
    Eveland v. Wheeler, administrator.
    
    
      Discharge of mortgage by rescission of contract.
    
    Where, on a purchase of land, a mortgage on other property is given for part of the purchase-money, a cancellation of the principal contract, and restoration of possession to the vendor, works a satisfaction of the bond and mortgage, in the absence of any agreement to the contrary.
    Appeal from the general term of the Supreme Court, where a judgment entered in favor of the plaintiff, upon the report of a referee, had been reversed, and a new trial awarded; the plaintiff stipulating for judgment absolute, in case of affirmance.
    This was an .equitable action, brought by Abraham Eveland against Rufus G. Bowman, for the cancellation of a bond and mortgage, then in process of foreclosure by the defendant. The latter died pending the suit, and George Wheeler, his administrator, was substituted.
    The case was tried before a referee, who found the following state of facts: In March 1855, the plaintiff and Rufus G. Bowman entered into a written contract, by which the latter agreed to sell and convey to the plaintiff, a certain farm in the town of Castile, and county of Wyoming, containing about one hundred and six acres, for the sum (as expressed in the written contract) of $3000. On the same day, the plaintiff, with one Charles Strong as his surety, executed and delivered to Bowman his bond in the penal sum of $3130, conditioned for the payment to the latter of the sum of $1565.31, with interest, in instalments, as therein stated; and at the same time, the plaintiff, with his wife, executed and delivered to the said Bowman a mortgage to accompany said bond, upon other lands, to secure sum meWioned *in the condition of that instrument; which mortgage was duly acknowledged, and was recorded in the county of Wyoming,'where the lands covered thereby were situated. The 4th, 5th, 6th, 7th and 8th findings were in the following words:
    4. The price or sum for which said tract of land, containing 106xVn acres, was contracted to be sold, was $43 an acre, or $4565.31; and the said agreement above mentioned, and said bond and said mortgage, were executed and delivered to secure to the plaintiff the conveyance of the said tract of land described in the contract, and to secure to said defendant the purchase-price of said land, and for no other object, purpose, consideration or qualification, except as particularly stated and set forth in said written contract.
    5. The plaintiff, immediately after the making, executing and delivery of said contract, bond and mortgage, entered into the possession and occupancy of said tract of land described in said contract, and used, occupied and enjoyed the same, and received the rents, profits and proceeds thereof, and made repairs and improvements thereon, for the period of about four years after the making, execution and delivery of said contract, bond and mortgage, and made various payments upon said contract, and one payment upon said bond and mortgage, amounting to between $400 and $500 in the aggregate.
    6. It was, afterwards, either in the year 1858, or spring of 1859, mqtually agreed between the plaintiff and defendant, that said written contract should be cancelled and annulled, and that said plaintiff should surrender up and relinquish to the defendant said tract, piece or parcel of land described therein, and all claim, right, title or interest in and to the same, and to all payments made on said contract, bond and mortgage; and also that the plaintiff should work said farm on shares, and the defendant was to have one-half of the crops raised thereon.
    *7. The plaintiff did work said land on shares, and the defendant received his half or share of the crops raised thereon; and said written contract was, afterwards on or about the 1st of April 1860, cancelled, by cutting or tearing off the seals of the same, and the defendant resumed the exclusive possession and control of said tract, piece or parcel of land.
    8. No agreement was ever made or entered into between plaintiff and defendant, as to the cancellation of said bond and mortgage, or whether the same should or should not be deemed cancelled or discharged by the cancellation of said contract; on the contrary thereof, it was the design and intention of the defendant to retain and keep said bond and mortgage in full force and effect, and the plaintiff designed and intended that said contract, bond and mortgage should all be cancelled and annulled.
    Upon this state of facts, the referee held and decided as matter of law, that the contract and bond and mortgage constituted one indivisible contract, and that the cancellation and annulling of the written contract was, in law, a cancellation of the bond and mortgage; and he directed judgment for the plaintiff, accordingly. Judgment was entered in pursuance of the report, directing that the mortgage be discharged of record; that the bond be delivered up and cancelled; and that the mortgagee be perpetually enjoined from any further attempt to enforce them as valid instruments.
    The judgment, however, was reversed by the general term, and a new trial awarded, on the ground, as appeared by the opinion there delivered, that although the written agreement, bond and mortgage were given at the same time, and related to the same subject, and for the purposes of construction, were to be regarded as one contract, yet, that they were divisible in theii nature, and should, under the facts found, be deemed to stand separate and independent of each other; and, consequently, that the cancellation of the written contract, of itself, did not affect the validitj'- of the bond and mortgage. The plaintiff, thereupon, appealed to this court, giving the usual stipulation.
    
      Comstock, for the appellant.
    
      Thayer, for the respondent.
    
      
       Also reported in 4 Trans. App. 12.
    
   Bocees, J.

(after stating the facts.)—It is not controverted, nor can it be, that the written agreement and bond and mortgage are, for the purpose of construction, to be read together as constituting one contract. The re^eree s0 correctly adjudged, and this was *taken for granted or assumed by the supireme court. The three instruments were executed at the same time, were between the same parties, and related to the same subject-matter. Taken together, and not otherwise, they show the entire agreement. The authorities in support of this proposition are numerous, and are quite too familiar to require citation.

