Opinion
11-10-1902
BARGER v. GERY.
James H. Rogers, for complainant. Daniel L. Campbell, for defendant.
Specific performance by Helen M. Barger against John Gery. Decree for plaintiff.
The bill is filed by the vendor to compel the vendee to perform his contract. The vendee defends on the ground that the title offered is not marketable. The title in dispute is traced back through various conveyances, which are not questioned, to a sheriff's deed in a foreclosure suit made in 1877,—23 years before the contract was made which is sought to be specifically enforced in this suit. The alleged defect in the title may be described, briefly, as this: that the mortgage foreclosed in the abovementioned suit may, notwithstanding such foreclosure, be an outstanding incumbrance enforceable on behalf of one John I. Anderson, who was not a party to the foreclosure suit, or by some person claiming through him. In other words, it is claimed that the party complainant who foreclosed the mortgage apparently did not own it; that his title to it was through an assignment from a former owner, who had previously assigned it to one John I. Anderson by a valid deed of assignment, which was on record at the time of the second assignment, under which the complainant in the foreclosure suit held title. The complainant contends that under all the circumstances the possibility of there being any enforceable claim under the mortgage on behalf of Anderson or any one deriving title from him is too remote for consideration; that there is no room for reasonable apprehension that any claim under the supposed Anderson assignment will ever be made. The facts in which dates are of great importance are as follows: The bond and mortgage were made by Archibald Warren to the New Jersey Mutual Life Insurance Company. They bear date February 18, 1873, and the mortgage was recorded February 24, 1873, in the Passaic county clerk's office. The debt secured was $2,600, and it was payable May 1, 1874, with Interest. The property consisted of a plot 100 feet square, containing four city lots in the outskirts of the city of Paterson, on which a house—apparently a substantial residence—was erected. The house and two lots, making a plot 50x100 feet, are the subject-matter of the contract in this case, and the contract price is $1,250. On March 25, 1873, the New Jersey Mutual Life Insurance Company assigned the bond and mortgage to one Daniel J. Noyes, and on the same day Daniel J. Noyes assigned the mortgage to Kate C. Woolsey, and on May 29, 1873, Kate C. Woolsey assigned the mortgage back to the New Jersey Mutual Life Insurance Company. All of these assignments were duly recorded. According to the records of the Passaic county clerk's office, on September 7, 1874, the New Jersey Mutual Life Insurance Company assigned the bond and mortgage to one John I. Anderson, the assignment being recorded December 28, 1875. The arguments of counsel assume that there is no record of any kind of any assignment of the bond and mortgage by John I. Anderson. On January 24, 1877, the New Jersey Mutual Life Insurance Company executed a deed of assignment bearing that date, purporting to transfer the bond and mortgage to one Minot Mitchel, of Yonkers, Westchester county, in the state of New York, which deed of assignment was duly recorded January 31, 1877. Subsequently Minot Mitchel assigned the bond and mortgage to one Alexander Phillip, who thereupon, on May 31, 1877, filed a bill in the court of chancery to foreclose the said mortgage. Thisforeclosure bill is in the usual form, setting forth the execution of the mortgage by Archibald Warren to the New Jersey Mutual Life Insurance Company, the assignment thereof by the insurance company to Minot Mitchel, above mentioned, and the assignment thereof from Minot Mitchel to the complainant, Alexander Phillip, but ignoring altogether the assignments of the bond and mortgage prior to the assignment to Minot Mitchel, including the supposed prior assignment to John I. Anderson. The solicitors who filed this foreclosure bill were Messrs. Lynn & Babbitt, of Jersey City. The suit was prosecuted in the usual way, and no exception is taken to any of the proceedings therein. The