Quackenbush v. O'Hare — 16 N.Y.S. 33

Majority

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Quackenbush v. O'Hare et al.

(Supreme Court, General Term, First Department.

October 16, 1891.)

Headnote

1. Mortgages—Foreclosure—Inverse Order of Alienation.

The rule that where several parcels of property are covered by a mortgage, and the owner of the equity of redemption has conveyed all of such property to different grantees, the court will, in an action to foreclose the mortgage, order the property sold in the inverse order of its alienation, so that the property last conveyed shall be first subjected, is not applicable in a proceeding by such mortgagor to obtain satisfaction of his mortgage out of a surplus arising_ from a sale under a prior mortgage, of a part of such property other than that which was last conveyed.

2. Same—Want of Parties.

In such case, the owners of the parcels of property covered by the mortgage, other than the parcel sold, not being before the court, it has no jurisdiction over them, and can make no decree directing a resort to their property to satisfy the mortgage, for the relief of the prior alienee.

8. Mortgages—Merger in Conveyance in Fee—Defeasance.

A creditor directed his attorney to pay off a mortgage on the debtor’s property, which consisted of three several parcels, and take an assignment thereof for the creditor’s benefit, which was done. Prior thereto the creditor had taken a conveyance in fee of one of such parcels, subject to be defeated by payment to him of the grantor’s indebtedness. ■ Meld, that the creditor’s mortgage did not merge in the conveyance in fee, which, by reason of the defeasance, was itself a mortgage only.

Appeal from special term, New York county.

Action by Bebecca M. F. Quackenbush, plaintiff, against Marie O’Hare and others, defendants, to foreclose a mortgage. The mortgage was foreclosed, and a proceeding in the action was taken by S. T. Cannon, the holder of a junior mortgage, (by assignment for benefit of Abraham Steers,) on the premises sold, to obtain a distribution of a surplus remaining after satisfac

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tian of the prior mortgage. In tills proceeding Washburn & Barnes, holding a mortgage subsequent to that of Cannon, appeared and contested his- claim to satisfaction out of such proceeds, on the ground that his (Cannon’s) mortgage covered two other pieces of property, which, having been aliened after that on which contestant’s mortgage was a lien, (out of which such surplus arose,) should be first subjected to his (Cannon’s) mortgage. The Murray Hill Bank, an intervener,' holding a mortgage on such other property not covered by Washburn & Barnes’ mortgage, contended that Cannon’s mortgage should be satisfied out of the surplus as asked for by him, to the relief of the property covered by the bank’s mortgage. From the referee’s report it appears that the mortgage foreclosed herein was one made by Marie O’Hare for $1,000, dated February 28, 1884, covering a lot on west side of Second avenue 50.5 feet north of 110th street, being a purchase-money mortgage; that subsequently, on July 9, 1885, Marie O’Hare gave a bond and mortgage for $2,000 to Lambert Suydam, which' he, on January 2, 1886, assigned to James Suydam, and which mortgage covered three parcels of land, i. e., said Second-Avenue lot, a house and lot in West Third street, and a house and lot in Seventy-Fourth street. (It is under this $2,000 mortgage that Cannon now claims.) On February 2, 1887, Marie O’Hare, who was the owner of the Third-Street property, being indebted to Abraham Steers in the sum of upwards of $11,000, made to him a deed of the Third-Street property, subject to all mortgages, interest, taxes, and assessments then outstanding and unpaid thereon, and at the same time took from Steers an agreement in writing which recited that James O’Hare was indebted to Steers in the sum of $11,729.50; and that on payment of such indebtedness, and any further indebtedness that might accrue within 12 months, Steers would reconvey to Marie O’Hare thé said premises. Ever since that time Steers has held the property as security for the payment of the amount of the indebtedness to him. On January 28, 1887, Marie O’Hare made to the claimants, Washburn & Barnes, two notes,—one for $1,600 and one for $1,630.67,— and executed a mortgage on the Second-A venue property to secure the payment of said notes. These notes and the mortgages were delivered to Washburn So Barnes on January 30, 1887, but were not put on record until February 11,1887, Washburn & Barnes having agreed not to record it immediately. In April, 1887, a mortgage on the Third-Street property for $5,000, held by Kaufman, was under foreclosure, and a decree of sale had been obtained; and in June, 1887, Suydam, the owner of the $2,000 mortgage thereon, had called it. Steers, at that time holding the West Third Street property to secure his debt, requested S. T. Cannon, who was his attorney, to take up the Kaufman and Suydam mortgages, and he did so, paying the amount thereof, together with a considerable amount for back interest and taxes, etc. Subsequently Steers repaid to Cannon a part of the amount so advanced by him, and, although no assignment was made, yet Steers isnowthe equitable owner of these mortgages, Cannon having taken assignment of them in his interest. On the trial before the referee, counsel for Washburn ■& Barnes made a motion to dismiss the claim of Cannon, on the ground that Cannon paid the money out for Steers and had been reimbursed, and that, therefore, he could make no claim to the fund; and further moved to dismiss on the ground that the Suydam mortgage had been merged in the fee at the time the deed of the Third-Street property was executed to Steers. In the requests to find, made to the referee by counsel for Washburn So Barnes, the claim that the mortgage had been merged and was paid off was made, and it was also claimed that, under the equitable rule of applying mortgaged parcels in inverse order of alienation, the Third-Street lot should first be applied to the payment of the Suydam mortgage. From a judgment directing payment of the mortgage assigned,to Cannon (for benefit of Steers) out of the surplus in controversy, defendants Washburn & Barnes appeal.

