Case ID: ad_110/html/0596-01.html
Source: Caselaw Access Project
Author: {"author": "Kellogg,. J.: Smith, J. (concurring):", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

John F. Curlette, Respondent, v. Franklin M. Olds, Appellant, Impleaded with Clinton S. Harris and Others, Defendants.
    Third Department,
    January 8, 1906.
    Stay— when foreclosure not stayed because of prior action in Federal - court to cancel mortgage on ground of usury. s
    The defense of a former action pending for the same catise between the same . parties is not available when the courts are in different States, or oné is a Federal court and the other a State court, even though the Federal court he in a district embracing the State. A stay of such subsequent action is in -the x sound discretion of the court.
    An action to foreclose a mortgage will not'be stayed on the ground that a prior action has been begun by the mortgagor in a' Federal court to set aside the mortgage On the ground of usury, when it appears that the mortgagor is an attorney of the courts of this State and brings.said action in the Federal' court on a technical non-residence and there are* circumstances which make it probable that said action tyas so brought to hinder and delay the mortgagee.
    Rules governing stay of proceedings on conflict in jurisdiction between State and Federal courts stated by Smith, J.
    Appeal by the defendant, Franklin M. Olds, from an order of the County Court of Sullivan county, entered in the office of the clerk of said county on the 11th day of September,’1905, denying the said defendant’s motion for a stay of proceedings.
    This action is pending in the County Court of Sullivan county for the foreclosure of a mortgage given May 5,1904, by the defendant Franklin M. Olds ,to the plaintiff. The wife of the mortgagor and several judgment creditors are also parties defendants. Just after the first payment became due upon the mortgage, and before the beginning of this action, the mortgagor began an action against plaintiff in the United States Circuit Court for the Southern District of New York, seeking to set aside said mortgage and two grants of rights over his lands, alleging that the same were void -for usury. He thereupon moved the' County Court of Sullivan county, upon affidavits, for an order staying the proceedings in this action until the decision of the action in the Federal court, which motion was denied, and the defendant appeals to this court. The moving affidavits show that the plaintiff held a prior mortgage made by the defendant upon the same premises, and upon default being made an action of foreclosure was brought and judgment, of foreclosure and sale had, and that from time .to time the defendant had made payments upon said judgment, and upon the 5th day of May, 1904, the amount remaining unpaid was $3,875, and that upon that day the.mortgage now in suit was given in place of the other mortgage, which was discharged. The prior mortgage and judgment are conceded valid in all respects. The defendant Olds is an attorney with an office and doing business at Mountaindale, Sullivan county, but with a legal residence at Newark, N. J. As jl part of the transaction in which the second mortgage was given, and in consideration of the forbearance of the debt represented by the judgment and the first mortgage, he alleges that the plaintiff (in addition to the full lawfql rate of interest) exacted, took and received, without other consideration, two valuable rights or privileges, namely, the - right to flow water onto, upon and over adjacent lands belonging to him, from an overflowing'artesian.well upon plaintiff's premises, and the right (in case of completion of a telephone line then recently' projected'and partially constructed through JVlountaindale) to connect. therewith by poles and wires extending over, upon and across other lands of the defendant, "so that plaintiff might have a telephone receiver in his house for liis-own use, and that a certain grant of said rights was executed and acknowledged by both parties in writing, “ all contrary, as claimed by me, to' the statutes of this State against usury.” . ■ ■
    
      Franklin M. Olds, 'for the appellant.
    
