The People of the State of New York ex rel. Wilbur K. Mathews, Relator, v. Timothy L. Woodruff, Lieutenant-Governor of the State of New York, and Others, Constituting the Board of Land Commissioners of the State of New York, Respondents

The People of the State of New York ex rel. Wilbur K. Mathews, Relator, v. Timothy L. Woodruff, Lieutenant-Governor of the State of New York, and Others, Constituting the Board of Land Commissioners of the State of New York, Respondents. Agreement to give a mortgage—enforced as an equitable lien as against a subsequent mortgagee with notice—failure to make a demand for the mortgage — burden of-proof as to bona tides — rights of subsequent purchasers and incumbrancers with and without knowledge of such agreement. A bond,, by the terms of which the obligor, who was the owner of real estate incumbered by mortgages which were then being foreclosed, assigns to the obligees, out of any surplus moneys realized on the foreclosure sale, ■ an amount equal to the amount of the obligees’ claim, and provides that,, in the event of the foreclosure proceedings being set aside or discontinued, the obligor will, upon demand, execute to the obligees a proper bond and mortgage upon the premises for the amount due to them, creates, in the event of the discontinuance of the foreclosure actions, an equitable lien upon the premises. The failure of the obligees to demand the execution of the mortgage as soon as the foreclosure actions were discontinued does not affect the obligees’ right to assert the lien except as against a tona fide purchaser. The burden of showing that a person who purchased the premises from the obligor subsequent to the execution of the bond was not a bona fide purchaser is upon the obligees. "Where it appears that such purchaser did have knowledge of the existence of the equitable lien when he took the conveyance, and that he executed a mortgage upon the premises to the Loan Commissioners of the State of New York, who also had knowledge of such equity, the mortgage executed to the Loan Commissioners is subordinate to the equitable lien. JSemble, that, if the purchaser took title without notice of the equitable lien, the mortgage executed to the Loan Commissioners would be superior to such equitable lien, even though the Commissioners had knowledge of the existence of such lien at the time they took the mortgage. Certiorari issued out of the Supreme Court and attested on the loth day of- February, 1902, directed to Timothy L. Woodruff, Lieutenant-Governor of the State of New York, and others, constituting the Board of Land Commissioners of the State of New York, commanding them to certify and return to the office of the -clerk of the county of Albany all and singular their proceedings in relation to the determination of an application under section 18 •of chapter 317 of the Laws of 1894. The State bid off certain lands upon the foreclosure of certain mortgages, executed by one Bowers to the loan commissioners in •and for the county of New York, and took the title thereto. The relator, Mathews, claims that such lands were subject to an equitable lien in his favor for about $2,000, created by an agreement in writing executed to him on March 20, 1899, by Mrs. Romeyn, the grantor of said Bowers ; and lie applied to the Commissioners of the Land Office, under the provisions of section 18 above cited, for payment to him of such lien. That board, after taking the proofs in the matter, held that such agreement did not constitute an equitable lien upon the premises, and, therefore, refused his application. This certiorari is taken out to review their decision. The instrument creating such lien is fully set out in the petition in this matter. • It is a bond for $2,000 executed by Harriette S. D.-Romeyn to to Mathews, Grange & Co., and contains the following provisions: “ Whereas, the said obligor is the owner in fee of certain Real' Estate situate in the County of New York, on the east side of McComb’s Dam Road, 125 feet north of St. James Street, being 620 feet front by the full depth of 225 feet, a complete description of wliicn will appear in the foreclosure proceedings of Josephine Wand ell against Romeyn, now pending; now, therefore, it is further stipulated and agreed by the said Harriette S. D. Romeyn that, as additional security for the obligation above mentioned,' she hereby assigns and sets over to the said Mathews, Grange & Company, out of the residue or from any and all sum or sums remaining due to' her from said foreclosure proceedings, an amount equal to the amount due said Mathews, Grange & Company, and the Referee, or any other party holding said sum, is hereby authorized to pay said amount to said Mathews, Grange & Company, their executors, administrators or assigns, upon demand. “ In the event that said foreclosure proceedings should for any reason be set aside or discontinued, th'en it is further agreed by the said Harriette S. D. Romeyn that upon demand she will execute a, proper bond and mortgage to secure the said Mathews, Grange & Company the payment within six (6) months of such amount as shall to that date be due them. ■ “ But it is mutually understood by the said obligor and obligees hereto that the said Mathews, Grange & Company shall have the-option of enforcing the terms or privileges contained herein in such' manner' as they may deem best, and that nothing herein shall be deemed to restrict them as to the enforcement of the payment herein mentioned as a bar to