Case Name: Kathleen H. M. B. Lapham, Respondent, v. George H. Lapham and Others, Defendants, Impleaded with Reuben A. Scofield, as Receiver of the First National Bank of Penn Yan, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901
Citations: 63 A.D. 597
Docket Number: 
Parties: Kathleen H. M. B. Lapham, Respondent, v. George H. Lapham and Others, Defendants, Impleaded with Reuben A. Scofield, as Receiver of the First National Bank of Penn Yan, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 63
Pages: 597–603

Head Matter:
Kathleen H. M. B. Lapham, Respondent, v. George H. Lapham and Others, Defendants, Impleaded with Reuben A. Scofield, as Receiver of the First National Bank of Penn Yan, Appellant.
Lease—assignment thereof by the lessor who subsequently mortgages the leasehold estate to secure alimony — what the wife is entitled to on a foreclosure of the mortgage.
Where a man executes a lease of premises owned by him and thereafter assigns - his interest as lessor in the lease to a creditor, and subsequently, ata time when the lessee was in possession of the leased premises and the creditor was in possession of the assignment, in obedience to a decree of separation granted to his wife, executes a mortgage upon the leased premises to secure the payment of an annuity which the decree directed him to pay to her in equal quarterly installments, the lease and the assignment thereof, executed in good faith, are not subordinate to the mortgage.
Where the mortgage provides that in the event of a default in the payment of any of the quarterly installments it shall be lawful for the wife to foreclose the mortgage and sell the premises, and out of the money arising from the sale to retain the amount then due, with interest, together with the costs and charges of making the sale, and that the surplus shall be paid by her into court to be held subject to such order or direction as the court may deem it proper to make to secure the payment of the installments thereafter accruing the wife upon the foreclosure of the mortgage is not entitled to be paid at once out of the proceeds of the sale the present value of her annuity, but only the amount of the installments due to her at the time of the sale.
Appeal by Reuben A. Scofield, as receiver of the First Rational Bank of Penn Yan, from the following portions of a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of Yates on the 14th day of February, 1901, upon the report of a referee, viz:
From that part of .said judgment which, as against this defendant, directs that the mortgage set up in the complaint be reformed so as to include all the parcels of land in said judgment described.
From that part of said judgment which directs that the Referee, to whom it is referred to, make the sale, pay to plaintiff from the avails of the sale the sum of $5,500, with interest thereon from January 26, 1903, less the amount paid by the appellant as therein pro. vided, or so much thereof'as the purchase money of the mortgaged premises will pay of the same.
• From that part of said judgment which directs that appellant, as Receiver, pay to plaintiff, - or her attorneys, all rents received or collected by him, or to be collected by him as such Receiver.
From that part of said judgment which directs that plaintiff recover of the appellant the sum of forty-five dollars.
From that part of said judgment which adjudges that the rights of the plaintiff in the premises described in said judgment are prior and superior to the rights of this appellant, and which secures such priority to plaintiff by the disposition directed of the proceeds of the sale of said premises.
George S. Sheppard, for the appellant.
John Van Voorhis, for the respondent.

Opinion:
Rtjmsey, J.:
This action was brought to reform a mortgage made by George H. Laplaam to the plaintiff, and to foreclose it as reformed. Several defendants other than the appellant answered in the action, but against all these defendants as well as against the appellant the plaintiff succeeded. ¡None of the other defendants, however, has , appealed, and the case comes here solely upon the objections raised by Scofield, the appellant who is the receiver of the First National Bank of Penn Yan.