      Melvin H. Couch and T. F. Bush, for the respondent.
   Kellogg,. J.:

The defense-of-a former action pending for the same cause between the same parties is not availablé where the courts are in different States, -or one is a. Federal an^d the other a State'court, and this -is "true notwithstanding the fact that the Federal court is in a district embracing the State. Each action may proceed to judgment, unless the court in wliidh -the’ latter action is brought,"in the exercise of a sound discretion, stays its prosecution, and. the party .first obtaining his judgment may, in a .propet’ case, use'-it, by an. amended pleading, or as evidence in the other action. (Douglass v. Phenix Ins. Co., 138 N. Y. 209 ; Stanton v. Embrey, 93 U. S. 548 ; 1 Cyc. 36, 38, 39.) Here neither the parties, the cause of action nor' the relief'-sought are the-saíne. A former action to set aside a judgment is no defense to an.action brought to enforce the judgment, as they are not for. the same cause and their scope is different. (McGrath v. Maxwell, 17 App. Div. 246.) ■ If-the plaintiff'in this case is successful- in the other action, he must still proceed here to realize his mortgage debt.- And as the Code of-Civil Procedure '(§' 982) requires an action of foreclosure to be brought in- the county where the -mortgaged property is situate, the plaintiff was not required to set up and seek to enforce his mortgage in the Federal court. In fact, he could not effectually do so, for the reason- that the wife and the judgment creditors of the mortgagor are. necessary parties- to the foreclosure. .

It is true that .the policy, of the law is that the first tribunal obtaining jurisdiction of the parties and the subject of the action shall decide the controversy, so that a multiplicity of suits may bp avoided, and that there shall be no unseemly race between parties after action brought to get a speedier trial in some court in- which they feel a trial is more convenient or otherwise more desirable. Here a stay cannot be claimed as a matter of right, but rests in the sound discretion of the court, and there are many circumstances which appeal to the discretion of the court and naturally lead to a denial of the defendant’s motion. The mortgagor is an attorney of this court, having an office for the practice of his profession in the county in which the foreclosure is sought; and while he lias the right to bring the action in the Federal court, based upon his technical non-residence, it would seem that the State court would be more, accessible ■ to him and more convenient for all parties concerned. The action of foreclosure, as we have seen, is local in its character, and the allegations conferring upon the Federal courts jurisdiction in this case may be considered somewhat technical instead of really substantial. It is conceded that the original mortgage and the judgment of foreclosure were in all respects valid, and even though the defendant establishes usury in the second mortgage, the first mortgage and judgment are not voided by his defense of usury. They may be reinstated and enforced, if not in this action, .. at least in a proper proceeding brought for that purpose. (Winsted Bank v. Webb, 39 N. Y. 325 ; Gerwig v. Sitterly, 56 id. 214 ; Troy Carriage Co. v. Simson, 15 Misc. Rep. 424 ; affd., 12 App. Div. 626.) The usury laws provide that where usury is established a payment of the loan shall not be required, and accordingly that the borrower may maintain an action in equity and shall not be required to make restitution of the money borrowed as a condition for equitable relief. It is not necessary to consider here whether a court of equity will require as a condition of such relief the reinstatement of the valid security, and in that way avoid a circuity of action. It is probable that the'mortgagor must at some time either pay the original indebtedness or lose his farm. It is not very material to him whether he pays the judgment or this mortgage, or whether his farm is sold upon that judgment when revived or in this action. He has not, therefore, any real substantial interest in the controversy aside from the rights granted, and his moving papers do not allege- that they have any real substantial value, and it cannot be inferred fiom the description of them that they aré of great value. Assuming that their value is small, he is still at liberty to' bring an action for their cancellation and have his'rights adjudicated by the Federal court". This court, however, will not feel called upon, in a substantial controversy like this, to compel a creditor to await the result of an action where so little actually depends, and " the result’ of which will not be conclusive here. - Upon all the circumstances, the pourt may well feel .that the Federal action is not brought in good faith to establish a right or redrpss a wrong, but rather is intended to delay the plaintiff and put him to expense,and trouble, and to prevent him obtaining a speedy collection of his mortgage debt. The order of the County Court is affirmed, with ten 'dollars costs and disbursements.

