De Peyster against Hasbrouck and others

De Peyster against Hasbrouck and others. Where a mortgage does not cover all of premises owned by the mortgagor which he by false and fraudulent representations induced the mortgagee to believe were included therein, when the latter made a loan and accepted it as security therefor, a court of equity will," as against the mortgagor or his voluntary grantee, reform the mortgage and enforce it against the part of the premises not originally embraced therein. Accordingly, where an applicant for a loan proposed to secure its repayment hy a mortgage upon premises which he stated had been conveyed to him by a party named, and by false and fraudulent representations induced the lender to believe that certain valuable erections, which were situate on adjacent premises owned by the applicant, were upon the premises so conveyed to him, and the lender made the loan and accepted a mortgage executed by the applicant containing a description which included only these premises, believing, and the applicant representing to him that the erections were embraced, and the mortgagor soon thereafter conveyed the land on which the erections were .situate, without consideration, in trust for his wife; in an action by the mortgagee against the mortgagor, his wife and her trustee, the trust deed was adjudged invalid against the mortgage, the latter was reformed so as to embrace the land with the erections thereon, and a decree of foreclosure and sale was made as to all the premises. The action was commenced in September, 1848, by De Peyster against Joseph 0. Hasbrouck and Eliza his wife and others. The complaint alleged the following facts: That in January, 1846, Joseph 0. Hasbrouck applied to the plaintiff in New-York for the loan of $12,000, and represented that he owped about seventy acres of land, situate in New Paltz, Ulster co., with the buildings, &c. thereon, as mentioned in the certificates hereafter referred to, upon which he proposed to execute a mortgage to secure the repayment of the loan. Subsequently, and during the negotiation, Hasbrouck produced and left with the plaintiff, a certificate signed by Samuel Johnson and Martinus Millspaugh, headed, “ A statement of property owned by Joseph 0. Hasbrouck in the town of New Paltz,” wherein they certified that the property therein mentioned was, in their judgment, worth the sums set opposite each portion thereof, and in which the land was stated as being worth, without the buildings thereon, $7000, and then followed an enumeration of the mills, buildings, &c. thereon, each estimated at a separate amount; and among these were the following: “ Tanning yard with a large building, and a bark mill run by water, worth $1500 ; two store houses worth $1000; a large house occupied as a tavern, with sheds and stables, worth $2000 ; a mansion house, worth $3000 ; and a dwelling house occupied by one Johnson, worth $2500.” The value of the property as stated in this certificate, amounted to $31,300. Hasbrouck also produced and left with the plaintiff another certificate of valuation, signed by Willett Linderman, headed “ A statement of the real estate owned by Joseph O. Hasbrouck in Tuthilltown, Ulster co., a farm of about 70 acres, including,” &c. Here followed a statement of the land, and the various erections thereon, with the value of each. Among these were the same erections mentioned in the other certificate, and the valuation of the entire property amounted to about $27,000. The plaintiff being satisfied with the property as security for the proposed loan, referred Hasbrouck to E. H. Owen, Esq. as his attorney, to examine the title, and if it was found satisfactory, to prepare a bond and a mortgage thereon for the amount. Mr. Owen reported that the title was satisfactory', and prepared a bond and mortgage, the former of which was executed by Hasbrouck, and the latter executed and acknowledged by him and his wife, conditioned for the payment of $12,000 and interest. The premises covered by the mortgage were described therein by courses and distances, and a reference to adjacent lands and • monuments, so that a party could not locate them without going upon the ground and having them traced by a surveyor or the lines pointed out. The description concluded as follows : “ containing sixty-eight acres and 1%, be the same more or less, excepting two acres and -fV, formerly belonging to James McCullough.” The mortgage did not mention or refer to the erections upon the mortgaged premises. The complaint alleged that during the negotiation, Hasbrouck represented that the premises proposed to be mortgaged, and upon which the erections mentioned in said certificates were situate, had been conveyed to him by the Bank of Poughkeepsie, and the description of the premises in the mortgage was copied from the deed which he furnished, executed by the Bank of-Poughkeepsie to him; that when the mortgage was executed, Hasbrouck stated and represented that it covered all the property mentioned in the certificates of valuation ; and that subsequently, and before the plaintiff advanced to him the full amount of the $12,000, he signed a paper attached to the certificates of valuation, whereby he stated “ that all the property, mill privileges, buildings, &c., mentioned and valued in the annexed certificates, are covered and intended to be covered by the mortgage to J. Watts He Peyster, (the plaintiff,) being upon the land purchased of the Bank of Poughkeepsie 