Case Name: ALLEN v. PIERSON et al.
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1906-05-02
Citations: 100 N.Y.S. 451
Docket Number: 
Parties: ALLEN v. PIERSON et al.
Judges: 
Reporter: West's New York Supplement
Volume: 100
Pages: 451–459

Head Matter:
(113 App. Div. 586.)
ALLEN v. PIERSON et al.
(Supreme Court, Appellate Division, Fourth Department.
May 2, 1906.)
Mortgages—Foreclosure—Power—Construction.
The owner of certain property transferred the same to his sons to carry on his nursery business thereon, whereupon the sons immediately mortgaged the property to secure payment of loans made, and to be made to carry on the business and the then existing debts and liabilities of the father. The mortgage provided that in case of default in the payment of the advances and loans made for the purpose of carrying on the business or in the payment of the claims continuing for 30 days, then the trustee or his successors in the trust might and on request in writing of any one on whose note default shall have been made or on the written request of a majority in amount of the holders of claims annexed, should take possession of the property and enforce the rights of creditors. Held, that the holder of a secured claim against the mortgagors’ father, which was included in the schedule annexed to the mortgage, but which was less in amount than a majority of all the claims of its class, had no authority to direct a foreclosure of the mortgage after the jointure of other creditors sufficient to make the amount of all their names a majority of the claims so annexed.
' McLennan, P. J., and ICruse, J., dissenting.
Appeal from Special Term, Seneca County.
Action by Addie E. Allen against Albert H. Pierson and others. Erom an interlocutory judgment, overruling a demurrer to the complaint for want of facts, defendants appeal. Reversed.
Argued before McLENNAN, P. J., and SPRING, WILLIAMS, NASH, and KRUSE, JJ.
George E. Zartman, for appellants.-
Charles E. Opdyke and Henry E. Miller, for respondent.

Opinion:
WILLIAMS, J.
The judgment should be reversed, and the demurrer sustained, with costs to the appellant with leave to the respondent to plead over on payment of the costs of the demurrer and of this appeal. The action is brought to foreclose a trust mortgage. The trustee was requested to bring the action, but failed to do so, and, thereupon, one of the cestui que trusts brought this action. The defect in the complaint is the failure to allege a request or notice to the trustee to bring the action made as provided in the mortgage. There is no dispute, .but the action can be maintained by the cestui que trust, if the trustee failed to bring it, upon proper request or notice. The mortgage is annexed to the complaint, and formed a part thereof. The circumstances under which the mortgage was given are fully recited in the mortgage, and are in brief as follows:
June 17, 1897, Edwin C. Pierson owed debts to various parties amounting to $36,589.73; a list of which was annexed to the mortgage. He. transferred all his real and personal property, nursery stock, and nursery business to his two sons, the mortgagors, and they gave the mortgage upon the property to the trustee William B. Clark. The mortgagors gave their promissory notes' for the debts and liabilities constituting the then existing indebtedness of their father. The mortgage also recited that the sons might be obliged to borrow money not- exceeding $4,000 annually, for the purpose of carrying on the business. This loan of $4,000 could only be made from time to time, however, on the consent and approval of the trustee. Notes were to be given, we assume, for these loans and advances. The mortgage was given to secure payment of such loans to carry-on the business, and the then existing debts and liabilities, and the default clause in the mortgage was as follows:
"In case default shall be made In the payment of the advances and loans made to parties of the first part for the purpose of carrying on their business as aforesaid, or in the payment of the claims as .aforesaid, and in the manner herein set forth, and if any such default shall continue for the space of 30 days, then and' in such case, the said William B. Clark or his successors, in the trust, created or declared by this indenture, may and upon the request in writing of any one on whose note default shall have been made or upon the request in writing signed by a majority in amount of the holders of claims hereto annexed shall take possession of said property, and enforce the right of said creditors, under these presents, by entry and sale of the property herein conveyed, in such manner as authorized by law or the practice of the court, and after deducting from the proceeds of such sale, allowances for all expenses, or costs, to first reimburse said parties for their advances, made as herein provided, and then distribute the remaining proceeds arising from the sale, among the creditors, named in the list hereto annexed, in equal pro rata proportions, and without preference or priority to any, and if any surplus remains to pay the same to the parties of the first part, or to dispose of the same as any court of competent jurisdiction may direct."
It is alleged in the complaint that the plaintiff was one of the creditors holding claims against the father, and was named in the list annexed to the mortgage; that default occurred in the payment of her debt when due, and continued for 30 days, and then she gave notice in writing under the default clause in the mortgage, and requested that the trustee proceed to enforce her rights by taking possession of, and selling the property, and that the trustee refused to comply with such notice and request. The right of plaintiff to maintain this action is based upon such notice, request, and refusal. Under the clause in the mortgage, however, the notice and request, if it emanated from the creditors of the father, a list of whom was annexed to the mortgage, could only be effectual if signed by a majority in amount of the holders of those claims. Plaintiff's claim was only about $2,600, and the whole amount was upwards of $35,000.
There were two classes of creditors whose claims were secured by the mortgage: Those who made the loans and advances annually for carrying on the business, and any one of them could give the notice and make the request, but no one creditor in the list annexed to the mortgage could give the notice and make the request unless his claim was a majority in amount of the claim in such list. There can be no doubt as to this being the proper construction of the default clause in the mortgage. All this list of creditors held notes for their claims, and if any one of them holding such a note could alone give the notice and make the request, then the second clause relating to such notice and request would be meaningless. The suggestion that plaintiff was not a party to the trust agreement, and knew nothing about it, is absurd. She took her note under it, and her right of action, as alleged in her complaint, is founded upon it. Our construction of the default clause in the mortgage does not permit the plaintiff to maintain this action upon the facts alleged; and, therefore, the complaint fails to state facts constituting a cause of action, and the demurrer thereto must be sustained.
Interlocutory judgment reversed and demurrer sustained, costs, with leave to plead over upon payment of the costs of the demurrer and of this appeal.
NASH, J., concurs. SPRING, J., concurs in a separate memorandum. MCLENNAN, P. J., dissents in an opinion. KRUSE, J., dissents in a separate memorandum.