Mayer v. Burr

and priority thereof. He reported that, after the payment of certain expenses, three-fourths of the balance should be paid to the respondent Morton Trust Company, as trustee, and one-fourth to the plaintiff, $353.18, with interest from July 25, 1902, to be first paid from the plaintiff’s share to R. & A. C. Weil, attorneys, whose right thereto is not contested. The plaintiff appeals from an order confirming his report, and directing a distribution in accordance therewith.

It appears that, subsequent to the giving of the mortgage foreclosed, the premises were devised to the four children of one Sommer. On the 12th of March, 1889, two of these children, Emma J. and Sebastian, conveyed their respective undivided one-fourth interests therein to the same grantees, Moser & Heidenheimer, who gave back to each of them a purchase-money mortgage for $20,000, covering all the right, title, and interest of the grantees in the premises conveyed. Both deeds and both mortgages were dated the same day, and all .four were subsequently recorded at the same time. Moser & Heidenheimer prior to such conveyances had no interest in the property, but they thereafter acquired an additional one-fourth interest. The mortgage given to Emma J. was subsequently paid, but the one given to Sebastian was not paid and was foreclosed by his executrix in 1898, as appears later, and one of the principal questions presented on the appeal is what interest in the property was covered by this mortgage. In February, 1894,-title to the entire premises had becomex vested in the Bavarian Star Brewing Company and to secure an issue of its bonds ,it mortgaged all its property, including the 'premises in question, to the State Trust Company, now the respondent Morton Trust Company, as trustee, for $900,000. The brewing company was thereafter dissolved, and its property sold pursuant to an order of the court. The premises in question, together with other property/ were conveyed to the purchaser, plaintiff’s husband, by deed dated March 27, 1897, and he irnmediately conveyed the same to the Colonial Brewing Company. In May, 1897, the action to foreclose the mortgage given by Moser & Heidenheimer to Sebastian Sommer was commenced. The lien of this mortgage was superior to the lien of the trust company mortgage, and the trust company was made a party defendant to the action. The action resulted in a judgment of foreclosure and sale, and the decree directed the sale, not of the mortgagors’ interest, but of the entire premises. The sale took place on the 15th of July, 1898, and the premises were purchased by the plaintiff, who received a deed which purported to convey the entire premises to her. She immediately conveyed the same to the Colonial Brewing Company, taking back a purchase-money mortgage for $12,000. This mortgage was subsequently foreclosed; a decree having been entered on the 25th of July, 1902. The amount due was something over $10,000, but a sale of the property was stayed, the Colonial Brewing Company being in bankruptcy, and it is under this decree that the plaintiff claims the surplus which has been realized in the present action.

It must be conceded that whatever interest the plaintiff purchased on the foreclosure of the Sommer mortgáge she conveyed to the Colonial Brewing Company, and the purchase-money mortgage which it gave to her was free from any lien of the trust 'company’s mort

gage, and to that extent she has a right superior to it to the surplus in question. This interest the learned referee found to be an undivided one-fourth, but I am of the opinion that he erred in reaching that conclusion. The mortgage contained no covenants of title nor warranty, and consequently covered only the interest which Moser & Heidenheimer had when it was given. Jackson v. Littell, 56 N. Y. 108 ; Nat. Fire Ins. Co. v. McKay, 5 Abb. Frac. (N. S.) 445; Donovan v. Twist, 85 App. Div. 130 , 83 N. Y. Supp. 76 . Moser & Heidenheimer acquired from Emma J. and Sebastian Sommer an undivided one-half interest in the property. The deeds and mortgages were given at the same time and constituted a single transaction. It must be assumed that title was conveyed to them before the mortgages were given, and, there being no priority between the deeds, it follows that the right, title, and interest covered by the mortgages was an undivided half. It is true they were purchase-money mortgages, and that each grantor had conveyed only a one-fourth interest, but unless one deed was given prior to the other, which plainly was not the case, the mortgages were each a lien upon an undivided half. The mortgage to Emma J., as we have seen, was paid. The one to Sebastian was not, and I am of the opinion that it clearly attached to the half. The mortgage contains the statements that the mortgaged premises were “part of the same property this day. conveyed” by Sommer to Moser & Heidenheimer, and “this mortgage being given to secure a part of the purchase price thereof.” These statements, as appears from the referee’s opinion, seem to have influenced him in reaching the conclusion that the mortgage covered only one-fourth, but he overlooked the fact that Sommer by the same deed conveyed not only his interest in the two lots in question, Nos. 232-234, but Nos. 221, 223, 225, and 227, as well, so that these statements have no real significance when applied to the whole subject of the grant. The mortgaged premises, whether a fourth or a half, were “part of the property this day conveyed,” and the mortgage was “to secure a part of the purchase price thereof.”

