Merchants' National Bank of Albany, N. Y., Respondent, v. Ole L. Snyder and Others, Defendants. The Altamont Club, Appellant, and Amos C. Hall, Respondent

Merchants’ National Bank of Albany, N. Y., Respondent, v. Ole L. Snyder and Others, Defendants. The Altamont Club, Appellant, and Amos C. Hall, Respondent. Purchase-money mortgage — the fact that the grantor (the moi'tgagee) had only a-mortgage interest is not a defense to its foreclosure — what claim does not tend to diminish or defeat the plaintiff’s recovery. The fact that the grantor in a warranty deed has only a mortgagee’s interest in the premises conveyed does not, in the absence of an eviction, constitute a defense to an action to foreclose a purchase-money mortgage given by the grantee to -the grantor; the grantee’s remedy is by an action upon the covenants contained in his deed. Allegations, contained in the answer interposed by a defendant in a foreclosure-action, of facts not constituting a defense to the action, coupled with a; demand for a money judgment against the plaintiff, do not constitute a counterclaim, where the complaint does not demand a personal judgment against the answering defendant, as, in such a case, the alleged cause of action will not tend to-diminish or defeat the plaintiff’s recovery. . Appeal by the defendant, The Altamont Club, from a judgment of the Supreme Court in favor of the plaintiff and of the defendant Amos O. Hall, entered in the office of the clerk of the county of Hamilton on the 26th day of December, 1899, upon the report of a referee in an action brought for the foreclosure of a mortgage upon real estate. This action was commenced in January, 1899. It was brought to foreclose a mortgage dated May 17, 1897, and given by the defendant Ole L. Snyder to the plaintiff as security for the payment of $20,000 in two equal annual payments, and covering 5,000 acres of land, part of Great Lot No. 8 in the Moose River tract in Hamilton county. In the complaint it is alleged that the defendants, The Altamont Club and Hall, have or claim some interest in or lien upon the premises, which interest or lien, if- any, has accrued subsequently to the lien of the mortgage. No personal judgment was asked against any defendant except Snyder, who gave a bond in connection with the mortgage. None of the defendants answered except the Altamont Club. It set up as a defense and counterclaim that it was organized on or about May J, 1897, for the purpose of purchasing for club purposes the property described in the complaint; that upon its organization the defendant Snyder was elected a trustee and treasurer of the club, and conducted on its behalf all the negotiations and assumed charge of the business looking to the end of purchasing and acquiring title thereto, and that for that purpose the club placed in his hands the sum of $12,950 ; that as a result of such negotiations Snyder paid plaintiff the sum of $10,500, and gave the mortgage in suit, a deed being at the same date given by the plaintiff to Snyder; that in the same transaction Snyder paid from said moneys to defendant Hall $2,100 and gave him a mortgage on the premises bearing date October 8, 1897, for $8,000; that the plaintiff and Hall represented to Snyder and to the club that the plaintiff had a good and perfect title to the premises when, in fact, it had only a mortgage, and the deed it gave conveyed no title; that all of the said payments and instruments were made under a misapprehension or mistake of fact as to plaintiff’s title, and that the consideration thereof failedthat the defendant relied on the statements of the plaintiff and Hall, and had no notice of the defect of title till long after-wards. In general terms it is alleged that the payments were obtained and the mortgages procured-by false and fraudulent representations made by plaintiff and Hall to Snyder and the defendants. Relief was asked that the. deed to Snyder and the two mortgages. given by him be canceled,- and that the plaintiff pay back to the club the money which Snyder had paid. The answer. of the club was served on defendant Hall. The referee held that the answer in effect alleged a conspiracy between the plaintiff, the defendant Snyder and the defendant Hall, whereby the club had been defrauded of its money; that the evidence failed to establish the alleged conspiracy, and, if it did, it would not avail the club in this action, as no personal claim was made against it, and it claimed no interest in the property proceeded against, so that the claim, if established, would only result in an independent judgment not affecting the foreclosure prayed for, and, therefore, not admissible as a counterclaim. The ■ judgment appealed ■ from is the ordinary judgment in foreclosure. Edward De Witt, Marcus T. Hun and Learned Hand, for the appellant. , Arthur L. Andrews, for the plaintiff, respondent. Isaac Lawson, for the defendant Hall, respondent. [MAJORITY — Merwin, . J.:] Merwin, . J.: The main questions upon this appeal are whether the defense