Opinion
Submitted October term, 1935.
Decided January 31st, 1936.
1. Complainants sold and conveyed eight acres of a seventy-eight-acre tract to L under agreement recited in the deed that the grantee should lease the remaining seventy acres and pay the taxes and assessments due and to become due thereon during the life of the grantor and her daughter. Simultaneously with the execution of the deed, complainant, her daughter and L executed a lease on the seventy-acre tract whereby L agreed to pay as rent all taxes and assessments assessed or that might be assessed against the property during the lifetime of the lessors, and the lease contained a provision making it binding upon the heirs, executors, administrators, or assigns of the respective parties thereto. L conveyed the eight-acre tract to his corporation, the deed reciting the agreement of lease, and on the same day the corporation executed a first mortgage to the defendant company, and subsequently executed a second mortgage on the same eight-acre tract to the defendant company, both mortgages reciting the agreement of lease. The defendant corporation had full knowledge of the agreement to pay taxes and assessments not only at the time when the two mortgages were executed but as early as the date when complainant conveyed the eight-acre tract to L. The mortgagor corporation having been adjudicated insolvent and a receiver appointed, the eight-acre tract was sold subject to the claim, if any, of complainant for taxes paid. Complainant seeks a decree establishing an equitable lien in her favor upon the eight-acre tract for the payment of taxes and assessments by or upon the seventy-acre tract. Held, that although the provision in the deed from complainant to L is not a legal condition of the continuance of the fee in the grantee, nor is it a legal covenant running with the land, nevertheless, the agreement in the deed from complainant to L gave rise to an equitable lien on the eight-acre tract, as security for the payments agreed to be made for the conveyance of the tract.
2. The defendant corporation, having had full notice and knowledge of the complainant's equity, is not a purchaser for value without notice.
3. The proofs clearly establish that the rental value of the leased seventy-acre tract was less than half of the annual taxes and that the agreement by L to pay those taxes was a part of the consideration for the execution by complainant of the deed to the eight-acre tract.
4. By filing a proof of claim with the receiver of the mortgagor corporation, complainant made no election of remedies and did not waive her claim to an equitable lien in the eight-acre tract. The burden of proof is upon the defendant to establish a waiver of lien and the proofs fail to show any such waiver.
5. The fact that payments were made to continue over a period of years in nowise takes away complainant's right to an equitable lien in the eight-acre tract; neither does the fact that the termination of the period of years is not at a fixed and certain date. The defendants took with full knowledge of all of the terms of the agreement.
On appeal from a decree of the court of chancery advised by Vice-Chancellor Buchanan, who filed the following opinion:
"In and prior to July, 1930, complainant owned a tract of land of about seventy-eight acres in Linden, New Jersey. On July 22d 1930, she conveyed a portion (about eight acres) of that tract to Prall W. Lambert. The portion of the said eight acres is hereinafter referred to as the Lambert tract, and the remaining seventy acres as the Child tract.
"Prior to that time, Lambert had leased the eight-acre tract from Mrs. Child, and spent a large amount of money in erecting a factory thereon, and hence desired to get a conveyance of the eight acres. In the negotiations between Lambert and Mrs. Child, she was willing to sell and convey him the eight acres, but insisted as a part of the transaction that he should also lease the remaining seventy acres, the Child tract, and should pay the taxes and assessments due and to become due on the Child tract, and it was only upon Lambert's agreeing so to do that she consented to convey to him the Lambert tract.
"Accordingly, in consummation of this agreement, Mrs. Child executed to Lambert on that day a deed of conveyance for the `Lambert tract for the recited consideration of $1.00 and other valuable consideration,' which deed contains an express provision that
"`This conveyance is also made subject to the agreement that the said Prall W. Lambert, his heirs, executors, administrators, or assigns shall and will pay all municipal taxes and/or assessments due or to become due to the City of Linden aforesaid upon the whole tract of which the premises herein conveyed are a part, consisting of a parcel of land containing seventy-three acres more or less * * * said payments so to be made by Prall W. Lambert, his heirs, executors, administrators, or assigns, for and during the natural life of said Mary Baldwin Child, and at her death, for and during the natural life of Ruth Child, daughter of Mary Baldwin Child, or until the said balance of the said premises shall be sold or otherwise disposed of by either or both the said Mary Baldwin Child and/or Ruth Child, at which time the payment of the said tax by said Prall W. Lambert, his heirs, executors, administrators, or assigns shall cease, and he or they shall be relieved from the further payment thereof, or should a certain lease for the balance of the whole of said parcel between the parties hereof of even date herewith be terminated before the expiration of its term according to the conditions therein, then he or they shall be relieved from the further payment thereof.'
