Case ID: ad_5/html/0181-01.html
Source: Caselaw Access Project
Author: {"author": "Barrett, J.: Van Brunt, P. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

In the Matter of the Petition of Joshua S. Piza, as Administrator, etc., of Rachel S. Piza, Deceased, Respondent, for Leave to Sue David W. O’Neil, Appellant.
    
      Foreclosure — purchasing property subject to a mortgage — extension of time of payment of the mortgage — action on the bond after a moi'tgage forelosure has been discontinued as to the obligor — liability of the obligor.
    
    Upon an appeal from an order granting tlie petition of Joshua S. Piza, as administrator of Rachel S. Piza, for leave to sue one David W. O’Neil upon a bond executed by him, it appeared that O’Neil executed a bond and a mortgage on certain premises on the 4th day of January, 1889, and in December, 1890, sold the mortgaged premises to Abraham Steers, who took the title subject to the mortgage, but did not covenant to pay it. The bond and mortgage fell due January 4, 1892, when the petitioner’s intestate, then being the owner thereof, made an agreement, without the knowledge or consent of O’Neil, with Steers, who-assumed the payment thereof, extending the time of payment for three years.
    The mortgage was foreclosed in 1894, and O’Neil, being made a party to the foreclosure action and a judgment for any deficiency being asked against him, asserted that the extension of the time of payment of the mortgage had relieved him from all liability on the bond, and the action was discontinued as to him by consent.
    In January, 1896, Rachel S. Piza having died, the petitioner instituted this proceeding, alleging that at the time of the making of the agreement between his intestate and Steers the property was of less value than the mortgage, while O’Neil, on the other hand, alleged that the property was then worth more than the amount of the mortgage.
    
      Held, that leave to sue was properly granted;
    Van Brunt, P. J., dissented.
    That if Steers bad covenanted with O’Neil to assume the mortgage the extension of time would have absolutely discharged O’Neil, who would then have occupied only the position of a surety for the performance of the covenant of payment;
    That as Steers did not so covenant, O’Neil’s exemption from liability on the bond was limited to the value of the land at the time of the making of the agreement;
    That as the value of the land at that time was in dispute, it was proper to allow the administrator to bring an action to determine that question, as it was not a question which could be conveniently or properly litigated in the foreclosure action.
    Appeal by David W. O’Neil from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 7th day of February, 1896, granting the petition of Joshua S. Piza, as administrator, etc., of Rachel S. Piza, deceased, to sue him upon a certain bond executed by him.
    
      George E. Miner, for the appellant.
    
      Benjamin N. Cardozo, for the respondent.
   Barrett, J.:

The order appealed from grants the petitioner, Joshua S. Piza, applying as administrator of Rachel S. Piza, deceased, leave to sue David "W. O’Neil to recover the amount due upon a bond executed by him.

O’Neil executed a bond and mortgage to the petitioner individually on January 4, 1889. They were for $25,000, and fell due January 4, 1892, prior to which time they were assigned to the decedent. In December, 1890, O’Neil sold the mortgaged premises to one Steers, who took subject to the mortgage, but did not covenant to pay it. On January 4, 1892, the decedent entered into a written agreement with Steers, without O’Neil’s knowledge or consent, extending the time of payment three years. By this instrument Steers made himself liable for the whole principal sum “ with like effect as if the party of the second part (Steers) had assumed and agreed to pay the said mortgage in and by the terms of the deed” which he received from O’Neil. The mortgage -was foreclosed in the early part of 1894, on account of a default in the payment of interest. O’Neil was at first made a party defendant, and judgment for any deficiency was claimed against him; but upon his assertion that the extension had relieved him from all liability on the bond, the action was discontinued as to him by consent.