20th of May, 1839, and were offered as security for the same loan, when it was applied for, and that he, Hasbrouck considered the property of the full value set upon it in said certificates.” Before the plaintiff advanced the money upon the bond and mortgage, Hasbrouck executed to him a paper by which he agreed to insure the property offered as security for the loan to the amount of $12000, and keep it insured for that amount during the existence of the mortgage, and to assign the policy to the plaintiff as collateral security. That the plaintiff made the loan and accepted the mortgage, relying upon and believing the representations and statements of Hasbrouck that it covered all the property mentioned in the certificates,- and which he owned at Hew Paltz, and that but for such representations and belief he would not have done so; that at the time of the loan, Hasbrouck assigned to him policies of insurance upon the buildings mentioned in the certificates as collateral security, and some of which were upon the property which was not included in the mortgage. The complaint further averred that, in point of fact, the tannery and bark-mill and the other buildings, above particularly specified as contained in the certificates; were not upon the premises described in the mortgage or embraced within the description therein contained, but were situate on two small parcels of land, the one containing two and one half acres, and the other one acre situate adjacent to the land described in the mortgage, both of which parcels were owned by Hasbrouck at the time of the negotiation for the loan and the execution of the mortgage. Soon after the bond and mortgage were executed and the money advanced thereon, Hasbrouck, by a deed executed by himself and Eliza his wife, conveyed the two small parcels of land above mentioned to one Mitchell, one of the defendants, in trust for the separate and sole use and benefit of the said Eliza. It was alleged that at the time of this conveyance, Hasbrouck was insolvent; that he subsequently conveyed the mortgaged premises to a third person, and was, at the time of commencing the suit, entirely insolvent. That default had been made in the payment of the amount secured by the mortgage, and that the premises covered thereby were an inadequate security for the same. The complaint prayed that the deed in trust to Mitchell of the two small parcels be declared void as against the plaintiff’s mortgage; that the lien of the mortgage be decreed to extend over the said two small parcels of land and the erections thereon, with the same force and effect as though they had been included therein; and that the usual decree of foreclosure and sale as to all the premises be made, or that the plaintiff have such other relief as should be deemed adequate and proper. Hasbrouck did not answer the complaint. His wife put in an answer, by which she controverted most of the material allegations contained in the complaint, and insisted that the two parcels conveyed in trust for her to Mitchell should not be subjected to the lien of. the mortgage. Some of the other defendants answered, but their claims are not material to the question discussed and decided on the appeal to this court. The cause was tried at the Ulster county circuit, in 1851, before Justice Harris. The certificates of valuation and the Writing executed by Hasbrouck thereto annexed, and also the agreement executed by him to insure the property and assign the policies to the plaintiff were read in evidence as the same are in the complaint stated. The bond and mortgage were also given in evidence, and it was proved that Hasbrouck assigned to the plaintiff the policies of insurance upon the property as in the complaint alleged. A good deal of other evidence was. given upon the trial, but the same and the conclusions of fact arrived at by the justice who tried the cause, are sufficiently stated in the opinion of Denio, J. Justice Harris denied the relief prayed as to the two sniall parcels of land not included in the mortgage, and gave the usual judgment of foreclosure as to the premises included therein. The plaintiff’s counsel excepted to that part of the decision denying the relief asked as to the premises not included in the mortgage, The judgment was affirmed by the supreme court at general term in the third district. The plaintiff appealed to this court. The cause was submitted on printed points. C. Livingston, for the appellant. R. W. Peckham, for the respondant, [MAJORITY — Denio, J.] Denio, J. I am prepared to concur with the supreme court in its conclusions upon the matters of fact, as they are stated in the opinion delivered by Mr. Justice Harris, before whom the action was tried. According to that opinion, which I think is sustained by the testimony, the defendant Joseph 0. Hasbrouck, in the spring of 1846, applied to the -complainant for a loan of $12,000, upon the security of certain real estate which Hasbrouck owned in the county of Ulster, and which he offered to mortgage to the plaintiff. It was understood between them that the real estate to be mortgaged was the same which had been conveyed to Hasbrouck by the Bank of Poughkeepsie, and during the negotiations for the loan Hasbrouck produced and delivered to the counsel for the plaintiff the conveyance executed by that bank to him, and the mortgage ultimately given to the plaintiff was copied, as to the description of the premises, from that deed. In this deed the premises are