Case ID: ad_153/html/0677-01.html
Source: Caselaw Access Project
Author: {"author": "\n      Scott, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Joshua Silverstein and Others, Respondents, v. Menno Brown, Appellant, Impleaded with Louvre Realty Company and Others, Defendants.
    First Department,
    December 6, 1912.
    Mortgage — foreclosure — personal liability of purchaser of mortgaged premises for interest paid on prior mortgage — decree of foreclosure . modified — provision for increasing mortgage debt by interest paid on prior mortgage construed — whenjudgmentnotenteredbydefault.
    A purchaser of mortgaged premises, who enters into agreements with the holder of the mortgage for an extension of time and agrees to pay the principal sum then due, with interest, at stated periods, does not render himself liable upon the foreclosure of the mortgage to a personal judgment for the amount of interest which the owners of the mortgage have paid on a prior mortgage, although such mortgage provides that in default of payment of interest due upon any prior mortgage the owner of the present mortgage may pay the amount of such interest, which thereupon becomes a lien upon the premises secured by the present mortgage.
    A judgment of foreclosure and sale directing that a personal judgment be entered against such purchaser for any deficiency that may arise upon a sale of the mortgaged premises, should be modified so as to provide that the amount for which said purchaser is to be personally liable shall be the deficiency, if any, which shall arise in the amount due for principal and interest, not including the sum paid for interest on the prior mortgage, after deducting the costs, allowances, disbursements and unpaid taxes.
    Provisions for increasing the mortgage debt by the amount paid for interest on prior mortgages are intended merely to protect the mortgagee’s security and do not increase the personal liability of any one who has not assumed its payment.
    Where the owner of mortgaged premises appears in a suit of foreclosure and demands service of all papers except the complaint, he reserves the right to be heard on the form of the judgment to be entered.
    Appeal by the defendant, Menno Brown, from part of a judgment of the Supreme Court in favor of the plaintiffs, entered in the office of the clerk of the county of New York on the 23d day of February, 1912, upon the decision of the court rendered after a trial at the New York Special Term.
    
      Samuel H. Sternberg, for the appellant.
    
      Jacob R. Schiff, for the respondents.
   Scott, J.:

The defendant Menno Brown appeals from so much of a judgment of foreclosure and sale as directs that a personal judgment be entered against him for any deficiency that may arise upon a sale of the mortgaged premises.

On January 15, 1906, one Samuel Ramsfelder, not a party to this action, made, executed and delivered to the McKinley Realty and Construction Company a bond for $16,000 payable on December 31, 1910, and to secure the payment thereof executed the mortgage sought to be foreclosed in this action. The mortgage further provided that in default of payment of interest due upon any prior mortgage, the owner of the present mortgage might pay the amount of such interest, which thereupon became a lien upon the premises and secured by the present mortgage.

The bond and mortgage in due course came into the ownership of the plaintiffs, and the mortgaged premises were acquired by Menno Brown, the present appellant.

On December 12, 1910, Brown entered into an agreement with plaintiffs, who then owned the bond and mortgage, for an extension of the time for the payment of the principal sum due, which had then been reduced to the sum of $9,000. This agreement contained the following clause which constitutes the only agreement on the part of Brown to assume the payment of the mortgage debt, or any part of it: “And the said party of the first part [Menno Brown] agrees to the extension of the time of payment of the principal, to wit, the sum of Nine thousand ($9,000) Dollars now due and payable, and for his heirs, executors- and administrators does hereby covenant and agree to pay the same at the time and in the manner hereinbefore specified, and to pay the interest thereon on the days on which the same becomes due, as hereinbefore mentioned.”

Brown thereafter transferred the real estate to certain parties named Uhlfelder and Weinberg. The plaintiffs paid about $1,200 of interest due on a former mortgage and seek, as the mortgage permits them to do, to tack this sum onto the principal sum now due (amounting to $6,000) on the present mortgage. The judgment of foreclosure and sale provides that the referee shall pay out of the proceeds of sale the expenses thereof, the taxes and assessments due upon the property, and the costs of the action; that he shall then pay to the plaintiffs the amount found due to them, with interest, including the $1,200 paid for interest upon the superior mortgage, and, if the amount realized be found insufficient to meet all these payments, that the plaintiffs shall have a personal judgment against appellant for the deficiency.

