New York Life Ins. Co. v. Aitkin

• Decision Date: 24 February 1891
• Citation: 125 N.Y. 660,26 N.E. 732
• Parties: NEW YORK LIFE INS. CO. v. AITKIN.
• Court: New York Court of Appeals Court of Appeals

125 N.Y. 660

26 N.E. 732

NEW YORK LIFE INS. CO.

v.AITKIN.

Court of Appeals of New York.

Feb. 24, 1891.

Appeal from superior court of New York city, general term.

December 3, 1868, Phoebe T. Drew and John G. Drew, her husband, of Elizabeth, N. J., executed their bond conditioned for the payment to the plaintiff of $4,000 one year from the date thereof, and as collateral security therefor at the same time executed to the plaintiff a mortgage on certain premises in Elizabeth, N. J. On the 15th day of December, 1869, Mrs. Drew and her husband conveyed the mortgaged premises to John Gregg by a deed wherein the grantee covenanted and agreed to pay the mortgage above mentioned. On the 28th day of December, 1870, Gregg and his wife conveyed the mortgaged premises to Helen E. Aitkin by a deed which contained an assumption clause in the following words: ‘And this conveyance is made, subject, nevertheless, to the lien of a certain mortgage made and executed by the said party of the first part to the New York Life Insurance Company, bearing date the 3d day of December, 1868, to secure the sum of four thousand (4,000) dollars, lawful money of the United States, with interest thereon, which mortgage, forming a part of the consideration money hereinbefore expressed, and having been deducted therefrom, the said party of the second part hereby assumes and undertakes to pay and indemnify, and to save said party of the first part harmless therefrom.’ Mrs. Aitkin entered into possession of the premises so conveyed, and remained in possession, as owner thereof, until May, 1873, when she conveyed them to Aaron H. Rathbone by a deed in which he assumed payment of the mortgage. Mrs. Aitkin and her husband moved to the city of New York in 1873 or 1874, and she died there in 1875. She left a will, in which her husband, the defendant, was named executor, and the will was admitted to probate in the city of New York, and letters testamentary thereon were issued to the defendant. In September, 1879, the plaintiff filed a bill in the court of chancery in New Jersey to foreclose the mortgage, and named as parties defendant in that suit Phoebe T. Drew, John G. Drew, John Gregg, Helen E. Aitkin, James Aitkin, Aaron H. Rathbone, and Mrs. Aaron H. Rathbone. The bill alleged the making of the bond and mortgage by Drew, and the conveyance of the mortgaged premises to Gregg, and his assumption of the mortgage; the conveyance by Gregg to Helen E. Aitkin, and her assumption of the mortgage; the conveyance by Helen E. Aitkin to Aaron H. Rathbone, and his assumption of the mortgage. It alleged default in payment of the mortgage, and prayed for the foreclosure of it, and for payment of any deficiency arising on the sale by Phoebe T. Drew, John G. Drew, John Gregg, Helen E. Aikin, and Aaron H. Rathbone. Phoebe T. Drew, John G. Drew, and John Gregg were personally served with process within the state of New Jersey, and the other defendants, who resided in the state of New York, by publication and mailing. The bill was taken as confessed on February 20, 1880. On March 5, 1880, there was a decree of foreclosure and sale, and a decree for payment of the deficiency by the defendants, against whom it was asked. The mortgaged premises were sold on March 26, 1880, and resulted in a deficiency of $1,590.80. On September 28, 1888, a few days before the commencement of this action, the defendant procured from John Gregg a release from the covenant of assumption contained in the deed to Helen E. Aitkin in the following language: ‘For and in consideration of one dollar, lawful money of the United States of America, to me in hand paid by James Aitkin, as executor of the last will and testament of Helen E. Aitkin, deceased, I hereby release and discharge the said James Aitkin, as executor as aforesaid, of and from any liability to me for, because, or by reason of the assumption by the said Helen E. Aitkin and her undertaking to pay a certain mortgage of four thousand dollars to the New York Life Insurance Company, dated December 3d, 1868, with interest, contained in a certain deed bearing date the 28th day of December, A. D. 1870, made by me and my wife, Phoebe, (now deceased,) to said Helen E. Aitkin, and recorded in the office of the clerk of Union county in Book 42 of Deeds, on page 452, &c., in the state of New Jersey. Witness my hand and seal, dated September 28, 1888. JOHN GREGG. [L. S.]’ This action was commenced on the covenant of assumption contained in the deed from Gregg to Mrs. Aitkin on the 11th day of October, 1888, to recover the balance due upon the bond and mortgage. The material facts above set out were alleged in the complaint, and the amount claimed was $1,590.80, with interest from March 5, 1880, which was alleged to be the deficiency upon the New Jersey foreclosure of the mortgage. The defendant, in his answer, put in issue all the material allegations of the complaint, and alleged several defenses as follows: (1) That at the time of the deed to her, Mrs. Aitkin, she was a married woman, and that she was not, by the laws of New Jersey, personally bound by her covenant of assumption; (2) that he had no notice of the New Jersey foreclosure suit, and that neither he nor his wife was made a party thereto; (3) that he was discharged from any liability by reason of the release executed to him by John Gregg; (4) that no leave of the court was obtained by the plaintiff to bring the action before the commencement thereof; (5) that the action was barred by the New Jersey statutes of limitations. The action was brought to trial, and the facts above stated, and other facts, were proved, and at the close of the evidence on both sides the plaintiff moved for the direction of a verdict in its favor for the amount claimed, with interest; and the defendant moved for the direction of a verdict in his favor. The trial judge denied the plaintiff's and granted the defendant's motion, and directed the plaintiff's exceptions to be heard at the general term in the first instance, and that the entry of judgment be in the mean time suspended. The exceptions were brought to a hearing at the general term, and overruled, and judgment was ordered for the defendant. 11 N. Y. Supp. 349. From that judgment the plaintiff has appealed to this court.