The facts, which are substantially undisputed, are that the plaintiff was the wife of George H. Lapham ; that on the 5th of August, 1898, she had begun an action against him asking for a separation and for a proper and suitable allowance for her' maintenance and support; that a trial was had in that action, and on the 19th of June, 1899, a judgment was entered decreeing.a separation and requiring Lapham to pay to the plaintiff the sum of $600 annually for her support during her life in equal quarterly installments, and to deliver to her a mortgage upon his homestead in the village of Penn Yan to secure the payment of the allowance. On the 26th of June, 1899, Lapham executed the mortgage, intending to comply with the provisions of the judgment. As a matter of fact, however, the property intended to be covered by the mortgage was not all included in the description in the mortgage, a portion of the land being left out by mistake. An installment of this alimony of $150 which fell due on the 1st of January, 1900, and another falling due on the first of April in the same year were not paid; and thereupon this action was brought to reform the mortgage, to change the description so as to include all the land intended to be covered by it and to foreclose it as reformed.
The appellant was the receiver of the First National Bank of Penn Yan, of which bank Lapham had been president for many years. In the month of February, 1899, Lapham, who then lived upon the premises afterwards mortgaged, rented them to Emma L. Allen for a term of three years by a lease executed on that day. Mrs. Allen was in possession of the property under this lease at the time the mortgage was made. Before the execution of the mortgage Lapham, who was heavily indebted to the bank, executed and delivered to Scofield, as receiver of the bank, an assignment of the lease transferring all his right, title and interest in the lease, and Scofield was in possession of the lease under that assignment at the time this action was'begun.
The complaint of the plaintiff alleged that the lease and Scofield's, interests under it were subordinate to her rights as mortgagee. This was denied by Scofield, who insisted that his interests in the lease being prior to Mrs. Lapham's mortgage were not subject to.it. In this regard the referee found against him, and held that he was-bound to account for all the rents which he had received except such as-he had in good faith paid over to the treasurer of the United Stateside was also charged with a certain portion of the costs of the action.
The report of the referee fixed the value of the plaintiff's interests in the premises estimated upon the basis of the probability of the extent of her life, according to the Northampton tables,. at. $5,500. He directed that the premises should be sold; that certain, prior liens and incumbrances should be paid; that so much of the= annuity as had previously become due and had not been paid should be paid; that there should then be paid to the plaintiff the sum of $5,500, found by him to be the value of her mortgage interest, and out of the surplus then remaining, if any, certain other payments-were directed to be made which it is not necessary to consider.
The appellant's objection is, in the first place, to so much of the-, judgment thus entered, as requires him to account for the rents-which he had received and to pay certain of the disbursements of the action, and, in the second place, to that part of the judgment, which requires the payment to the plaintiff of the sum of $5,500, as the present value of her annuity in view of the probabilities of her life as shown by the Northampton tables.
The lease of the premises to Mrs. Allen, which was in evidence,, was dated on the 22d of February, 1898. It was made to appear by an affidavit .of Mrs. Lapham, made on the 5th day of May, 1899,. that she knew on that date -that Lapham had rented his homestead in Penn Yan at an annual rental of $720, and that the tenant was-Mrs. Allen There was no testimony whatever tending to show that the lease had not been delivered to Mrs. Allen at its date, or that, she "was not in possession of the premises after the lease was given to her and down to the time of the trial of the action; nor was-there any testimony -or' suggestion either that- the lease was fraudulent against the prospective claims of the plaintiff or that the assignment was made with the intent to hinder, delay or defraud the* plaintiff in the collection of her annuity.-
In view of these facts, we are unable to see by what process of reasoning the learned referee reached the conclusion that this lease was subordinate to the plaintiffs mortgage. It is quite true that the plaintiff was entitled to her support from her husband, but it is equally true that at the time this mortgage was given she had no right to any particular sum for her annuity, nor did she have a lien upon any portion of Lapham's property to secure what she might thereafter recover. He was the owner of the property, and he had the right to do whatever he saw fit with it, and there was no legal reason why he should not rent it if he wished to do so.
The fact that the lease bore date on the 22d of February, 1899, was of itself some evidence. that it was executed upon that day (Purdy v. Coar, 109 N. Y. 448), in the absence of something tending to show that it was not made and delivered at the time it bore date.
