Case ID: ad_87/html/0262-01.html
Source: Caselaw Access Project
Author: {"author": "O’Brien, J. :", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

New York Security and Trust Company, as Substituted Trustee of the Trusts Created in and by the Will of David Olyphant Vail, Deceased, and Anna Murray Vail, Respondents, v. Rosalie Schoenberg, Individually and as Trustee under the Last Will and Testament of Joseph Rosenfield, Deceased, and Others, Defendants, Impleaded with Solomon Rosenfield and Others, Respondents. North River Savings Bank, Purchaser, Appellant.
    
      Necessary parties to a mortgage foreclosure suit — remaindermen whose right is subject to a vested estate of inheritance are not — an action to revive and be subrogated to satisfied mortgages and to foreclose them is not within the rule—status of , one purchasing at a sale with knowledge of a defect of parties.
    
    In ah ordinary action to foreclose a mortgage upon real property it is sufficient to have as parties the first person in being who has a vested estate of inheritance in the property together with those claiming prior interests; those who may have a claim in remainder or in reversion after such vested estate of inheritance are not necessary parties.
    This rule is only applicable to .simple foreclosure suits and if is doubtful whether it will ever be extended.
    The holders of a mortgage given pursuant to' chapter 357 of the Laws of 1886 (affidg. 1 R. S. 730, § 65) upon property which had been by the will Of the prior owner carved into a trust estate and estates in remainder, discovered that the mortgage was inoperative as to the estates in remainder. ' They thereupon brought an action to re-establish and to foreclose two mortgages which concededly covered the entire estate in the property and which had been satisfied, out of the proceeds'of the mortgage held by the plaintiffs. The purchaser at the foreclosure sale refused to complete the purchase because certain persons who it was asserted held contingent remainders in the mortgaged premises had not been made, parties to the foreclosure suit.
    
      Meld, that the suit was not a simple foreclosure suit and that the failure to make the. alleged contingent remaindermen parties thereto rendered the title unmarketable;
    
      That the fact that the purchaser bid in the property, with knowledge that the contingent remaindermen had not been made parties, did not estop him from urging the defect of parties as a reason for refusing to complete his purchase. Patterson, J., dissented.
    Appeal by the North River Savings Bank, the purchaser at a sale had pursuant to a judgment in the above-entitled action, 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 5th day of June, 1903, requiring the said North River Savings Bank to complete its purchase.
    The order appealed from directed the North River Savings Bank to complete its purchase of premises sold pursuant to a judgment entered herein.
    The action which resulted in the judgment directing the sale was brought by the plaintiffs to re-establish two prior mortgages on the premises which had been satisfied by the proceeds of a mortgage held by plaintiffs, so that they might, by being subrogated to the rights of the original mortgagees, sell the premises and receive the amount of their claim. Certain contingent remaindermen were not made parties to the action, and for that reason the bank refuses to take title, contending that they should have been included as parties. The plaintiffs contend that this is a simple foreclosure suit, and hence that it was not necessary to make as parties the contingent remaindermen.
    The property in question was owned by Joseph Rosenfield, who died February 8,' 1881, leaving by his first wife, who was then deceased, three children, who are still living, and a widow now living, named Rosalie, and four children, who are also still alive, one of whom, Mrs. A. R. Jeffries, has an infant son. By his will the decedent gave to his wife all his estate in trust to receive the income thereof during her life, his entire estate at his death to vest absolutely in her children equally, and if any child died before her leaving issue, such issue to inherit the share his parent would have received if living. There were also similar provisions in the will as to the disposition of the estate in the event that his widow should marry. In certain contingencies, therefore, a grandchild of the testator, by the will, and the three children of the first marriage, as heirs at law, might become seized of the premises; but these persons were not joined in the action.
    