described in a manner which would convey no precise idea of their particular boundaries to a person not acquainted with the locality, nor even to such a person unless he had traced the lines on the spot with a chain and compass, or they had been pointed out to him. The description concluded with a statement that the land conveyed and described contained sixty-eight acres and sixty-nine hundredths of an acre, and there was excepted from this, two acres and five-tenths of an acre, stated to have formerly belonged to James McCullough. During the negotiations, and before the plaintiff had advanced to Hasbrouck any part of the money, the latter exhibited and delivered to the plaintiff, two several appraisements of the real estate proposed to be mortgaged, one signed by Samuel Johnson and Martinas Millspaugh, and the other by Willett Linderman. The first was headed, “ A statement of property owned by Joseph 0. Hasbrouck in the town of Hew Paltz,” and foots at $31,300; and the other was entitled, “ A statement of real estate owned by Joseph 0. Hasbrouek, in Tuthilltown, Ulster county, Hew-York,” and the aggregate of the items in this paper was §27,000. Each statement estimated the land separately, without the buildings, _ as being about seventy acres, and worth §7000. The remainder of each statement consists of a separate valuation of the various buildings on the land, consisting of manufactories, mills, hotel and dwellings of various kinds. The two statements are each designed to embrace the same property, some of the buildings being entered under different names. Tuthilltown is understood to be the name of a village which is situated in the town of Hew Paltz. Annexed to these appraisements were two other certificates, signed respectively by J. O. Linderman and E. P. Benjamin. In one there is an estimate of “ the real estate in land owned by the said Joseph O. Hasbrouek in Tuthilltown,” and the other speaks of the value of “ the property now owned by one Joseph 0. Hasbrouek in Tuthilltown.” A portion of the erections thus appraised, seven or more in number, and embracing a tannery, mill and yard, and valued together, according to the certificate of value which states the lowest prices, at §6500, did not in truth stand on the premises conveyed to Hasbrouek by the Bank of Poughkeepsie, but are two pieces of land immediately adjoining, one containing two and an half acres, and the other one acre of land; and consequently were not" embraced in the plaintiff’s mortgage. Prior to the payment to Hasbrouek of the whole amount loaned, and when §1336.83 remained to be advanced, Hasbrouek, at the instance of the plaintiff, signed a statement appended to the certificates of value, affirming in positive terms that all the property, mill privileges, buildings, <fcc., mentioned and valued in the certificates of value which hav'e been mentioned, were covered and intended to be covered by the mortgage which had been executed to the plaintiff, “ being,” it was added, “ upon the land purchased of the Bank of Poughkeepsie, 20th May, 1839,” and that “ they were offered as secu--' rity for the said loan when it was applied for.” The plaintiff required as a condition to the loan, and which was assented to by Hasbrouck, that the latter should procure policies of insurance against fire, and Hasbrouck procured and assigned to the plaintiff such policies in respect to the buildings on the small pieces of land, as well as in regard to those on the premises purchased of the Bank of Poughkeepsie, and included in the plaintiff’s mortgage. There are a few other circumstances less material than those which have been stated, but having in a slighter degree the same tendency. The supreme court concluded from these facts, and all the evidence in the case, that Hasbrouck, by the means which have been referred to, induced the plaintiff to believe that the buildings and improvements standing upon the small parcels of land, were in fact a part of the premises described in the mortgage, and that the plaintiff was actually made to believe that his mortgage covered all the property described in the certificates of valuation; and that in this respect the plaintiff was deceived and defrauded. Agreeing entirely with the result of the examination of the learned justice of the supreme court in this respect, and thinking it warranted by the evidence, I do not consider it necessary to go more into detail on this part of the case. The supreme court was of opinion that it did not possess the power of so reforming the mortgage as to make it embrace the small parcels of land upon which these buildings stood, though that land was then owned by Hasbrouck and subject to his disposal. The hesitancy of the court arose out of the consideration, that the lender understood that the land conveyed by .the Poughkeepsie bank embraced the whole promises upon which he had agreed to make the loan ; and that inasmuch as the land thus conveyed was included in the mortgage, he obtained a lien upon the whole subject contemplated by the agreement, and has therefore no right to this species of redress. But the extent of the area of land was a circumstance of minor consideration compared with the buildings and improvements. Two or three acres, more or less, would vary the security only to the amount of as many hundred dollars, whereas the failure to obtain a lien on the buildings, reduced it by twice as many thousands. If the plaintiff contracted for a lien restricted by the limits