Case ID: ad_85/html/0036-01.html
Source: Caselaw Access Project
Author: {"author": ".Willard Bartlett, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Long Island Loan and Trust Company, as Trustee under a Mortgage Made by The Long Island City and Newtown Railroad Company, Dated January 1, 1885, Respondent, v. The Long Island City and Newtown Railroad Company and The Mercantile Trust Company, as Trustee under a Mortgage Made by the New York and Queens County Railway Company, Dated June 29, 1896, Defendants, Impleaded with the New York and Queens County Railway Company, Appellant.
    
      Detachment of interest coupons from bonds&emdash;it does not deprive them of the security of the mortgage&emdash;action to foreclose the mortgage because,• of their non-payment &emdash; •when the trustees of the mortgage may sue without any action on the pa/rt of the bondholders &emdash; demand not necessary where the place specified therefor no longer exists&emdash;extra allowance beyond §200 pi’oper in a difficult and extraordinary mortgage foreclosure suit.
    
    The detachment of interest coupons from bonds secured by a trust mortgage does not deprive the holders of the coupons of the security of the mortgage.
    A trust mortgage given to secure an issue of bonds having interest coupons attached thereto contained the following clauses:
    ‘' Mfth. In case default shall be made in the payment of any half year’s interest or* any of the aforesaid bonds at the time and in the manner in the coupon issued therewith provided the said coupon having been presented and the payment of the interest therein specified having been at the place where it is payable as herein provided and such default shall continue for the period of six months, then, and in such case such trustee upon the request in writing of the owners of one-half of the said bonds hereby secured then outstanding," may elect to and can thereupon by such election makefile principal sum secured by all said bonds to become and be immediately due and payable anything contained in the said bonds or herein to the contrary notwithstanding," and,
    
      “ Seventh. ín case of default as hereinbefore defined the said Trustee may adopt any legal or equitable method for foreclosing this mortgage and enforcing the trusts herein contained or for collecting the principal and interest of the bonds secured hereby and may have appointed a Receiver of all property, real and personal, covered by this mortgage who shall have and exercise the powers by law provided for Receivers of railroad Corporation.”
    
      Held, that the provisions of the 7th section conferred ample power upon the trustee to sue for the foreclosure of the mortgage and compel the sale of the mortgaged premises to the extent necessary to pay interest represented by unpaid coupons detached from the mortgage, although a majority of the bondholders had not set the trustee in motion as provided for in the 5th section of the mortgage;
    That, assuming that a demand for the payment of the coupons in question was necessary, such demand would have to be made at the place where the interest was payable by the terms of the mortgage, to wit, at the office of the mortgagor corporation, and that as it appeared that such company had not maintained any office since the year in which the coupons were detached from the bonds, the trustee was under no obligation to make a demand of payment;
    That interest was allowable upon the coupons from the time that they were detached from the bonds and passed into separate ownership, thus becoming distinct negotiable instruments.
    Prior to 1898 section 3253 of the Code of Civil Procedure provided as follows: “ In an action brought to foreclose a mortgage upon real property, or for the partition of real property, or in a difficult and extraordinary case, where a defense has been interposed * * * the court may also, in its discretion, award to any party a further sum, as follows: 1. In an action to foreclose a mortgage, a sum not exceeding two and one-half per centum upon the sum due or claimed to be due upon the mortgage, nor the aggregate sum of two hundred dollars. 2. In any other case or special proceeding specified in this section, a sum not. exceeding five per centum upon the sum recovered or claimed, or the value of the subject-matter involved.”
    In 1898 the section was amended by substituting for the words “other case”' contained in the 2d subdivision, the word “ action.”
    
      Held, that the effect of the amendment was to permit the court in' a difficult and extraordinary action to foreclose a mortgage upon real property to grant an extra allowance of five per cent upon the sum due upon the mortgage, even though the amount of the extra allowance exceeded the sum of §200.
    Appeal by the defendant, the New York and Queens Oounty Railway Company, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Queens on the 2till day of March, 1902, confirming the report of the referee herein and directing a sale in foreclosure.
    The 5th and 7th clauses of the mortgage referred to in the opinion are as follows.:
    
      
      “Fifth. In case.default shall be made in the payment of any half year’s interest or* any of the aforesaid bonds at the time and in the manner in the coupon issued therewith provided the said coupon having been presented and the payment of the interest therein specified having been* at the place where it is payable as herein provided and such -default shall continue for the. period of six months then and in such case such trustee upon the request in writing of the owners of one half of the said- bonds hereby secured then outstanding, may elect to and can thereupon by such election ■ make the principal sum secured by all said bonds to become and be immediately due and payable anything contained in the said bonds or herein to the contrary notwithstanding.”
    
      “Seventh In case of default as hereinbefore defined, the said Trustee may adopt any legal or equitable method for foreclosing this mortgage and enforcing the trusts herein contained or for collecting the principal and interest of the bonds secured hereby and may have appointed a Receiver of all property, real and personal, covered by this mortgage who shall have and exercise the powers by law provided for Receivers of railroad Corporations.”
    
      George F. Hickey [William F. Stewart with him on the brief], for the appellant.
    
