Case ID: ny-st-rep_5/html/0021-01.html
Source: Caselaw Access Project
Author: {"author": "Daniels, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Julien T. Davies, receiver, etc., respondent, v. The New York Concert Company, (limited), appellant.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed October 15, 1886.)
    1. Mortgage — Trustee Named in — When action to foreclose may be BROUGHT BY A BONDHOLDER ON THE REFUSAL OF THE TRUSTEE TO BRING IT.
    , In this action the plaintiff, as receiver of G. and W., was possessed of certain bonds issued by the defendant and secured by a mortgage on its real estate. The mortgage was issued to D. as trustee for the benefit of the bondholders. The plaintiff applied to D. to institute a foreclosure suit upon the mortgage to collect the amount of certain overdue coupons remaining unpaid, which he refused to do. Held, that where a trustee refuses, upon a proper request made to him for that purpose, to take the necessary legal proceedings for the protection of the beneficiaries under the trust, they may, by the appropriate form of action, proceed for their own protection and the enforcement and maintenance of their rights and interests under the trust. That the default of the mortgagor in the particular respect must first be brought to the knowledge of the trustee and a request made to him to proceed upon the mortgage for that default.
    2. Same — When non-payment of interest does not prove default.
    Where the mortgage provided that it was made for the “ security and protection of the owners and holders of the bonds and interest warrants aforesaid, or any or either of them, and for the enforcing payment thereof when payable in accordance with the true intent and meaning thereof, and of the stipulations of this conveyance,” and “ so long as any of the said bonds shall he and remain outstanding the party of the first part will appoint and maintain ” some New York city bank “as its agent whereat payment shall he made of the interest and principal of the bonds secured. ” It further provides that, if the company shall pay the holders of the bonds the principal and interest thereon at the time and place and in the manner stipulated in the bonds and coupons attached thereto, then the mortgage to he void. It also provides that, “ if default shall be made in the payment of the principal or interest of the bonds aforesaid or any of them or the interest thereon,” the mortgage may be foreclosed by advertisement or otherwise; and that “ until default shall be made in the payment of the principal or interest of the bonds hereby secured or some of them . .. the party of the first part shall be suffered and permitted to possess, hold and enjoy the said premises,” etc. Held, that the simple circumstance that the coupons have not been paid does not disclose that default which, by the provisions of the mortgage was required to take place before action for its foreclosure could be instituted.
    3 Same — Pleading — Demurrer—What'fapt must be alleged to set FORTH A CAUSE OF ACTION IN THE FORECLOSURE OF A MORTGAGE FOR DEFAULT IN RAYING INTEREST.
    The complaint avers upon the subject of defendant’s default in payment that, “ among the interest coupons which were held and owned by the said firm of G-. & W. were twelve coupons for $15 each,” etc., “ and that said coupons were not paid at maturity nor was any of them paid, or any part thereof,” and that is all that is stated as to the fact of the non-payment of these coupons. It is nowhere alleged that the company had neglected or refused to pay them. Neither is it alleged that it had been requested to pay them and had. neglected to comply. • On demurrer on the ground that the complaint did not state a cause of action. Held, that the demurrer was well taken. That neither the default nor any facts from which it could be inferred to exist were alleged or set forth in the complaint.
    Appeal from an interlocutory judgment overruling a demurrer to tlie complaint.
    
      David Leventritt, for appellant; William B. Hornblower, for respondent.
   Daniels, J.

The first objection does not require to be specially considered, for it has now become very well settled, where a trustee refuses, upon a proper request made to him for that purpose, to take necessary legal proceedings for the protection of the beneficiaries under the trust, they may, by the appropriate form of action, proceed for their own protection, and the enforcement and maintenance of their rights and interests under the trust. Weetjen v. St. Paul, etc. R. R. Co., 4 Hun., 529, 5 id. 265; Greaves v. Gouge, 69 N. Y. 155; Brinkerhoff v. Bostwick, 88 id. 52, 56; Memphis City v. Dean, 8 Wall 65, 73.

A more serious difficulty in the way of the maintenance of the plaintiff’s action is presented by the other objection stated in the demurrer, and that is that the complaint does not state facts sufficient to constitute a cause of action. What the complaint avers upon the subject of the defendant’s default in payment is, that “ among the interest coupons which were held and owned by the said firm of Grant & Ward, were twelve coupons for fifteen dollars ($15) each, payable on the first day of January, 1884, and twelve coupons for fifteen dollars ($15) each, payable on the first day of April, 1884, and that said- coupons were not paid at maturity, nor Avas any of them paid, or any part thereof.” And that is all that has been stated as to the fact of the non-payment of these coupons. It is nowhere alleged that the company had neglected or refused to pay them, as it was obligated to do that by the mortgage, or that it was in any manner in default. Neither is it alleged that it has been in any form requested to pay them, or that it has neglected to comply Avith any demand, or request, for that purpose. But all that is alleged is, that these coupons were not, nor was any part of them paid at maturity. And that is consistent with the fact that no default had been made by the company which would, according to its own terms, permit a foreclosure of the mortgage.

