Opinion
Argued October 29, 1912
Decided February 25, 1913
Andrew J. Nellis for appellants. Danforth E. Ainsworth, Charles E. Sullivan and Fletcher W. Battershall for respondent.
This is a suit in equity to establish and enforce a vendor's lien upon land sold by Jacob Cohn to his mother, Theresa Cohn, under an agreement by which the grantee promised to pay the claims of certain creditors of the grantor, and among them the claim of the plaintiff. The land against which the plaintiff's lien has thus far been upheld by the courts has been sold under mortgage foreclosure, but, by stipulation, the surplus which arose upon the sale is held in its place. The complaint, in its original form, proceeded upon dual and inconsistent theories of relief, which gave rise to many troublesome questions of practice and dilatory motions that cannot now be considered in detail without losing sight of the main issue. Only a few of these incidental matters are of present interest and these we shall touch upon most briefly; the rest have been resolved in plaintiff's favor and may be dismissed without further mention. As the case stands, stripped of all non-essential questions, the plaintiff is in court solely upon his claim of right to a vendor's lien. The facts pertinent to that claim can be very briefly stated.
In June, 1902, the defendant Jacob Cohn was indebted to the plaintiff in the sum of over $5,000. On June 2d of that year Jacob executed two instruments of transfer, by which he conveyed to his mother, Theresa Cohn, deceased, all his real and personal property, which was of considerable value. Simultaneously with the execution by Jacob of those two instruments, Theresa executed another instrument reciting that in consideration of Jacob's transfer to her, she exonerated him from certain indebtedness owing by him to her, and agreed to save him harmless from, and to pay, the debts owing by him to his creditors; and it also contained a list of these creditors with a statement of the amounts owing to some of them. At the trial it was a disputed question whether the name of plaintiff was in the list of Jacob's creditors, contained in this instrument. The paper then produced by the defendants did not contain his name, but the court, upon sufficient evidence, found that the plaintiff's name was among the creditors set forth in the original instrument executed by Theresa. This finding has been unanimously affirmed by the Appellate Division, and upon this appeal we must, therefore, assume that the name of the plaintiff was in the instrument and that he was one of the persons for whose benefit the transfer to Theresa was made.
The evidence and the findings disclose that at or about the time of these transactions between Jacob and Theresa the plaintiff had some hearsay information thereof, but that he never saw the contract signed by Theresa, and never had an opportunity to see it until after five years of litigation with Jacob. In the supplementary proceedings instituted upon the judgment which the plaintiff recovered against Jacob in that litigation it finally transpired that this agreement was in the possession of Mark Cohn, a brother of Jacob, who then produced it, but without the name of the plaintiff as one of the creditors of Jacob whom Theresa had agreed to pay. This suit was then commenced. We have already referred to the difficulties which arose under the original complaint. At the first trial the complaint was dismissed upon the ground that the cause of action alleged, to set aside the transfer from Jacob to Theresa on the ground of fraud, had not been proved, and that the cause of action attempted to be proved to establish a vendor's lien had not been alleged. Upon appeal the Appellate Division reversed this decision and granted a new trial. Then the plaintiff moved at Special Term for leave to amend his complaint so as to make the action one solely to enforce a vendor's lien, and the amendment was allowed by the court upon condition that full costs be paid. The order permitting this amendment was affirmed by the Appellate Division, and no appeal was taken from that affirmance. As the case now stands, therefore, the suit is one to establish an equitable vendor's lien.
