#### Frances Way Haines, Respondent, *v.*Twelfth Ward Bank of the City of New York, Appellant.

First Department,

May 1, 1914.

Bills and notes —foreclosure of mortgage pledged to secure payment — suit to secure cancellation of judgment on note on ground that purchaser on foreclosure held as trustee — evidence insufficient to sustain decree.

The promissory note of a corporation, indorsed by the plaintiff and others, was given to the defendant, a bank, and to secure the payment of the . same the corporation assigned a part interest in a mortgage on real *165estate. Subsequently the defendant bank brought action upon the note and recovered against the maker and indorsers, pending which action the bank, as assignee, was made party defendant in a suit to foreclose a prior mortgage, and purchased the property. Pending the foreclosure one B. informed the defendant that the property had a certain value and that he had a party interested in pm-chasing it for that amount, but that he could not finance the deal, and asked that the defendant buy the property, pay all liens subsequent to the first mortgage, and convey to the intended purchaser, taking back a second mortgage for a portion of the purchase price. This agreement was reduced to writing and was carried out.

This action is brought upon the theory that the defendant in purchasing the mortgaged premises on foreclosure acted as trustee for the plaintiff, an indorser on said promissory note, and the relief demanded is a cancellation of the judgment on said note upon the ground that said purchase by the bank constituted payment. There was no evidence that the persons who induced the defendant bank to purchase the lands on foreclosure represented the plaintiff in any manner, or that the plaintiff was induced to refrain from bidding at the sale. On all the evidence, Held, that the bank did not purchase the property for the benefit of the plaintiff, with whom it had no fiduciary relation, but purchased in order to protect itself and that there was no basis for the relief .demanded.

Appeal by the defendant, Twelfth Ward Bank of the City of New York, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 10th day of December, 1918, upon the decision of the court after a trial at the New York Special Term.

*Philip W. Russell,*for the appellant.

*A. S. Gilbert,*for the respondent.

Laughlin, J.:

The material facts are established by uncontroverted evidence. The appellant is a domestic banking corporation. On the 27th day of May, 1910, the Haines Realty Corporation executed and delivered its promissory note, indorsed by the plaintiff and others, to the defendant, and assigned to it as collateral security therefor a one-half interest in a *fourth*mortgage for $25,000 on premises known as No. 12 Fifth avenue, borough of Manhattan, New York. On the 27th day of August, 1910, the bank commenced an action in the Supreme Court against the maker and indorsers of the note, and judg*166ment thereon was duly entered in its favor on the 9th day of February, 1911, for the sum of $6,242.68. Pending the action on the note, the bank, as such assignee, was made a party defendant to an action for the foreclosure of a prior mortgage on the premises, and it purchased the property on the foreclosure sale on the 20th day of January, 1911, for $182,500. The prior liens and costs of foreclosure aggregated at that time approximately $185,000 or $186,000. The cashier of the bank testified that prior to the foreclosure sale one Baldwin called on him and inquired whether the hank contemplated bidding to protect itself, and that in reply thereto he said *“*we hadn’t made up our minds yet, that we were not-” whereupon Baldwin informed him that he had sold the property two or three times and that in his opinion it was worth about $200,000, and that he had a party interested in purchasing it for that amount, who, however, did not have the money to finance the deal and would not. bid at the auction as he anticipated that the bank would bid to protect itself, and Baldwin suggested that the bank buy the property and pay off all liens subsequent to the first mortgage, and that he would obtain a purchaser for the property if the bank would take back a second mortgage for $50,000 or $55,000 in part payment; that finally it was agreed between the bank and one Alexander, whom Baldwin represented, and the agreement was reduced to writing on the 9th day of November, 1910, that the bank would bid not to exceed $182,500 on the sale of the property, and if it became the purchaser it would pay off the liens subsequent to the first mortgage and take a second mortgage for $50,000 in part payment of the purchase price and Alexander would purchase it from the bank at $201,000; that prior to the foreclosure sale Alexander paid to the bank $26,000, which was the total of the cash payments to be made by him; that the hank purchased the property in fulfillment of that contract, and after complying with the contract on its part and paying a commission of $2,000 to Baldwin, immediately conveyed the premises to Alexander; that prior to the foreclosure sale it had been determined by the officers of the hank to bid $190,000 if necessary; that if the bank had bid in the property at $190,000 it would have credited one-half the excess of the bid over the prior *167liens, which would be about $2,500, on the indebtedness represented by the note for which it held the assignment as collateral security; and that the total indebtedness of the maker of the note to the banks at that time was $11,000. Baldwin testified that the cashier informed him that if the bank bid over $182,500, one-half of the excess of the bid over that amount would have to be applied on the indebtedness represented by the Haines note, *“*and therefore he didn’t want to bid over that; that he would still hold the security against Mrs. Haines,” and that thereupon they agreed upon those figures as the maximum of the bank’s obligation to bid; that the cashier stated to him in substance that the bank would have to pay brokerage commissions, and that it would cost it ten per cent of the $50,000 mortgage to negotiate it, and that it would be necessary for the bank to sell the property for about $202,000 to protect itself. The cashier’s testimony does not fully harmonize with that of Baldwin, but it fairly appears therefrom that the bank negotiated with Baldwin and contracted with Alexander and bid in the property with a view to protecting itself with respect to the indebtedness of the maker of the note to it, part of which only was evidenced by the note. The bank still holds the mortgage for $50,000 wholly unpaid, and the first mortgage, which is for $125,000, is in process of foreclosure.