So read and construed, the entire agreement in its most material parts and significance, was to this effect: That the defendant’s intestate would convey the farm to the plaintiff, who, in consideration thereof, would secure and pay to the former $4565.31—the sum of $3000 as stipulated in the. written contract, and the balance of $1565.31 by his bond and mortgage, covering other property, the terms of which were then agreed on and inserted in such instruments; which instruments were then executed and delivered. The papers taken together evidenced a perfect agreement, and the entire agreement between the parties. They showed as well the duty of the intestate to convey, as also the obligation of the plaintiff to secure payment of, and to pay the entire sum constituting the consideration of the conveyance. Payment, or the securing of payment to the intestate, according to the terms of the agreement, was the consideration for the conveyance; and the conveyance was the consideration for such payment. The promises were mutual and dependent; a conveyance could not be required, without payment or the securing of payment, according to the terms of the agreement; nor could payment be enforced, without the delivery or tender of the conveyance.

Under this condition of duty and obligation, the parties, by mutual consent, cancelled and annulled the written contract, and the plaintiff surrendered to the intestate the farm, the possession of which he had held under the agreement to purchase, for the period of about four years. During his occupation, the plaintiff made repairs and improvements on the farm, and also various payments on the contract, and one payment on the bond and mortgage, in the aggregate amounting to between four and five hundred dollars, all claim for which repairs, improvements and payments was *relinquished by him, on such cancellation. There was not, however, any express agreement between the parties, that the bond and mortgage should, or should not, be deemed cancelled and discharged, by the annulling contract; on the contrary, as the referee certifies, “it was the design and intention of the defendant (the intestate) to retain and keep said bond and mortgage in full force and effect, and the plaintiff designed and intended that said contract, bond and mortgage should all be cancelled and annulled.” Notwithstanding this diversity of intention, and mutual misunderstanding of the parties, neither asks to be restored to his former pósition, for that cause, but both plant themselves on'the surrender and cancellation of the written contract—holding it as binding and conclusive, as regards their rights, and demand an adjudication by the court as to its legal effect.

The question, then, is, did the cancellation of the contract, ipso facto, also cancel the bond and mortgage ? We are of the opinion, that such was its legal effect, in the absence of an express agreement between the parties to the contrary. On the cancellation of the con: tract, the intestate was discharged from all obligation to convey, which obligation constituted the sole consideration for the plaintiff’s promises to pay. The essential element to the validity of the bond and mortgage— a consideration—was then wanting. They might, undoubtedly, have been kept on foot, by an express agreement to that effect, having for its consideration the cancellation of the contract and the surrender of the premises contracted to be conveyed. But no such condition was imposed. The instruments must, therefore, stand or fall with the consideration on which they were made to depend in their inception.

We are not without authority on this question. In Dearborn v. Cross (7 Cow. 48), the former bound himself by bond, to sell land to the latter, 'who gave his notes for the consideration-money, and took possession. Afterwards, the land was surrendered to Dearborn, who sold it to another. It was held, that although the bond was not cancelled or surrendered, yet it was, in legal effect, discharged, and that, consequently, no action could be maintained on the notes. *In De Peyster v. Pulver (3 Barb. 284), it was decided, that when a contract has been abandoned, by mutual agreement of the parties thereto, one party cannot sue the other upon a note given as a part of the consideration for the performance of the contract by the party suing. In this case, it was remarked by the court, per Harris, J.: “ The acts of both parties sufficiently show a mutual agreement that the contract between them should be abandoned. The contract being thus abandoned by mutual agreement, the note for which this action is brought, and which was given as a part of the consideration for the performance of the contract of the plaintiff, cannot be recovered.”

So, in the case now under examination, the considera» tion of the bond and mortgage sought to be set aside and annulled, was the agreement by the defendant’s intestate to convey to the plaintiff the farm described in the contract. This agreement to convey was can-celled, by mutual consent of the parties, without any agreement that they 'should remain on foot as valid obligatory instruments. There is, therefore, no good reason for their enforcement; and they must be deemed to be invalid, like other contracts the consideration of which has wholly failed. When, as in this case, the failure of the consideration touches the principal point and essence of the contract, such failure constitutes good ground in equity to set it aside. These considerations require a reversal of the order of the general term.

There is another view of the case, not without significance. The referee finds that the plaintiff intended that the bond and mortgage should be cancelled, and that the defendant’s intestate intended the reverse. Did the intestate, although intending the reverse, know of plaintiff’s undertaking and understanding? If so, and he permitted him to act upon such understanding, he is now bound by it, inasmuch as he retains all the advantages of the arrangement. In such case, he will be concluded, on well-settled principles applicable to the doctrine of estoppel. We think it quite probable, from the facts found, that the intestate knew of the plaintiff’s intention and understanding, at the time of the *cancellation of the contract. But it is unnecessary to consider this question.

The order appealed from must be reversed, on the ground above discussed, unless evidence was admitted or rejected, prejudicial to the defendant’s rights. On a careful examination of the case, we are of opinion, that no error exists in this regard. The order appealed from must be reversed, and the judgment directed by the referee affirmed, with costs.

Order reversed, and judgment of the special term affirmed.  