bond and mortgage, the assignment from the insurance company to Minot Mitchel, and the assignment from Minot Mitchel to the complainant, Alexander Phillip, were all produced before the master, and marked as exhibits in the cause. The master, now deceased, reported the amount due on the bond and mortgage at $3,393.71, and $1,581.65 due upon a subsequent judgment. Final decree and execution followed, and the sheriff of Passaic county, to whom the execution was issued, conveyed the mortgaged premises to the said Minot Mitchel by deed dated December 8, 1877. Whether the assignment from Minot Mitchel to Alexander Phillip, the complainant in the foreclosure suit, was or was not recorded, is not material, because Minot Mitchel became the purchaser, and the title of Mrs. Barger, the complainant in this cause, is derived from him, and therefore includes the entire title to the mortgage, if any, which Minot Mitchel took from the New Jersey Mutual Life Insurance Company by his assignment, together with the title of Warren, who held the equity of redemption and the title of the subsequent incumbrancers. Mrs. Barger apparently holds a good title to the premises described in the contract before the court, unless some one in existence at the present day can enforce this mortgage against the property under title thereto derived in some way from John I. Anderson. The defendant alleges, in his answer, that, after the execution of the contract in question, he was advised by counsel of a contemplated mortgagor that the title was defective, and not marketable, but no proof was offered of this allegation. Any such opinion of counsel was presumably based upon the record only. After the bill was filed in this cause, the solicitor for the complainant herein procured the bond and mortgage in question from the executor of the late Mr. Lynn, of Lynn & Babbitt, who found them among his testator's papers. The bond and mortgage, with the assignment from the insurance company to Minot Mitchel as well, were offered in evidence in this cause. These papers all bear the indorsement of the master in chancery in the usual form, showing that they were exhibits in the foreclosure suit of Alexander Phillip against Archibald Warren and others, above mentioned. The New Jersey Mutual Life in surance Company was located at Newark, in this state, and has been defunct for about 20 years. The immediate grantee of Minot Mitchel was Augustus H. Drury, a practicing lawyer of Paterson, who took title from Mr. Mitchel by warranty deed dated November, 1887. Mr. Drury was sworn as a witness on behalf of complainant, and testified that he was acquainted with both Minot Mitchel and John I. Anderson, and that these men have been dead for several years; that the house upon the property was built by Mr. Warren, and the whole property was formerly worth about $4,000, but that it was not worth that much at the present time; that John I. Anderson and Minot Mitchel were "business associates, and had a good deal of business with each other," and belonged to a set of "lawyers and real estate people" who were doing business together In New York. The witness further testified that John I. Anderson knew of the foreclosure suit of Mr. Phillip, and that the foreclosure suit "was in the interest of Mr. Minot Mitchel," and that Anderson also knew of the conveyance by Minot Mitchel to the witness 10 years later. These statements were undisputed, the witness not even being cross-examined in regard to them. The witness testified also that during the time he owned the premises no demand was ever made for interest on the mortgage by any one. The witness owned the premises from November, 1887, to January, 1900. It is admitted that Minot Mitchel, the purchaser at the sheriff's sale in 1877, and his grantees and assigns, including the complainant, have been in possession of the premises ever since the sheriff's sale. The complainant took title January 2, 1900. The defendant offered no evidence except an abstract of title of the premises, which was admitted by consent of complainant, and which exhibits the deeds, mortgages, and assignments mentioned above.
James H. Rogers, for complainant.
Daniel L. Campbell, for defendant.
