Case ID: nys_8/html/0415-01.html
Source: Caselaw Access Project
Author: {"author": "Daniels, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Knapp v. Van Etten et al.
    
    
      (Supreme Court, General Term, First Department.
    
    January 10, 1890.)
    Mortgages—Foreclosure—Deficiency—Sureties on Appeal.
    Judgment was rendered in proceedings to foreclose a mortgage, but no specific sum of money recovered, other than from the sale of the mortgaged premises. Defendant appealed, and furnished sureties in compliance with Code Proc. N. Y. §§ 835, 338. The obligation of the sureties contained no express agreement on their part to pay any deficiency after sale of mortgaged premises. Held, that the sureties incurred no liability for said deficiency.
    
      On exceptions from circuit .court, Yew York county.
    Action by Shepherd F. Knapp, receiver of Bowling Green Savings Bank, against James Van Etten and another, sureties, to recover the residue of a mortgage indebtedness after foreclosure and sale of mortgaged premises.
    Argued before Van Brunt, P. J., and Barrett and Daniels, JJ.
    
      Alexander Cameron, for plaintiff. E. P. Wheeler and H. A. Nelson, for defendants.
   Daniels, J.

The action was brought upon an undertaking executed by the defendants upon an appeal taken to the general term from a judgment in an aciion for the foreclosure of a mortgage and the sale of the mortgaged premises. The judgment was affirmed; and after the sale had taken'place, and the application of the proceeds to the payment of the expenses, and so much of the residue as remained to the payment of the mortgage debt, there remained a deficiency of $27,193.08. This deficiency, with interest upon it, the plaintiff claimed to recover against the sureties in the undertaking, in addition to the sum of $1,609.90, for the use and occupation of the premises, and interest, and costs on the appeal in the action in which the undertaking was given. . The court limited the recovery by the plaintiff to this sum of $1,609.90, and directed a verdict for that amount. Before this direction was given the plaintiff's counsel requested the court to instruct the jury to find a verdict for the deficiency, in addition to the sum for which the verdict was directed. That the court declined to do, and an exception was taken to that refusal; and it is upon that exception, and another, to a similar effect, that the plaintiff has made this motion for a new trial.

The judgment was in the ordinary form for the foreclosure of the mortgage and a sale of the mortgaged property; and it contained the direction “that if the proceeds of said sale be insufficient to pay the amount so adjudged due to the plaintiff, with the interest and costs as aforesaid, the said referee specify the amount of such deficiency in his report of sale, and that the defendant Philip J. Bonesteel pay the same to the purchaser.” It was further adjudged that there was due and owing to the plaintiff in that action the sum of $33,-261.56; and the referee, by whom the sale was to be made, was directed to pay this sum of money, with interest upon it from March 11, 1874, or so much as the purchase money of the premises would pay, out of the proceeds of the sale, and that direction was so far complied with as the proceeds permitted it to be done. But, after paying what was directed by the judgment in the way of expenses and upon the mortgage debt, there remained still the deficiency already mentioned. The appeal was taken from the judgment in the foreclosure action in 1874, and the sureties in the undertaking undertook “that the said appellant will pay all costs and damages which may be awarded against him on said appeal, not exceeding five hundred dollars, and do undertake that during the possession of the said property by the appellant he will not commit, or suffer to be committed, any waste thereon; and that if the said judgment so appealed from, or any part thereof, be'affirmed, or the appeal be dismissed, the said appellant will pay the amount directed to be paid by the said judgment, or the part of such amount as to which the said judgment shall be affirmed, if it be affirmed only in part, and all damages which shall be awarded against said appellants on the said appeal; and that if the judgment be affirmed he will pay the value of the use and occupation of said property from the time of the appeal until the delivery of possession thereof, pursuant to the judgment, not exceeding the sum of one thousand dollars, which amount is so fixed by the judge approving this undertaking.” From this statement of the obligation of the defendants, the undertaking appears to have been given to comply in part with section 335 and in part with section 338 of the Code of Procedure. But it contained no express agreement or undertaking on the part of the defendants for the payment of any deficiency