The mortgage contemplated the intention to have been, that more than this mere fact of non-payment, should transpire before. the right to bring an action for its foreclosure could arise. For it has been provided in it, that it was made for the “ security and protection of the owners and holders of the bonds and interest warrants aforesaid, or any or either of them, and for the enforcing payment thereof, when payable, in accordance with the true intent and meaning thereof, and of the stipulations of this conveyance,” and “so long as any of the said bonds shall be and remain outstanding, the party of the first part will appoint and maintain, in the Marine National Bank, in the City of New York, or some other bank, or a trust company in the said City of New York, as its agent, whereat payment shall be made of the interest and principal of the bonds secured,” and no default in the observance of this obligation is alleged in the complaint. It has been further provided in the mortgage that if the “ party of the first part, its successors or assigns, shall well and truly pay, or cause to be paid unto the holder of each and every of the bonds aforesaid, the principal and interest to grow due thereon at the times and places, and in the manner stipulated in the said bonds and the coupons, or interest warrants, attached thereto, according to the true intent and meaning thereof . . . then these presents and the estate hereby granted, shall cease, determine and be utterly null and void.” It is further declared that, “ if default shall be made in the payment of the principal or interest of the bonds aforesaid, or any of them, or of the interest thereon, . . . the said party of the second part, his successors, legal representatives or assigns shall also be at liberty immediately after any such default, upon a complaint filed, or other proper legal proceedings being commenced for the foreclosure of tins mortgage on account of default in the payment of principal or interest, or both,” ... to apply for and secure the appointment of a receiver, and to apply the rents and profits “ to any deficiency which may exist after applying the proceeds of the sale of the said premises to the payment of the amount due, including interest and the costs of the foreclosure and sale.” It was also provided “ that in case of any such defardt as aforesaid,” the mortgage might also be foreclosed by an advertised sale, and the amount of the indebtedness paid out of the proceeds, and “ until default shall be made in the payment of the the principal or interest of the bonds hereby secured, or some of them,” . . . “ the party of the first part shall be suffered and permitted to possess, hold, and enjoy the said premises,” etc. These clauses of the mortgage are in no manner affected, or restricted, in any respect by any other provisions, or directions, contained in the instrument, and they clearly contemplate the intention to have been that default should be made by the company in the payment of the mortgaged debt, or of some part of the interest thereon, before an action of foreclosure can be instituted and maintained. The simple circumstance, that the coupons have not been paid, which is all that is averred in the complaint, and is not inconsistent with the fact of the performance of all the obligations of the company, as they have been declared, does not disclose that default which by the provisions of the mortgage was required to take place before an action for its foreclosure, and a sale of the mortgaged premises could be instituted.

In this respect the case differs from the authorities of Wolcott v. Van Santvoord, 17 John, 248; Caldwell v. Cassidy, 8 Cowen, 271; Hills v. Place, 48 N. Y. 520; Locklin v. Moore, 57 N. Y., 360, and Indig v. National City Bank, 80 N. Y., 100, 101, relied upon by the respondent sustaining the right of a party to maintain an action upon a draft, agreement, or promissory note made payable at a particular place, without alleging a demand of payment either at that place, or of the maker of the obliga^tion. For in those cases, the liability of the maker depended wholly upon a simple agreement to pay the debt, and it was sufficient to show in the first instance that payment had not been made, leaving it to the debtor to establish the fact that he had provided funds at the place of payment, at the time of the maturity of the demand for its payment there. For in this case the right of foreclosure was not made solely dependent on the fact of the coupons not being paid, but it was made to depend upon an actual default on the part of the company in the performance of these stipulations contained in the mortgage. And neither that default, nor any facts from which it can be inferred to exist, have been alleged or set forth in the complaint. What was legally requisite for that purpose was to show in some form that the defendant had failed to fulfill or perform the obligations it had assumed for the payment of these interest warrants. And neither of the cases of Arents v. Com., 18 Grattan, 750; Savannah R. R. Co. v. Lancaster, 62 Alabama, 555, or Philadelphia R. R. Co. v. Johnson, 54 Penn., 127, decides anything relieving the plaintiff from the necessity disclosed by this mortgage of stating a default on the part of the company itself, before a foreclosure suit upon it can be sustained. For in each of them, the default of the company was affirmatively made to appear. That was not averred, or disclosed in this action, and the complaint, for that reason, did fail to state facts constituting a cause of action.

It has been further alleged in the complaint that the company neglected to perform the covenant in the mortgage to bear, pay and discharge, as soon as the same became due and payable, all taxes, charges and assessments imposed by law upon the mortgaged premises. But that averment will not entitle the plaintiff to maintain the action, for the trustee was not informed of this default, or requested to commence a foreclosure of the mortgage on tbat account, but tbe information and request was restricted to a notice informing tbe trustee of the default in tbe payment of the coupons, and it was for that alone tbat tbe plaintiff became entitled to institute this action for tbe foreclosure of the mortgage. To secure tbat right to it for tbe omission of tbe company to pay taxes, charges and assessments, its default in tbat respect must first be brought to tbe knowledge of tbe trustee, and a request made to him to proceed upon tbe mortgage for tbat default. No knowledge or information of tbat fact was given to tbe trustee, and be is not in default, therefore, for failing to institute a foreclosure on tbat account, and until be shall be put in default, tbe plaintiff, as a party interested under the mortgage, has no right to take this proceeding because of tbat failure to pay. As tbe case has been presented, tbe second ground of demurrer was well taken, and tbe judgment should be reversed and a judgment entered sustaining tbe demurrer, with leave to the plaintiff to amend the complaint within twenty days after notice of tbe decision, on payment of tbe costs of tbe demurrer, and tbe costs and disbursements of tbe appeal.

Brady, J., concurs.