If Steers had covenanted with O’Neil in the deed to assume the mortgage, there is no doubt that O’Neil would have become simply a surety for the performance of the covenant, and that the extension would have relieved him from all liability. (Calvo v. Davies, 73 N. Y. 216.) But Steers did not so covenant, and O’Neil’s exemption from liability on the bond was limited to the value of the land at the time of the agreement. (Murray v. Marshall, 94 N. Y. 611.) He was not liable for any deficiency which might arise upon the sale in the foreclosure suit. He was only liable for the difference between the actual value of the land at the time of the agreement and the amount of the mortgage. The risk of future depreciation fell upon the creditor. It is doubtful, therefore, whether the question of O’Neil’s liability and its extent could have been properly tried in the foreclosure action. Not being liable for any deficiency upon the sale, and his liability, if any, depending upon considerations foreign to an ordinary decree of foreclosure and sale,, his being dropped as a party defendant did not substantially prejudice him, or affect his real interests. Whether he is now liable, depends not upon what the property brought at the foreclosure sale, but entirely upon its value at the time of the agreement between the decedent and Steers. The petition states, upon information and belief, that the property was then of less value than the mortgage. O’Neil states, also, upon information and belief, that it was worth more. These conflicting claims cannot properly he tried upon affidavits, and we see nothing oppressive or inequitable in permitting the petitioner to bring his action to have that question properly determined.

The order should, therefore, be affirmed, with ten dollars costs and disbursements of the appeal.

Rumsey, O’Brien and Ingraham, JJ., concurred; Van Brunt, P. J., dissented.

Van Brunt, P. J.

(dissenting) :

On the 4th of January, 1889, David W. O’Neil being the owner of certain premises in the city of New York, executed a bond containing the usual interest clause and a mortgage thereon to Joshua S. Piza, to secure the sum of $25,000. Thereafter said Joshua S. Piza assigned said bond and mortgage to one Rachel S. Piza. On the 9th of December, 1890, O’Neil conveyed the premises in question to one Abraham Steers, subject to the mortgage above mentioned. The said mortgage falling due on the 4th of January, 1892, Rachel S. Piza and the said Abraham Steers entered into an agreement reciting the execution of said mortgage and the assignment of the same, and that said Steers was the owner of the premises, by which the said Rachel S. Piza extended the time of the payment of the mortgage until the 4th of January, 1895, and said Steers agreed to pay the same.

Rachel S. Piza having died, the petitioner, Joshua S. Piza, was appointed her administrator. On the 4th of January, 1894, Steers having failed to pay the interest falling due on that day, and it remaining unpaid for the period mentioned in said bond, Joshua S. Piza, as administrator, commenced an action to foreclose the said mortgage, and made O’Neil a party thereto, claiming a judgment for any deficiency. O’Neil having put in an answer asserting his discharge by reason of the agreement to extend the time of payment of the mortgage with Steers, the action was discontinued as to him, and proceeded to a judgment of foreclosure and sale on the 10th of April, 1894, and the premises were sold at public auction for the sum of $22,000, and there was a deficiency of $6,164.24, upon which the plaintiff received the sum of $1,542.50, leaving $4,621.14 still due.

In January, 1896, said Piza, as administrator, made this application to the court for leave to sue O’Neil upon the bond for the amount of this deficiency. In O’Neil’s affidavit in opposition, he alleges the fact that at the time of the malting of the agreement extending the time for the payment of the mortgage, the premises in question were worth $35,000, and that he was discharged from liability by reason of such extension. The court below granted the motion, and from the order thereupon entered this appeal is taken.

It is well established that the granting of leave to sue upon a bond to recover a deficiency arising upon the sale of premises mortgaged to secure the payment of a bond, is not a matter of right, but rests in the sound discretion of the court. (Equitable Life Ins. Co. v. Stevens, 63 N. Y. 341; United States Life Ins. Co. v. Poillon, 6 N. Y. Supp. 370.)

In the case at bar it appears that O’Neil was made a defendant in the action in foreclosure; that he set up his defense in that action and that the action, as against him, was discontinued, and that he had full reason to believe from this action upon the part of the plaintiff that no further claim would be made against him. He was, therefore, justified in taking no proceedings for the purpose of making the premises which were sold under foreclosure bring as much as possible, or to protect himself against a judgment for deficiency by buying them in. But the holder of the mortgage, having lulled O’Neil into security by the discontinuance of his claim for any deficiency, after he has sold the premises and a deficiency has arisen, now seeks to charge him therewith when he has no means whatever of protecting himself.

We think that, under these circumstances, it would be inequitable to allow the holder of this bond and mortgage to pursue O’Neil for the deficiency.

The order should be reversed, with ten dollars costs and disbursements, and the motion denied, with ten dollars costs.

Order affirmed, with ten dollars costs and disbursements.