The appellant further claims that, since the judgment directed the sale of the entire premises and the trust company was a party to the action, the lien of its mortgage upon the remaining one-half was thereby foreclosed. It is true it had notice of the terms of sale, and it is also claimed that, by its failure to protest or take measures to have the same corrected, it is now estopped from asserting its lien. This conclusion, however, does not follow. The mortgage covered only a half interest in the property and as to such interest, concededly, it was superior to the lien of the trust company mortgage. The trust company had no defense to the action to foreclose the mortgage on that interest, and I do not think it was under any obligation to protest because the judgment directed a sale of more than the mortgagors’ interest. It has been held that a prior incumbrancer’s lien is not cut off by such a judgment. Emigrant Industrial Savings Bank v. Goldman, 75 N. Y. 127 ; Smith v. Roberts, 91 N. Y. 470 ; Jacobie v. Mickle, 144 N. Y. 237 , 39 N. E. 66 ; Stillwell v. Hart, 40 App. Div. 112 , 57 N. Y. Supp. 639 .

It is further claimed on the part of the appellant that the lien acquired by the trust company mortgage was destroyed by the sale made to the plaintiff’s húsband by the receivers in the dissolution proceedings of the Bavarian Star Brewing Company. He conveyed whatever interest he acquired at that sale to the Colonial Brewing Company prior to the purchase-money mortgage given by it to the plaintiff; and the contention is that, by reason of that fact, the purchase-money mortgage given by the Colonial Brewing Company covered the entire premises, and therefore entitles the plaintiff to the entire surplus. The claim thus made is principally based upon the fact that the property of the Bavarian Star Brewing Company, which was sold upon its voluntary dissolution, included the premises in question, and that such property was sold free and clear from the lien of the trust company mortgage, and it was thereby deprived of any interest which it theretofore had. There is, in fact, no foundation so far as I can discover for this claim. None of the papers in the proceeding by which the sale was brought about indicate that the real property of the brewing company was sold free from all liens and incumbrances. It was only certain personal, property that was so sold and the terms of sale show that only the “right, title, and interest of the receivers” in the real property was offered for sale. The report of sale indicates-the same thing, while the deed given in pursuance of the sale purports to convey only “all the right, title and interest of the receivers and of the Bavarian Star Brewing Company,” and that the conveyance is “subject, however, to all mortgages, liens and incumbrances thereon.” There were then several mortgages which were liens upon the premises here under consideration, viz., the one to the Emigrant Industrial' Savings Bank, the one to Sebastian Sommer, the one to the State Trust Company, also others; and it seems to me clear that it was never intended to sell the premises freed from the lien of these mortgages or any of them, and, if it was, the court had no power to-direct such sale. One holding a valid lien upon real property cannot be deprived of it without his consent, and all the power which the court has with reference to directing a sale on the dissolution of a corporation is to order all the right, title, and interest of the corporation or the receivers sold. Matter of Coleman, 174 N. Y. 373 , 66 N. E. 983 ; People v. N. Y. Building Loan Banking Co., 189 N. Y. 233 , 82 N. E. 184 .

If the foregoing views be correct, then it follows the order appealed from should be modified so as to direct that after the expenses of the proceeding are paid, one-half of the balance should be paid to the Morton Trust Company as trustee, and the other half, after the payment to R. & A. C. Weil of the amount due them, paid to the plaintiff, and, as thus modified, the same is affirmed, without costs to either party. All concur.