Stumpf v. Hallahan — 101 A.D. 383

Majority

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Charles Stumpf, Appellant, v. John Hallahan and James Ahearn, Respondents.

Headnote

Contract—the interpretation, etc., of, by what law governed—presumption aé to the place of performance—intention of the parties — action in the State of New York on a bond for a deficiency on the foreclosure of a mortgage on land in another State — the right of recovery is regulated by the law of such other State—form of direction of a verdict where the plaintiff moves for the direction of a verdict and the defendant for a dismissal of the complaint.

All matters bearing upon the execution, interpretation and validity of contracts, including the capacity of the parties to the contract, are determined by the law of the place where the contract is made.

All matters connected with its performance are regulated by the law of the place where the contract, by its terms, is to be performed; if no place of performance is mentioned in the contract, a presumption arises that the parties intend . that it shall be performed where it is made.

Contracts referring to the transfer of title to land are governed by the law of the place where the land is situated.

All matters respecting the remedy to be pursued, including the bringing of suit, etc., depend upon the law of the place Where the action is brought.

These general rules are subordinate to the primary canon of construction, which requires that where it can be ascertained the intention of the parties shall govern.

Where, at the end of the whole case, on a trial before a jury, the plaintiff moves for the direction of a verdict in his favor and the defendant for a dismissal, and the court reaches a conclusion in favor of the defendant, the court should direct the jury to find a verdict in the defendant’s' favor, and not direct a verdict of nonsuit. ' ■

Meta R Sedgwick, a resident of the State of New York, who owned certain premises located in the State of New Jersey, entered into a contract with John Hallahan and James Ahearn, who also resided in the State of New York, by which, among other things, she agreed to convey to them the New Jersey property and also to procure for them a loan to be secured by a mortgage upon the New Jersey property made simultaneously with the transfer of the title. The closing of the transaction took place in New York city, including the delivery of the bond and mortgage, which were executed by Hallahan and Ahearn to a resident of the State of New Jersey.

Held, that the right of the mortgagee or a person claiming under him to sue Hallahan and Ahearn upon the bond executed by them for a deficiency, arising upon the sale of the premises pursuant to a judgment of foreclosure and sale • rendered by a New Jersey court, was governed by the laws of the State of New Jersey.

Appeal by the plaintiff, Charles Stumpf, from a judgment of the Supreme Court in favor of the defendants, entered in the office of

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the clerk of the county of Hew York on the 17th day of June, 1904, upon a verdict of nonsuit rendered by direction of the com't after a trial at the Hew York Trial Term.

This action is brought upon a bond made by the defendants to Caroline F. Harrison, to recover for a' deficiency arising from the foreclosing of a mortgage covering lands, in Hew jerséy given to . secure the bond. ,

The bond ,in suit was made -under the following circumstances : On the 5th of May, 1897, Meta B. Sedgwick, a resident of Hew York city, being the owner of certain premises, in Llewellyn Park, Orange, H. J., entered into a contract with the defendants Hallaban and Ahearn, who were also residents of the city of Héw York, and the owners of the premises Ho. 280 Manhattan avenue in that city, whereby it was agreed that she should purchase Ho. 280 Manhattan avenue for the sum of $64,000, payable as follows: $32,000 by talcing title subject to a mortgage for that amount; $30,000 by conveying to Hallaban .and Ahearn the .Llewellyn Park property, and $2,000 in cash. By the. terms of this contract Mrs. - Sedgwick further agreed to procure for Hallaban and Ahearn a mortgage on the Llewellyn Park property for tlie sum of $13,000 at six per cent to be made simultaneously with the transfer of the title. Pursuant to this contract, Mrs. Sedgwick procured from Caroline F. Harrison, of "East Orange, H. J., a loan of $13,000 to be secured by a purchase-money mortgage on the Llewellyn Parle property. The' closing of the transaction, including the exchanging of the properties and the execution and delivery of the bond in suit with the mortgage, was done in Hew York city. Thereafter the defendants paid to attorneys representing the mortgagee in Hew York city the six months’ interest due Hovember 14, 1897. By deed dated April 1, 1898, the defendants conveyed the Llewellyn Park property • to one Joseph E. Weed, who accepted the conveyance subject to the aforesaid mortgage of $13,000, which he assumed and agreed to pay. The purchaser thereafter defaulted in the payment of interest. The. mortgagee, Caroline F: Harrison, commenced suit in the Court."of .Chancery, State of Hew Jersey, to foreclose the mortgage, making Weed ..and one Vandervóort, a subsequent ■ incumbrancer, parties thereto, and judgment of foreclosure and Sale was ..entered and the property sold to the said Caroline F. Harrison for - $10,000. ^ The

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amount due on the bond and mortgage at that time was $13,988.03, and for the amount of the deficiency, together with interest thereon, this action was brought.

These defendants were not joined as parties to the foreclosure action, and no demand was made upon them until a few days before this action was instituted. • The bond in suit was assigned to the plaintiff. Upon the trial defendants tendered to the plaintiff in cash the sum of $18,500 for the property, which included the amount of the mortgage, principal, interest, taxes, etc., which was refused. At the end of the whole case plaintiff moved for a direction of a verdict in his favor and the defendants for a dismissal of the complaint. The court directed the jury to return a verdict of nonsuit, .-and it is from the judgment entered thereon that this appeal is taken.

