Bouden v. Long Acre Square Building Co. — 92 A.D. 325

Majority

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Milton L. Bouden, Appellant, v. Long Acre Square Building Company, Defendant, Impleaded with Leander S. Sire, Respondent. Henry B. Sire, Respondent.

Headnote

Bight of a creditor’ of a defendant in a mortgage foreclosure action to intervene — what must be shown where the application rests on an oral agreement inconsistent with written documents.

A creditor of a defendant in an action to foreclose a mortgage on real property io not, by virtue of such relation, entitled to intervene in the action.

A person seeking to intervene in an action, and to interpose a defense based upon an alleged oral agreement, absolutely inconsistent with the written documents relating to the matter, should present a strong case to remove the suspicion of bad faith and give reasonable grounds for believing that he has a meritorious defense.

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Appeal by the plaintiff, Milton L. Bouden, from an order of the Supreme Court, made at the New York Special Term and entered in the office of the clerk of the county of New York on the 8th day of January, 1904, granting a joint motion on behalf.of Henry B. Sire and the defendant Leander S. Sire to amend the summons and complaint without prejudice to proceedings already had regarding the other defendants, by making said Henry B. Sire and one Edward R. Thomas parties defendant, and permitting said Henry B. Sire at. his election to serve his answer on the defendant company and upon" said Thomas, and extending the time of said Leander S. Sire to , answer.

The action is brought to foreclose .a mortgage executed by the defendant company to the plaintiff on or about the ,5th day of May, 1903, to secure the payment of $47,748.07 in one year from date. On the 15th day of October, 1902, a lease was executed by the trustees for Henry Astor to the plaintiff of premises situate at the northwest corner of Broadway and Forty-fifth street for the term of twenty-one years from the 1st day of November, 1902, with the privilege of two renewals. This lease was sold and assigned by the plaintiff to the defendant company on condition that the mortgage be given on this leasehold interest to secure part of the purchase price of the assignment of the lease, and the assignment and mortgage so. recited. The mortgage contains a condition that the mortgagor should promptly pay the ground rent reserved in the lease, and upon default in such payment the mortgagee might elect that the entire principal should become due and payable. The mortgagor defaulted in paying the rent due on the 1st day of August, 1903. The plaintiff paid this rent and then brought the action to foreclose the mortgage for the entire amount. The plaintiff claims that Leander S. Sire was made .a party defendant for the reason that' he was in possession of the premises by virtue of some arrangement with the mortgagor. He was absent, from the State and is now in New Orleans. Personal service was made upon him in Chicago, pursuant to an order for service by publication, on the 3d day of October, 1903. He has appeared' by attorney, and obtained an extension of time to answer for twenty days from the 4th day of December, 1903, upon an affidavit that within that time he would return to this State. ■ So far as the defendant Leander ,S. Sire is

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concerned, the only reason assigned for the extension of time is that it is deemed advisable that he should not answer until Henry B.’s motion to be made a party defendant is determined, as there are “ highly important revelations forthcoming in the answer, which it is proposed to serve,” and it is preferred that it be served on behalf of Henry. Henry B. and Leander S. Sire are brothers.

The affidavit of Henry B. Sire shows, not of his own personal knowledge, but on information derived from conversations with Leander' embracing communications between Leander and Thomas, . that Leander and Thomas organized the defendant company to conduct a theatre upon said premises on which they held leases in severalty; that they, by mutual agreement, surrendered their leases ahd procured the issue of a new lease for twenty years to the plaintiff, who held it for their benefit, and by their direction transferred it to the company and took back the mortgage, to foreclose which this action is brought; that Thomas also purchased an adjoining lot to enable them to extend the theatre; that the mortgage was intended as temporary security to secure the amount of Thomas’ contribution toward the enterprise; that it was agreed that they should eventually have the same security in the leasehold, and to that end Thomas was to surrender the mortgage before it became due and accept sixty per cent of a bond issue of the company, which was to equal the amount invested by both, and that twenty-five per cent of the stock was to be issued to Thomas, and that the balance of the bonds and stock was to be issued to Leander; that labor strikes and financial stringency thwarted their building operations and Thomas has resorted to this foreclosure to get back his money; that the greater part of the money invested by Leander was Henry’s; that he wishes to have Thomas joined as a defendant with a view to compelling a specific performance of the agreement to surrender the mortgage and to issue the bonds and stock of the company; that Leander gave Thomas the majority of the directorate of the company for the first year, and that Thomas controls a majority of the directors, but that upon the issue of the bonds and stock it was understood that Leander should thereafter control the company; that Leander is in New Orleans “and his return to this city is uncertain;” that he, Henry, applies tobe admitted as a party defendant “because of the investment in the property being so

