Case ID: ny-st-rep_53/html/0019-01.html
Source: Caselaw Access Project
Author: {"author": "O'BRiEisr, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Augustus B. Dudley, App’lt, v. The Congregation of the Third Order of St. Francis, Resp’t.
    
    
      (Court of Appeals,
    
    
      Filed June 6, 1893.)
    
    1. Mortgage—Benevolent corporations.
    A mortgage of real estate made by a religious or charitable corporation without obtaining leave of the supreme court is-void.
    
      2. Same.
    In an action brought to foreclose a mortgage given by a religious or
    
      charitable corporation, for the execution of which the requisite leave of the court had not been obtained, the court cannot allow plaintiff to prove the loan and recover a judgment at law upon the debt.
    Appeal from judgment of the supreme court, - general term, first department, modifying and affirming judgment at special term dismissing complaint and granting defendant affirmative relief.
    
      Wm. H. Shepard, for app’lt; Peter B. Olney, for resp’t.
    
      
       Affirming 47 St. Rep., 60.
    
   O'BRiEisr, J.

It is important in the determination of the legal questions arising upon this appeal to get a clear view of the precise nature and character of the action. The complaint alleges that on or about the 21st day of July, 1888, the defendant, a domestic corporation, for the purpose of securing to the plaintiff the payment of the sum of $2,000, with interest, executed and delivered to the plaintiff a bond in double that sum, conditioned for the payment of the debt in one year from date, with semiannual interest. That as collateral security for such payment the defendant also executed and delivered at the same time to the plaintiff a mortgage upon certain real estate therein described, which contained a promise or covenant for the payment of the debt at the time and in the manner stipulated in the bond. That the debt was not paid, but default made in the conditions upon the performance of which both instruments were to become void. The prayer for judgment is that the lands be sold and the proceeds applied upon the debt, and in case of a deficiency, that the defendant be adjudged to pay the same.

The answer averred that the defendant was incorporated under the act for the formation of charitable, benevolent and other societies, being chap. 319 of the Laws of 1848. That no order of the supreme court was ever made permitting the defendant to mortgage its real estate, as required by chap. 50 of the Laws of 1854, and the execution and delivery of the mortgage was, therefore, put in issue by a denial of these allegations in the complaint. For another defense it was separately stated that the bond was not the obligation of the defendant. That it was executed together with the mortgage by or under the direction of certain persons named, who had previously usurped and intruded into the office of directors, which places they held wrongfully, to the knowledge of the plaintiff, when the bond and mortgage was executed and delivered, and that subsequently, in an action brought by the People, they were ousted and the rightful and lawfully elected directors reinstated. That the instruments were not sealed with the corporate seal or executed or delivered by any corporate au- * thority. It is stated that evidence was given in support of both defenses, but in the disposition of the case the courts below have passed upon but one of them. It was not claimed that the court had ever given its assent to the execution or delivery of the mortgage, and it is found that no such assent was given and no application therefor ever made. There are also findings that the defendant carried on and maintained “ St. Elizabeth’s Hospital ” upon the lands covered by the mortgage. That both the bond and mortgage were executed by and under the direction of persons who at the time were in possession of the offices of the corporation, and it was authorized by persons who, at the time, assumed to be and were in fact acting as the trustees and directors, though they were afterwards ousted from these places by the judgment of the court. It was held that the mortgage was void for the reason that it was made without the order of the court and that the plaintiff was not entitled to a judgment at law upon the bond. The record, therefore, presents two questions: (1) The validity of the mortgage. (2) The right of the plaintiff to recover in this action a general judgment at law upon the debt, evidenced by the bond, in the event that the mortgage is invalid.