and counterclaim set up is available as a counterclaim in this action, and if so, whether it is established. The referee held in -favor of plaintiff on both of these questions. It seems to be conceded that on and prior to December 24, -1895, Henry Patton held a perfect record title to the property in question. The defendant Hall claimed some equitable interest therein by reason of'some arrangement with Patton. At the date above named Patton executed and delivered to the plaintiff a quitclaim deed of the premises, for the consideration, as therein stated, “ of one dollar and other good and valuable considerations.” Upon the face of this deed- it was stated that it was given as security for the payment of any and all liability or indebtedness then existing to the party of the second part (the plaintiff) from Henry Patton, or the firm of Patton & Co., upon paper made or indorsed by them, and it was also provided that “ the said lands and premises shall not be sold or conveyed by the .party of the. second part except after fifteen days’ notice to the said Henry Patton of intention so to do, and then •only to the person or party making the highest offer thereof.” The amount of the indebtedness was not stated. On the 12th of February, 1897, Hall, having made an arrangement with the plaintiff by which it agreed to take $30,000 for its interest in the property and convey to whoever Hall might designate, and that he might have all he could obtain above that figure, •gave to Snyder in writing an option until March 12, 1897, to purchase the property at the price of $40,000, payable $2,000 March 12, 1897; $10,000 April 12,1897, an*d the balance in three equal annual payments to be secured by bond and mortgage, Hall “ to furnish a good and complete title search free from all incumbrances.” Thereupon Snyder, with three others,, proceeded to obtain subscribers to •a project for organizing a proprietary club for the purchase of the property under the terms of the option given by Hall. A meeting •of these subscribers was held on May 4,1897, and it was then determined to organize a corporation under the name of the A1 tarn on t ■Club. A certificate of incorporation was prepared and executed, nine persons being named as trustees, of whom Snyder was one. The certificate was duly approved, and was filed in the office of the Secretary of State and the New York county clerk’s office on May '20, 1897. A meeting of the named trustees was held on May 4, 1897, and Mr. Snyder was chosen treasurer, and he was orally .authorized to take charge of the business of looking after the purchase of the property on behalf of the club. He was a practicing lawyer. He testifies that he received from the board of trustees •oral instruction to take title to the property; that he was instructed to take title and give bond. On May 7, 1897, an agreement in writing was made between plaintiff and Snyder, by which plaintiff, for the price of $30,000, agreed to convey to Snyder the said premises “ in fee simple, by a good and sufficient deed of conveyance, with covenants of warranty, free and clear from all liens, rights of dower, or other incumbrances,” and Snyder agreed to pay the price as follows: $500 upon the execution of the agreement; $9,500 on or before May 17, 1897, at which date upon payment of such sums the deed was to be given and a bond and mortgage given back for $20,000, payable in two equal animal payments, with interest semi-annually. This agreement was made with the understanding between Hall and Snyder that the balance of the price named in the option of February 12,. 1897, should be paid or secured to Flail. Snyder received as treasurer of the club $12,000, of which $10,000 was paid by him to plaintiff and $2,000 to Hall. A warranty deed was executed by plaintiff to Snyder, bearing date May 17, 1897,. acknowledged September 23, 1897, and recorded June 20, 1898.The consideration stated in this deed is “ one dollar and other good and valuable considerations.” The mortgage in suit was- executed by Snyder to plaintiff bearing date May 17, 1897, acknowledged September 23, 1897, and recorded June 20, 1898. Snyder also-' executed to Hall a mortgage for $8,000 bearing date October 8, 1897, and recorded October 13, 1897. It appears that the deed from plaintiff to Snyder had not, on the 25th of May, 1898, been delivered. The president of' the plaintiff, at that date, so informed the secretary of the club upon inquiry made by letter on May 20„ 1898. From this letter it appears that the secretary of the club,, who was also a trustee, had at that date information that a deed had been exécuted from plaintiff to Snyder and a bond and mortgage from Snyder to plaintiff, and a deed from Snyder to the club-information was asked from plaintiff as to their delivery. The plaintiff had no contract with the club. Its agreement was-with Snyder on May 7, 1897, .which was before the filing of the certificate of the incorporation of the club. Snyder was acting in behalf of the club, but he w:as, as