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Argued before Van Brunt, P. J., and Daniels and Ingraham, JJ.

Earley & Prendergast, for appellants. Cannon & Atwater, (Henry G. Atwater, of counsel,) for respondent Cannon. Guggenheimer & Untermeyer, (Moses Weyman, of counsel,) for respondent Murray Hill Bank.

The equitable principle, where several pieces of property are covered by a mortgage to secure the payment of a sum of money, and the owner of the equity of redemption has conveyed the several pieces of property to different grantees, that, in an action to foreclose the mortgage, the court will order the property sold in the inverse order of the alienation, so that the property last conveyed shall be the first sold to pay the amount due to secure which the mortgage, was given, is not applicable to this case. No application is made in this action to sell any portion of the mortgaged premises. By the conveyance or mortgaging of the separate parcels of property by the mortgagor the lien of the respondent’s mortgage was not affected; it still remained a lien upon all of the several pieces of property mortgaged, and, the surplus money in this proceeding being the proceeds of a piece of property upon which the respondent’s mortgage was a lien, he was entitled to have such surplus applied to the payment of his mortgage. The owners of the parcels of property covered by the respondent’s mortgage, other than the parcel foreclosed in this case, are not parties to this action, and the court has no jurisdiction over them. It cannot make a decree directing a sale of the property, and the effect of sustaining the contention of the appellant would be to destroy the respondent’s lien upon a portion of property upon which he had such a lien by the execution of the mortgage. The court having no power in this proceeding to marshal the assets so as to apply the rule above stated, the rule cannot be applied at all. Whether or not the appellant would be entitled to be subrogated to the rights of the respondent to enforce the mortgage against the West Third Street property is not presented on this appeal, and need not, therefore, be discussed. When Steers took a conveyance of the West Third Street property, he had no notice that the property foreclosed in this suit had been conveyed, or that a mortgage to the appellant had been given; and, as that mortgage was not recorded, he had no constructive notice of such conveyance; so that he had the right to assume that the parcel of property foreclosed in this action would, if the rule contended for by the appellant was applicable, be primarily liable for the payment of this mortgage, and the subsequent purchase of the mortgage under which the respondent claims transferred to the respondent the right of the original mortgagee to obtain the payment of his mortgage from the proceeds of any of the property upon which it. was a lien. It is clear that the mortgage was not merged by its transfer to the respondent, for transferring the mortgage instead of satisfying it, or taking an assignment to himself, was a clear intimation by Steers that it was not the intention that the mortgage should merge, even assuming that Steers, by payment of the mortgage or the amount paid by the respondent for it, became its equitable ow-ner. It is not claimed that Steers has realized anything out of the parcel of property conveyed to him, and the defeasance executed by Steers shows that such conveyance was simply a mortgage, and that by it he acquired only a lien upon the property to secure the amount of the mortgagor’s indebtedness to him. It does not appear from the record that any motion was made in the court below to bring other parties in, so that the questions raised by the appellant could be determined, and to award this surplus money to the appellant would be, in effect, to hold that the appellant’s lien was prior to that of the respondent, when in fact the respondent’s lien was prior to the appellant’s. The respondent was the real party in interest, as he was the owner of the mortgage, and it was to him that the money must be paid. The fact that, as between himself and some other person, such other person might be equitably entitled to a transfer of

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the mortgage, does not make such other person the real party in interest. It is the real owner of the obligation that is entitled to enforce it. I think, therefore, the order was right, and should be affirmed, with $10 costs and disbursements. All concur.