      At the death of the,testator there was due $7,000 on an outstanding mortgage against this property; and in 1883 a further mortgage for $2,500 was placed upon it by order of the court' in behalf of the widow and children. Thereafter, in 1886, by virtue of chapter 257 of the Laws of 1886 (amdg. 1 R. S. 730, § 65), another mortgage for $26,000 was given by the widow and her children on property including the premises in question, and the order permitting the giving of the mortgage, directed that from the- proceeds there should be paid the prior outstanding mortgage on. which $7,000 was due, and the other mortgage of- $2,500; and such mortgages were satisfiéd of record., Aud finally, in 1891, another application under that statute, as amended by .chapter 209, Laws of 1891,, was made by the widow and her children to mortgage the premises and other property of the estate for $30,000, which was granted, .and two mortgages, one for $12,000 and the other for $18,000, were given, and by direction of the. court the prior mortgage of $26,000 was paid. . The plaintiffs, who are the owners of the $12,000 mortgage, subsequently discovered that under chapter 257 of the Laws of 1886 the trust estate only could be mortgaged, and the estate in ' remainder would not be affected by any mortgage made under that _ act (Losey v. Stanley, 147 N. Y. 560), and, therefore, brought their action, as stated, to re-establish the original mortgages of ■ $7,000 and $2,500,. which were paid by their moneys, and, by being subrogated to, the rights of the original mortgagees, to foreclose such mortgages. The plaintiffs obtained a judgment directing a sale of the premises,, and at such sale the bank bid for the property but refused to complete the purchase. From the order directing the purchaser, the North River Savings Bank, to complete its purchase,, this appeal is taken,.
    
      Harold Swain, for the appellant.
    
      Lorenzo Semple, for the plaintiffs, respondents.
    
      Harold Nathan, for the respondents Solomon Rosenfield and others.
   O’Brien, J. :

The question presented, is whether, in an- action such as this,-the contingent’ remaindermen were necessary, partiesor, differently expressed, whether the judgment is binding on certain contingent remaindermen who were not parties to the action.

The learned judge at' Special Term in granting the motion compelling the purchaser to complete its purchase, stated that the doctrine of Nodine v. Greenfield (7 Paige, 544) has been repeatedly followed, never overruled, and must now be deemed the established law of this State.” In view of the controlling influence which this decision exercised over the Special Term, it becomes important to examine into the facts of that case, and see precisely what questions were determined. The objection to the title therein was that children who were in existence at the time when the bill of foreclosure was filed, and who were the first devisees of the remainder in fee after the termination of the life estate of the widow, were not made parties to the suit. The contention that their equity of redemption was, therefore, not extinguished at the time of the sale in that suit, was sustained, and in the opinion it was said : “ Where there is a contest in chancery in relation to real estate, or where a mortgagee wishes to foreclose a mortgage, in a case where there are several future and contingent interests in the equity of redemption, it is not necessary to make every person having or claiming a future and contingent interest in the premises a party to the bill, in order to bar his right or claim by the decree in the cause; but is sufficient if the person who has the first vested estate of inheritance, and all other persons having or claiming prior rights or interests in the premises, are brought before the court.” While this decision, therefore, directly decided that certain vested remaindermen were necessary parties, we have dicta from which the rule, frequently followed, has been deduced that in foreclosure actions it is only necessary to bring into court as parties those having the first vested estate of inheritance and those having prior rights.

In ordinary foreclosure suits we have thus the general rule established that it is sufficient to have as parties the first person in being who has a vested estate of inheritance, together with those claiming prior interests; and that in such suit those who may have a claim in remainder or in reversion after such vested estate of inheritance may be omitted as parties. This rule was based upon the English authorities and upon the fact that at common law contingent remainders were regarded as being mere possibilities which could nqt be transferred before the happening of the contingency; otherwise than by estoppel. In other words, they were not estates' in land. Under the Revised Statutes and Real Property Law, however, contingent remainders are future estates, devisable; descendible and alienable (See 1 R. S. 723, §§ 9, 10, 13; Id. 725, § 35; Laws of 1896; chap. 547, §§ 26, 27, 30, 49); and, therefore, in actions affecting their interests, contingent, remaindermen ought to be made parties. In ordinary foreclosure suits, as stated, the rule is well established that they are not necessary parties; but with respect to actions other than simple foreclosures, we are referred to no case wherein it has been held that they are not necessary, parties, and it is doubtful if the rule which has been made applicable to simple foreclosures will ever be extended in this State as long as the provisions of the present statutes relating to estatés in land remain in force and effect.

