
    Kerzia Brockway, Resp’t v. John W. Tayntor et al., Appl’ts.
    
      (Supreme Court, General Term, Third Department,
    
    
      Filed November, 1886.)
    1. Deed — Lien created by — Parties claiming under grantee take SUBJECT TO.
    On August 29th, 1874, plaintiff, being the owner of land subject to two mortgages executed by her, the first, for a balance thereon of $ 1200, and the second for $600, conveyed the premises to her daughter M. L. B., subject to said mortgages, which the grantee agreed to pay, and also subject to an annual payment of $100, by the grantee to the grantor during her natural life; and also to the support of the grantor during her natural life, with an agreement by the grantee to make such payment and to perform as a consideration of the deed; andan agreement that said $100 and said support should be a lien on the premises. On the same day an agreement between the said parties to the same effect was executed; and both deed and agreement were recorded in the deed book of the county clerk’s office. In July, 1877, N. D .W. sued this plaintiff on a note of $500. The action was never tried. On September 19th, 1877, M. L. B. executed to ST. D. W. a mortgage on the premises of $500. On June 5th, 1878, Ñ. D. W. took an assignment of the $ 600 mortgage and soon commenced a foreclosure making plaintiff and M. L. B. parties. Judgment of foreclosure and sale was entered July 19th, 1878, but no sale has been had. M. L. B. conveyed the premises to N. D .W. on November 9th, 1878, by warranty deed, no mention of any of the mortgages being made therein. N.D. W. died intestate April 9th, 1879, leaving a widow and children. His administrator, with the funds of the estate, paid off and satisfied the $1200 mortgage on September 3rd, 1880. This action was brought to enforce against the premises a lien for the annual payment of $100 alleged to be in arrears, and for the annual support alleged not to have been furnished Held, that the recorded deed from plaintiff to M. L. B., was notice to all claiming under M. L. B. of its provisions and of the lien established thereby. The subsequent grantees of M. L. B. are charged with notice not altogether under the recording act, but because they must make title through her, and therefore take subject to the charges which her title deeds show.
    2. Mortgage — Party assuming payment of becomes principal debtor.
    
      Held, that M. L. B., by agreeing to pay the first and second mortgages, as a part of the consideration, became in equity liable as quasi principal to pay those mortgages and the plaintiff became in equity the quasi surety; the land being also the primary fund.
    3. Equity of redemption — Lien created on, is subsequent to that of prior mortgages.
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    4. Libes — Conveyance of premises subject to — What not sufficient TO MAKE GRANTEE MARL® PERSONALLY,
    The $2500 mentioned, as the consideration in the deed from, M. L, B, to N. D. W., was about equal to the aggregate of the then existing liens. But in the absence of any proof on that point, it cannot be assumed that the existing mortgages were the actual consideration. On the face of the deed, the.consideration is expressed of §2500 ‘‘paid to hex',” and nothing is said about the mortgage. While, therefore, N. D. W. took only such interest in the premises as M. L. B. had, he did not become personally liable in regard to any of the mortgages or liens.
    5. Same — 'Warranty— Grantor bound to protect grantee peom ouster BY FORECLOSURE.
    
      Meld, that M. L. B. having become in equity, the principal debtor of the first and second mortgages; and having conveyed toN. IX W. by waiTanty deed not mentioning the mortgages, she remained the pi'incipal debtor and boxrnd to protect him from ouster under foreclosure of the mortgages.
    6. Same — Payment op mortgage by administrator op grantee — Priority OF DIEN PRESERVED.
    
      Meld, that when the administrators of H. D. W., paid off and satisfied the $ 1200 mortgage, they were not paying any liability which NT. D. W. owed to any one, they were only relieving the land of his heirs from a burden. As between hei’self and N. D. W., plaintiff was the pei'son bound to pay the mortgage. In any recovery for the plaintiff’s annuity and support, tliei’e ■ should be declaimed a prior lien to the administrators of ÜST. D. W. for the money paid by them in satisfaction of the $1200 mortgage.
    
      7. Merger — When it will not occur.
    
      Meld, that the $600, which had been foreclosed by N. D. W., was not merged in the conveyance of the premises to him. Mex-ger will not be permitted if the parties intend that there should be no merger, or if merger will produce injustice. (Landon J., dissenting.)
    S. Mortgagee not entitled to rents unless action op foreclosure COMMENCED AND RECEIVER APPOINTED.
    
