Opinion
Argued March 26, 1928
Decided May 1, 1928
Appeal from the Supreme Court, Appellate Division, Second Department.
Raphael H. Weissman and Sarah Schreiber for appellants.
Edward J. O'Toole for respondents.
The complaint is for the foreclosure of a purchase-money mortgage. The answer is a counterclaim for breach of a covenant of seizin. Whether seizin was lacking is the question to be answered.
Plaintiffs sold the land to the defendant Francis Tallman in April, 1925. A predecessor in title was Miller Lockwell, Limited, a Canadian corporation. By a decree of the courts of the Province of Quebec, made in 1911, the corporation was adjudged insolvent, and its property, real and personal, was ordered to be sold by two liquidators duly appointed according to the laws of the Province. The liquidators conveyed the land to the plaintiffs, who thereafter sold to Tallman with covenant of seizin. The land is located in the city of New York. The defendants insist that title does not pass under a deed by foreign liquidators.
A second and confirmatory deed, made in December, 1926, is also the subject of attack. After the sale to Tallman, the plaintiffs procured the execution of a quit-claim deed by the Canadian corporation. This deed, made by the corporation to the defendant Francis Tallman, contains a recital that it is given "in confirmation of a deed" made by the liquidators, "it being the opinion of the liquidators that this deed is necessary for the beneficial winding up of the party of the first part and they having requested the execution of the same." The statutes of Canada are to the effect that the corporate life survives the appointment of a liquidator until the winding up is finished, but that the powers of the directors cease "except in so far as the court or liquidator sanctions the continuance of the same." The defendants insist that the later deed, being made under compulsion, adds nothing to the first one, and leaves the title where it was.
The answer demands judgment for the cancellation of the purchase-money mortgage, the return of the cash payment, and reimbursement for the value of subsequent improvements.
We think the counterclaim must fail.
There is no need to determine what effect would be given to the liquidators' deed considered by itself. If they were chancery receivers ( Sterrett v. Second Nat. Bank, 248 U.S. 73; Keatley v. Furey, 226 U.S. 399; Lion Bonding Co. v. Karatz, 262 U.S. 77, 87, 88; Mabon v. Ongley Elec. Co., 156 N.Y. 196; Decker v. Gardner, 124 N.Y. 334), or receivers or assignees in insolvency or bankruptcy ( Security Trust Co. v. Dodd, Mead Co., 173 U.S. 624, at p. 629; Osborn v. Adams, 18 Pick. 245; Callender, Sykes Co. v. Colonial Secretary, 1891, A.C. 460; Dicey, Conflict of Laws, p. 331), their deed would be a nullity. They would not gain a title to land within this State by force of their appointment in a foreign jurisdiction, and not having it themselves, could not transmit it to another. If they were the universal successors of the corporation ( Keatley v. Furey, supra, at pp. 403, 404; Chipman v. Mfrs. N. Bank, 156 Mass. 147, 149), the representatives in dissolution proceedings of its personality and powers, a different consequence would follow ( Martyne v. Am. Union Fire Ins. Co., 216 N.Y. 183; Relfe v. Rundle, 103 U.S. 222). The character and purpose of the proceedings in the courts of Canada are exhibited too imperfectly to enable us to judge with certainty of the origin and measure of the liquidators' powers. We leave the question open till decision becomes necessary.
