a year and a quarter later, for the amount to which he was entitled at that time. But the motives .of the parties are immaterial, excepting as they shed light on 'the question as to whether the deed was, as it purports to be, intended to be absolute and to discharge the indebtedness. As bearing on this question, the fact that Gabriel J. Wolff did not obligate himself to pay the amount specified in. the option is significant, although not controlling. (Morris v. Budlong, 78 N. Y. 543; Holmes v. Grant, 8 Paige, 243 ; Fullerton v. McCurdy, 55 N. Y. 637.) It woujd seem that he desired merely an opportunity of purchasing the premises, for the consideration stated, should he be able and disposed to do so prior to the expiration of the time specified. The fact that the conveyance was made to Yon Au subject to the mortgage which was being foreclosed is pointed out as indicating an attempt on the part of the parties to keep the mortgage alive. The inference from this fact is rather, we think, that Eugenie J. Wolff in executing a conveyance with a covenant against incumbrances, conveyed subject to this mortgage in order to protect herself against liability on the covenant. Of course, the mortgage might have been satisfied by Yon Au before the conveyance was executed to him, but it was not material which form the transaction took. This mortgage merged in the deed the moment Yon Au obtained title. The fact that it was subsequently formally discharged in order to remove any possible question is of no consequence. The rule is undoubtedly firmly settled in our jurisprudence that where a deed absolute in form was. in fact intended as security for .an indebtedness, it is in equity a mortgage with a right of redemption remaining in the grantor which , it is not competent for him to relinquish by any agreement made at the tíme of executing the deed. (Pardee v. Treat, 82 N. Y. 385 ; Macauley v. Smith, 132 id. 524.; Mooney v. Byrne, 163 id. 91, 92; Hughes v. Harlam, 166 id. 432.) But this rule has no application to the case at bar as we view the facts. It is perfectly competent for the owner of an equity of redemption, in an action for the foreclosure of a mortgage, to convey the premises to, the holder of the mortgage and discontinue the' action, and thus cut off any right of redemption. That is precisely what was done by the owner of the equity of redemption in this case. The mere giving of a concurrent option to purchase either to a third party as was done here, or even to the owner of the equity of redemption, does not affect the absoluteness of the deed. (Randall v. Sanders, 87 N. Y. 578.) The material inquiry in this class of cases is whether the debt was extinguished. (Robinson v. Cropsey, 2 Edw. Ch. 138, 148; Davis v. Thomas, 1 Russ. & M. 506; Randall v. Sanders, supra.) To infer from these facts that the mortgage indebtedness was intended to remain, and that .the conveyance was intended merely as security therefor — which is the only condition on which it could be said that the title is defective—is to do violence to the written instruments by which the parties have recorded their agreements and to indulge in unwarranted speculation.. We are, therefore, of opinion that the title tendered by defendants was free from reasonable doubt, and that specific performance of the contract was properly decreed. It follows that the judgment should be affirmed, with costs. Yah Bruht, P. J., Ihgkraham and Hatch, JJ., concurred; Pattersoh, J., dissented. ' ' Judgment affirmed, with costs.