The first question to consider is, whether a suit to enforce a vendor's lien will lie under the circumstances here disclosed. The material part of the instrument upon which the plaintiff relies provides that in consideration of the conveyance by Jacob to Theresa she promises and agrees "to save harmless the said party of the second part (Jacob) of and from the following debts and liabilities of the said party of the second part, and to pay the same as follows." This is supplemented by a list of creditors which, we must assume, includes the name of the plaintiff. Thus the plaintiff's claim against Jacob entered into and formed a part of the consideration for the promise made by Theresa to pay. It can hardly be doubted that a court of equity would have granted Jacob's prayer to have this property impressed with a lien for Theresa's failure to pay the consideration, and we do not perceive why the plaintiff is not entitled to the same relief. To the extent of his claim he stands in the shoes of his debtor, who is the vendor, and to that extent he is for all practical purposes equitably subrogated to the rights of the vendor. ( Pardee v. Treat, 82 N.Y. 385, 387.) The learned trial court has not found that there was an intention to create a lien; and such a finding was not necessary. A vendor's lien may, of course, be reserved by express contract, but it is usually implied from circumstances. It is a pure invention of equity to protect those who have parted with real estate without security. In this state the equitable principle has been extended so far as to imply a lien in favor of a grantee who has paid his purchase money without securing the property he bargained for, although until quite recently it was thought doubtful whether in this jurisdiction there is such a thing as a vendee's lien. ( Elterman v. Hyman, 192 N.Y. 113.)
We shall not attempt to discuss the theory upon which the vendor's lien is based, for that is a problem which no amount of learning or discussion seems to have been able thus far to solve. It may well be doubted whether any subject in our American law is involved in more hopeless dispute concerning its origin and the principles of its application. It is difficult to suggest any one principle upon which it securely rests, and impossible to assign any positive reason for its transplantation from the civil to the common law, except that it is a device admirably adapted to the equitable amelioration of inflexible legal rules. Although it has many apparent analogies in the law, it is yet strictly sui generis. Whatever its derivation may be, it is too firmly established in the jurisprudence of this state to need any justification in this day and generation. If there have been occasional indications of judicial reluctance to its enforcement, they seem to have sprung more from the difficulty of applying it to particular facts than from any sound reason against its use as a recognized agency of remedial justice. It is a remedy which must, of course, be applied with caution and discrimination, for in many cases the lien is the creature of secrecy and implication, and from its very nature calculated to work injustice to innocent third parties. No such danger exists in this case, for the answers of the defendants admit that the debts of Theresa have all been paid, and thus it is plain that the rights of no other creditors are involved. The case in short, stripped of all extraneous considerations, presents the naked question whether the equitable remedy will lie in favor of a creditor in payment of whose debt a conveyance of property is made, where no intervening rights of other creditors are involved.
In Hallock v. Smith (3 Barb. 267) the owner of real estate, being indebted to plaintiff, assigned his property to the defendant to pay certain debts due to the plaintiff. Among the assets transferred to the defendant was a note made to the assignor by one of the defendants for the purchase price of certain real property formerly owned by the assignor, who, as in this case, was plaintiff's debtor. In that action a lien was enforced in favor of plaintiff on the real estate the debtor had conveyed. It was there contended, as it is in the case at bar, that the lien can only be asserted by the vendor; but the court distinctly held that, as the purchase-money note was assigned to secure debts owing to the plaintiff by the vendor, he was entitled to enforce the lien. This case has remained the unchallenged law of this state for over half a century, and has been many times cited with approval in this court and in the courts below. The precise question has also arisen in other cases, and the lien has been sustained in favor of a third person whose debt was made a part of the consideration of the conveyance. ( McWhorter v. Stewart, 39 App. Div. 212; Binghamton Savings Bank v. Binghamton Trust Co., 85 Hun, 75.)
In Bach v. Kidansky ( 186 N.Y. 368) the vendors had conveyed real property subject to certain mortgages, one of which covered other lands. For the purpose of releasing these other lands from the mortgage, the vendors paid $1,000 upon it, thus reducing to that extent the incumbrance on the property conveyed. The vendees refused to allow the vendor for this payment. This court sustained an action to establish a vendor's lien for the money thus paid on a debt owing to a third person. It may be said in passing that there seems to be no distinction in principle between that case and the one at bar. The only difference lies in the fact that there the vendor enforced the lien and here the vendor's creditor invokes the remedy. In the Bach case we found no difficulty in applying the equitable principles underlying the lien so as to prevent injustice, and in another case, quite similar in its facts to the one at bar ( Ahrens v. Jones, 169 N.Y. 555), we upheld the claim to a lien when a person had conveyed property to his wife in consideration, among other things, of the wife's agreement to pay the plaintiff a sum of money. The plaintiff's claim to a lien was sustained, but our decision was based in part upon the theory that this was a trust ex maleficio. To the same extent see also Harris v. Fly (7 Paige, 421).