It is said that there was no evidence that Scofield was a holder in good faith of the assignment. Such proof was not necessary. It appeared that Mrs. Lapham knew that this lease was in existence and that Mrs. Allen was the tenant under it. This was brought to her notice and was sworn to by her in May, 1899, in an affidavit made for the purpose of giving to the court information upon which to base her award for alimony, and which has been referred to above. As she had at that time actual notice of the existence of the lease, she could not have been a holder in good faith as against the rights of Mrs. Allen, or the rights of any one who was entitled to receive the rents under that lease.
It appears from the complaint that the mortgage was executed and delivered on the 2d of September, 1899, although it appears to have been dated the 19th of June, 1899. The execution of the mortgage at that time was admitted, so upon the facts as they appear there is no question that Scofield was actually in possession of this assignment of the rent several weeks before this mortgage was executed. As there is no claim that the assignment was fraudulently made, and as Lapham was indebted to the bank in a sum very much larger than that which, the assignment was given to secure, no possible reason is seen why his ownership of this rent should be held to be subordinate to Mrs. Lapham's rights under her mortgage. That provision of the judgment, therefore, which requires Scofield to account for the rents which he has received by virtue of his assignment, is improper, and should clearly be reversed.
We think, too, that so much of the judgment as fixes the value of Mrs. Lapham's interest at $5,500, and requires the payment of that sum to her as the present value of her annuity, was also erroneous, and should be reversed. The mortgage was given as security for the payment of the installments of the annuity at the times fixed in the decree and according to its terms. These installments were $150 each, payable on the 1st day of October, 1899, and $150 on the first days of each January, April, July and October thereafter. The mortgage further provided that for any default in the payment of these sums, or any of them, it should be lawful for Mrs. Lapham to foreclose the mortgage and sell the premises and out of the moneys arising from the sale to retain the amount then due with interest, together with the costs, and charges of making such sale, and the surplus, if there should be any, should be paid by her into, court to be invested or deposited by the court, and held, subject to such order or direction as the court might at any time deem it proper to make, to secure the payment of the installments of alimony thereafter to accrue. This was the full extent of the rights of the plaintiff under her mortgage. In no event, under the provisions of the mortgage, could Mrs. Lapham be entitled to anything more than what .'might be due at the time of the sale. It is quite clear from the provisions of the mortgage that it was never intended that the present value of her annuity should be paid, to her under any circumstances. Her right to the annuity ended with her life. When she died, all her interest in the premises, or in any surplus there might be if there had been a foreclosure, ceased; and the surplus thereafter should be paid to Lapham, or to those who, by assignment or otherwise, were entitled to his interest. Just what interest the appellant might have in that surplus is not certain, blit it is very possible that he, as receiver, might have a claim against the surplus for the value of the rents which he might be deprived of by the cancellation of the lease. But it is unnecessary to discuss here the interest which Scofield or any one else might have in that surplus. It is sufficient to say that there is no authority in the mortgage to fix Mrs. Lap-ham's present value of the annuity, but that all she is entitled to receive out of the proceeds of the sale, is what was due her at the time of the sale upon her annuity; and. that whatever remains by way of surplus, after making all the payments to which the parties to the action were entitled, is to be paid into court to await its further order, and when that surplus shall have been ascertained then these rights can be adjudicated intelligently.
The result, therefore, is that the judgment appealed from must be modified by striking out so much thereof as requires the appellant Scofield to account for the rents received by him under this lease, and by directing that the surplus, after making the payments due upon prior liens and paying to Mrs. Lapham the amount due to her at the time of the commencement of the action, shall be paid into court to await the further order of the court, and also by vacating so much of the judgment as requires the appellant Scofield to pay one-half of the referee's fees and the fees of the stenographer, and, as so modified, affirmed, with costs to the appellant against the respondent.
All concurred.
Judgment modified as required by opinion, and, as thus modified, affirmed, with costs to the defendant Scofield against the plaintiff. Order to be settled by and before Mr. Justice Rumsey upon five days' notice.