Opinion
05-19-1890
ZABRISKIE v. BAUDENDISTEL et al.
Gilbert Collins, for complainant. F. W. Stevens and W. J. Davis, for defendant.
Gilbert Collins, for complainant. F. W. Stevens and W. J. Davis, for defendant.
This is a bill to foreclose a purchase-money mortgage given by the defendant Gustave Baudendistel to the complainant, Lansing Zabriskie, jointly with Garret Ackerson, Jr., who subsequently assigned his interest in the mortgage to the complainant. The contest in the case arises upon the claim of the defendants to deduct from, or set off against, the amount due on the mortgage, certain taxes and assessments existing upon the property at the date of the conveyance, and claimed to be valid incumbrances upon the premises. The defendant also files a cross-bill in connection with his answer, based upon the covenant for further assurance which was contained in the deed from complainant to defendant conveying the property, and asks the performance of this covenant by the removal of the incumbrances. The complainant denies the right of the defendant to any deduction from the mortgage for either the taxes or assessments, or to the removal of these alleged incumbrances on the bill for specific performance, upon the grounds (1) that under the deed itself and the covenants therein the defendant is not entitled to require the payment of these incumbrances by the complainant; (2) that a written agreement in relation to these alleged incumbrances was executed by the complainant, and delivered to the defendant, at the time of the delivery of the deed, and as a part of the transaction, by which agreement the liability of the complainant in reference to these taxes and assessments was limited to defending him in any proceedings taken by the city to enforce them, and, if unsuccessful, then to pay the claims without requiring an action on the covenant of warranty contained in this deed. The complainant also contends (3) that, as to the taxes and assessments claimed to be liens, there are no liens against the property, for the reason that they have been cut off by sales to the complainant by the city for taxes levied in subsequent years, and also that the assessments are unconstitutional and void, having been levied under unconstitutional laws. The defendant denies the execution of or delivery to him of any written agreement at the time of receiving the deed and executing the mortgage.
No proceedings appear to have been taken by the city against the defendant to enforce the collection either of the taxes or assessments, other than the sale of the premises. The property in question is situated in the town of Harrison, Hudson county, and before the conveyance in question was owned by the complainant, Lansing Zabriskie, and the late Garret Ackerson, Jr., as tenants in common. By his deed dated April 7, 1880, Lansing Zabriskie, the complainant, conveyed to the defendant Gustave the equal undivided half part of the premises, in fee, with the following covenants: "And the said Lansing Zabriskie, party of the first part, for himself, his heirs, executors, and administrators, doth covenant, grant, and agree, to and with the said party of the second part, his heirs and assigns, that the said party of the second part, his heirs and assigns, shall and may, at all times hereafter, peaceably and quietly have, hold, use, occupy, possess, and enjoy the above granted premises, and every part and parcel thereof, with the appurtenances, without any let, suit, trouble, molestation, eviction, or disturbance of the said party of the first part, his heirs or assigns, or of any other person or persons claiming or to claim the same. And also that the said party of the first part, and his heirs and assigns, shall and will, at any time or times hereafter, upon the reasonable request, and at the proper costs and charges in the law, of the said party of the second part, his heirs and assigns, make, do, and execute, or cause to be made, done, and executed, all and every such further and other lawful and reasonable acts, conveyances, and assurances in the law, for the better and more effectually resting andconfirming the premises hereby granted, or so intended to be, in and to the said party of the second part, his heirs and assigns, forever, as by the said party of the second part, his heirs or assigns, or their counsel learned in the law, shall be reasonably advised or required; and the said Lansing Zabriskie and his heirs the above-described and hereby granted and released premises, and every part and parcel thereof, with the appurtenances, unto the said party of the second part, his heirs and assigns, against the said party of the first part, and his heirs, and against all and every person and persons whomsoever, lawfully claiming or to claim the same, shall and will warrant, and by these presents forever defend." The deed contains no covenant against incumbrances, nor any covenant of seisin or right to convey.