STEVENSON, V. C. (after stating the facts). No exact definition has been, or probably can be, formulated of either a marketable or an unmarketable title. Various descriptions have been attempted. Prof. Pomeroy lays down the law as follows: "A specific performance will never be decreed at the suit of the vendor whenever the doubt concerning his title is one which can only be settled by a further litigation, or when the court can see that the purchaser will, with reasonable probability, be exposed to bona fide adverse claims on the part of third persons, and to the risk of litigation for the purpose of removing such claims." Pom. Spec. Perf. § 203. Chancellor Runyon, in Dobbs v. Norcross, 24 N. J. Eq. 327, 331, and the court of errors and appeals in Tillotson v. Gesner, 33 N. J. Eq. 313, 327, adopted the language of Prof. Parsons, as follows: "The purchaser should have a title which should enable himnot only to bold his land, but to hold it in peace; and, if he wishes to sell it, to be reasonably sure that no flaw or doubt will come up to disturb its marketable value." In all cases where the vendor seeks to force a title upon the vendee, it is the latter's position, not at the commencement of the suit, but at its termination, which is to be regarded. The question is not what kind of a title the vendor has, but what kind of a title the vendee will get if the court of chancery or the court of errors and appeals, after reviewing the decree of the court of chancery, forces the offered title upon him. Where the alleged doubt in regard to the offered title relates to a matter of law, a decision of the court in the suit for specific performance undertaking to establish what the law is must, of necessity, have some effect either to strengthen or dispel the doubt. How far the court will undertake to settle a disputed question of law out of which the doubt in regard to the title has arisen has been the subject of a variance of judicial opinion, although the general trend has been toward enlarging the jurisdiction of tae court of equity in dealing with the doubtful matter of law. Fry, Spec. Perf. (3d Am Ed.) §§ 865-868; Pom. Spec. Ferf. § 202. The ecses on this subject are discussed at length in the opinion of Vice Chancellor Em ery in Lippincott v. Wikoff, 54 N. J. Eq. 108. 33 Atl. 305, and a rule on the subject is therein indicated (page 120, 54 N. J. Eq., and page 310, 33 Atl.). In Fahy v. Cavanagh, 59 N. T. Eq. 278, 282, 283 44 Atl 154, Vice Chancellor Pitney expresses himself in favor of a broader rule.
But whaterer curative power upon a doubtful title the court of chancery, or the court of errors and appeals on appeal from the court of chancery, can exercise in a suit for specific performance, where the doubt relates to some general rule of law, or the construction of some form of language employed in a writing, practically very little, if any, such curative power can be exercised where the doubt relates to a mere fact. The reason is apparent A disputed fact may be proved in one litigation to-day, and be disproved in another litigation between different parties tomorrow. The evidence which clearly established a fact at one time may be wholly beyond reach a year or five years later. In Tillotson v. Gesner, supra, the defect in the title from which danger to the purchaser was apprehended was a judgment recovered against a former owner, who had, immediately before its recovery, conveyed the land by a deed, the bona fides of which was open to doubt In Fahy v. Cavanagh, supra, the title rested upon a will apparently witnessed by two persons, but without any attestation clause reciting the facts showing compliance with our statute of wills. Vice Chancellor Pitney found that the will had been lawfully executed, but refused to force the title upon the purchaser, because he might years after be utterly unable to prove the will in an action of ejectment brought by the heirs of the testator. That titles must be held marketable, although dependent on the proof of facts, cannot be disputed. If this were not so, a vendor holding title as heir or devisee in a large number of eases could not have the remedy of specific performance. But when we come to inquire for rules as to the nature and quantum of evidence necessary to render a title dependent on facts which must be proved by witnesses a marketable title, we find ourselves with comparatively little help from the decided cases. It must be true, from the nature of things, that every case must largely rest upon its own circumstances. We have the general rule that the purchaser has a right to a title which is reasonably safe,—reasonably safe against loss, and reasonably safe against attack. When the authorities speak of the "hazard of litigation" to which the purchaser must not be subjected, it seems to me that they must refer to a hazard which is to be determined by the chance of successful attack as viewed by the court in the suit for specific performance. When, also, they speak of a "doubt" or a "supposed flaw" as affecting the saleability of a title, they must refer to the character of the doubt or flaw as the court views it, and not as it may be viewed by the indeterminate judgment of the real estate market. Some purchasers, guided by cautious counsel, will not accept a title against which the slightest possibility of doubt is suggested; and yet there is no title concerning which a possible doubt or the possibility of a future