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largely my own, and because I now hold an assignment of the said Leander S. Sire’s rights and claims that are to be litigated in the present controversy; ” that he has' not been able to secure the affidavit, of Leander as to these facts, “ but I do not see as it matters, since it will not bé probably denied that I have, by virtue of an assignment of his rights, the standing of a stockholder” in the company, It does not expressly appear that Thomas knew that Leander. represented Henry, but Henry further states in his affidavit,.apparently on personal knowledge, that he had an interview with Thomas concerning the payment of 'the ground rent due on August first, and it was agreed that they should provide funds in the name of the company to pay them, “ so that I left it in the hands of Mr. Thomas and promised to pay over to him the proportion which would fall to the Sire interest to take care of, the company having • no funds in its treasury. Mr. Thomas promised- me personally to take care of the matter on behalf of the company, and, my brother Leander being away at the time, I rested on Mr. Thomas’ assurances and was entirely ready to take care and pay the Sire portion.” The attorney who appeared for Leander makes the motion in behalf of Henry, and makes affidavit that he believes that one or the other of them has a good defense to the complaint, in whole or in part.

It' appears that no stock of the company has been issued, except sufficient to qualify three directors, and that neither Henry nor Leander is a director. The plaintiff’s affidavit shows that he purchased these outstanding leases on his own account, and that in surrendering them and procuring the other lease, selling and assigning the same to the company and taking the mortgage back for the purchase money, he was acting for himself, and that neither Henry nor Leander Sire nor Thomas had any interest therein; that, pend-^ ing the action, rent for another quarter has become due, and he has been obliged to pay the same, and that any further delay will greatly prejudice his rights on account of necessitating the advancement of money as it falls due, and now that it appears that Leander Sire is not in possession he contemplates making a motion to discontinue as to him. The affidavit of the treasurer of the company corroborates that of the plaintiff as to the- transactions between him -and the company, and shows that the company contemplated raising money by a sale of its bonds, and contemplated contracting with

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Leander Sire for the construction of a theatre and office building on the premises, but that it was unable to make the necessary financial arrangements or to procure a satisfactory contract, and having no money- to pay rent, upon a meeting of the directors subsequent to notice to all the stockholders and officers of the commencement of this action, it was decided that the company had no defense. It appears that Thomas is in Europe, and that it is not expected that he will return for some time.

Emery E. Sykes, for the appellant.

William Stone, Jr., for the respondents.

It is manifest that as á creditor of Ms brother Leander, Henry Sire is not entitled to intervene in this action. Nor is he entitled to intervene by reason of the promise of Thomas concerning the payment of the ground rent. It does not appear that Thomas knew that Henry, to whom he made the promise, had any personal interest in the matter. Thomas had a right to assume that Henry was acting for his brother Leander. No satisfactory excuse is offered for his not obtaining the affidavit of Leander. It appears that he knows where Leander is, and we may take judicial notice that within a few days an affidavit coMd be forwarded from New Orleans. Henry shows no personal knowledge of any of the material facts. Even if it be assumed, therefore, that he has succeeded by assignment to the rights and interests of Leander in the premises, he has not shown by Competent proof that he has a meritorious defense to the action if he were admitted as a party. Moreover, he does not satisfactorily show an assignment of the rights and interests of his brother. It is only stated in an argumentative way, and only relates to the “ rights and claims that are to be litigated in the present controversy.” . The affidavit appears to be evasive, and it is doubtful whether the application was made in good faith. It may be that business men would allow their rights to rest in parol and execute written documents absolutely inconsistent with the existence of the parol agreements, but that is not the ordinary course, and the applicant who desires to intervene in an action to interpose such a defense should present a strong case to remove the suspicion of bad faith and give reason

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able ground for believing that he has'a meritorious defense. The court would also have been justified in denying the application to -extend Leander’s time to answer, but that not having been done, we think Leander should be given leave to serve his answer within two days after service of the order to be entered on this appeal.

It follows that the order should be reversed, with ten dollars costs and disbursements, and motion denied in so far as it relates to the ■ application of Henry B. Sire to intervene and to have Thomas joined as a defendant, with ten dollars costs, and should be modified as already indicated so far as it relates to Leander’s application for an extension of time, and as modified affirmed, without costs.

Van Brunt, P. J., Patterson, O’Brien and MoLaughlin, JJ., concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied in so far as it relates to application of Henry B. Sire to intervene and to have Thomas joined as a defendant, with ten dollars costs, and modified as indicated in opinion so far as it relates to Leander Sire’s application for extension of time, and as modified affirmed, without costs.