The better opinion and the weight of judicial authority is in favor of the view that the English statutes passed in the reign of Elizabeth, restricting religious and, charitable corporations from alienating their real estate, have been adopted and followed by the courts of this state in determining the powers which such corporations possess to alienate or incumber their real property. It may be true, as the learned counsel for the plaintiff contends, that these statutes, as such, were never introduced here, but the principle embodied in them became the rule of our courts and the policy of the legislature in dealing with questions of the same nature and character, and, therefore, a part of our municipal law. Mad. Av. Bap Ch. v. Bap. Ch. in O. St., 46 N. Y., 141; De Ruyter v. Tr. St. Pet. Ch., 3 Barb. Ch., 122; Bogardus v. Trinity Ch., 4 Paige, 178. But the question whether these statutes were or were not actually adopted here we do not regard as an important or practical one in this case. This court is firmly committed to the doctrine that § 11 of chapter 60 of the Laws of 1813, 3 R. S. (Banks’ 8th ed.), p. 1888, § 11, which is substantially identical in language with that now under consideration, operates to forbid sales oh the real estate of religious corporations without the assent of the court, though the statute in terms simply makes it lawful for the chancellor to make the order in case he shall deem it proper. Mad. Av. Bap. Ch. v. Bap. Ch. in O. St., supra; Refd. Gh. v. Schoolcraft, 65 N. Y., 134, 143; Christie v. Gage, 71 id., 189, 190; Manning v. Moscow Pres. So., 27 Barb., 53 ; Mad. Av. Bap. Ch. v. O. St. Bap. Ch., 73 N. Y., 82. The act of 1854, ch. 50, § 1, applied to benevolent, charitable, scientific or missionary societies, but as it is almost identical in terms, and as it must be presumed to have originated in the same general policy, and was intended to prevent the same abuses, it should receive the same construction as the act of 1813, which applied to religious corporations. It cannot, we think, be doubted that the legislature intended to and did enact that compliance with that statute should be absolutely necessary to the validity of any mortgage of real estate which corporations of the class described therein should execute and deliver. It was assumed that without the statute such corporations could not mortgage theirlands at all, and the legislative intent was to permit them to do so only when the assent of the court was first obtained. Therefore, the mortgage in question lacked an element indispensable to its validity, and the courts below properly denied to the plaintiff a judgment of foreclosure.

The ruling of the court refusing to allow the plaintiff to prove the loan and recover a judgment at law upon the debt remains to be considered. An action to foreclose a mortgage is a proceeding in a court of equity which is regulated by statute. Code Civ. Pro., chap. 14, title 1, art. 4, § 1626. The holder of a bond and mortgage has two remedies. He may proceed at law to recover a judgment for the debt, represented by the bond, and enforce the judgment in the usual way, or he may proceed in equity by action to foreclose the mortgage and appropriate the land embraced in it to the payment of the debt. While an action is pending for the foreclosure of the mortgage, or of the final judgment therein, an action at law upon the bond is prohibited, without leave of the court, § 1628. In an action to foreclose, the complaint must state whether any other action has been brought to recover any part of the mortgage debt, and if so, whether any part thereof has been collected. § 1629. And where the plaintiff has recovered judgment upon the debt, he cannot maintain an action on the mortgage unless an execution has been issued upon the judgment and returned unsatisfied in whole or in part. § 1630. Therefore, a party is not entitled, as of right, to both remedies at the same time. In an action in the nature of a proceeding in revi to foreclose a statutory lien, and where a personal judgment against some of the parties follows as incidental to the general relief, such judgment cannot be rendered where the plaintiffs fail to establish the lien. Burroughs v. Tostevan, 75 N. Y., 567.

In an action to foreclose a mortgage a judgment for deficiency is authorized, and may be rendered as incidental to the principal relief demanded, but it cannot be rendered in an action where the plaintiff fails to establish the mortgage. The peculiar statutory provisions applicable to actions of foreclosure above referred to indicate that it was never intended to permit the joinder in the same complaint of two separate causes of action, one at law to recover a personal judgment on the bond for the debt, and the other in equity to procure a sale of the land covered by the mortgage given to secure the same debt and the application of the proceeds thereon, and if not, then the complaint in this case does not contain but a single cause of action, and that in equity, for the foreclosure of the mortgage lien. It is true that the giving of the bond is stated, but that is incidental to the main facts alleged, and only necessary, if at all, for the purpose of showing the consideration of the mortgage and the amount of the deficiency, if any.