Garret Ackerson, Jr., and wife, by deed of the same date, also conveyed to the defendant Gustave an undivided half interest in the premises, and this deed contains the same covenants as the deed from complainant. The purchase price was $3,800, ($1,900 being the consideration of each deed,) of which $1,300 was paid in cash, and the balance, $2,500, secured by the mortgage in question given by the defendant to Zabriskie and Ackerson jointly, dated April 1, 1880, payable April 7, 1885, with interest at 6 per cent. On or about May 7, 1880, Ackerson assigned his interest in the mortgage to the complainant. At the time of the sale the following taxes on the premises were unpaid, and sales for payment of taxes had been made, the city being the purchaser:
| Sale. | Due at Sale. | ||
| Taxes 1873, | $ 67 34 | ......Oct. 24, 1874 | $ 81 71 |
| " 1874, | 54 40 | ......Feb. 1, 1876 | 67 53 |
| " 1875, | 41 08 | ......Sep. 12, 1877 | 49 60 |
| $162 82 | $198 84 |
Previous to the conveyance to Baudendistel, and on June 12, 1879, the complainant bought the property at a sale for the unpaid taxes of the years 1876 and 1877, taking receipts or certificates for the payments then made, and declarations of sale thereon have since been executed by the town of Harrison, and delivered to the complainant, conveying to the complainant the premise's sold for the term of 50 years. At the time of the conveyance the total amount of the unpaid taxes of 1873, 1874, and 1875, with the interest thereon calculated at 12 per cent., as allowed by the charter, from the time of sale, was $301.33. At the time of the conveyance there were also outstanding the following assessments against the premises conveyed: (1) An assessment of $543 33 for grading Harrison avenue, which was made and confirmed in the year 1871, under and pursuant to the provisions of an act of March 25, 1869, (P. L. p. 694, § 25.) which provided that all the expense and cost of grading should be assessed upon the lands fronting upon the improvement applied for, "in proportion to the benefit received by said lands and real estate." Such provisions, it has been settled, since the case of Passaic v. State, 37 N.J. Law, 538, (court of errors and appeals, 1875,) limit the assessment to the amount of benefits received, and are therefore constitutional. (2) An assessment for $550.42 for paving Harrison avenue, which was confirmed June 3, 1875, persuant to the provisions of the charter approved March 6, 1873, and its supplements. This charter of March 6, 1873, provided (P. L. 1873, p. 295, § 69) that the whole expense of paving should be assessed upon the owners of lands upon the line of the street, without restricting the assessment to the benefits conferred, and was therefore unconstitutional; but by a supplement to the charter approved April 6, 1875, (P. L. 1875, p. 447,) the assessment was expressly limited to the benefits received, and this assessment was therefore constitutional. (3) An assessment of $642.03 for the grading of Fifth street, which was confirmed November 28, 1873, at which time the provision for assessments for grading was the constitutional provision of the act of March 6, 1873, relating to grading, above referred to.
The premises were sold for the payment of these various assessments, as follows: Harrison avenue, grading, June 14, 1873, for amount due, $660; Harrison avenue, paving, February 25, 1876, amount due, $586.47; Fifth street, grading, February 25, 1876, amount due, $739.26; and at the time of the conveyance the total amount of the assessments, with interest at 6 per cent. from the day of sale, was $2,582.02. The total amount of taxes and assessments, with interest at the date of the deed, was $2,883.35, and the question now to be decided is whether the whole or any part of these taxes and assessments, with the subsequent interest thereon, must be deducted from the mortgage, or paid by the complainant as a condition for allowing the foreclosure of his mortgage. On January 27, 1887, the defendant served notice in writing upon the complainant requiring him to remove taxes and assessments existing on the property at the date of the deed, which, with interest to December 30, 1886, were stated to be $3,656.27, and February 3, 1887, a similar notice was served on the administrator of Mr. Ackerson.