      Meld, that N. D. W. and his heirs were entitled to the rents and profits of the land, and were not bound to pay them to the moi-tgagee or to plaintiff. The mortgagee can only be entitled to rent by commencing an action and having a receiver appointed.
    On the 29tli day of August, 1874, the plaintiff was the owner of the premises in question, subject to two mortgages ; the first for a balance thereon of $1200, the second for $600 ; both executed by her.
    On that day she conveyed the premises to her daughter, Mary L. Brockway, for a consideration, as stated, of one dollar and other good considerations, subject to the two mortgages, which the grantee agreed to pay and also subject to an annual payment of $100 by the grantee to the grantor during her natural life ; and also to the support of the grantor during her natural life ; with an agreement by the grantee to make such payment and to perform as a consideration of the deed; and an agreement that said $100 and said support should be a lien on the premises.
    On the same day an agreement between the said parties to the same effect was executed ; and both deed and agreement were recorded in the deed book of the County Clerk’s office. In July, 1877, Nathaniel D. Woodhull sued the plaintiff on a note of $500. The action was never tried.
    On the 19th day of September, 1877, Mary L. Brockway executed to Woodhull a mortgage on the premises of $500. This mortgage mentions a prior incumbrance on the premises of about fifteen hundred dollars ; referring undoubtedly to the two mortgages aforesaid. The defendants claim that this five hundred dollar mortgage was in settlement of the action on the note ; but this fact is not found.
    On the 5th of June, 1878, Woodhull took an assignment of the second or six hundred dollar mortgage (then reduced to $415. 14), and soon commenced a foreclosure ; making plaintiff and Mary L. Broekway parties. Judgment of foreclosure and sale was entered July, 19th, 1878, but no sale has been had.
    On the 9th of November, 1878, Mary L. Brockway conveyed the premises to Woodhull by warranty deed. The consideration stated in the deed is twenty-five hundred dollars. But no mention is made therein of any of the mortgages.
    On the 19th day of April, 1879, Woodhull died intestate, leaving a widow and children. On the 3rd of September, 1880, his administrator, with funds of the estate, paid off and satisfied the $1200 mortgage.
    The plaintiff now brings this action to enforce against the premises a lien for the annual payment of $100, alleged to be in arrears and for the annual support alleged not to have been furnished.
    The court held that the liens and claims of the plaintiff were prior to all the mortgages ; that the $1200 mortgage was paid in pursuance of the administrator’s duty, and that defendants were not entitled to have it made a lien ; that the $500 mortgage was merged in Woodhull’s title.
    Tiie defendants who are heirs and grantee of an heir of Woodhull appeal.
    
      J. W Crane, for respondent; Dunning, JSdsali, Mart and Fowler, for appellants; John M. Shedd, Guardian ad litem.
    
   Learned, J.

The recorded deed from plaintiff to Mary L. was noticed to all claiming under Mary L. of its provisions and of the lien established thereby. This is not the case of a deed intended as a mortgage and recorded improperly in the deed book. The subsequent grantees of Mary L. are charged with notice, not altogether under the recording act, but because they must make title through her, and therefore take subject to the chargeswhich her title deeds show.

Mary L., by agreement to pay the first and second mortgages, as a part of the consideration, became in equity liable as quasi principal to pay those mortgages and the plaintiff became in equity the quasi surety ; the land being also the primary fund.

The $500 mortgage executed by Mary L. to Woodhull, being subsequent to the deed to her which contained the provisions for a lien, was subject to the lien for plaintiffs annuity and support. But as the deed to Mary L. was expressly subjected .to the first and second mortgages, they remained prior liens to the lien of plaintiff’s annuity and support. Plaintiff’s interest in the land when she conveyed to Mary L., was only the equity of redemption, after payment of these two mortgages. Therefore the lien which she created by her deed was only upon the said equity of redemption. She was herself liable on those two mortgages and she transferred nothing to Mary except the equity subject to them. And this should be borne in mind when we consider her equity. And so these parties expressly stated the matter in the deed. Therefore subsequent purchasers had notice that those two mortgages had priority over the lien for annuity and support; and that all the interest in the laud which plaintiff had, on which to create this lien, was this bare equity of redemption.