If the deed by the liquidators be assumed to be inoperative, there was none the less a conveyance of title upon delivery by the corporation of a confirmatory deed of grant. A judgment of a foreign court will not avail of its own force to transfer the title to land located in this State. It will not avail though a conveyance be executed by the sheriff or a master or other agent of the court in fulfillment of its mandate ( Fall v. Eastin, 215 U.S. 1, 11; Carpenter v. Strange, 141 U.S. 87, 105; Watts v. Waddle, 6 Pet. [U.S.] 389). "The court, not having jurisdiction of the res, cannot affect it by its decree, nor by a deed made by a master in accordance with the decree" ( Fall v. Eastin, supra). But the rule is different where the conveyance is executed by the owner, though he act under compulsion ( Fall v. Eastin, supra, at p. 11; Watkins v. Holman, 16 Pet. [U.S.] 25, 57; Corbett v. Nutt, 10 Wall. [U.S.] 464, 475; Gardner v. Ogden, 22 N.Y. 327). The conveyance, and not the judgment, is then the source of title. As to this the law has been undoubted since Penn v. Lord Baltimore (1 Ves. Sr. 444). The distinction is between a judgment directed against the res itself, and one directed against the person of the owner, who acts upon the res. His deed transmits the title irrespective of the pressure exerted on his will.
A different question would be here if we were required to determine whether the title would prevail against the remedies of creditors (cf. Huntington v. Chesapeake, etc., Ry. Co., 98 Fed. Rep. 459, 464; Osborn v. Adams, 18 Pick. 245). A title acquired in foreign insolvency proceedings is subordinated to local creditors with executions or attachments against the goods and chattels of a debtor ( Security Trust Co. v. Dodd, Mead Co., supra; Barth v. Backus, 140 N.Y. 230; Vanderpoel v. Gorman, 140 N.Y. 563; Willitts v. Waite, 24 N.Y. 577, 582; Blake v. Williams, 6 Pick. 286; Disconto Gesellschaft v. Umbreit, 208 U.S. 570, 579, 580). Authority is not lacking that it is so subordinated in respect of land, though seizin has been transferred by the assurance of a deed ( Huntington v. Chesapeake, etc., Ry. Co., supra; Osborn v. Adams, supra). If all this be assumed, the defendants are not greatly helped. Seizin there still is, though subject to the claims of creditors as inchoate or potential liens ( Matter of Waite, 99 N.Y. 433; Security Trust Co. v. Dodd, Mead Co., supra, at p. 635; Mabon v. Ongley Elec. Co., supra). We do not know from the answer whether any such claims exist. Very likely they have been extinguished, for fifteen years have elapsed between the appointment of the liquidators and the service of the counterclaim. If the claims are alive, they are at most in the nature of an incumbrance, burdening the title, but not defeating its transmission. A judgment that is merely inchoate or potential can have no greater effect than one that is actual and consummate (Rawle on Covenants for Titles, §§ 59, 60; Sedgwick v. Hollenback, 7 Johns. 376; Jackson v. Garnsey, 16 Johns. 189, 192; Kuntzman v. Smith, 77 N.J. Eq. 30). The defendants do not counterclaim because of the presence of an incumbrance. They do not even say that such a covenant was made. The basis of the counterclaim is the covenant of seizin. In the view of the pleader, title has so failed that the transaction in all its parts must be undone from the beginning. More must be shown, to justify that upheaval, than the threat of a potential lien.
The defendants make the point that the deed of 1926, which they admit that they accepted, was ineffective, however voluntary, to destroy a cause of action for breach of a covenant of seizin in the deed of 1925, since the breach was complete when the covenant was made. If it did not destroy the cause of action, it made the damage nominal. The confirmatory deed was given before the counterclaim was served and before demand was made for the repayment of the purchase price. Consideration has not failed now that title has been cured ( Murphy v. U.S. Title Guaranty Co., App. Term., 104 Misc. Rep. 607; King v. Gilson, 32 Ill. 348, 355; Cornell v. Jackson, 3 Cush. 506).
The order of the Appellate Division and that of the Special Term should be reversed, with costs in the Appellate Division and in this court, and judgment ordered in favor of the plaintiffs for the relief demanded in the complaint; the first question certified is answered "no;" the second question is not answered; and the third, fourth, and fifth questions are answered "yes."
POUND, CRANE, LEHMAN, KELLOGG and O'BRIEN, JJ., concur; ANDREWS, J., not sitting.
Ordered accordingly.