All. concurred; Parker, P. J., in result, and Smith, J., in concurring memorandum. 1

Smith, J. (concurring):

There, seem -to be two classes of cases in which this question arising Over the" question of the jurisdiction of United States and State courts has been discussed. One is a class of cases in which.one of two courts .of concurrent jurisdiction, lias .possession of the res, in which case there is no alternative whatever. The assumption of jurisdiction by both courts, .would create as it were a clash of arms-.. That, is, there would- be a strife between the receivers or between the sheriff and the United States marshal for the final'possession of the property, which would be unseemly, as indicated in the case of Gates v. Bucki (53 Fed. Rep. 966). In that class of cases it is not material whether the -res has been actually taken possession of by the court first' acquiring jurisdiction if the case be of such a nature that it may be necessary to, take possession thereof in. order to carry out 'the decree of the court. (Farmers' Loan, etc., Co. v. Lake Street R. R. Co., 177 U. S. 61.) Theré.is. another class- of eases where there will not be-this, clash of executions,, where the assumption of jurisdiction by the two courts would not necessarily result in a con test, for the. possession of the property but still where the judgment in the court first acquiring jurisdiction ■would be practically nullified by .a judgment' of the court .after-wards acquiring jurisdiction. It seems that in such cases if the judgment sought in the court last acquiring jurisdiction is one purely in personam, there may be doubt as to whether a stay should be granted.. But • if the judgment be not one strictly in personam, nevertheless if the matter could be litigated in the first action, and the judgment in the second action should actually make ineffective the judgment in the first action brought, the trial of the second action should be stayed. This class of cases is illustrated in the decision in Sharon v. Terry (36 Fed. Rep. 337). That was a case in which an action was brought in a Federal court to set aside and cancel a marriage contract. An action was thereafter commenced in the State court for a divorce which assumed the validity of the marriage contract. It was there held that the Federal court having first acquired jurisdiction had the prior right and could stay proceedings in the State court. In this class of cases, if the court first acquiring jurisdiction shall insist upon its prior right, it must be granted both as a matter of courtesy and necessity to avoid a conflict of jurisdictions. In the case at bar there is no specific res for the possession of which both parties are struggling. A judgment rendered in the Federal court might, however, be wholly thwarted by the hasty trial and judgment In the State court. In the Sharon case (upon p. 360) an exception to the rule there laid down is recognized in cases upon contracts or obligations which from their nature are merged in the judgment rendered, the subject upon which the' first suit is founded having thus ceased to exist. Whether the case at bar comes within that exception it is, in my view, unnecessary here to decide. Enough has been shown to throw grave doubt lipón the right of the defendant, in any event, to a stay of the action in County Court.

An application for an injunction against the prosecution of this action in County Court may be entertained by the Federal court. (Stewart v. Wisconsin Cent. Ry. Co., 117 Fed. Rep. 782.) Where a conflict between two courts of concurrent jurisdiction is possible the court with the prior right to jurisdiction can well in its discretion refuse to enjoin the action later brought or enjoin the same upon terms. In my judgment it would be scant courtesy for the court in which the later action is brought to assume to exercise thai discretion. The record discloses facts to which a court would give (much weight in determining whether as: matter of discretion this County. Court action should be stayed or, if stayed, whether it should not be stayed upon. terms. That the first mortgage and judgment ehtered thereupon can still be enforced, even though the second mortgage be usurious, would seem to be clearly held' in Gerwig v. Sitterly (56 N. Y. 214). Upon application for an injunction to the Federal court that court,- with the prior right of jurisdiction, could exercise- its discretion and''refuse.the injunction or grant it upon terms, as for instance -the- payment of the original mortgage or judgment entered thereupon. The judgment entered Upon the foreclosure of the first mortgage is for the exact amount included in the second' mortgage. In such case the action in the Federal court could.proceed to set aside the rights claimed to have been unlawfully exacted from the defendant by the plaintiff. The stay, therefore, was, in my judgment, properly denied to the end that the plaintiff be driven to the Federal court for liis relief, which, court could freely consider plaintiff’s equities iri determining whether the County Court, action should be enjoined, or if so, upon what terms. I .concur, therefore, in the affirmance of the order. . , -.

" Order affirmed, with ten dollars costs and disbursements.'