Upon consideration of the pleadings and proofs in this cause, I reach the following conclusions:
1. Upon the bill filed for foreclosure of his mortgage the complainant is entitled to a decree that the whole mortgage is due, without any deduction for the taxes and assessments set up as liens on the premises. I base this conclusion upon the ground that under the covenants contained in the deed, being only the covenants for quiet enjoyment, for further assurances, and general warranty, the defendant is not entitled to such deduction. Had the deed contained the covenant against incumbrances, the defendant would have had the right to the deduction of any valid outstanding incumbrances existing at the date of the deed. This has been the practice of this court from the time of Van Riper v. Williams, 2 N. J. Eq. 407, (Chancellor PENNINGTON 1841.) See White v. Stretch, 22 N. J. Eq. 76; Bank v. Pinner, 25 N. J. Eq. 495; Stiger v. Bacon, 29 N. J. Eq. 442, and cases cited. If the land conveyed is not free from incumbrances,this covenant against incumbrances is broken as soon as made, and a right of action vests eo instanti in the grantee, and a court of equity, to avoid circuity of action, will protect the grantee on an application to foreclose the mortgage, unless the grantee has waived the protection of this equitable right. The covenants for quiet enjoyment and general warranty, on the other hand, are not broken by reason of the existence of incumbrances upon the land existing at the date of the conveyance, and an eviction under title paramount is necessary in order to constitute a breach, and entitle the covenantee to his action. Carter v. Denman, 23 N. J. Law, 260, (N. J. Supreme Court, 1852.) See opinion of Chief Justice GREEN, 270, 271, 274. This eviction may be constructive as well as actual. Kellog v. Platt, 33 N. J. Law, 328, (supreme court, 1869, opinion of Mr. Justice DEPUE, 334, 335.) Where an eviction under superior title is threatened, or possession disturbed, by a suit actually pending at the time of the foreclosure, it has been the practice of the court to exercise the equitable right of staying the foreclosure until the determination of the suit at law without waiting for an actual eviction. Coster v. Manufacturing Co., 2 N. J. Eq. 467;. Jaques v. Esler, 4 N.J. Eq. 461. And the grantee would also, as I understand the cases, have the right to have the question of the validity of the incumbrances either tried in this suit, although the persons claiming the incumbrances are not parties, or to have the proceedings stayed until the question of their validity is settled by a court of law. But this is strictly an equitable right, and one which may be waived by the mortgagee, leaving him to his remedy at law upon the covenants, (Jaques v. Esler, supra;) and a mere allegation or claim of an outstanding superior title, without suit pending, has never, in this state, been held sufficient to stay the foreclosure of a purchase-money mortgage, (Van Waggoner v. McEwen, 2 N. J. Eq. 412; Hulfish v. O'Brien, 20 N. J. Eq. 230, affirmed on appeal, 22 N. J. Eq. 471.)
Does the covenant for further assurance contained in this deed give the grantee the same right of deduction in this suit as a covenant against incumbrances, or is the right of action under this covenant one which arises only on disturbance or eviction, actual or constructive? This covenant is somewhat unusual in New Jersey, and no decisions of any of the courts of this state upon the question have been called to my attention by counsel, or found in my investigation; but by the general weight of American authority this covenant for further assurance is classed with those of quiet enjoyment and warranty, as prospective in its character, and not with the covenants in præsenti, as the covenant for seisin, right to convey, and covenant against incumbrances. Rawle, Cov. (5th Ed.) pp. 301,302, § 205, and notes. And, although there may be a nominal breach of this covenant by a failure to make the further assurance subsequently demanded by the grantee, yet the right to substantial damages on this covenant inures to the assignee of the land after the refusal, who has sustained the ultimate damage. Id. § 230, p. 340. It would seem, therefore, that the defendant, not having as yet sustained any actual or substantial damages from the breach of this covenant, has no present right to a deduction from the mortgage for the amount of these incumbrances, as such actual damages received, and that this court has no right, on the bill to foreclose, to direct the amount of the alleged taxes and assessments to be deducted as the losses sustained by a breach of this covenant, and direct a sale for the balance, if any, due on the mortgage.