The appellant claims that he cannot be subjected to a personal judgment for more than the principal sum due upon the mortgage, with interest, and that as to that he stands in the position of a surety and is entitled to have the purchase price" first applied to so much of the amount found due as he is liable for before any payment is made of the $1,200 paid for interest on the prior mortgage or for taxes and assessments due upon the property.

So far as concerns the $1,200 paid for interest on the prior mortgage, we think that the appellant’s position is well taken.

It is well settled that a purchaser of land incumbered by a mortgage assumes no personal obligation to pay the mortgage debt unless he, in some way, assumes the debt or agrees to pay it. (Belmont v. Coman, 22 N. Y. 438; Equitable Life Assurance Soc. v. Bostwick, 100 id. 628; Smith v. Cornell, 111 id. 554.) The only personal undertaking that appellant ever made to pay any part of the mortgage debt was his agreement above quoted to pay the principal sum then due, with interest. He never agreed, so far as the record shows, to pay any sum which the holder of the mortgage might have to pay for interest on a prior mortgage. The original mortgagor agreed to pay it, and of course the amount so paid falls under the mortgage and is secured by it, but that does not establish the appellant’s personal liability for it if the mortgaged property proves to be an insufficient security. The provisions for tacking onto the mortgage debt the amount paid for interest on prior mortgages was intended merely to protect the mortgagee’s security, but it does not increase the personal liability of any one who has ■ not assumed its payment.

As to so much of the amount due upon the mortgage as represents unpaid principal, the appellant undoubtedly is personally liable if there is a deficiency on the sale, but as to that he is liable as surety and is liable as well for the interest thereon and the costs. (Murray v. Marshall, 94 N. Y. 611.) The mortgagee, therefore, held a claim against the proceeds of sale for only a part of which was the appellant liable. Under such circumstances the surety is entitled to ask that the proceeds of the security be first applied to the payment of that proportion of the amount for which he stands liable as surety. (Orleans County Nat. Bank v. Moore, 112 N. Y. 543.) As to the taxes agreed to be paid out of the proceeds of sale, an interesting question would arise if the record contained a finding as to when the appellant parted with .the property, for in that case it might appear that when such taxes accrued the appellant no longer owned the' property, ’ and such taxes never, therefore, became a debt due from him.

It is suggested that the judgment was entered upon appellant’s default and, therefore, that he may not appeal from it, but should have moved below to correct the judgment and, if his motion had been denied, should have sought relief by appealing from the order denying it. We do not understand that the judgment was entered upon appellant’s default. He appeared generally in the action, and while he waived service of the complaint, he demanded service of all papers except the complaint. This included a notice of settlement of the judgment, which he apparently received, for the judgment as amended recited his appearance. It is true that he did. not answer, and, so far as the record shows, did not attend at the trial, but this was because he could not deny any of the allegations of the complaint, and had neither an affirmative defense or a counterclaim to interpose. His sole interest was as to the form of the judgment to be entered on the admitted facts, and he reserved his right to be heard on that subject.

It appears from the records of our own court, of which we may take judicial notice as to the questions relating tó the history of litigation, that after the entry of the judgment the appellant moved before the trial justice that the judgment be amended by reciting his appearance, and also that he filed an affidavit in opposition to the form of the judgment as entered. This motion was granted only to the extent of reciting his appearance, but was denied in so far as he asked that the judgment show that he opposed its form. From this order appellant appealed to this court, expressing in his brief the apprehension that unless the judgment recited his opposition he might be met, if he attempted to appeal from the judgment, with the suggestion that he had acquiesced in it, or had suffered it to be entered by default. The present respondents, who were also respondents on that appeal, opposed any modification of the order on the sole ground, very persuasively argued, that under the judgment as it stood there could be no doubt of appellant’s right to appeal from it. We affirmed the order without opinion. (151 App. Div. 934.) The appellant is clearly entitled to relief, and if respondent was right before in arguing that the judgment was one which appellant could test by appeal, he must be wrong now in contending that an appeal is not the proper remedy. The judgment should, therefore, be modified so as to provide that the amount for which the appellant is to be personally hable shall be the deficiency, if any, which shall arise in the amount due for principal and interest, not including the sum paid for interest in a prior mortgage, after deducting from the purchase money the costs, allowances and disbursements, as well as the unpaid taxes and assessments, and as so modified will be affirmed, without costs in this court.

Ingraham, P. J., McLaughlin, Clarke and Dowling, JJ., concurred.

Judgment modified as directed in opinion, and as modified affirmed, without costs. Order to be settled on notice.