arising upon the sale of the mortgaged property; and for that reason it was considered at the trial that the defendants incurred no liability for the deficiency. By so much of the undertaking as was given under the authority of section 335 of the Code of Procedure, the defendants agreed and undertook that if the judgment appealed from, or any part of it, should be affirmed, or the appeal should be dismissed, the appellant would pay the amount directed to be paid by the judgment, or the part to which it should be affirmed, if affirmed only in part, and all damages which should be awarded against the appellant upon the appeal. But there was no amount recovered or directed to-be paid by the judgment, otherwise than from the proceeds of the sale of the premises; neither were any damages awarded against the defendants in the action on the appeal. This provision Of the Code was clearly not designed to impose a liability upon the sureties giving an undertaking in compliance with it for the payment of a deficiency arising upon the sale of property in an action for the foreclosure of a mortgage. But the liability which is expressed by it, and was intended to be placed upon the sureties in the undertaking, was for the payment of the amount directed to be paid by the judgment as a final and ultimate adjudication. It was intended to include that class of cases, and only those, where a specific or certain sum of money was directed to be paid, or recovered by the judgment; and so much of the undertaking as-was given to comply with this section of the Code was inoperative in the action, unless it might, possibly, include the amount recovered for costs and disbursements. In Barnard v. Onderdonk, 98 N. Y. 158, a judgment or decree. recovered in an action for the foreclosure of a mortgage was considered not to be within this part of this section of the Code; and it was there held, that the judgment was not for the payment of any sum of money, and that it-could only be made a personal judgment by other proceedings following the-sale of the property, and the application of its proceeds; that no amount of money was recovered by it, nor does it direct the payment of any sum of money. Id. 166, 167. At the time when the appeal was taken and the undertaking was given, no deficiency whatever was or could.have been adjudged to exist in the action; and there accordingly could be no adjudication or direction for the payment of any sum of money which should finally appear to be left unpaid after the application of the proceeds of the sale cf the property. There was no sum of money adjudged or directed to be paid by the judgment because of any deficiency; neither could that be ascertained until the property was sold, and its proceeds applied as the judgment directed that to be done. And that the undertaking given under this section of the Code was not intended to include a deficiency in a foreclosure suit is confirmed by the latter part of section 338; for that has provided, upon an appeal from a foreclosure judgment, to obtain a stay of proceedings, that the sureties should undertake and bind themselves for the payment of a deficiency arising from the sale of the property. And this provision would not have been made a part of the section, if an undertaking under section 335 had been designed, or was to be construed, to provide for such a payment. Section 335 was in no manner adapted to an appeal from the foreclosure judgment; but that was regulated; and provided for by section 338, which declared what the form of the undertaking should be. And the undertaking in this instance failed to comply with that direction, so far as it included a possible or probable deficiency remaining after the application of the proceeds of the sale. ITeither by the language of the undertaking itself, nor the application of these sections to the action, was any liability incurred on behalf of the defendants to make payment of this deficiency. They entered into the obligations assumed by them as sureties, and the extent of their liability is to be determined by the language which was employed. Wood v. Fisk, 63 N. Y. 245. In ¿he cases of Post v. Doremus, 60 N. Y. 371; Goodwin v. Bunzl, 102 N. Y. 224, 6 N. E. Rep. 399; Carr v. Sterling, 114 N. Y. 558, 22 N. E. Rep. 37; and Gerould v. Wilson, 81 N. Y. 573,—the undertaking or contract entered into was expressed in language so broad, declaratory of the liability of the sureties, as to include that which they were held to have respectively entered into and assumed. And there was therefore no impropriety in holding the extent of liability to be that which was enforced against them in those cases. But they are distinguishable from the present action in the important circumstance that these defendants employed no language whatever in their undertaking which expressly or by fair implication can be held to include an obligation for the payment of this deficiency. In Chamberlain v. Applegate, 2 Hun, 510, the judgment did provide for the amount whicli the plaintiff was found entitled to recover; and it was in effect recovered by the judgment. And then a sale of the premises included in the contract directed to be specifically performed was required to be made, and the proceeds applied upon that judgment. The right of the plaintiff there, so far as the judgment included the debt, was fixed and absolute. It required no further proceeding or adjudication to ascertain the debt or amount finally remaining unpaid, while in this action that could only be done upon further proceedings being taken on the basis of the report of the referee after the sale. The undertaking there was given under section 335 of the Code of Procedure; and, the judgment being for the recovery of money, it was held to be within the undertaking. But that is not this case; for here no sum of money, certainly beyond the costs, was definitely recovered by the judgment in the foreclosure action against the defendant. And, as the court at the trial appears to have been right in the direction which was given, the exceptions should be overruled, and the motion for a new trial denied, with costs to the defendants, and the plaintiff have judgment on the verdict rendered by the jury. All concur.