of the Poughkeepsie bank conveyance, he at the same time contracted for an incumbrance upon all the land upon which the enumerated buildings stood, and the latter circumstance we cannot fail to see was the one which must have operated upon his mind to assent to the transaction. It does not appear that any particular "number of acres were contracted for, or what precise area was conveyed by the mortgage'. The manner in which Hasbrouck obtained his title was a circumstance of entire indifference. It is plain that the plaintiff was mistaken and misled when he supposed that the bank conveyance was so limited as to leave out the tannery, factory, the hotel, &c.; and when he assented to have the premises contained in that conveyance transcribed into his mortgage, he acted under a fatal mistake as to the extent of the premises contained in that description. He thought, and Hasbrouck induced him to believe, and knew that he did "believe, that the lines therein mentioned, when traced on the ground, would include the tannery, factory, &c. To me it seems very plain that it is no answer to say to the plaintiff, you obtained a lien upon all the ground contained in the bank deed. He can properly reply: The deed from the bank was of no moment, except for the supposition that it covered the valuable erections which I was to obtain a' lien upon as security. The deed was used only as a convenient method of describing those premises ; but now that it appears that it only embraced a part of them, it would be inequitable to limit me to the deed which, in the actual circumstances, was used only as an instrument to deceive. The case is similar to Wiswall v. Hall, (3 Paige, 313,) where the defendant, being the owner of a certain lot Ho. 22, bounded on the Hudson river at the line of tide water, had obtained a grant, from the corporation of the right to erect a wharf in front of his lot, and had erected such wharf thereon. He then contracted to sell the premises to the complainant, and conveyed them as lot Ho. 22, &c., as the same was described in and had been occupied and held under a certain deed which was particularly described, executed by Van Rensselaer to MeCartan, and by the latter assigned to the defendant. Now this lot No. 22 did not embrace the wharf, nor was that conveyed by Van Rensselaer to McCartan, but the defendant held it under a different title, namely, the grant from the corporation. The defendant by his answer insisted, as the present defendant does, that he did not intend to sell any thing more than the lot as it originally was. The chancellor said he was satisfied from the evidence that this allegation was literally true; but he was also of opinion that the defendant knew that the plaintiff did not so understand the bargain, and that although he assented to take a- conveyance limited to the land embraced in lot No. 22, and conveyed by Van Rensselaer to McCartan, it was only because he believed that lot and conveyance embraced the wharf as well as the upland, and he decreed that the defendant should execute to the plaintiff a release of the wharf. This case is upon principle identical with the one before the court; and it is unnecessary to refer to cases to establish the familiar doctrine that where, through mistake or fraud, a contract or conveyance fails to express the actual agreement of the parties, it will be reformed by a court of equity so as to correspond with such actual agreement. The English cases have been ably digested by Chancellor Kent, and the principle has been stated with his accustomed care and accuracy in Gillespie v. Moon, (2 John. C. R. 585.) There is no evidence that the defendant, Mrs. Hasbrouck, was a party to the deception. Her contingent right of dower must not therefore be affected by the decree or sale of the premises not actually embraced in the mortgage. The trust deed being between husband and wife, and no consideration being shown, must be regarded as purely voluntary. As neither Mrs. Hasbrouck or the trustee are proved to have parted'with any thing to obtain that conveyance, it cannot be set up against the complainant’s equity. (Burgh v. Francis, 1 Eq. Cas. Ab. 320, pl. 1; Taylor v. Wheeler, 2 Vern. 564; Russel v. Russel, 1 Bro. C. R. 269; Dickerson v. Tillinghast, 4 Paige, 215.) The judgment of the'supreme court must be reversed, and a judgment entered declaring the rights of the parties according to the principles stated in this opinion, and with the usual provision contained in a decree of foreclosure. It will direct the premises described in* the mortgage to be first sold, and the other parcels to be sold only in the event of a deficiency in the amount of principal, interest and costs, arising out of the first sale. If there should be a surplus arising out of the sales of the smaller parcels, the judgment will direct that it be retained by the sheriff to abide the further order of the court; it will direct the plaintiff’s costs in the supreme court to be paid by the defendant, Joseph 0. Hasbrouck, and no costs of any of the parties against the others to be allowed in this court. ■ Should the parties be unable to agree upon the form of judgment, it will be settled on notice by the judge by whom this opinion is prepared. Allen, J., delivered an opinion to the same effect. Gardiner, G. J., and Ruggles, Johnson and Edwards, Js., cpncurred. Parker, J., was in favor of affirmance, and Selden, J., took no part in the decision. Judgment in accordance with the foregoing opinion.