Court Opinion

ID: 5757365
Source: CourtListenerOpinion
Date Created: 2022-01-12 17:08:39.657338+00
Date Added: 2024-06-11T08:41:27.233774
License: Public Domain

Hopkins and Benjamin, JJ.,
concur in part and dissent in part with the following memorandum: We concur with the majority insofar as it determines that defendant Ray Lupoli holds the mortgage as trustee for plaintiff and directs said defendant to comply with article 9 of the Lien Law with respect to the mortgage. We dissent insofar as the majority denies plaintiff that same relief with respect to the 500 shares of stock. This was an action to impress a trust on said mortgage and stock. This stock was half of that issued by a realty corporation originally formed and owned by plaintiff and defendant Peter Lupoli. The mortgage was a lien on the realty (and sole asset) of that corporation; plaintiff says that he owned it, having- gotten it by assignment after he bought it with his own funds; defendants say that plaintiff bought it with corporate funds and wrongfully had it assigned to himself alone; it is undisputed that it was in plaintiff’s possession on June 3, 1959. On that date plaintiff pledged the stock and mortgage as security for a loan from defendants Kraitz and Silverman to another corporation of which plaintiff was a principal. There was a default *560on that loan and the lenders sued the corporate borrower to recover the moneys loaned. While that action was pending, plaintiff went to Mexico on business for a year. Plaintiff says that defendant Peter Lupoli promised to look after his interests while he was away. Peter Lupoli denies this, but admits that he agreed to look after their realty corporation’s affairs during that period. Some months after plaintiff left, the lenders (defendants Kraitz and Silverman) recovered an uncollectible judgment against the corporate borrower and then started an action to foreclose the pledged mortgage on the realty of the corporation whose stock was owned by plaintiff and Peter Lupoli. While plaintiff was still in Mexico, that corporation’s attorneys arranged a settlement of the foreclosure action. Pursuant to that settlement agreement, the balance due the lenders was paid to them; and in return the lenders gave assignments of the pledged mortgage and stocks to defendant Ray Lupoli, the brother of Peter Lupoli. Plaintiff says that it was Peter Lupoli who actually paid the lenders and that his brother Ray was merely Peter’s nominee for the taking of the assignments. When plaintiff returned from Mexico, he tendered to Peter Lupoli the amount paid to the lenders and demanded the return of the mortgage and stock. This having been refused, he brought this action to impress a trust on the theory that there was a trust relation between himself and Peter Lupoli and that Peter Lupoli acted as his agant when the mortgage and stock were obtained from the lenders in the name of Ray Lupoli as the nominee of Peter. At the trial plaintiff abandoned his theory of a constructive trust based upon a trust relation between himself and Peter Lupoli and instead tried his ease on the theory that the lenders’ private sale of the pledged mortgage and stock to Ray Lupoli was in violation of article 9 of the Lien Law, which requires a public sale on notice to the owner of the pledged property; and the pleadings were conformed to the proof supporting that theory. The majority is holding that the sale of the mortgage and stock to Ray Lupoli was contrary to the provisions of the Lien Law; that in the absence of a waiver of the protective provisions of that statute, such sale does not cut off plaintiff’s rights in the property; that with respect to the mortgage the pledge agreement did not constitute a waiver of the statutory provisions, plaintiff’s rights therein were not cut off by the sale to Ray Lupoli and Ray Lupoli consequently holds the mortgage as trustee for plaintiff; and that with respect to the stock the pledge agreement constituted a waiver of the protective provisions of the Lien Law and plaintiff’s rights therein consequently were cut off by the sale to Ray Lupoli. We agree with the majority’s holding with respect to the mortgage; we disagree with its holding with respect to the stock. In our opinion, the ambiguous provisions of the pledge agreement do not constitute a waiver of the protective provisions of the statute. The pledge agreement for the mortgage and the stock was a single instrument. It provided for an “ assignment ” of the mortgage and a “pledge” of the stock. As the majority has correctly concluded, the agreement was a pledge of both the mortgage and the stock, despite the difference in semantics. With respect to the stock, the agreement provided that it be held in escrow by the lenders’ attorney; that it be returned to plaintiff on repayment of the loan; and that in the event of a default the eserowee would deliver it to the lenders and “ title of same shall pass on to them.” With respect to the mortgage, the agreement merely provided for a “ reassignment ” to plaintiff on payment of the loan and contained no provision for the contingency of a default. Undoubtedly, a provision for disposition of the mortgage in the event of default was considered unnecessary because it had already been assigned to and given into the possession of the lenders; and upon default they had only to retain possession of it. As we read this pledge agreement, we see in it no intention to make any material differentiation *561between the mortgage and the stock with respect to the parties’ rights under the Lien Law. In our view, the differences in the provisions relating to the mortgage and stock were ones of form and semantics only; and the intent was merely to serve convenience, not to work a difference in substance and rights. To hold that this single document, expressing a single transaction, evidences an intent to waive substantial statutory rights with respeet to the stock, but not with respeet to the mortgage, is to give it a construction which would make the agreement not merely anomalous but also contradictory. In our opinion, the agreement cannot and should not be so read. We believe the agreement was not a waiver of the Lien Law provisions with respeet to the stock any more than it was with respeet to the mortgage; that the sale to Ray Lupoli did not cut off plaintiff’s rights with respect to the stock; and that Ray Lupoli holds not only the mortgage, but also the stock, as trustee for plaintiff. It should be remembered that this is an action in equity. The scanty record does not disclose and we cannot tell what tactical reasons induced plaintiff to abandon, at trial, his original theory of abuse of a trust relation by Peter Lupoli, and to proceed instead on the theory of a violation of the Lien Law. But on the surface, at least, the transaction here attacked by plaintiff would seem to have a suspicious aura about it — so suspicious, indeed, that we would have favored a new trial in the interests of justice if we were not hereby concluding that on the present record plain till is entitled to a judgment that defendant Ray Lupoli holds the mortgage and the stock as trustee for plaintiff and that he must comply with the Lien Law with respeet to all the pledged property. In our opinion, the result we reach is not only legally correct but also equitable and proper in light of the fiduciary “ partnership ” relationship between plaintiff and Peter Lupoli.