There are certain cases in this state which, on a superficial examination, would seem to indicate that no lien will be sustained in favor of third persons; but a careful reading of the opinions will disclose that the real reason underlying the decisions is that the agreements under which liens were claimed were not engagements for the payment of money to the third persons, but agreements for support and maintenance. ( McKillip v. McKillip, 8 Barb. 552; Camp v. Gifford, 67 id. 434.) Agreements of that character have always occupied a peculiar place in the law of contracts, to which the principle of specific performance is more applicable than enforcement by lien. This distinction may explain the apparently contradictory statements by Judge Story. (Story's Equity Juris. secs. 1227, 1233.)
Some of the text book writers lay down the rule that the lien is personal to the vendor and does not exist in favor of a third party or a creditor whose debt enters into the consideration of the transfer. (Overton on Liens, sec. 620; 2 Devlin on Deeds, sec. 1256.) These statements appear to be founded upon some of the earlier decisions which we think do not support the unqualified rule laid down by the authors. The cases relied on by the text writers are Patterson v. Edwards ( 29 Miss. 67); Vandoren v. Todd ( 3 N.J. Eq. 397); Chapman v. Beardsley ( 31 Conn. 115); Hiscock v. Norton ( 42 Mich. 320); Sears v. Smith ( 2 Mich. 243), and Long v. Burke (2 Bush [Ky.], 90). They are all thoroughly reviewed and satisfactorily distinguished by Judge MAGRUDER in Koch v. Roth ( 150 Ill. 212). In none of them was the question squarely presented and decided. As to the rule in Connecticut, it is enough to say that it is doubtful whether the vendor's lien is recognized in that state (See Soule v. Hurlbut, 58 Conn. 511); and in Michigan, Mississippi and Kentucky, where other cases relied on were decided, the contrary has been held in later cases involving the very question presented in the case at bar. (See Lee v. Newman, 55 Miss. 365; Louisiana Nat. Bank v. Knapp, 61 id. 485; Kilbourne v. Wiley, 124 Mich. 370; Mize v. Barnes, 78 Ky. 506.) In other states the statutes have done away with the vendor's implied lien, or the courts have never recognized its existence. (See 29 Ency. Law [2d ed.], p. 741.) In the states, however, where the implied lien is recognized and the question has arisen, it has been squarely held that a creditor whose debt enters into the consideration which passes between the vendor and vendee, is entitled to have a lien decreed in his favor. ( Carver v. Eads, 65 Ala. 190; Waller v. Janney, 102 id. 442; Francis v. Wells, 2 Colo. 660; Mitchell v. Butt, 45 Ga. 162; Koch v. Roth, 150 Ill. 212, 223; Barrett v. Lewis, 106 Ind. 120; Pruitt v. Pruitt, 91 id. 595; Mize v. Barnes, 78 Ky. 506; De L'Isle v. Succession of Moss, 34 La. Ann. 164; Kilbourne v. Wiley, 124 Mich. 370; Simily v. Adams, 88 Mo. App. 621; Lee v. Newman, 55 Miss. 365; Louisiana Nat. Bank v. Knapp, 61 id. 485; Compton v. Railway Co. 45 Oh. St. 592, 621; Zwingle v. Wilkinson, 94 Tenn. 246; Vanmeter v. Vanmeter, 3 Gratt. [Va.] 148; Joiner v. Perkins, 59 Tex. 300; Tisen v. Wabash Ry. Co., 15 Fed. Repr. 763.) Some of the text writers adopt the same rule. (Story's Equity Juris. sec. 1227; 2 Jones on Liens [2d ed.], sec. 1094.) One state, North Dakota, has adopted the contrary rule, but an examination of the single case on the subject discloses that the statute there confines the lien to the vendor, and the decision was based entirely upon the statute. ( Bray v. Booker, 6 N.D. 526.)