It seems that the $2500 mentioned as the consideration in the deed from Mary L. to Woodhull was about equal to the aggregate of the then existing leins. But in the absence of any proof on that point, it cannot be assumed that the existing mortgages were the actual consideration. On the face of the deed the consideration is expressed of $2500 “paid to Tier ” and nothing is said about the mortgage. We must therefore take the deed as it reads, expressing a money consideration paid to her, and no agreement to assume the mortgages. While, therefore, Woodhull took only such interest in the premises as Mary L. had, he did not become personally liable in regard to any of the mortgages or liens. It is unnecessary to cite authorities on a point so plain. He was under no personal obligation to pay the mortgages or to pay the annuity or support of plaintiff. Very possibly the $500 mortgage of Mary L. to him became merged, in the absence of any evidence that it was to be kept in force.

In fact, as the deed of Mary L. to Woodhull was a warranty deed, Mary L. was bound to protect him against any ouster by virtue of the first or second mortgages or by virtue of the plaintiff’s lien.

Under that deed it remained the duty of Mary L. to discharge those mortgages and to pay the lien. All of those three obligations rested on her personally, and none of them rested on Woodhull personally.

Of course, he might have to pay them to protect his land; but if those mortgages had been foreclosed and Woodhull had been dispossessed, or if the plaintiff’s lien had been enforced by action, and he had been dispossessed, he would have had a right of action against Mary L. on her covenant of warranty.

As Woodhull then owed no obligation to Mary L. to pay the first or second mortgages, or to pay the annuity or support, still less did be owe any obligation to the plaintiff to pay these mortgages or the annuity and support. As above pointed out, Mary L. had become in equity the principal debtor of the first and second mortgages ; and by conveying to Woodhull by warranty deed not mentioning the mortgages she remained the principal debtor and bound to protect him from ouster under foreclosure of these mortgages.

When the plaintiff executed her deed to Mary L. the only property on which she established a lien was the equity of redemption, subject to the first and second mortgages.

She had not then and she has never since had any equity except upon the land, subject to those two mortgages. That was all which she owned on which she could create a lien. Mary L., who made herself personally bound to pay the annuity and the support and the mortgages also, was in no position to assert this, but Woodhull was, because he was personally liable for nothing. He could claim that the plaintiff had no interest or claim until payment of those two mortgages.

When, therefore, the administrator of Woodhull paid off and satisfied the $1200 mortgage, they were not, as is above shown, paying any liability or obligation which Woodhull owed to any one. They were only relieving the land of his heirs from a burden. They were paying an obligation owed in equity as principal by Mary L. and as surety by the plaintiff, and on which the plaintiff was legally and in respect to him the principal debtor.

By this act, unless relief is now afforded, the administrators will have given the plaintiff a lien on premises increased by $1200 in value above what she owned when she created the lien; and that too by taking this value from the heirs of Woodhull, who was under no obligation to pay the amount.

As between herself and Woodhull, the plaintiff was the person bound to pay the mortgage. For he had not only not assumed it personalty, but he had not even taken the land expressly subject thereto. So that, as against him, the land was not the primary fund. His administrators have therefore paid her debt; and she seeks to take advantage of their act.

In any recovery, therefore, for the plaintiff’s annuity and support, there should be declared a prior lien to the administrators of Woodhull for the money paid by them in satisfaction of the $1200 mortgage.

It is claimed, however, that in this there should be taken into account rents which Woodhull has received. And it is urged that he and his heirs stands as mortgagees in possession.

On the contrary, they are owners of the equity in fee ; purchasers under a warranty deed, and in no way mortgagees.

It matters not, on this point, whether Woodhull actually paid Mary L. $2,500, or whether he only took a conveyance of the incumbered property without payment.

In either case he became a purchaser in fee. She was owner in fee, and had a right to convey to him in fee with or without .consideration. As owner in fee he was entitled to the income. Neither the mortgagee, nor the plaintiff under her lien can claim any right to the rents.

The possession and receipt of lands mortgaged does not make the possessor liable to pay out of the receipts, or to keep down, interest on the mortgage. The mortgagee can only be entitled to rent by commencing an action and having a receiver appointed. Argall v. Pitts, 78 N. Y., 239.