Robert L. Harrison, for the appellant.

Joseph A. Farley, for the respondents.

In this action on the bond for a deficiency arising from the fore.closure of the mortgage covering lands in New Jersey given to secure the bond, the defendants among others interposed as a defense the statute, of New Jersey regulating proceedings to recover on bonds and mortgages, and the foreclosure and sale of property thereunder. ■ That statute, among other things, provided that in all cases where a bond and mortgage were given for the same indebtedness the proceedings to collect the debt shall be : First, to- foreclose the mortgage, but no deficiency judgment can be obtained in a foreclosure action; second, if the property does not sell for enough to satisfy the debt, interest and costs, an action may be brought on the bond for the deficiency within six months after the sale; third, if the mortgagee recovers a judgment for the deficiency in an action' on the bond, the foreclosure is opened and the mortgagor may redeem within six months after the entry of judgment. (See Gren. Stat. N. J. 2112, §§ 47, 48.)

The point upon which the learned trial judge decided the case was that this New Jersey statute was binding and was a bar to the maintenance of this action. It follows, therefore, that the question

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which is presented for our determination .upon this appeal is as to whether the hand in suit is' governed by the law of Hew York or by the law of Hew Jersey. Some of the general rules respecting the law of place summarized by the appellant,' which we regard as settled, may be stated: First, all matter bearing Upon the execution, interpretation and validity of contracts, including the capacity of the parties to the contract, are determined by the law of the place where the. contract is made (Union Nat. Bank v. Chapman, 169 N. Y. 5 .38) ;• second, all matters connected with its performance are regulated by the law of the place where the contract, •by its terms, is to be performed; third, if no place of performance is mentioned in the contract, a presumption arises that the parties intend that it should be performed" where it is made;. -fourth, ' contracts referring to the transfer of title to land are governed by the law of the place where" the land is situated; fifth, all matters respecting the remedy to be pursued, including the bringing of suit, etc., depend upon the law of. the place where the action ^is brought.

These general rules are subordinate to the primary canon of construction, which "requires that where it can be ascertained -the intention of the parties, shall govern. Thus, though it may be stated generally that a contract is to be considered and determined under the law of the State where it was made, this rule is of no force in a case where it can be fairly said that the parties at the time of its execution, manifested an- intention that, it should be governed by the. laws of another State; or, differently expressed, “ where thé contract is, either, expressly or tacitly, to be performed in any other place (than where made), there the general' rule is in conformity to the ■ presumed intention of the parties, that the contract as to its' validity, nature, obligation and interpretation is to be governed by the law of the place of performance.” (Story- Confl. Laws [8th ed.], § 280.)

As indicative-of the intention of the parties, as to the law of the place which should govern, we start first with the proposition, not" to be disputed, that the bond and mortgage constituted one contract and are to be considered together. Examining them, we find that the obligee was a resident of Hew Jersey; that the bond was secured' by mortgage on lands in-Hew Jersey; that the bond is made in reference to the laws of Hew Jersey^ that being the State in which the lands mortgaged to secure the payment of . said bond were, situate,

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and. that obligee foreclosed the mortgage in Hew Jersey, thus taking advantage of the laws of that State in respect to the foreclosure. We say that the bond was payable in Hew Jersey, because, that being the residence of the mortgagee, the law requires that the debtor must seek the residence of the creditor for the purpose of discharging the debt. Though not a conclusive consideration, the manifest injustice of applying any other rule to the facts here appearing is apparent. By the conveyance to Weed in which he assumed and agreed to pay the mortgage debt, the relation of principal and. surety was created as between the parties. The mortgagee must be held to have legally received notice by the recording of the deed, and she must have had actual notice at the time of the commencement of her foreclosure suit. She was not at liberty to disregard the relationship thus created, or do any act prejudicial to the interests and rights of the surety. She neglected, however, to notify them or make them parties in the foreclosure action, and thus elected to make the land the primary fund, and by selling it as she did the defendants- lost their rights to protect the security, or do what they could to protect themselves against a deficiency. Had they brought suit in Hew Jersey within the six months as provided by statute, the defendants would have had the right to redeem. Instead, however, of following that remedy, she waited nearly three years béfóre proceeding upon the bond, and then the land having gone forever, the defendants were unable to protect themselves and could no longer redeem ; and although upon the trial the defendants tendered the full amount due, the mortgagee was unable or unwilling to restore to the defendants the property.

We deem it unnecessary to decide the point as to whether or not the failure to make the defendants parties in the foreclosure suit and the proceedings taken to sell the property discharged the defendants, because upon the first proposition which we discussed, as to whether it was the law of Hew York of the law of Hew Jersey that should govern, we have sufficiently indicated our view that the law of Hew Jersey must govern. Under the statute of that •State the right to proceed upon the bond for a deficiency was barred, and the learned trial judge was right in holding that the plaintiff’s action could not be maintained. In directing a nonsuit, which is an anomaly, there was an error in form. The learned

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trial judge,' having reached a correct conclusion in favor of the defendants, should have directed the jury to find a verdict in their favor. This, however,, is a. raeré: error in form which should be corrected, and the judgment should accordingly be modified, and as so modified affirmed, without costs.

Van Brunt, P. J., Patterson, Hatch and Laughlin, JJ., concurred.

Judgment modified as directed in opinion, and as modified affirmed, without costs-.