their proper protection. ■ “ HARRIETTE S. D. ROMEYH.” The foreclosure actions referred to in the bond were discontinued. The obligees made no demand upon Mrs. Romeyn for the execution of ' the mortgage which she agreed to give them until after the sale of the premises to the State. Henry M. Ea/rle, for the relator, ... John G. Davies, Attorney-General, and George H. Stevens, Deputy Attorney-General, for the respondents. [MAJORITY — Parker, P. J.] Parker, P. J. It must be held, I think, that, as between Mrs.. Romeyn and the relator in this matter, the agreement of March 20, 1899, should be treated in equity as an equitable mortgage, and that as against her it would be enforced as such. It is true that such agreement itself does not purport to create a present lien upon the premises in question, but there is contained in it a distinct and positive agreement to execute a mortgage to secure the $2,000 therein mentioned in the event that the foreclosure proceedings then threatening to divest her of such lands should, for any reason, not proceed to judgment. The intent is plain. By the instrument itself she gives to Mathews & Co. a lien upon the surplus moneys that she then expected to receive through the judgment in foreclosure, but if that expectation was not realized on account of the action being discontinued, she agrees to give him a lien, by mortgage, upon the land itself. And such mortgage is to be given whenever Mathews & Co. shall demand it. I do not agree with the Attorney-General that such demand was a condition precedent to any liability on Mrs. Romeyn’S part under such agreement. Her obligation arose at once, to give the mortgage whenever she was asked to, and I discover nothing in such agreement that required Mathews & Co. to demand the mortgage as soon as the discontinuance of the action occurred. By delay such firm took the chances of some bona fide purchaser intervening; but so long as no intervening equity arose they could enforce such promise against Mrs. Romeyn unless the debt was otherwise discharged. (Pom. Eq. Juris. § 1237; Lynch v. Utica Ins. Co., 18 Wend. 236; Husted v. Ingraham, 75 N. Y. 251, 257; Deeley v. Dwight, 132 id. 59, 64; Kribbs v. Alford, 120 id. 519, 524; Sprague v. Cochran, 144 id. 104,112,113 ; Hamilton Trust Co. v. Clemes, 163 id. 423, 427; National Bank of Deposits v. Rogers, 166 id. 380, 390.) If Bowel’s was a bona fide grantee for value, and if the loan commissioners were bona fide mortgagees, then this equity could not be enforced against the premises. Bowers in that event would have acquired through his conveyance from Mrs. Romeyn a title to the premises freed from the lien above suggested. ' So, also, if Bowers had acquired such a title the loan commissioners, although they had -notice of such equity, could rely upon that title and hold the premises acquired from him. (Pom. Eq. Juris. § J54.) It is averred in the petition, and not disputed in the return,, that the commissioners, when they took the mortgages from Bowers, had actual notice of the instrument of March 20, 1899, and so, of course, they had notice of the agreement by which such equity is created. But' there is no charge in such petition that Bowers had such notice when he took his conveyance from Mrs, Romeyn, and the'burden is upon the one who claims the benefit of such outstanding equity to establish that the one who claims under the record title had notice of such equity. (See Brown v. Volkening, 64 N. Y. 76.) But I am of the opinion that the record shows that Bowers also had notice of such agreement and equity. The affidavits of Earle and of Davidson used upon the hearing, show that in June and July, 1899, Bowers had purchased two other parcels of the land referred to in this agreement of March 20, 1899, and had mortgaged them to such commissioners, and that on the application of Davidson, who was then acting as Bowers’ attorney as I understand the statement in his affidavit, the firm of Mathews & Co. released such parcels from the lien created by such agreement and such releases were put upon record. In the face of that fact we must, I think, conclude that on August 30, 1900, when he took the conveyance of the remaining part of such premises he still had notice of such-agreement, and that, unless released, such parcel also would be subject to such lien. Such deed was taken to Bowers on the .thirtieth and the mortgages executed on the thirty-first; evidently it was one transaction, and the commissioners took the title upon the understanding that Mathews’ debt had been paid and that a release for this last parcel was not necessary. When one of the commissioners afterward ascertained that the debt was not paid and tried to get the release, he stated these facts to Mathews’ attorney. This appears from the affidavit of Earle and is not contradicted. We must conclude then that both Bowers and the commissioners had actual knowledge of this agreement creating this equitable lien and that neither took the title to these premises as- purchasers in good faith. The lien was and still is a prior one to their title, and, inasmuch as the commissioners represented the Staté in acquiring the title to such lands the State now holds such title subject to such lien. These conclusions require that the determination of the Commissioners of the Land Office be reversed, with fifty dollars costs and disbursements. All concurred. Determination of the Land Commissioners reversed on law and facts, with fifty dollars costs and disbursements.