Court Opinion

ID: 5353870
Source: CourtListenerOpinion
Date Created: 2022-01-08 06:52:15.824319+00
Date Added: 2024-06-11T08:29:46.198567
License: Public Domain

Townley, J.
Plaintiff, formerly a third mortgagee of the premises at No. 7 West One Hundred and Thirty-seventh street, Manhattan, took title to the property on the foreclosure of the third mortgage by a referee’s deed given after a sale made on July 9, 1937. The relief prayed for against the respondent, the first mortgagee, in possession since December, 1933, under a voluntary assignment of rents by the prior owner, included among other things the following:
“ 1. Cancelling and setting aside the said assignment ef rents and extension of mortgage dated December 28, 1936, as to the defendants;
*515“ 2. Placing the plaintiff in possession of said premises known as 7 West 137th Street, Borough of Manhattan, City and State of New York;
■ “ 3. Requiring the defendant, Atterbury, as Trustee, to account for his receipts and disbursements during his management of said premises, and if any surplus should be found in his hands, that the same be equitably applied in reduction of the claims on said premises.”
The ordinary law applicable to this situation was summed up by the Court of Appeals in Becker v. McCrea (193 N. Y. 423, 427, quoting in part from Trimm v. Marsh, 54 id. 599), as follows:
“ ‘ Before taking possession the mortgagee had a mere lien upon the real estate pledged for the security of his debt. After possession he has in his possession the property pledged as his security, the title remaining as it was before. The mortgagor’s title is still a legal one, with all the incidents of a legal title subject to the pledge, and the mortgagee’s interest is still a mere debt secured by the pledge. If the mortgagee should die in possession, the debt would still go to his personal representatives to be administered as personal estate, and the mortgagor’s title would go to his heirs.’ In the same case Judge Reynolds said: ‘ In such case the creditor, instead of leaving his debtor in possession and relying upon his intangible legal lien for his security, takes the thing pledged in his own possession and enjoys its use until his debt is paid. He must account for profits and waste to his debtor, and when his debt is paid by the receipt of rents and profits, or in any other manner, his lien is extinguished and his possession is no longer justified by law.’
“ Though, as we have seen, the surrender of possession by the mortgagor to the mortgagee confers no title upon the latter, still it is settled law that in such case ejectment cannot be maintained by the mortgagor against the mortgagee, but he must resort to an action in equity to redeem. (Phyfe v. Riley, 15 Wend. 248; Chase v. Peck, 21 N. Y. 581.) ”
It will be noted that the owner of the legal title at the present time is asking in equity to be put in possession of the premises without making any offer to redeem. The basis for this claim is that at the time the agreement to extend the mortgage was made in 1936, though there was a default in principal which entitled defendant Atterbury to remain in possession, nevertheless, the moratorium statute  which prevented Atterbury from foreclosing the mortgage, likewise acted as an ouster of the mortgagee in possession as soon as the defaults in interest and taxes had been made up under the assignment of rents.
*516We find nothing in the moratorium statute to affect the right of a mortgagee in possession to remain in possession until the mortgage debt is paid and certainly nothing has been done in this case to give the plaintiff who is suing as owner of the legal title any other right than to get possession of the property by redemption. The moratorium statute is designed as a shield for the protection of mortgagors. No equitable purpose would be served by permitting its use as a device for disseising a mortgagee rightfully in possession without the necessity for redeeming the property from the mortgage debt. There is no issue in this case as to the right of an owner to waive the provisions of the Moratorium Act. Nothing has been waived, in so far as that act is concerned. That act provides that no foreclosure action may be brought when there is no default on payment of interest or taxes. The defendant Atterbury has brought no foreclosure action; in fact he has agreed not to bring one until 1939.
When the defendant Atterbury accounts for his disposition of the rents and profits, if any of the funds collected from the property that should have been applied to the reduction of the mortgage have been applied to other purposes, it may be that equity will deem that those moneys have been applied pro tanto to the reduction of Atterbury’s debt. But that is the limit of the relief to which plaintiff is entitled under the rules of law above discussed.
The judgment should be affirmed, with costs.
Martin, P. J., and Glennon, J., concur; Untermyer and Cohn, JJ., dissent and vote to reverse and grant a new trial.