Hyperlawhypertext legal database Union Bank v. Schneider 128 N.Y.S. 878

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Union Bank v. Schneider

128 N.Y.S. 878 Court N.Y. Cty. Ct. English

Delivered by FAWCETT, J.

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p. 878
(70 Misc. Rep. 377.)
UNION BANK OF BROOKLYN v. SCHNEIDER et al.
(Kings County Court
January, 1911.)

Headnote

1. Mortgages (§ 317[1] )—Payment—Satisfaction.
Where the owner of land pays a mortgage, he may keep it alive and assign it to another as security for a new indebtedness.
[Ed. Note.—For other cases, see Mortgages, Cent. Dig. § 955; Dee. Dig. § 317.[1] ]
2. Mortgages (§ 298[1] )—Payment—Sufficiency.
Where a mortgagee bank accepts a check on funds obtained by the discount of a new note, it is not an actual payment of the former note and mortgage.
[Ed. Note.—For other'cases, see Mortgages, Dec. Dig. § 298.[1] ]
3. Subrogation (§ 18[1] )—Vendor of Mortgaged Property—Payment.
The grantees of land assumed the payment of a mortgage placed thereon by the grantor and paid it, but kept it alive to secure a new debt of theirs. They then sold the land to a second grantee; it still being subject to the first mortgage, which secured a debt of $5,000. After the sale they paid the note with proceeds of a new note discounted at the bank which held the old one, and when the new note became due the original grantor paid it with the check drawn upon his account at the above-mentioned bank. On the day of that payment his account, which was more than sufficient to have covered the cheek, was augmented by the proceeds of a note signed by the first grantees. Held that, the mortgage having been once discharged as to the original grantor, his payment was the act of a volunteer, and he was not entitled to be subrogated to the rights of the assignee under the original mortgage.
[Ed. Note.—For other cases, see Subrogation, Cent. Dig. § 6; Dec. Dig. § 18.[1] ]
Action by the Union Bank of Brooklyn against David Schneider^ and others. Judgment for defendants on the merits.
Edward M. Grout and Paul ‘Grout, for plaintiff,
H. Cook and Robert H. Roy, for defendants.

This is an action to foreclose a mortgage. The widow and three infant children of one Feiner are defending, and contend that the mortgage was paid and discharged.

On February 6, 1906, David Schneider executed and delivered his bond to the Citizens’ Trust Company for $45,000, and on the same day his mortgage for a like amount, covering premises in the borough of Brooklyn then owned by him. Both instruments were conditioned for the payment on demand of so much of said sum as at the time of demand had been advanced. Two days thereafter the said mortgage was duly recorded. Advances thereunder were afterward made from time to time, so that, by May 4, 1906, the sum of $32,500 had been advanced. On May 7, 1906, David Schneider conveyed the premises involved herein to David L. Snyder and Isaac Madamsky subject to said mortgage. Between that date and February 21, 1907, by sums received for releases of parts of the premises originally mortgaged and otherwise, the amount secured by said mortgage was' reduced to $6,000. On February 21, 1907, the then owners of the

p. 879
premises, David D. Sñyder and Isaac Madamsky, paid to the Citizens’ Trust Company the said sum of $6,000, with interest, and had the mortgage assigned to a holding corporation of the plaintiff, and then to the plaintiff, as security for the payment of a note for $6,000, made by David L. Snyder and Isaac Madamsky to the order of David D. Snyder, and discounted to the credit of David L. Snyder.

[1] By this act the original indebtedness secured by the mortgage was paid. However, it was the right of Madamsky and bnyder to keep the mortgage alive and assign it to the plaintiff as security for a new indebtedness of their own; they being the only ones concerned at the time. Angel v. Boner, 38 Barb. 425 . On May 29, 1907, Madamsky and Snyder conveyed the premises in question to one Feiner. The $6,000 note of February 21, 1907, became due on June 21, 1907. One thousand dollars had been paid off on the same. On that date Dávid L. Snyder paid said note by a check drawn on the plaintiff for the amount thereof, but out of funds made available for that purpose by the discount to his credit of a note for $5,100 made by David L. Snyder and Isaac Madamsky.

[2] Defendants contend that, when the bank accepted this check, it constituted payment of the note and a discharge of the mortgage, and urge the cases of Pratt v. Foote, 9 N. Y. 463 , Commercial Bank v. Union Bank, 11 N. Y. 203 , and Mayer v. Heidelbach, 123 N. Y. 332 , 25 N. E. 416 , 9 L. R. A. 850 , as controlling authorities on the point. None of these cases, however, involve the element of the note being paid'out of funds made available by the discount of a new note made by the parties to the original note. It is well settled that payment in the law means real, not technical or imaginary, payment. Equity regards only the substance of things, and deals with human affairs on that principle. Jones v. Guarantee Co., 101 U. S. 622 , 25 L. Ed. 1030 ; Brinckerhoff v. Lansing, 4 Johns. Ch. 65 , 8 Am. Dec. 538 ; Pinckney v. Pomeroy, 62 Barb. 460 .

On July 6, 1907, David Schneider, who originally executed the mortgage in question, paid the note of June 21, 1907, in full, by his check drawn on the plaintiff. On the same day there were credited by the plaintiff to his account the proceeds of a $2,000 note made by David L. Snyder and Isaac Madamsky to the order of David Schnei-der. It appears that at this time Michael Feiner was the owner of the premises. It does not appear of record that he at any time had anything to do with the note transactions in the banks. His lips are sealed by death. As against his widow and children, the burden of clearly showing the original mortgage to be security for tlys $2,000 note is on the plaintiff.

[3] It appears from the account of David Schneider with the plaintiff that he had ample funds to meet the check drawn on it in payment of the note which came due July 6, 1907, without recourse to any funds made available by the discount of the $2,000 note. David Schneider was-under no legal liability here. When he conveyed the premises to Madamsky and Snyder subject to the mortgage, the land became the fund for the payment of the mortgage, and he became simply a surety. . The payment of the amount due to the Citi

p. 880
zens’ Trust Company by Snyder and Madamsky on February 21, 1907, canceled his obligation on the bond. Brewer v. Staples, 3 Sandf. Ch. 579 . And, so far as the record goes, Schneider, in paying this note of July 6, 1907, the note which fell due on that day, by his check, was in the position of a stranger paying the debt of another. Under such circumstances, he acquired no right in and under the mortgage, and could give none to the bank. Wilkes v. Harper, 1 N. Y. 586 .

Nothing appears in the record to show what the arrangements were between Schneider and Snyder and Madamsky. There is not anything in the record that clearly shows that the $2,000 note was necessarily connected with the $5,000 payment. And the record totally fails t'a show that the note of June 21, 1907, was paid off, even in part, out of funds made available by the discount of the $2,000 note. The plaintiff has failed to sustain the burden of proof as to this point.

It appears that there were various renewals by Schneider of his $2,000 note, the last one being for $1,700; but the question of the validity of this mortgage security hinges entirely on the transaction of July 6, 1907. As a question of fact I find that the payment made on July 6, 1907, by David Schneider was a voluntary payment from his own funds of the note coming due on that day. The note being actually paid, the mortgage held as collateral security for said payment must be considered as discharged and. satisfied.

Judgment for the defendants on the merits, dismissing the complaint.

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