Court Opinion

ID: 5340752
Source: CourtListenerOpinion
Date Created: 2022-01-08 05:54:58.574619+00
Date Added: 2024-06-11T08:29:33.976167
License: Public Domain

Glennon, J. (dissenting).
A careful examination of the evidence convinces me that no inference can be tortured from the actual proof in this case to support the theory that the defendant Norwood entered into a conspiracy with his codefendant, Greenberg, to deprive the plaintiff of her mortgage hen.
The property in suit is located at No. 941 Rogers place, in the borough of the Bronx. The defendant Carlisle Norwood, a retired member of the bar, eighty-nine years of age, held a first mortgage on it in the sum of $46,500. In 1930, Silberman Realty Co., Inc., gave plaintiff its bond for $6,500 and a second mortgage covering the property as security for its payment. How much money the plaintiff, Kossoff, actually advanced to the Silberman Realty Co., Inc., at the time of the delivery of its bond and mortgage does not appear.
Some time thereafter — the date is not fixed — Greenberg purchased the property subject to the mortgages for the sum of $10,000. He paid thereafter to the plaintiff on account of the second mortgage the sum of $2,250 in installments, thereby reducing the face amount thereof to $4,250. It is fair to assume that, when he became the *653owner, the returns from the property were sufficient to pay all the carrying charges.
Later, the period of depression in real estate ensued. An open public bath was built next to the premises, causing a loss of tenants and a falling off of the rents. About that time Greenberg, the father of a large family, lost his business and apparently was without funds. Plaintiff pressed him to make payments of installments and interest, which he was unable to do, and threatened to foreclose her mortgage. Greenberg offered to deliver a deed to her for the sum of $700, an amount about sufficient to cover the costs of foreclosure, but she refused to accept. Through her attorney, the plaintiff countered with a proposition for a delivery of the deed without any payment, although it does not appear that Greenberg was a party to the bond which had been delivered to her by the Silberman Realty Co., Inc.
On January 1, 1933, the water rates became due and payable. On April first interest on the first mortgage amounting to $697.50 became due. On April sixth Greenberg tendered to the defendant Norwood a check in the sum of $300 in part payment of the interest. This was not Greenberg’s first default. He was late in making payments of interest due on January first of that year. Norwood, however, accepted installment payments during January and February. This time he returned the check assigning as a reason therefor that the real estate taxes would become due on May first following and that he did not wish to waive any of his rights. On April twenty-first the attorneys for defendant Norwood ordered a foreclosure search which was received about April twenty-seventh from one of the title companies.
During the latter part of April the attorney who represented the plaintiff, together with the defendant Greenberg, visited the defendant Norwood, in order to try to secure a reduction of the interest on the first mortgage from six to four and one-half or five per cent, although at the same time the plaintiff was insisting that the installments on her mortgage, and the interest thereon, should be paid in full. Her request was naturally denied. On April twenty-sixth Mrs. Claire Weiner, a daughter of Greenberg, retained one Irving S. Finkston as attorney. The latter, without success, first tried to obtain, from the plaintiff’s attorney, an extension of time of one year within which to pay the interest on the second mortgage. Thereafter, Finkston, who fixed the date as about April twenty-eighth, visited the defendant Norwood, and submitted a proposition to him that in case he, as first mortgagee, should become the purchaser of the property in the foreclosure action which was about to be commenced, he would consent to sell the property to Greenberg *654or Ms nominee. Mr. Norwood, sympatMzing with the plight of the defendant Greenberg, and not wisMng to be burdened with the care of the property at Ms advanced age, agreed that in the event he had to purchase the property to protect Ms investment at the public sale, he would assign Ms bid to Greenberg or Ms nominee upon the conditions outlined in the written agreement wMch was entered into on May tliird.
The action to foreclose the mortgage was instituted on May second. Although, according to the testimony of Jacob M. Zinaman, the attorney for the plaintiff, he was informed by Messrs. Finlcston and Greenberg in the course of the discussion that “ unless we took a nominal sum, the amount then mentioned was $400 in full payment of the mortgage, they would arrange to have the first mortgage foreclosed and wipe out the second mortgage,” still, no answer was interposed by Ms client in the foreclosure action to forestall any such attempt. WMle the trial court did not place any credence upon tMs testimony with reference to the offer of $400, it is fair to say if any such threats were made, that this plaintiff would have been in a position to have raised the point as a defendant in the foreclosure action instead of waiting until after it went to final judgment.
It is not contended that Norwood was in any way related to Greenberg. Their acquaintancesMp apparently grew out of the fact that Norwood held a first mortgage on Greenberg’s property. The loan, as well as that of plaintiff’s, was made to the Silberman Realty Co., Inc., and not to Greenberg. The latter was well Mgh penmless and the income from the property was insufficient to satisfy plaintiff’s demands that payments of installments and interest should be met in full. Norwood had a legal right to protect Ms investment. He did notMng either before or at the foreclosure sale wMch prevented prospective buyers from mating fair bids. TMs plaintiff could have purchased the property at the sale and protected her investment. If there was a surplus, by virtue of her mortgage, she would have been entitled to it, at least to the extent of her lien. The foreclosure sale was brought about solely by reason of the conduct of tMs plaintiff in refusing to grant an extension of time to Greenberg. She was perfectly willing to accept a deed from Greenberg without payment although she knew that by so doing she would deprive Mm of all he had remaimng of Ms investment.