This action was brought on the theory that the sale at foreclosure, as between plaintiff and the bank, should be deemed to have been made for the price at which the bank was then under contract to sell it, or that in purchasing it the bank should be deemed to have acted as trustee for plaintiff; and the relief demanded in the complaint and decreed by the judgment is the satisfaction and cancellation of the judgment on the note, on the ground that in the circumstances of this case the purchase by the bank at the foreclosure sale constituted a payment in full.

There is no evidence that either Baldwin or Alexander in any manner represented the plaintiff, or that the plaintiff was made aware of the facts to which reference has been made by the bank or otherwise, or was induced thereby to refrain from bidding or obtaining others to bid on the sale. Nor is there any evidence tending to show that either Baldwin or Alexander *168would, have bid, or would have obtained another to hid, on the property had not the contract been made with the bank. The evidence does not warrant the inference that the hank purchased the property for the benefit of the plaintiff. All of the testimony is consistent with the bank’s having purchased the property for its own protection and security with respect to the indebtedness of the maker of the note to it. It may very well he that but for the fact that the bank held this assignment as collateral security, it would not have hid on the sale as an investment, but evidently it did not feel that it was fully secured by the mere liability of the maker and indorsers of the note, and it deemed it advisable to bid as high as $190,000 for the property if necessary, and to enter into this contract with Alexander. It is manifest that in so doing the hank assumed the risk of its ability to sell the mortgage for $50,000, of to realize on it in the event of a foreclosure of the prior mortgage, or of it. These risks it did not take for the benefit of the plaintiff, and it was under no obligation to incur them for the plaintiff. There is no principle of law or equity which precluded the bank from bidding in the property for its own protection. There was no fiduciary relation between the bank and the plaintiff. The facts disclosed, therefore, afford no basis for the relief granted.

It follows that the findings made by the trial court in so far as they are inconsistent with the views herein expressed are reversed, and findings in accordance with these views will be made, and the conclusions of law are reversed and conclusions of law directing the dismissal of the complaint upon the merits will be substituted therefor, and the judgment will be reversed, with costs to the appellant, and judgment entered dismissing the complaint upon the merits, with costs.

Let an order embodying the reversal of findings and new findings and the conclusions of law and for judgment as herein directed be presented and settled on notice.

Ingraham, P. J., McLaughlin, Clarke and Scott, JJ., concurred.

Judgment reversed, with costs, and complaint dismissed upon the merits, with costs. Order to be settled on notice,