flaw cannot be raised. The authorities, I think, establish the rule as a safe one that a title dependent on a fact must be regarded as marketable when (1) the fact is so conclusively proved in the suit for specific performance that a verdict against the existence of the fact would not be allowed to stand in a court of law, and (2) where there is no reasonable ground for apprehending that the same fact cannot be in like manner proved, if necessary, at any time thereafter for the protection of the purchaser. In Shriver v. Shriver, 86 N. Y. 575, 584, Chief Justice Folger says: "A title may be doubtful—which is to say unmarketable—because of the uncertainty of some matter of fact appearing in the course of the deduction of it; and if, after the vendor has produced all the proofs that he can, a rational doubt still remains, a title is not marketable. It seems that a rational doubt may be said to exist when a court of law would not feel called upon to instruct a jury to find that the fact existed on the existence of which the vendor's title depends." See Hellreigel v. Manning, 97 N. Y. 56, 60; Moser v. Cochrane, 107 N. Y. 35, 13 N. E. 442; Ferry v. Sampson, 112 N. Y. 415, 20 N. E. 387. In Ferry v. Sampsqn, supra, the New York court of appeals declared that: "If the existence of the alleged fact which is supposed to cloud the title is a possibility merely, or the alleged outstanding right is a very improbableand remote contingency, which, according to the ordinary experience, has no probable basis, the court may compel the purchaser in such a case to complete his title." In Vought v. Williams, 120 N. Y. 253, 258, 24 N. E. 195, 8 L. R. A. 591, 17 Am. St. Rep. 634, the above-quoted statement was repeated by the same court, although held inapplicable to the case then before the court. The English rule stated by Prof. Pomeroy (Spec. Perf. § 205) takes special account of any presumption favorable to the title, and apparently takes no account of the availability of the evidence produced in favor of the title for the future protection of the purchaser in a subsequent litigation between the purchaser and a third party; thus ignoring the class of cases to which Fahy v. Cavanagh, supra, belongs.
Coming now to the consideration of the case before the court, my conclusion is that, whatever may be the exact definition of a marketable title which is dependent on the proof of facts, if such a definition can safely be framed, this title is proved in this case to be a marketable one. It is conclusively proved, in my opinion, that the alleged mortgage held by John I. Anderson cannot be enforced against this purchaser, the defendant, and that there is no reasonable basis for any apprehension that the purchaser cannot at all times defend his title against this mortgage, or that any future intending purchaser should, as a reasonably prudent man, hesitate to accept the title which this defendant, the present purchaser, will be able to offer to him. The sole fact which is set up against the merger of the mortgage in the fpreclosure decree is that apparently John I. Anderson owned the mortgage in 1875. No proof is offered that Anderson did not transfer the mortgage back to the New Jersey Mutual Life Insurance Company. Before the Anderson assignment was made, the mortgage had already been transferred by this company, and, after changing hands several times, had been transferred back to the insurance company. After the Anderson assignment was made, the bond and mortgage were in the possession of the insurance company or of their later assignees with an open claim of ownership. The complainant Phillip in the foreclosure suit produced the bond and mortgage, and he was adjudged to be the owner of it in the fore closure suit. A bond and mortgage are assignable by delivery. Possession of a bond and mortgage with claim of ownership would seem to carry as strong a presumption of title as does possession of a chattel. The assignment of Anderson is not at all inconsistent with a subsequent ownership of the bond and mortgage by the insurance company and by Mitchel and Phillip. It has never been the custom in New Jersey to make all the former holders of incumbrances parties to a foreclosure suit in order to prevent all future question as to their having parted with their titles. The protection of titles derived from foreclosure sales may call for a wider rule than any which I shall apply in this case; but it seems to me that, where a bond and mortgage are produced by a complainant or a defendant in a foreclosure suit, and he is therein adjudged to be the owner thereof, public policy justifies a strong presumption that he was such owner in favor of a purchaser at the foreclosure sale and against a vendee from him who merely proves that some one else owned the mortgage prior to the time when the party to the foreclosure suit acquired the title to the mortgage which was accepted in such suit. The burden in such case should, in my judgment, be placed not upon the purchaser to prove that the former owner transferred his title, but upon his adversary to present some evidence that the former owner did not transfer his title, or that some person can assert a title under him. I think, therefore, that in this case we start with a strong presumption in favor of the complainant and against the existence of any valid title to this mortgage outstanding at the present day and held under the Anderson assignment.