The legal principles gleaned from the authorities wMch are referred to in the prevailing opimon are not applicable to the facts and circumstances wMch are presented in tMs case. Thus in the case of Otter v. Lord Vaux (6 DeGex, M. & G. 642), we find the *655sound legal principle that a “ mortgagor cannot set up against his own incumbrancer any other incumbrance created by himself.” Here, however, the second mortgage was not created by Greenberg. The property was burdened with it when it was purchased by him. In the English case the second mortgage was the direct obligation of the owner. He created it, and the court refused to allow him to destroy it.
The cases dealing with tax liens are also distinguishable. The courts there have adopted the sound policy of preventing owners and mortgagees from foreclosing a superior lien created solely by law for the purpose of cutting off the rights of other parties in interest. By way of illustration it might not be amiss to quote from the case of Connecticut Mutual Life Ins. Co. v. Bulte (45 Mich. 113; 7 N. W. 707), cited in the prevailing opinion, in which Judge Cooley said: “ It certainly cannot be said that the second mortgagee owes any duty to the first mortgagee to protect his lien as against tax sales. Neither on the other hand does the first mortgagee owe any such duty to the second mortgagee, or to the owner. To the State each one of the three may be said to owe the duty to pay the taxes; and the State will sell the interest of all if none of the three shall pay. As between themselves, the primary duty is upon the mortgagor; but if he makes default, either of the mortgagees may pay, and one of the two must do so or the land will be sold and his lien extinguished. But in such cases, where each has the same right, payment by one is allowed to increase the amount of his incumbrance; for in no other way could he have security for its repayment by the mortgagor, who ought to protect the security he has given. When therefore each mortgagee has the same interest in making payment of the tax, and the same right to do so, and the same means of compelling repayment, it may well be held that a purchase by one shall not be suffered to cut off the right of the other, because it is based as much upon his own default as upon that of a party whose lien he seeks to extinguish. It is as just and as politic here as it is in the case of tenants in common, to hold that the purchase is only a payment of the tax.”
Furthermore, the two cases in the Supreme Court of the United States (Louisville Trust Co. v. Louisville, etc., R. Co., 174 U. S. 674; Northern Pacific R. Co. v. Boyd, 228 id. 482), also cited by the majority, deal with the foreclosure of mortgages covering extensive railroad properties and, consequently, are not applicable to the facts and circumstances of this case. The following quotation from the opinion of Mr. Justice Brewer in Louisville Trust Co. v. Louisville, etc., R. Co. (supra) will suffice to indicate the views of the court: “ We have held in a series of cases that the peculiar character and *656conditions of railroad property not only justify but compel a court entertaining foreclosure proceedings to give to certain limited unsecured claims a priority over the debts secured by the mortgage. It is needless to refer to the many cases in which this doctrine has been affirmed. It may be, and has often been said, that this ruling implies somewhat of a departure from the apparent priority of right secured by a contract obligation duly made and duly recorded, and yet this court, recognizing that a railroad is not simply private property, but also an instrument of public service, has ruled that the character of its business, and the public obligations which it assumes, justify a limited displacement of contract and recorded hens in behalf of temporary and unsecured creditors. These conclusions, while they to a certain extent ignored the positive promises of contract and recorded obligations, were enforced in obedience to equitable and public considerations. We refer to these matters not for the sake of reviewing those decisions, but to note the fact that foreclosure proceedings of mortgages covering extensive railroad properties are not necessarily conducted with the limitations that attend the foreclosures of ordinary real estate mortgages.”
It might be well to note that the defendant Norwood fixed the rate of interest in the new mortgage at the sum of five per cent for the first year, and, in addition thereto, that he did not exact any payment from his codefendant, Greenberg, for attorney’s fees. On the closing Greenberg was actually short the sum of $682, which was due as interest on the original loan, and it became necessary to include it in the amount of the new mortgage. The net result of the transaction, in so far as the defendant Norwood is concerned, was that it actually cost him a considerable sum of money in order to protect his original investment. By no stretch of the imagination can any one say that Norwood was guilty of a dishonest act. In his desire to be fair he has been met with a charge that he entered into a conspiracy with Greenberg to defraud this plaintiff with whom he had not the remotest relationship. The facts and circumstances in this case do not sustain the charge.
The situation here presented was brought about by the unreasonable demands on the part of this plaintiff in a period of widespread depression which had a very bad effect upon the rental value of the property which is the subject of this litigation. There was no conspiracy, collusion or bad faith on the part of the defendants Nor-wood and Greenberg.
Under the rule which the majority of the court is about to apply, the plaintiff, who seeks equitable relief, will have her mortgage reinstated in the face amount thereof, less payments actually made, *657although there is not a scintilla of evidence in the record to indicate the actual outlay made by her in procuring it.
The judgment entered at Special Term should be affirmed in all respects, with costs and disbursements.
Martin, P. J., concurs.
Judgment reversed, with costs, and judgment directed in favor of the plaintiff reinstating her mortgage to the extent of $4,250, with interest from November 20, 1932, as a second mortgage hen against the premises, subject only to a first mortgage of the defendant Norwood in the sum of $46,500 and any unpaid interest thereon, with costs. Settle order on notice reversing findings inconsistent with this determination, and containing such new findings of fact proved upon the trial as are necessary to sustain the judgment hereby awarded.