As the result of our examination of the more recent decisions of the courts of other states upon this subject, we think the strong consensus of judicial opinion is against making any distinction per se between the vendor and his creditor when it is plain that the sum to be paid to the vendor's creditor is in fact a part of the purchase price to be paid by the vendee. Nor do we see why, on principle, there should be any such distinction. If A sells his land to B why should they not be able to agree that the whole or a part of the purchase price shall be paid by B to the creditors of A? If this may be done as to one creditor, why not as to a number? Equity, the parent of this lien, looks through mere form to the substance of things. For all practical purposes it is the same whether the lien is declared in favor of the vendor or his creditor. The evils which arise from the inherent character of the lien and its usually secret origin are no greater in the one case than in the other. Equity simply subrogates pro tanto the creditor of the vendor for the vendor himself.
It is also urged by the learned counsel for the appellants that the amount of plaintiff's debt was unliquidated when Jacob and Theresa executed those instruments and that, therefore, no lien was created. Some of the books contain expressions to the effect that no lien will lie except for a fixed, certain amount. It is difficult, if not impossible, to ascertain upon what principle that idea is based. The vendor's lien is peculiarly a creation of equity devised to protect one party who has parted with land without being paid therefor. It is, said this court in Fisk v. Potter (2 Keyes, 64, 68), "an anomaly in the law, and though it exists in certain cases, and perhaps we may say generally as between vendor and vendee, its existence depends upon and is controlled by no well-settled rules, but, on the contrary, the existence of the lien is generally made to depend upon the peculiar state of facts and circumstances surrounding the particular case, that is whether or not a case of natural equity is established." There are cases, of course, in which it is impossible to measure the sum upon which the lien is to be predicated; or where the debt or obligation for which it is sought to be enforced is wholly contingent upon such uncertain events that practical considerations coerce the courts into refusing this equitable remedy. (See Pomeroy's Equity Juris. sec. 1251, and cases cited.) But the fundamental principle underlying the lien is that it would be unconscionable for the vendee to hold the land and not pay for it. It is immaterial, then, so far as the principle itself is concerned, what the form of the obligation may be upon which it is sought to rest the lien. In equity form gives way to substance, and the court will adapt its relief to the exigencies of the case. (Warvelle on Vendors [2d ed.], sec. 690.) The basis of the lien, said Judge COOLEY in Payne v. Avery ( 21 Mich. 524, 552), must be something which "if not fixed in amount, is at least capable of being measured by some pecuniary standard." In the case at bar the plaintiff's debt arose out of certain transactions in the purchase and sale of stocks. Its amount was readily capable of ascertainment, for the only sense in which it was unliquidated when the instruments were signed by Jacob and Theresa was that it had not been judicially determined. The ascertainment of the amount was only an incident to the main relief ( Bradley v. Bosley, 1 Barb. Ch. 125), and even that was not necessary, because the plaintiff's claim had been reduced to judgment in the action against Jacob when the plaintiff finally learned all the facts upon which he brought this action.