But, aside from all presumptions, let us examine the evidence on the two questions: First, whether John I. Anderson parted with his title or estopped himself to set it up; and, second, whether, without regard to any possible transfer from Anderson back to his assignor, the mortgage is enforceable at the present time under the statute of limitations. In discussing both questions, especially the first, we must regard not only the evidence, but the probability of its availability for the protection of the defendant in the future.
1. The mortgage was due in 1874,26 years before the contract was made by these parties. There is no evidence, apart from the assignment to Anderson, that he ever had the mortgage in his possession; nor is there any evidence that he ever collected any part of the principal or interest secured by it. He was connected in business with Minot Mitchel, and knew of the foreclosure suit, and also knew of the purchase of the property by Mr. Drury 10 years after the foreclosure sale to Mitchel had taken place. The bond and mortgage remained, apparently, for over 23 years in the custody of the lawyer who conducted the foreclosure suit, or of his executor—remained as dead and worthless papers, —until the solicitor for the complainant in this suit had them looked up and produced. The property was improved rentable property, and has been occupied continuously by a series of owners under title derived from the foreclosure sale for these 23 years before the contract between the parties to this suit was made. The inference is unavoidable that no attempt was made by Anderson, or any one claiming under him, to enforce this mortgage, although Anderson was alive for at least 10 years after the foreclosure sale. Mr. Drury's testimony strongly indicates that, if Anderson had any title to this mortgage althe time of the foreclosure sale, he estopped himself to set it up; and also indicates that there are other witnesses who can testify to the facts going to establish this estoppel. Every year that goes by may make the proof of this estoppel, if there was one, more difficult; but this same lapse of time makes the probability of any attempt to assert the supposed Anderson title to the mortgage more remote, and makes any such assertion of title more hopeless. If this mortgage was not merged in the foreclosure decree, then we have a mortgage which was due 28 years ago, on which the defendant in this suit does not show that any claim has ever been made since it was openly foreclosed by a party who had possession of it about 25 years ago. Inasmuch as the property in dispute has all these years been rentable property, yielding an income, occupied by a succession of owners, it would seem as if the defendant might have been able to prove some assertion of the Anderson title, some recognition of it by payment of interest or otherwise, if proof of that character could at any time be possibly obtained. The possession of the bond and mortgage during all this period by the solicitor who undertook to foreclose it or his executor is an additional indication that the mortgage in fact was merged in the foreclosure decree, and that the possible or presumed former owner, Anderson, had lost what title to it he ever had. Upon the facts stated, in my judgment, the defendant has no right to stand upon the mere existence of this record of an assignment to Anderson 27 years ago, and the absence of any record of an assignment from Anderson. He is bound, whether a presumption is established against him by the foreclosure suit as indicated above or not, to bring some evidence to show that the Anderson title has life to-day. He is not bound to establish the Anderson title, but out of all the witnesses who plainly can be produced to give positive or negative testimony in relation to this property and its incumbrances he should be able to find one spark of testimony in favor of his contention,—in favor of the doubt which he claims inheres in the title.