      Melvin G. Palliser and William M. Ingraham [Roger S. Baldwin with them on the brief], for the respondent.
    
      
       Sic.
    
   .Willard Bartlett, J.:

This is a suit by a trustee under a mortgage to foreclose the same for the non-payment of interest represented by coupons detached from bonds of the Long Island City and Newtown Railroad Company with which they were issued. The case was tried before the Hon. Ernest Hall as referee, who found $31,251.91 to be due upon the coupons and directed judgment of foreclosure. This appeal is taken by the New York and Queens County Railway Company, which has acquired the mortgaged property under a subsequent mortgage to that in suit.

The plaintiff’s authority to bring the action is disputed by the appellant on the ground that a majority of the bondholders have not set the trustee in motion as provided for in the 5th section of the mortgage. The suit is not brought under that section, however, which relates to an election by a majority of the bondholders to declare the principal sum due for the non-payment of interest. It is brought under the 7th section, the provisions of which seem to confer ample power upon the trustee to sue in foreclosure to compel a sale of the mortgaged premises so far as may be necessary to pay the interest represented by unpaid coupons. No attempt is made to enforce the payment of this interest by the appellant corporation individually, the purpose of the action being merely to reach the property described in the mortgage, to which the appellant now has the legal title. The coupons were secured by the mortgage and their detachment from the bonds did not deprive the holders of them of the security of the mortgage. That remained security for their payment until paid, whether attached to or detached from the bonds.” (Union Trust Co. v. Monticello & P. J. R. Co., 63 N. Y. 311.) And such a mortgage as this may be foreclosed for the interest alone. (Central Trust Co. v. N. Y. City & N. R. R. Co., 33 Hun, 513.)

A defense of payment was set up in the answer of the appellant, but the evidence sustains the finding of the referee that none of the coupons which are the basis of the present suit have been paid. ■

The objection that no demand was made for the payment of some, of the coupons is not available to the appellant. Assuming that a demand was necessary, it would have to be made at the place where interest was payable under the terms of the mortgage, to wit, the office of the Long Island City and.Newtown Railroad Company in Long Island City; yet it appears that the company has had no office there since 1895, the year in which these coupons were detached from the bonds. The abandonment of the office made a demand there impossible, and the plaintiff cannot be defeated for failing to perform an impossibility. It was under no obligation to search elsewhere for an office at which to demand payment of the coupons.

We think the referee was right in allowing interest upon the coupons from the time they were detached from the bonds and passed into separate ownership, thus becoming distinct negotiable instruments., (See Williamsburgh Savings Bank v. Town of Solon, 136 N. Y. 465.)

The-judgment appealed from awards to the plaintiff $1,562.55 as-an additional allowance. It is conceded that the extra allowance in a mortgage foreclosure suit could not exceed $200 prior to 1898. (Waterbury v. Cordage Co., 152 N. Y. 610.) In that year, however, section 3253 of the Code of Civil Procedure was amended by striking out the words “ other case ” from the 2d subdivision ; and it is contended that the effect of the amendment is. to permit the court now to allow more than $200 additional costs in a suit to foreclose a mortgage. The point will be made clear by a comparison of the section before and after the amendment. Prior to 1898 the section read as follows: “In. an action brought to foreclose a. mortgage upon real property, or for the partition of real property, or in a difficult and extraordinary case, where a defense lias been interposed in an action, or except in the first and second judicial districts, in a special proceeding by certiorari to review an assessment under chapter two hundred and sixty-nine of the laws of eighteen hundred and eighty, and the acts amending the same, the court may also, in its discretion, award to any party a further sum, as follows: 1. In an action to foreclose a mortgage a sum not exceeding two and one-half per centum upon1 the sum due or claimed to be due upon' the mortgage, nor the aggregate sum of two hundred dollars. 2: In any other case or special proceeding specified in this section, a sum not exceeding five per centum upon the sum recovered or claimed, or the value of. the subject-matter involved.”

At the time judgment herein was rendered the section read thus : “ In an action brought to foreclose a mortgage upon real property, or for the partition of real property, or in a difficult and extraordinary case (where a defense has been interposed in an action), or, except in the first and second judicial districts, in a special pro- • ceeding by certiorari to review an assessment, under chapter two hundred and sixty-nine of the laws of eighteen hundred and eighty; and the acts amending the same, the court may also, in its discretion, award to any party a further sum, as follows: 1. In an action to foreclose a mortgage a sum not exceeding two and one-half per centum upon the sum due or claimed to be due upon the mortgage, nor the aggregate sum of two hundred dollars. 2. In any action or special proceeding specified in this section, where a defense has been interposed, or in an action for the partition of real property, a sum not exceeding five per centum upon the sum recovered or claimed, or the value of the subject-matter involved.”

The argument is that the elimination of the words “other case” from the 2d subdivision leaves that' subdivision applicable even to a mortgage foreclosure suit of a difficult and extraordinary nature. It seems to me that such is the necessary effect of the change and the logical construction of the language of the section as it now stands.

The judgment should be affirmed.

Woodward, Hirsohberg and Hooker, JJ., concurred; Goodrich, P. J., not sitting.

Judgment affirmed, with costs.