Thomas v. Zahka

Putnam, J.: Defendants were vested with the title to this mortgage, and had the full right to protect their own superior interests. They did not become trustees for plaintiff. The two portions of the original debt were severed, as if secured by separate and successive mortgages. Notice to plaintiff by making her party to any foreclosure was, of course, necessary, since otherwise the decree and sale might be defective. (Wilt. Mort. Forec. § 116.) Defendants had agreed to pay over to, or account to, plaintiff for what she might be entitled to beyond defendants’ $2,000 interest. They had the right to collect, or exchange the security. (Lowenfeld v. Wimpie, 139 App. Div. 617; 203 N. Y. 646.) In view of the amount of prior incumbrances, this $3,500 mortgage was speculative and precarious, depending, as it did, on future prospects, rather than on actual values. [176] In the absence of bad faith, defendants were not obliged to wait till after the mortgage matured, with the possible extinguishment of the security, before acting for their own protection. Such acts as exchanging, or compromising the security, were within the ample powers conferred by the two instruments, defendants, however, being always answerable for bad faith or waste, or like impairment of the security. (State Bank v. Smith, 155 N. Y. 185, 200.) It would have been prudent to have given plaintiff notice of this step, but if defendants were remiss in this respect, that alone did not amount to waste. As plaintiff simply averred a satisfaction of the mortgage, she did not show any ground for damages, since the mortgaged property was fully covered by prior liens. Had bad faith been charged, defendants might have been called upon to justify their relinquishment of this security on the terms shown. The judgment should be reversed and a new trial granted, costs to abide the event. Jenks, P. J., Mills and Blackmar, JJ., concurred; Rich, J., voted to affirm upon the opinion of Mr. Justice Cropsey at Trial Term [99 Misc. Rep. 333]. Judgment reversed and new trial granted, costs to abide the event.