As affecting foreclosure suits, taking the rules as stated to' be established, it remains to be determined whether or not this is a •simple foreclosure suit. Its purpose is to establish an equitable lien upon this property; and to that end it seeks, fh’st, to set aside two satisfaction pieces of mortgages filed many years ago, and to re-establish ‘such'mortgages, and then to foreclose them. Here it appeared that the property in question was owned by one Joseph Rosenfield, and that after his death the. executors and special guardian of his children executed two mortgages pursuant to chapter 257 of the Laws of 1886 (as amd. by Laws of 1891, chap. 209). The Court' of Appeals in Zosey v. Stanley (147 N. Y. 560) held that under the provisions of that law the trust estate only could be mortgaged and that the estate in remainder would not be- affected by any mortgage authorized under that act. As this mortgage which the plaintiff held, therefore, did not cover all the interest which Joseph Rosenfield had in the property at his death, but only covered the trust estate held by the executors, it is sought in this action to re-establish the mortgage which was a lien on the entire estate or interest which Joseph Rosenfield had in the property at the time of his death. This, together with the other mortgage sought to be reinstated as a lien, was long since satisfied. To re-establish these mortgages as liens, testimony was introduced tending to show that the money obtained by the executors upon the mortgage made pursuant to the statute of 1886 was used to discharge the mortgage which existed at the time of Rosenfield’s death, and another mortgage made by liis executors and trustees and children shortly after his death;/and the plaintiffs, under the doctrine of subrogation, endeavored to re-establish these mortgages to the end that they might thus have a lien upon the entire property and, under the judgment of sale in this action, give to a purchaser a good title thereto.

An action such as this, which is intended to establish an equitable lien which shall be more extensive than the mortgage which the plaintiffs held, and then to foreclose such lien when established, is, in our opinion, something unlike and dissimilar to an ordinary foreclosure suit. Were it sought to create a mortgage on the property, then, seemingly, in such an action, all persons having an interest in the property should be made parties. With respect to those having an interest therein, what is the difference in principle or in result between an attempt to create a mortgage on the property and re-establishing a mortgage thereon which has been once legally satisfied ? By the amendment made in 1897 to section 87 of the Real Property Law (Laws of 1896, chap. 547, as amd. by Laws of 1897, chap. 136) it was provided that a trustee could not be authorized by the court to make a mortgage binding his estate and future estates until written notice of the application had been served upon “ the beneficiary of such trust and every other person in being having an estate vested or contingent in reversion or remainder in said real property.”

In an action such as this wherein it is sought to establish an equitable mortgage or lien, seemingly the same practice should be followed with a view to effectually cutting off contingent interests in the property.

Here the infant son of Mrs. Jeffries, it is claimed, has a contingent estate in the premises; and it is agreed, we take it, that as such he would have been a proper party. The plaintiffs insist, however, that he is not a necessary party. It is not essential for us to determine flatly that he is (which is the view we would be inclined to take if a decision were required); but to render this title unmarketable it is only necessary that upon that question there exist a reasonable doubt, which should not be solved in the absence of those to be affected thereby.

To obviate the objection made, certain of the respondents suggest that under the will as it should b'e construed the alleged contingent remaindermen had no interest in the property. It is urged that the purchaser should be compelled to take .on the ground that, under the will of their father, Joseph Rosenfield, the children then alive took a vested estate absolutely upon the remarriage of their mother, and that, therefore, there was no contingent remainder in favor of their issue or any one.else outstanding. We would gladly assent to this view as a means of curing the objection if such a construction -were entirely free from doubt ; but where, as here, there is a serious dispute as to the construction of the will, we can only repeat what has already been said in our discussion of another point that before reaching a determination which would exclude the son of Mrs. Jeffries, who it is insisted has a contingent estate in the property, he ought upon.that- question to have his day in court. The other contention, that this purchaser acted at the sale with knowledge of the fact that this contingent remainderman was not a party and is, therefore, estopped, is, we think, equally without merit. The bank, wanting the . property, was not required, even with the knowledge of the question involved, to permit ’ some one else to purchase it a lower price, perhaps eventually to' find that the title would be upheld as marketable and good; This would be asking the bank to run the risk- of losing- the property. It had the right to purchase at the. sale, even though it knew of and intended to raise the question affecting the title, and thus submit,, as in this case was done, to the court its rights as a purchaser.

Having reached the conclusion that this is not a simple foreclosure suit, and that there is no disposition to extend the rule as to necessary parties in actions affecting real estate, it is sufficient for the determination of the present appeal to say-that upon the ques-. tion Whether the contingent remaindermen were or were not neces-. sary parties — which we are not called upon to decide — there is such a grave doubt that the Special Term should not have compelled the purchaser- to complete the.sale and accept a title which, in the face of this objection, was, we think, unmarketable.

The order accordingly should be reversed, with ten dollars costs and disbursements, and the motion to compel the purchaser to take the property should be denied, with ten dollars costs.

Hatch and Laughlin, JJ., concurred; Van Brunt, P. J., concurred in result; Patterson, J., dissented.

Order reversed, with ten dollars costs and disbursements, and motion to compel purchaser to take the property denied, with ten dollars costs.