It is also asserted that the plaintiff should not have a lien because the transfer from Jacob to Theresa embraced both real and personal property. The implication of this statement is that there can be no vendor's lien when a part, and especially a substantial part, of the property transferred consists of personalty. That is a generalization which must be answered by the peculiar facts of this case. The plaintiff was prevented by the appellants, or those under whom they claim, from satisfying his debt out of the personal property transferred when it was still available to him. The agreement upon which he bases his claim was kept from him, and he did not know its contents. His claim was contested for five years, and when Theresa's agreement for his benefit was finally brought to light, his name had been expunged therefrom. It is not strange that he was in doubt whether to attack the whole scheme as a fraud or to affirm its validity and seek its benefit. That was, perhaps, the very doubt which the design of the plan was intended to create. In the period which elapsed before the plaintiff had acquired such information as enabled him to move in the matter, all the personal property and most of the realty was sold to pay the debts. The answers of the appellants allege that all of Theresa's debts have been paid. The only thing left is the surplus arising out of the sale on foreclosure of the last remaining piece of real estate conveyed by Jacob to Theresa. Why should the appellants now be heard to say that the plaintiff's claim could have been satisfied out of personal property of which he had no knowledge and which was used by the appellants to pay other debts? If relief is now refused the plaintiff against this fund he will be remediless, not through any fault of his own, but by the fraudulent acts of those through whom the appellants claim. Equity, therefore, in the exercise of its comprehensive jurisdiction over frauds, should mold its relief to meet the exigencies of the case, and fix a lien upon this fund in favor of the plaintiff. ( Bradley v. Bosley, supra; Mills v. Bliss, 55 N.Y. 139; Lightfoot v. Davis, 198 id. 261, 273.)
One of the defenses interposed by the appellants was that the plaintiff had an adequate remedy at law, and, therefore, this action in equity could not be maintained. In support of this defense there are cited certain cases in which action at law have been maintained on the transferee's promise to pay the debt of a third person. ( First Nat. Bank v. Chalmers, 144 N.Y. 432; Clark v. Howard, 150 id. 232; Pardee v. Treat, 82 id. 385.) That such an action at law can be maintained on such a promise is amply supported by the authorities cited; but it does not follow that an equitable action in the nature of an action to establish a vendor's lien may not be maintained. On the contrary, the remedies are concurrent and not exclusive. "An action at law might be entirely ineffectual by reason of the insolvency of the defendant or his inability to render a pecuniary compensation, while, if the equitable relief can be had, the remedy is effectual by reason of the lien which is established." ( Mills v. Bliss, 55 N.Y. 139, 142.) To the same effect see, also, Bradley v. Bosley (1 Barb. Ch. 125); Dubois v. Hull (43 Barb. 26).
We have already referred to the form of the original complaint, and to the complications in practice which arose from the plaintiff's apparently inconsistent claims for relief. Whatever ground that gave the defendants for asserting that the plaintiff had conclusively elected to pursue a remedy inconsistent with the one he now invokes, has been eliminated by the course of the litigation. On the first trial the plaintiff claimed the suit was two-fold in its nature; that in one aspect its object was to set aside the transfers from Jacob to Theresa as in fraud of creditors, and in another view it was a suit to enforce the contract made between Jacob and Theresa for the benefit of Jacob's creditors. When the court compelled the plaintiff to elect upon which of these two theories he would stand he chose the latter, and then his complaint was dismissed. He appealed from the judgment entered upon that decision and succeeded in obtaining an order granting him a new trial. Before going to his second trial, however, he moved for leave to amend his complaint so as to set forth more fully the theory upon which he had elected to stand. An order was made granting such leave, and the defendants appealed to the Appellate Division, where there was an affirmance. The motion for leave to amend was granted upon condition that the plaintiff pay all the costs of the action to that time. These costs have presumably been paid by the plaintiff and accepted by the defendants. There has been no further review of that order and it is, therefore, the law of this case upon the character of the complaint and the nature of the issues involved.
The voluminous briefs of counsel, covering hundreds of pages, present many arguments which we have not overlooked. We have simply endeavored to confine our discussion to the one central issue, with only such reference to related questions as the disposition of that issue, in the present status of the case, seems to require. For the reasons given we think the judgment should be affirmed, with costs.