On the other hand, the plaintiff, as respects her lien, is the quasi mortgagee, while Woodhull and his heirs are the owners of the property, subject to her lien, such as it may be. They have the right to the rents and profits and are under no liability to account to her therefor. And they are entitled to these rents and profits, without reference to the question what price Woodhull paid Mary L. for the premises. He certainly did not take as mortgagee. When a mortgagor conveys the mortgaged land by a warranty deed to the mortgagee, the latter does not enter as mortgagee in possession. The acceptance of the deed disavows any such position.

The defendants insist that the $500 mortgage was given for a debt of plaintiff, and it should therefore have a preference. The circumstances render it probable such was the consideration ; but the fact is not found.

It is further claimed by the defendant that neither the $500 mortgage nor the judgment of foreclosure, or the balance of the $600 mortgage were merged in the conveyance to Woodhull; and that both of these should have priority over plaintiff’s claim.

That position has been answered as to the $500 mortgage. It was subject to plaintiff’s claim in its inception. It can hardly be supposed that the deed of Mary L. warranted Woodhull against a mortgage which he himself held. As to the foreclosure, it is familiar law that merger will not be permitted if the parties intend that there should be no merger, or if merger will produce injustice.

Now at the time when Mary L. conveyed to Woodhull, he held the second mortgage then in judgment. The plaintiff held the third lien, viz., that for annuit}'- and support, and Woodhull had the fourth, the $500 mortgage.

The deed to him, as before mentioned, was with warranty; so that he assumed nothing. Is it equitable, or can the parties intend, that the second mortgage, should become merged in the title, so as to give the third lien a preference over the second ? Certainly not. The doctrine of merger is not applied so as to give a subsequent incumbrance preference, merely by the legal merger of the former incumbrance in the title. And therefore the second mortgage (being the one in judgment of foreclosure), has preference over plaintiff’s claim.

Some of the questions, particularly as to the burden of proof were presented. But we need not consider them.

To recapitulate ; when Mary L. conveyed to Woodhull the the liens were as follows. First; $1200 mortgage, second, the balance on the $600 mortage ; third, the plaintiff’s lien for support and annuity; fourth, the $500 mortgage to Woodhull. The deed to Woodhull did not change these liens or the order unless the fourth may have been merged.

Woodhull’ assumed no personal liability, and, on the contrary, his title was warranted by Mary L.

He and his heirs were entitled to the rent and profits ; and were not bound to pay them to the mortgagee or to plaintiff.

The payment by his adminstrators of the $1200 mortgage was not in discharge of any obligation of his; and they should not lose the priority of that lien.

But as my brethren do not agree as to some of these conclusions, the judgment must be somewhat differently modified.

The judgment must be modified so as to declare that the $1200 mortgage andthe interest thereon (or the amount thereof), and the judgment of foreclosure with its costs and interest, are liens on the premises prior to the plaintiff’s claim.

The Guardian ad litem is entitled to costs of the action and appeal.

From the avails of the sale after paying the expenses thereof, there shall be first paid to the administrators defendant the amount of the first mortgage, $1200, with interest from September 8,1880 ; next, from the balance there shall be paid the costs of the guardian ad litem; next should be paid the plaintiff’s claim and the balance to the heirs of Woodhull.

Landon, J.

I concur with the presiding-justice in his conclusions respecting the first or $1200 mortgage, and respecting the rents and profits of the premises. I think, however, the first and fourth mortgages were merged in the legal title. Woodhull held these mortgages when he obtained the deed. They were regarded as part of the purchase money. If otherwise, then, as to these two mortgages, he would be mortgagee in possession and should, to the extent of the rents and profits necessary to satisfy them, account.

This would result in the practicable extinguishment of these two mortgages, certainly of the elder of the two. But the trial judge was right in holding them merged in the title. As to the $1200 mortgage, Woodhull was not obliged to apply the rents and profits, and he assumed no personal obligation to pay that mortgage or the plaintiff’s mortgage. His administrators were therefore not liable to pay it, but having paid it mistakenly, ought to be subrogated to the rights of the holder.

Upon final consultation, no two mémbers of the court being in all respects in accord, the following result was reached and is the judgment to be pronounced.

Judgment notified by directing the payment, first to the defendants, the administrators upon the first mortgage of $1200, and interest from September 3, 1880; second, the costs of the guardian ad litem; third, the plaintiff’s claim; fourth, the surplus to the defendant’s heirs of Woodhull. No other costs of this appeal as in the court below. As notified affirmed.  