Salmon v. Allen

Davis, P. J.: The facts of this case as they appear in the findings of the referee and in the evidence, are substantially as follows: The appellant was owner of certain premises which she contracted to sell to one Charles H. Beman. The contract provided for the conveyance by the appellant to Beman, when he should have commenced and brought the building of certain houses to a designated stage. Afterwards, when Beman had commenced such buildings and had [30] become entitled to tbe conveyance, tbe appellant, at his request, conveyed tbe premises to one Daniel D. Beman, wbo executed to ber a purchase-money mortgage for $10,000. Daniel D. Beman, subsequently, at tbe request of Charles H. Beman, executed to bim tbe bond and mortgage sought to be foreclosed in this action. Charles H. Beman assigned this mortgage to one Biggs, as collateral security for certain advances; Biggs subsequently assigned tbe same to one Boody. These assignments were put upon record. Mrs. Allen, tbe appellant, commenced a foreclosure suit of her mortgage, executed by Daniel D. Beman for tbe ptmcbase-money of tbe premises, and to that action she made parties defendant Daniel T. Beman and Lucinda bis wife, Charles H. Beman and others, but did not make Boody, tbe assignee wbo then held tbe mortgage as collateral security, a party. Upon a decree in that foreclosure suit, tbe property was sold and bought by Mrs. Allen, and by ber contracted to be sold and afterwards conveyed to one Charles G-edney, wbo is a party defendant to this action. After tbe judgment of foreclosure in Mrs. Allen’s action, on May 7, 1873, Boody assigned tbe bond and mortgage, given by Daniel T. Beman to Charles H. Beman, to tbe plaintiff, as attorney, for a nominal consideration. Subsequently, tbe plaintiff commenced this action of foreclosure upon tbe mortgage assigned to bim, making Gedney and bis wife and the appellant Mrs. Allen, parties to tbe action, and alleging in bis complaint that they claimed to have or bad some interest in or lien upon tbe mortgaged premises or some part thereof, which interest or lien bad accrued subsequently to tbe lien of bis mortgage. Mrs. Allen answered in tbe action, amongst other things averring that tbe mortgage made by Daniel T. Beman to Charles H. Beman, which tbe plaintiff was seeking to foreclose, bad no valid or legal consideration, and setting up tbe purchase-money mortgage made to ber and tbe foreclosure thereof and tbe sale and purchase by ber, and that she bad taken possession of tbe property and conveyed the same to Gedney, and that a large sum of money, to wit, $20,000 or $25,000 bad been expended in erecting buildings thereon, and praying that tbe mortgage mentioned in tbe complaint of tbe plaintiff be adjudged to have been foreclosed and cut off by tbe judgment in ber action. It appears that tbe assignment of tbe plaintiff’s mortgage by [31] Charles H. Beman to Biggs, was made as a collateral security for moneys advanced; that the assignment to Boody was substantially of the same character, and that the assignment to the plaintiff in this action was, substantially, without consideration. The referee has found all these assignments to have been made in good faith and for valuable consideration. He does not seem to have regarded it as of any importance that these assignments were made as collateral to an indebtedness, which may have been at the time of Mrs. Allen’s foreclosure much less than the amount of the mortgage now sought to be foreclosed. Charles H. Beman was a party to that foreclosure, and so far as he had any interest in the mortgage which had previously been assigned by him as collateral, to Biggs, and then by some arrangement transferred also as collateral to Boody, that interest was cut off by the foreclosure sale. The referee ought, therefore, to have made some inquiry into the condition of the claim which Boody had to the mortgage at that time, so as to have ascertained the amount for which he was entitled to hold it as collateral as against Charles H. Beman. The plaintiff as assignee of Boody, is only entitled to enforce that mortgage, under the circumstances, for the amount and to the extent that Boody could have claimed as between himself and Charles IT. Beman (for all beyond that would be Beman’s interest in. the mortgage), and that would be only for the amount that Biggs is entitled to hold it for, as between him and Beman. The referee does find that the claim and interest of Biggs in the bond and mortgage was transferred to Boody for value, but fails to find what that interest was. Biggs could convey no greater interest, by his assignment to Boody than he himself had as between him and Beman, and, therefore, if Beman had any interest in the mortgage which was held by Biggs as collateral, it would be cut off pro tambo by the foreclosure; and equity would only permit the enforcement of the mortgage as against the property, under the circumstances of this case, to the actual amount at which Biggs and Boody could hold it in a controversy between them and Beman. On this question the case is not only in some degree of confusion, but has a somewhat disagreeable atmosphere. The plaintiff had no right to file his bill of foreclosure in the manner he did, malting the appellant a party as an alleged junior [32] incumbrancer. By doing so he necessarily forced her to come in and answer and set up the facts of the case for her protection; and for that reason he ought to have been charged with the costs of the defense. But a serious difficulty arises in this case upon the facts found by the referee, and established by the evidence, as to the remedy to which the plaintiff is entitled. By the foreclosure of Mrs. Allen’s mortgage and her purchase at the sale, the fee has become vested in her and her mortgage is completely extinguished. By the failure to make Boody a party to that suit the foreclosure is inoperative to cut off his right of redemption; but it does not follow from that fact that he has the right to treat the mortgage -to Mrs. Allen as still subsisting as a mortgage only, and to have the judgment of the court directing that the premises be sold on his mortgage subject-to the lien of Mrs. Allen’s mortgage. That course would tend to throw the title into great confusion, for there can be no doubt that, as between the owner in fee and the other persons who were made parties to the foreclosure of Mrs. Allen’s mortgage, her title to the lots under the foreclosure' is complete, and her mortgage is extinguished by the conveyance to her of the fee under the decree. All the right that the plaintiff has, therefore, in equity, under his junior mortgage, is the right to redeem the premises from Mrs. Allen, by paying off the amount of her mortgage and interest, unless she chooses to come in and pay the amount of his mortgage for the purpose of perfecting her title. The complaint and answer present together a state of pleadings under which, on proper findings by the referee, a proper judgment can be made by the court. We think it was not proper to have adjudged a sale of the fee of the premises subject to the lien of Mrs. Allen’s mortgage, as the judgment in the court below does, but that instead of such a judgment a decree of redemption should have been entered in accordance with the established practice in equity. (Gage v. Brewster, 31 N. Y., 218; Vroom v. Ditmas, 4 Paige, 526; Vanderkemp v. Shelton, 11 id., 28; Benedict v. Gilman, 4 id., 58; Pardee v. Van Anken, 3 Barb., 534; Brainard v. Cooper, 10 N. Y., 356; see opinion of Mullin, J., in Gage v. Brewster, supra, at p. 226 ; People v. Beebe, 1 Barb., 379 ; 2 Barb. Ch. Pr. [rev. ed.], p. 193 et seq., and notes.) [33] Upon the facts before the court, the decree might probably be modified, but we think the question as to the amount for which the plaintiff’s mortgage is a substantial lien on the equity of redemption, as above suggested, ought to receive further investigation. ¥e have not considered the question whether the plaintiff should be charged with the value of subsequent improvements in order to redeem. The facts upon which that question can arise will probably be more fully presented upon another trial. The judgment should be reversed, new trial granted, with costs to appellant to abide event. Brady and Daniels, JJ., concurred. Judgment reversed, new trial granted, costs to appellant to abide event.