The question which this appeal presents is whether the plaintiff is entitled to equitable relief in the nature of a vendor's lien upon certain real estate, which had been conveyed by his debtor, Jacob Cohn, to another; in part consideration of which the grantee "agreed to pay and to save harmless the said Jacob Cohn of and from certain debts and liabilities in said agreement set forth." At the time of this conveyance, June 2d 1897, the plaintiff's claim is found to have been unliquidated and disputed; but it is, also, found that the agreement of the grantee of the property contained his name. A suit was commenced by the plaintiff against Jacob Cohn and resulted in a judgment, in 1902, in the former's favor and it is found that, subsequent to the commencement of the suit, he was informed concerning the agreement of Jacob Cohn's grantee. After obtaining judgment against Jacob Cohn and being unable to enforce its payment, by execution and proceedings thereupon, the plaintiff instituted this action in equity to have the judgment debt declared to be a lien upon the property conveyed by Jacob Cohn and held by the defendants; into whose hands it had come, either under the will of Theresa Cohn, Jacob Cohn's grantee, or through mesne transfers. The trial court, holding the plaintiff entitled to a vendor's lien upon the real estate transferred by Jacob Cohn in 1897, adjudged the debt to be a lien and charge upon certain surplus moneys, "proceeds of the foreclosure and sale of the premises described in the complaint." This judgment has been affirmed by the Appellate Division and the question, upon this appeal, is whether the respondent was entitled to the equitable relief decreed. I think that he was not. By the promise of Jacob Cohn's grantee to pay his debt to the plaintiff, among other creditors named in her agreement, the promisor assumed and made that debt her own and an action at law, adequate and complete, would lie against her for its recovery. ( First National Bank v. Chalmers, 144 N.Y. 432.) She, then, became primarily liable to the plaintiff, and Cohn stood, in relation to the agreement, as surety. The plaintiff has not shown that he had, unsuccessfully, resorted to an action at law against the grantee; nor does he aver any facts to show that he was excused from bringing such an action, by the intervention of some cause cognizable at law, or in equity. The court found that he was informed of the agreement to pay him and it must be assumed that the promisor was able to perform. Not having exhausted his plain legal remedy, I do not think that the plaintiff had a standing to ask the aid of a court of equity to apply the extraordinary remedy of a vendor's lien in his behalf. Plaintiff's claim against Jacob Cohn being unliquidated and disputed at the time of the latter's transfer of his property, no lien could well attach. Nor was it necessary that it should; for, so far as it appears, he could have recovered payment from Cohn's transferee upon her agreement to pay. Not having adopted, nor sought to enforce, her agreement, I do not see how the plaintiff can well assert the right to a vendor's lien upon the property conveyed for the amount of his unpaid debt. A contract is essential to the existence of a vendor's lien for the unpaid purchase money and the vendee's right to a lien, upon the default of the vendor, to the extent of any payment made, has only recently been recognized by this court. The contract between the parties is the essential basis of the lien, in either case, to protect vendor, or vendee, upon performance of their respective agreements. ( Davis v. Rosenzweig Realty Operating Co., 192 N.Y. 128; Elterman v. Hyman, Ib. 113.) To extend the right, under the circumstances of this case, seems to me to be carrying the equitable doctrine too far. The doctrine of a vendor's lien is an anomaly in the law, any way. Plaintiff was not a party to any contract, upon which he might predicate a claim for a lien, and he does not appear to have been remediless at law.
Perhaps to repeat somewhat, I say, upon what theory can the plaintiff claim to be entitled to a vendor's lien; that is, to stand in Jacob Cohn's shoes? Cohn's transfer of the property was absolute and perfectly good as to the plaintiff. The plaintiff's remedy was, then, against the transferee; whose agreement inured to his benefit; for it ran to him. Until shown to be unenforceable, how could the plaintiff claim to be without an adequate remedy at law?
I advise the reversal of the judgment and that a new trial be ordered; the costs to abide the event.
CULLEN, Ch. J., WILLARD BARTLETT and CHASE, JJ., concur with WERNER, J.; HISCOCK and COLLIN, JJ., concur with GRAY, J.
Judgment affirmed.