"This deed was duly recorded.
"On the same day and as a part of the same transaction, Mrs. Child and her daughter, Ruth, made a written lease to Lambert, executed by all three of them leasing the Child tract to him for and during the term of the natural life of the lessors, Lambert agreeing to pay as rent therefor all taxes and assessments assessed or that may be assessed against said property during the lifetime of the lessors. The lessors had the right to cancel the lease at any time on sixty days' written notice. It contained quite a number of other minor provisions and also a provision that the lease `Shall be binding upon the heirs, executors, administrators, or assigns of the respective parties hereto.' This lease was acknowledged by the parties, but was not recorded.
"By deed dated August 8th, 1930, Lambert and his wife conveyed the Lambert tract to his corporation, P.W. Lambert Co., Inc. This deed recites the deed from Mrs. Child to Lambert above mentioned, and also contains this provision:
"`This conveyance is also made subject to a certain agreement made between Prall W. Lambert and the said Mary Baldwin Child as recited in the deed last above referred to for the payment of the taxes upon the remaining acreage of the whole parcel of which the premises herein conveyed were formerly a part, which said agreement the party of the second part hereby assumes according to the terms hereof.'
"This deed was also duly and promptly recorded.
"On the same day, August 8th, 1930, the P.W. Lambert Co., Inc., executed a mortgage of $50,000 to C.H. Winans Co. This mortgage recited the last mentioned deed, and contained an express provision that
"`In addition to the payment of the taxes upon the premises herein described as hereinafter provided, that the payment of the tax upon the adjoining parcel in accordance with an agreement made with Mary B. Child in a deed from her to Prall W. Lambert, shall be a condition of this mortgage; and that if there should be default in the payment of such taxes, the mortgagee should have the right to demand immediate payment of the full principal of the mortgage, or should have the option of paying the tax and add the amount to the principal of the mortgage.'
"Two years later, the P.W. Lambert Co., Inc., gave to the C.H Winans Co. a second mortgage of $30,000 upon the same Lambert tract, containing similar recitals and similar provisions.
"In December, 1932, P.W. Lambert Co., Inc., was adjudicated insolvent, and a receiver was appointed for it. September 13th, 1933, the receiver sold the said Lambert tract at public sale, free and clear of the mortgages. The C.H. Winans Co. became the purchaser at such sale. By the terms of the sale the conveyance was made subject to `the claim, if any, of Mary B. Child for taxes paid by her.'
"Taxes had become in default on the Child tract for the years 1931, 1932 and 1933. Complainant made demand upon the defendant Winans Co. for the payment of these taxes, and subsequent to defendant's refusal filed this bill. She also paid the taxes for 1931 herself in order to avoid sale by the municipality.
"Complainant by her bill seeks a decree establishing an equitable lien in her favor upon the Lambert tract for the payment of the taxes and assessments upon the Child tract as above mentioned.
"There is little, if any, dispute as to the facts involved, although there is some dispute as to some of the conclusions to be drawn therefrom. The principal issue however is as to whether or not complainant is entitled to a lien under the facts of the case.
"It is established beyond question that the Winans Co had notice and knowledge of the provisions in these various instruments and of the facts upon which the claim of Mrs. Child is based, — not only prior to the sale and conveyance to the Winans Co. by the receiver (at which sale announcement was made by Mrs. Child's representative of the nature and facts of her claim), but also prior to the taking of the two mortgages by the Winans Co., and indeed at the very time of the deed from Mrs. Child to Lambert. The proofs show that the $20,000 which was paid by Lambert to Mrs. Child for the deed from her to him was loaned to Lambert by the Winans Co., and that at the time of the negotiations and the transactions culminating in the deed and lease from Mrs. Child to Lambert, the attorney who acted for Lambert also at the same time acted for the Winans Co. Moreover, the proofs also show that prior to the taking of the $50,000 mortgage by the Winans Co., there was a discussion between that company and the Lambert Co. and their legal representatives as to what was the legal effect of the provisions in the deed and lease from Mrs. Child to Lambert. Their conclusion as to that effect of course in no way binds Mrs. Child, but the fact of the discussion shows an actual knowledge by the Winans Co. of these provisions, and not merely constructive notice.