2. Without regard to the question of the ownership of the mortgage, the evidence very strongly indicates that the statute of limitations is a complete bar to any attack upon this title based on the alleged existence of this mortgage as an incumbrance. The mortgage is 28 years overdue. While the evidence of nonpayment of interest is not as complete as might have been expected, no objection to the sufficiency of the proof on this subject was made at the argument, and no claim was made that the mortgage had been kept alive by any such payments. It seems almost incredible that interest could have been paid by the owners of this property on the mortgage upon the foreclosure of which their title depended, and which was lying, with its accompanying bond, among the old papers of the lawyers who conducted the foreclosure. In Ely v. Wilson, 61 N. J. Eq. 94, 104, 47 Atl. 806, 810, Vice Chancellor Pitney holds "that a payment on account of the debt, in order to be efficient to preserve the mortgagee's right against lapse of time, must be made by the party in possession of and claiming title to the mortgaged premises." Payment by the makers of the bond, Mr. and Mrs. Warren, would not keep the mortgage alive. If during the past 20 years, or during 20 years preceding this contract, either of the three owners of this property paid interest upon the mortgage to any person, this unknown person, whose possible existence is held to create the fatal doubt in this case, apparently must have had notice of the foreclosure sale, and of the title adverse to his mortgage which the occupants of the property held. It may be added that apparently the statute of limitations began to run against John I. Anderson at least when Minot Mitchel took possession of the property 25 years ago. In Foreman v. Wolf, 29 Atl. 837, the court of appeals of Maryland declare that in that state it was "well settled that a title by adverse possession for over 20 years, where the only persons who could claim were all under no disability, is marketable, and such as a court of equity will compel a purchaser to take." Kip v. Hirsh, 103 N. Y. 565, 9 N. E. 317, is very similar in its essential facts to the one at bar. A mortgage upon certain vacant lots was made in 1835. In 1840 the mortgagor made a general assignment for the benefit of his creditors, which reserved to him any surplus. The assignment was recorded. The mortgage was foreclosed, and the lots were sold in 1841. The assignee was not made a party. The lots were inclosed and leased in 1867, and wore occupied thereafter. In 1875 the defendant contracted to purchase the lots, but refused to accept a deed, claiming that there was a defect of title by reason of the omission to make the general assignee a party to the foreclosure suit The court held that the "presumption of payment attaches to all the debts, and it can hardly be conceived that any facts can exist which would entitle any person to enforce the trust." The court, therefore, reversing the court below, held that the defendant would acquire a good and marketable title. A doubt which can avail to defeat the vendor's remedy of specific performance "must be reasonable, and, so far as it depends upon contingent events and uncertain facts, their occurrence or existence must be fairly probable." Pom. Spec. Ferf. § 204. In my opinion, no verdict of a jury in favor of the existence of any enforceable claim under the title to the mortgage in question alleged to have existed in John I. Anderson in 1875 would be allowed to stand. The proof before this court, composed of presumptions, positive evidence on the part of complainant, and the absence of evidence on the part of defendant, appears to me to be conclusive in favor of the existence of the facts and conditions which arenecessary to render the title which will be forced on the vendee in this case a marketable title. As a general rule, it seems to me that any order for costs in a vendor's suit for specific performance must be made with regard to the status of the defendant, the vendee, not at the end of the suit, but at its commencement,—at the time when he refused to take the offered title. Where the suit has exercised a curative effect upon the title, and the vendee was justified under his contract in demanding that such cure should be made, the expense of the suit may be a necessary incident to the performance of the contract by the vendor. Not only should the vendee not be mulcted in the costs of the vendor, but in some cases I think the payment of the entire costs and expenses of the vendee by the vendor should be a condition upon which the decree in favor of the latter should be made. The English rule cited by Mr. Fry (3d Am. Ed. § 876), and embodied in a dictum of Sir George Tessel in Osborne v. Rowlett (1880) 13 Ch. Div. 774, 798, to the effect that, even if the vendee was justified in refusing the title until decree in its favor, still he should be ordered to pay the costs "so as to assure his title, and show that the court entertains no doubt upon it," if there is such rule, is, in my judgment, one not to be adopted by this court. Most vendees would prefer to accept the titles forced upon them by suits which they have properly required the vendor to bring without this unsolicited and expensive "assurance" from the court. In Radford v. Willis (1871) 7 Ch. App. 7, 11, the action and declaration of the court in regard to costs are inconsistent with the above-cited supposed rule. Where the dispute over the title is about a fact ordinarily, as we have seen, the decree can have little curative power. The decree in most, if not all, cases establishes the marketability of the title which the vendor offered, not merely the marketability of the title which the vendee will take as the result of the suit for specific performance. Nevertheless, the vendee in all cases is not under any obligation to search for evidence, and produce the witnesses who can establish the title of the vendor. In this case the evidence to support the offered title was not presented by the vendor to the vendee. A very important part of it was obtained by the vendor after this suit was commenced.
Under the circumstances, which always control a decree in equity in regard to this matter, no costs will be allowed to either party.