Court Opinion

ID: 6121244
Source: CourtListenerOpinion
Date Created: 2022-02-04 18:47:31.663063+00
Date Added: 2024-06-11T08:23:23.781781
License: Public Domain

Gilbert, J.:
The bond and mortgage in this case bear date April 24th, 1873, and they were given by the defendant James T. Dudley to. the Tarrytown Heights Land Company, to secure the purchase money of the mortgaged premises. The conveyance from said company, contained a covenant, whereby said company covenanted to pay and discharge a prior mortgage on said premises for $16,000, or cause said premises to be released from the lien thereof, on or' before the first day of July, 1875. That covenant has not been performed. The prior mortgage for $16,000 has not been paid or discharged, nor have the mortgaged premises been released from the lien thereof.
The plaintiffs are assignees of the mortgage in suit. This action *189is for the foreclosure thereof only, no personal claim against Dudley being made; and the breach of the covenant aforesaid is set up as a defense by way of counterclaim. The assignment to the plaintiffs was made on or about September 1st, 1875. The court below upon these facts rendered the usual judgment for the foreclosure of the mortgage in suit, and a sale of the mortgaged premises, and the payment to the plaintiffs out of the proceeds of sale of the whole amount of said mortgage.
There is no principle, that I am aware of, on which this judgment can be sustained. At the time of the- assignment of the bond and mortgage in suit, the mortgagor James T. Dudley had an immediate right of action against the assignor of the plaintiff, for the breach of the covenant of said assignor before mentioned. Dudley -was entitled to recover as damages, for such breach of covenant, the full sum of |16,000, notwithstanding he had not paid the prior mortgage nor any part thereof, and had not been evicted from the mortgaged premises, nor sustained any actual loss whatever in consequence of the breach of said covenant. That principle has been completely established in this State. (Juliand v. Burgott, 11 Johns., 477; Port v. Jackson, 17 Johns., 239; S. C. in error, id., 479; ex parte Negus, 7 Wend., 499; Thomas v. Allen, 1 Hill, 145; Gilbert v. Wiman, 1 N. Y., 550, 562; Rector, etc., v. Higgins, 48 id., 532; Belloni v. Freeborn, 63 id., 383.) The reason of the rule is that Dudley was entitled to have this estate unincumbered by the prior mortgage after July 1st, 1875. How could that be enforced unless. he could reeover the whole amount on the covenant? (Lethbridge v. Mytton, 2 Barn. & Adolph., 772.)
The plaintiffs took the assignment of Dudley’s mortgage subject to his right of action against the plaintiffs’ assignor. (Crane v. Turner, 67 N. Y., 437, and cases cited.) Such right of action constituted a valid set off or counterclaim against the plaintiffs. (Code of Proc., § 112; Code of Civ. Proc., §§ 501-502; Bathgate v, Haskin, 59 N. Y., 533; Hunt v. Chapman, 51 id., 555.)
The result is that the plaintiffs are bound to allow to Dudley that set off or counterclaim (Lathrop v. Godfrey, 3 Hun, 739), and they must seek their remedy for the loss so occasioned against *190their assignor. What that remedy may be it is not necessary now to consider.
We think the case of Nat. Fire Ins. Co. v. McKay (21 N. Y., 191), does not benefit the plaintiffs. In that case the defendant, who set up the counterclaim, insisted as a defense that he had been evicted under a paramount title, whereby he had been divested of his interest in the mortgaged premises. No personal claim was made against him. The court merely decided that a defendant, in a suit to foreclose a mortgage, against whom no personal claim is made, and who has no interest in the land to be affected by the judgment demanded, cannot set up a counterclaim. They recognized his right to do so, however, in a case like this. Although the plaintiffs have waived their claim against Dudley, his land will be bound by the judgment, and a sale thereunder will divest him of his title thereto and transfer it to the purchaser. It does not appear whether the land is worth more or less than the amount of the judgment. If it is worth more, the effect upon him of enforcing the judgment against the land will be as injurious as the enforcing of a personal judgment against him would be; and if it is worth less, he will sustain a proportionate loss.
We are of opinion that a party to an action to foreclose a mortgage, against whom either a personal judgment or one which may operate to transfer his estate in the land is sought, has a right to set up a counterclaim as a defense to the action, and that the case of Agate v. King (17 Abb. Pr. R., 159), so far as it asserts a contrary principle, ought not to be approved. (Lathrop v. Godfrey, 3 Hun, 739.)
It follows that the judgment must be reversed and a new trial granted, with costs to abide the event.
Barnard, P. J., concurred; Dykman, J., not sitting.
Judgment reversed and new trial granted; costs to abide event.