"Concededly, the provision in the deed from Mrs. Child is not a legal condition of the continuance of the fee in the grantee; neither is it a legal covenant running with the land. Complainant contends that the agreement by Lambert with Mrs. Child, in that deed, gave rise in equity to a charge upon or hypothecation of the eight-acre tract conveyed, as security for the payment of the payments agreed to be made for the conveyance of that tract; see Braddock v. Hinchman, 78 N.J. Eq. 270; and that this is especially true in view of the fact that the agreement or deed expressly binds the heirs and assigns of the parties thereto; see Wootton v. Seltzer, 83 N.J. Eq. 163, affirmed 84 N.J. Eq. 207.
"Complainant further contends that she has a vendor's lien on the Lambert tract; that the payment of the taxes on the Child tract was a part of the consideration for the conveyance of the Lambert tract, and that this part of the consideration not having been paid, she has in equity the usual vendor's lien therefor; and that she has a right to enforce her equitable lien against the Winans Co. because the Winans Co. took with full knowledge and notice of her equity.
"Defendant contends, in the first place, that it is a purchaser for value without notice. On this the proofs are beyond question against it. It took with full notice and knowledge of complainant's equity.
"Defendant further contends that the payment of taxes on the Child tract was not a portion of the consideration for the conveyance of the Lambert tract, — that the payment of these taxes was simply the consideration for the lease of the Child tract from Mrs. Child to Lambert, and that the Winans Co. in no wise took over or was affected by any interest in that lease. The latter part of the contention is true, but the former is not. The proofs clearly establish that the rental value of the leased Child tract was much less than half of the annual taxes; and they further clearly establish, as has already been pointed out, that the agreement by Lambert to pay these taxes on the Child tract was a part of the consideration insisted upon by Mrs. Child for her execution of the deed to the Lambert tract.
"It is further contended by defendant that the covenant or agreement is not one running with the land. As has already been said, complainant makes no such claim, and the claim that she does make does not in any wise depend upon any such premise. She seeks to establish that she is entitled to an equitable lien. If the covenant or agreement was one running with the land, it would be good at law, and she would not have had to come to this court.
"It is further contended by the defendant that by filing a proof of claim with the receiver of the Lambert Co., complainant has made an election of remedies and has waived any claim to lien. This contention is not well founded. The making of claim against one primarily liable does not waive the right to make claim against one secondarily liable. The burden of proof is upon the defendant to establish a waiver of lien, and the proofs fail to show any such waiver.
"The fact that payments are made to continue over a period of years in no wise takes away the complainant's right to lien; neither does the fact that the termination of the period of years is not at a fixed and certain date. Cf. Van Doren v. Todd, 3 N.J. Eq. 397, at 409. The defendants took with full knowledge of all of the terms of the agreement.
"It is concluded that complainant is entitled to the decree prayed for."
Mr. Charles L. Hedden, for the complainant-respondent.
Messrs. Whittemore McLean ( Mr. Siguard A. Emerson and Mr. Samuel Koestler, of counsel), for the defendant-appellant.
This is an appeal from a decree of the court of chancery sustaining complainant's claim that lands now owned by the defendant are subject to an equitable (vendor's) lien for the payment of taxes and assessments on adjacent lands owned by the complainant.
We have examined the proofs and concur in the findings of Vice-Chancellor Buchanan.
The decree will be affirmed.
For affirmance — THE CHIEF-JUSTICE, LLOYD, CASE, BODINE, DONGES, HEHER, PERSKIE, HETFIELD, DEAR, WELLS, WOLFSKEIL, RAFFERTY, JJ. 12.
For reversal — None.