#### Public Bank of New York City, Plaintiff, *v.*Israel M. Oshinsky et al., Defendants.

(Supreme Court, New York Special Term,

November, 1910.)

Mortgages — Assignments of mortgages — Action by assignor — Waiver of default.

A mortgage payable in installments with the accompanying bond was assigned as collateral security for the payment of a loan represented by four notes of the assignor who retained the physical possession of the securities and collected the interest and the installments of principal as the same became due. Thereafter the assignee of the bond and mortgage assigned it to plaintiff. Both assignments were duly recorded and thereafter an action, brought by the mortgagee to foreclose the mortgage upon default in the payment of interest and an installment of principal due, was settled though never discontinued, and after he had attempted to waive the default the property was conveyed to his cousin who, the evidence disclosed, was not a *"bona fide*purchaser. Held, that the assignee of the mortgage, in an action brought to foreclose the same, was entitled to judgment, with costs.

The rights of the assignee of the bond and mortgage were paramount to the rights of the mortgagee to the extent of the loan for which he had assigned it, and his collections of the interest and installments on the mortgage were subject to the rights of the assignee.

Action to foreclose a mortgage upon real estate.

H. Flugelman, for plaintiff.

C. Burnstein, for defendant.

McCall, J.

This is an action brought to foreclose a mortgage under unusual circumstances, and it becomes necessary-somewhat fully to review the facts as established by the evidence. On December 2, 1907, the defendant Israel M. Oshinsky was the owner of the premises covered by the mortgage being foreclosed herein, and the defendant Maurice J. Bur-stein, a practicing physician and an admitted attorney, was the owner and holder of the bond and mortgage which are the subject of this action. On said date Mr. Burstein bor*465rowed $10,000 from one Joseph ,-S. Markus, and for the purpose of securing the payment of the same gave to Mr. Markus four notes, two, each of $1,000, due January 2, 1908, and July 1, 1908, respectively; one for $1,500, due November 1, 1908, and one for $6,500, due February 1, 1909, and assigned to Mr. Markus the bond and mortgage sued on herein as collateral security. The mortgage was payable in installments. Those installments falling due after assignment were $1,200 on January 1, 190-8; $1,100 -on May 1, 190-8; $1,750 on November 1, 1908, and $1,750 every six months thereafter on the first days of May and November of each and-every year. The physical possession of the bond and mortgage remained with Dr. Burstein, who collected the interest and the installments of principal as the same became due. By an assignment dated April 22, 1908, Mr. Markus assigned the bond and mortgage to the plaintiff. The first assignment to Markus was recorded December. 2, 1907, and the assignment to the plaintiff was recorded June 15, 1908. The first three notes were paid. In November, 19-08, notwithstanding the assignment of the mortgage then of record, an action was brought by Dr. Burstein against Mr. Osbinsky for the foreclosure of the mortgage in suit on a default then made under the mortgage. Thereafter Dr. Burstein himself attempted to waive the default, and some arrangement was made whereby the foreclosure suit was settled, although never discontinued, and the property was conveyed to Sarah Both, a cousin of-Dr. Burstein. The testimony shows that Dr. Burstein began the foreclosure suit by filing a lis pendens November 10, 1-90-8. He immediately began negotiations with Oshinsky, the result of which was, in the language of Dr. Burstein, that “ Oshinsky was to receive a month’s rent, which amounted to about $1,100, and $200 besides for the deed to me, and Miss Both was to pay up the installment of $1,750 and $1,86-0 interest. I was to pay, however, the taxes and the mortgage interest; that was all straightened out on the 11th of November.” All this was done a day or so- before the deed was delivered. While Miss, Both testified that she owned the property she stated that Sll she gave for it was $3,810, which she turned over to her cousin, the doctor, to pay the installment and the *466■interest then due on the mortgage, and $200' to Oshinsky. This money, which she turned over to him, seemed to have been a deposit with the doctor, for she testified that she got the cash to pay for the property from the doctor, and then explained: *“*I had money with the doctor, and whenever I needed money I always used to go to the doctor and he used to give it to me.” She did not know how many tenants were in the property. Her cousin, Dr. Burstein, paid the taxes, and the doctor’s wife has been collecting the rents. While not passing upon the question, I am not convinced of the good faith of this transaction. The facts and circumstances as established by the evidence preclude, to my mind, the possibility of Sarah Both being a *bona fide*innocent purchaser of this property. The bond and mortgage sued on in this action were assigned for the purpose of securing this loan of $10,000. If the contention of Dr. Burstein should be accepted it would nullify .that purpose. If one can assign a bond and mortgage as security for a debt and thereafter so manipulate that security as to render it worthless, it is hard to understand the purpose of the assignment. The rights of the assignee of this bond and mortgage were certainly paramount to the rights of the assignor to the extent of that loan, and if the assignor collected the interest and installments on the mortgage he did so subject to those rights. To say that he could collect the interest and installments on the mortgage and put them in his pocket and then refuse to pay the notes and-claim that there was no default in the mortgage would make .the pledge of the bond and mortgage useless. There was a default in the payment of interest and the installment due November 1, 1908, which the assignor attempted to waive by taking title in the name of his cousin. If one controls the fee as well as the mortgage, payments on the mortgage to prevent defaults would be a mere matter of bookkeeping, and it would open the door to gross frauds on honest lenders of money. Judgment for the plaintiff, with costs. Submit findings and decision in accordance with this opinion.

Judgment for plaintiff.