When the plaintiff failed to establish the mortgage he failed to establish his cause of action in its whole scope and meaning, and he could not stand upon the incidental allegations in regard to the bond. It is not necessary to inquire how far or under what circumstances it was within the power of the court to permit him to change the form of the action to one for the enforcement of some purely legal remedy. He applied to the court for that purpose at the trial, and the permission was refused, in the exercise of that discretion which the court undoubtedly possessed. The question that we are now concerned with is whether it was legal error in the court below to hold, after the plaintiff had failed to establish his equitable cause of action, that he was not entitled, upon the same complaint, to a personal judgment against the defendant. We think not. The case, as an action in equity, was terminated by the finding of the court that the plaintiff had no valid mortgage to foreclose, and, without the permission of the court in some form, the plaintiff was not entitled in the same action to a different remedy. Beck v. Allison, 56 N. Y., 366.

The established rule, that when equity has obtained jurisdiction of the parties and the subject-matter of the action it may adapt the relief to the exigencies of the case, even to the extent of rendering a personal judgment, in order to prevent a failure of justice, does not apply here. That rule applies when the general basis of fact, upon which equitable relief was sought has been made out, but, for some reason, it becomes impracticable to grant such relief, or where it would be insufficient, and not to a case like this, where it appears that there never was in fact any ground for equitable relief whatever, but the sole remedy was an action at law. When facts are made out which bring the case within the general jurisdiction of equity, the court will not allow the case to fail because the specific relief prayed for is no longer practicable, but in such a case, as a substitute for the relief demanded, will- award an equivalent in damages, thus ending the controversy, instead of sending the parties to a court of law for that purpose. Valentine v. Richardt, 126 N. Y., 277; 37 St. Rep., 12; Lynch v. El. R. R. Co., 129 N. Y., 274; 41 St. Rep., 541; Van Rensselaer v. Van Rensselaer, 113 N. Y., 213; 22 St. Rep., 947.

In this case the plaintiff has failed because he never had any ground upon which to invoke equitable jurisdiction, and, in such a case, the court will not attempt to try another and purely legal cause of action. The question is not one of the right to a jury trial. That mode of trial is waived by the plaintiff when he elects to bring an action for relief, both legal and equitable in its nature, in respect to the same cause of action, and by a defendant when he omits to insist upon it in the answer by taking the proper objection, which is usually done by a distinct allegation that an adequate remedy exists at law, or by demanding it, or raising the question at the proper time in cases where he is entitled to that mode of trial according to the practice in equity cases. Cogswell v. N. Y. N. H. & H. R. R. Co., 105 N. Y., 319; 7 St. Rep., 203; Town of Mentz v. Cook, 108 N. Y., 504; 13 St. Rep., 845; Ostrander v. Weber, 114 N. Y., 95; 22 St. Rep., 979; Truscott v. King, 6 N. Y., 147. It is the case of an action in equity where none but equitable relief was demanded or claimed, commenced and tried before the court as such, and a finding made that the plaintiff was not entitled to the relief sought, with facts appearing upon the trial that might entitle the plaintiff to a money judgment in an action at law, which he did not claim in his complaint, and the right to which he in no way suggested to the court until the whole theory of his action, as presented by the pleadings, failed. Whatever power the court may have to permit a party, by amendment or otherwise, to thus change the whole scope and nature of his action, it cannot be demanded as a right, and a refusal by the court, under such circumstances, to go on and try other questions upon the same pleadings, and administer other remedies, purely legal in their nature, which are properly the subject of another and different form of action, is not error. Bradley v. Aldrich, 40 N. Y., 504; Wheelock v. Lee, 74 id., 500; Hawes v. Dobbs, 137 id., 465 ; 51 St. Rep., 271.

There are no other questions in the case, and no exceptions presenting any points that could possibly aid the plaintiff or change the result

The judgment should be affirmed, with costs.

All concur, except Andrews, Cli. J., not voting.