The important question, however, remains:
2. Can the defendant, upon his cross-bill for the specific performance of the covenant for further assurance, require the complainant to pay off such of these taxes and assessments as may in this suit be declared to be valid? If, on the bill for the equitable relief of specific performance, the rights of the parties were to be determined solely by the terms of the covenant in the deed, I am inclined to think that the defendant would be entitled to the payment of such incumbrances as should in this suit be declared valid. In King v. Jones, 5 Taunt. 427, it was said by HEATH, J., that, under this covenant for further assurance, an heir of the purchaser might certainly have called for the removal of a judgment or other incumbrance. This is a leading case upon the rights of the parties and their assigns under this covenant, and, although the action was at law for a breach of the covenant, this statement in the opinion seems to have been recognized as authority for the right to compel a specific performance of the covenant. Sugd. Vend. *613; Rawle, Cov. (5th Ed.) §§ 104, 105. The covenant for further assurance will, it is true, always be considered in connection with the other covenants of the deed, and with the estate granted by the deed, in order to determine whether it was the intention of the parties that the covenant should extend to the act demanded; and, in the language of Vice Chancellor STUART in Davis v. Tollemache, 2 Jur. (N. S.) 1181, 1185: "The covenant for further assurance in a deed is a covenant intended to give full effect and operation to the estate and interest conveyed by the deed." And, while there is no covenant against incumbrances in this deed, the other covenants are not restricted to persons claiming under the vendor, but are intended to protect the grantee in his possession against all lawful claims of all persons. The covenants for quiet enjoyment and warranty would certainly extend to an eviction, actual or constructive, under adverse claims based on these taxes or assessments. An essential difference between the covenant for further assurance and the covenants of quiet enjoyment and warranty is that, on breach of the latter, the validity of the adverse claim must be determined by proceedings taken by the adverse claimant against the grantee, or by what is equivalent thereto, while, on a bill for specific performance of the covenant for further assurance, the validity of the claim is determinedin a suit between the grantee and grantor, to which the claimant is not a party, and by which he is not bound.
But I am of opinion that the defendant is not entitled to the equitable relief of specific performance in this case, for the reason that, in my judgment, the evidence established that, at the time of the conveyance, an express written agreement in reference to these taxes and assessments was made, and that this agreement expressly provided for the liability of the complainant in reference to these taxes and assessments. The defendant denies that any such agreement was executed, but the evidence of the complainant on this point is substantiated by Mr. Heck, who took the acknowledgment of the deed and mortgage, and is positive that another paper, drawn up by the complainant, was delivered to the defendant at the time of the delivery of the deed and mortgage. The complainant's evidence satisfactorily establishes that this paper related to the taxes and assessments, which were admittedly the subject of conversation and negotiation before the execution of any papers, and which appear to have been the only matters in dispute. And the facts that, at the time of the conveyance, the amount of the taxes and assessments, with interest, exceeded the whole amount of the mortgage, and that the defendant without question paid interest on the mortgage until October, 1885, and made no demand on the complainant to pay the taxes and assessments until January, 1887, to some extent show the defendant's understanding of the nature of the complainant's liability under the paper or papers he signed. II such paper was executed and delivered to defendant, and related to these taxes and assessments, it seems to me that the defendant is not entitled to the equitable relief of specific performance of the covenant in the deed, unless the court is satisfied that the paper executed contained nothing to control or effect this equitable relief. In other words, in order to entitle the defendant to equitable relief, the whole contract of the parties relating to the subject should be before the court, and the loss or disappearance of the paper should not deprive the complainant of the benefit of it, if it related to these taxes and assessments. The paper has not been produced, no copy of it was retained by the complainant, and, according to the recollection of the complainant, which is now the only means of establishing its contents, the purport of the paper was that, if the defendant was affected by any action on the part of the town of Harrison under these claims, the grantors would protect him, and that the defendant was to notify them of any action on the part of the town of Harrison on these taxes and assessments, and they were to have an opportunity to contest the proceedings on the part of the city; and, if unsuccessful, they would pay them, and not put the defendant to an action on the covenant of warranty in the deed. If an agreement of this character was made, it seems to me clear that the parties at the time of the transaction contemplated that the validity of these incumbrances should be tested solely on proceedings initiated by the city. Whatever advantage to the grantor there may be in requiring that method of testing their validity, he is entitled to; and in the face of this agreement I do not think that the defendant, on his own motion, is equitably entitled to raise the question of their validity, and of the validity of the proceedings for sale, by a bill for the specific performance of the covenant for further assurance, to which the city is no party, and by which it cannot be in any wise bound. I am of opinion, therefore, that the defendant is not entitled to a specific performance of this covenant by a removal of these incumbrances, but must be left to his remedy at law.
Entertaining this view of the case, I do not now consider the question of the validity of the taxes and assessments, or of the proceedings for sale under the same, but leave this to be determined in proceedings brought by the city to enforce them. At the hearing it was admitted by the complainant that the taxes of 1873, 1874, and 1875 were properly imposed, but leave was reserved to the defendant to prove the validity of the proceedings for sale of taxes, and, if the defendant desires to do so, this evidence may be put in before decree is signed.