he testifies, to take the title, himself and give back a bond. The evidence tends to show that such was the arrangement between the club and Snyder, and the club in its answer does not allege the contrary. It is argued upon the part of the appellant that the acts of Snyder,,' subsequent to the signing of the contract with plaintiff, were not within the scope of his agency, and that, therefore, as he in making-that contract, represented in fact the club, it can enforce the contract, and that as the plaintiff’s title is defective it should refund the moneys of' the club. The club is not seeking specific performance. It did not by any corporate action assume the contract. It does not offer to perform upon receiving good title and evidently was not in a position to make, the payments as they became due according to the original option and contract. In its answer it claims no lien on the land for moneys paid. Its agent, Mr. Snyder, before executing the bond and mortgage, examined the deed from the plaintiff to him and also examined the search upon which there was an abstract of the conveyance from Patton to the plaintiff and a statement of the character of the conveyance. He was satisfied with the warranty deed from the plaintiff. He had previously learned that one Seymour was occupying some part of the property, and the bank thereupon, on demand from Snyder, obtained a deed from Seymour to Snyder bearing date August 9, 1897, and recorded June 20, 1898. On or about the 21st of July, 1898, Mr. De Witt, the secretary of the club and one of its trustees, called the attention of the board of trustees to the character of the conveyance from Patton to plaintiff, a certified copy of the deed being present. The plaintiff, so far as appears, was not called upon to remedy or provide for any defect. In December, 1898, the secretary in corresponding with the plaintiff about the interest on the mortgage and as to what might be done in case -of foreclosure, made no suggestion that the mortgage was not valid, or-that the title furnished by plaintiff was not good. We cannot say that if the plaintiff, at the time of the deed to Snyder, or at the time the board of trustees had knowledge of the alleged defect had been called upon to remedy it, it would not have been able to do so. We may assume that the plaintiff knew that Snyder was acting in behalf of the club and was paying to it the moneys of the club. We must also assume that it knew, when the contract was made with Snyder, that the club was not incorporated and that by arrangement between the club and Snyder the latter was to take the title and give hack a bond and mortgage. A purchaser who has made payments and is not in default may, in some cases, have a lien on the interest of the vendor in the premises for his payments, in casé the vendor cannot give good title (2 Sugd. Vend. 378, *671), but that principle is hardly applicable-here, even if its benefit was here claimed. The proof is not, we think, sufficient to show that the mortgage was procured by any fraud upon the part of the plaintiff or that the plaintiff was a party to any conspiracy to defraud Snyder or the club. The plaintiff had at least an interest as mortgagee which passed by its deed. It procured to be conveyed to Snyder the possessory interest of Seymour. So that it is not apparent that the mortgage to plaintiff was without consideration. The remedy of a grantee in such a case, when, as in this case, there has been no eviction, is upon the covenants in his deed, and he cannot, on the ground simply of defect of title,- resist, foreclosure, of a purchase-money mortgage. (McConihe v. Fades, 107 N. Y. 404.) The appellant failed, I think, to show the invalidity of the mortgage. That being so, the plaintiff has a right to foreclose it, and the claim of the appellant is reduced to a claim simply for money which would not tend to diminish or defeat the plaintiff’s recovery, as no personal claim is made by plaintiff against the appellant. The appellant’s claim, therefore, was not admissible as a counterclaim, and could not be determined in this action. The appellant also claimed to set aside the mortgage given to Hall, and, by amendment allowed to its answer' at .the trial, claimed to recover of Hall the $2,000 paid to him by Snyder. This claim, if established, would not affect the plaintiff’s right to foreclose. The judgment did not undertake to adjudicate as to the rights of any party to a possible surplus. There was no issue on that subject between the appellant and Hall, as the appellant did not claim any lien on the real estate. The claim against Hall for the money paid hiin was the subject of an independent litigation. (Kay v. Whittaker, 44 N. Y. 565 ; Lansing v. Hadsall, 26 Hun, 619.) No good reason is apparent for the reversal of the judgment, and it should be affirmed. All concurred. Judgment affirmed,, with costs. Note.— The rest of the cases of this term will be found in the next volume, 53 App. Div.— [Rep. DECISIONS m CASES NOT REPORTED IN FULL.