Case ID: ad_114/html/0886-01.html
Source: Caselaw Access Project
Author: {"author": "Woodward, J.:", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

The Washington Trust Company of the City of New York, as Trustee, Plaintiff, v. Morse Iron Works and Dry Dock Company and Others, Defendants, Impleaded with Prindle Engineering Company, Appellant, Respondent, and Henry H. Petze, as Trustee in Bankruptcy of the Morse Iron Works and Dry Dock Company, and Others, Respondents, Appellants. Morse Dry Dock and Repair Company, Appellant.
    Second Department,
    July 24, 1906.
    Mortgage—judgment—when adjudication that creditor has property-in mortgaged premises not affected by payment of mortgage.
    When the court has adjudged that certain property under construction for a corporation is-covered by a trust mortgage given by that company, and that the contractor constructing the same was entitled to be paid the balance due on its contract before "other creditors were paid, the contractor cannot be deprived of . its right to be paid first by the fact that the other creditors subsequently paid the bond secured by the mortgage. The sale of the property in an action for foreclosure should not be stayed.
    Gross-appeals by the defendant, the Prindle Engineering Company, and the defendants, Henry II. Petze, as trustee, etc., and others, and an appeal by the Morse Dry Dock and Repair Company from portions of an order of the Supreme Court, made at the Kings County Special Term and entered in the office of the clerk- of the county of Kings on the 26th day of October, 1905, denying the • motions made by- the said trustee and others to vacate a decree of foreclosure theretofore entered herein, and to make the Morse Dry Dock and Repair Company a party defendant, but directing the stay of a sale of the mortgaged premises.
    
      Henry Galbraith Ward [George M. Clarke with him on the brief], for the Prindle Engineering Company.
    
      David MeClure, for Henry H. Petze, as trustee, etc., and others.
   Woodward, J.:

In April, 1900, the Morse Iron Works and Dry Dock Company mortgaged all its property and appurtenances, acquired and to be acquired, to the plaintiff as trustee, to secure the payment of its bonds, amounting in the aggregate to $450,000. Subsequently, and in September, 1900, the Morse Company entered into a contract with the defendant Prindle Engineering Company for the construction of a flooding and pumping plant in the Morse Company’s dry dock, which was essential to the operation of the Morse Company’s plant. The Morse Company defaulted in its bond payments and this action was brought to foreclose the mortgage, the Prindle Company intervening. The question involved in the litigation, and which was disposed of on appeal (Washington Trust Co. v. Morse Iron Works, 106 App. Div. 195), was whether the Prindle Company had a right to have its pumping plant considered as a part of the mortgaged premises and to have the balance due upon its contract for such plant paid before the other creditors, or whether it was bound to rely upon its ownership of the property under the terms of its contract and have resort to the property for the payment of the same. This court, in a carefully considered opinion, held that the Prindle Company’s property was merged in that of the Morse Company; that that company had a mortgageable interest in the property and that it was proper that a court of equity should take the same and pay the balance due under the contract before payment of other creditors. The creditors subsequently paid the bonds in an effort to protect themselves, and the referee having advertised the premises for sale, at the request of the Prindle Company, which was interested to have its claim paid, an order was procured at Special Term staying the sale, and the principal question on this appeal is the legality of this order.

If this court was right in its adjudication that the property which had been furnished by the Prindle Company was' subject to the mortgage of the plaintiff, the Prindle Company being foreclosed by the judgment to assert any property in the pumping plant, then this order should not be permitted to stand, for it in effect reverses the decision of this court without restoring to the Prindle Company its right of property. It seems clear to us that the creditors by paying the bonds could not thus defeat the judgment which had been rendered in a court of competent jurisdiction and deprive the defendant, the Prindle Company, of its rights under such judgment. The same reasoning which prevailed in this court upon the original appeal makes it clear that the Prindle Company cannot thus be deprived of the benefit of the adjudication, all parties conceding that it has-a valid right to compensation, either by resort to the specific property or under the judgment.

The order in so far as it stays the sale of the premises and the discharge of the obligation to the Prindle Company should bo reversed, and as to the other matters it should be affirmed.

Hirschberg, P. J., Jerks, Hooker and Miller, JJ., concurred.

Order in so far as it stays the sale of the premises and the discharge of the obligation to the Prindle Company reversed, and as so modified affirmed, with ten dollars costs and disbursements to the Prindle Company.