Henry G. Atwater, for appellant.

Edward W. Scudder, for respondent.

EARL, J., ( after stating the facts as above.)

The record discloses that the plaintiff was defeated at the circuit, and the verdict there ordered in favor of the defendant, upon the sole ground that he was by the release executed to him by Gregg absolutely discharged from the covenant of assumption made by his wife, the testatrix; and the effect of the release is therefore the first matter now to be considered. If the question is to be governed by the law of this state, it is entirely clear that the release did not discharge the defendant. The covenant of assumption had, long before the release, come to the notice of the plaintiff, and it had adopted and acted thereon. Having no notice of the death of Mrs. Aitkin, it commenced the suit for the foreclosure of the mortgage in the state of New Jersey, and inserted her name in the process and complaint as a party to the action, and prosecuted the action to judgment upon the assumption that she had been made a proper party thereto. In the complaint in that action the covenant of assumption was alleged, and a deficiency judgment was prayed against Mrs. Aitkin and others. Whatever may be the effect of those foreclosure proceedings, they were at least competent to show that the plaintiff adopted and relied upon the covenant of assumption made by Mrs. Aitkin. After that covenant had thus come to the attention of the plaintiff, and had been adopted by it, Gregg, the covenantee, could not release her or her estate from the obligation of the covenant; and so the law must be deemed to be finally settled in this state. Gifford v. Corrigan, 105 N. Y. 223, 11 N. E. Rep. 498, 117 N. Y. 257, and 22 N. E. Rep. 756; Watkins v. Reynolds, 25 N. E. Rep. 322, (decided in this court October 7, 1890.) Therefore if the law of this state governs, the release was not operative to bar this action.

But we reach the same conclusion if, as contended by the defendant, the effect of the release is to be determined by the law of New Jersey. There the courts hold that a covenant by a grantee of mortgaged premises, contained in the deed to him, to assume and pay the mortgage debt, is a contract with his grantor only for the indemnity of the latter, and may be released and discharged by him; and, generally, that where parties have made a contract which will, either directly or indirectly, benefit a mere stranger, they may at their pleasure abandon it, and mutually release each other from its performance, regardless of the stranger's interest, unless the parties, with knowledge that he is relying on the contract, suffer him to put himself in a position from which he cannot retreat without loss in case the contract is not performed, and that then he may ask to have the contract performed so far as it touches his interests. They hold that the mortgagee in such a case may enforce the covenant of assumption in equity, on the principles of equitable subrogation, thus appropriating a security which the mortgagor has obtained from his grantee for the benefit of the mortgagee; and the rule seems to be that the covenant can only be enforced in equity. But the courts there have...