Wheeler v. Swan — 16 N.Y. St. Rep. 552

Majority

p. 552

John O. Wheeler, Resp’t, v. Joseph R. Swan, et al.,. App’lts.

(Supreme Court, General Term, Fourth Department,

Filed January, 1888.)

Headnote

Mortgages—What will not entitle third party to intervene to and-COMPEL FORECLOSURE OF—PAYMENT OF CONSIDERATION.

One of the defendants executes his bond to a person to secure the pay

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ment of an amount therein stated at the end of two years, with interest, and as collateral thereto he and his wife executed a mortgage on land owned by him. The mortgagee advanced no part of the consideration, but on the day following the execution of the instrument assigned the mortgage to the plaintiff, upon the agreement between him and the parties thereto, that the plaintiff should loan the mortgagor the sum which the bond and mortgage were executed to secure. The mortgage and assignment thereto were duly recorded on that day. This action was brought to foreclose the mortgage, and the appellant was made a party defendant because he held a lien on the mortgaged premises subject to the alleged lien of plaintiff’s mortgage. At the time of making the mortgage the mortgagee procured the appellant to indorse his promissory note, payable at a bank named ten days after date, upon the assurance that the plaintiff was to loan him the amount secured by the bond and mortgage, with which he would pay the note. . The note was discounted by the bank, dishonored, and the appellant duly charged as indorser. Held, that the validity of the mortgage depended upon the transactions that occurred between the mortgagor on the one part and the mortgagee and plaintiff on the other ; but assuming that the mortgagor might, by action, recover of the plaintiff the amount of the mortgage, or enforce him to specifically perform his agreement, still there being no privity by contract between the plaintiff and the appellant, and he having perpetrated no fraud on him, the latter had no right to intervene in the action to compel the plaintiff to pay the consideration of the bond and mortgage for the benefit of himself and the bank,

A. T. Goodwin, for app’lts ; C. D. Thomas, for resp’t.

Appeal from an order denying the appellant’s motion to have first, The First National Bank of TJtica made a party defendant; and, second, the default of the appellant opened and his proposed answer received as his answer in the action.

September 1, 1885, Otto E. C, Guelich executed his bond to Benjamin Coon, to secure the payment of $2,300, two years after date, with annual interest; and as collateral thereto, said Guelich and Elizabeth D., his wife, executed a mortgage upon real estate then owned by said Otto E. C. Guelich. Said mortgagee advanced no part of the consideration, but September 2, 1885, he assignee! the bond and mortgage to this plaintiff upon the agreement between the plaintiff, the mortgagor and mortgagee, that the plaintiff was to loan the. mortgagor the sum which the bond and mortgage were executed to secure. The mortgage and assignment were duly recorded September 2,1885.

This action was brought to foreclose the mortgage, and Joseph B. Swan was made a party defendant because he held a lien upon the mortgaged premises which is subject to the alleged lien of the plaintiff’s mortgage. The mortgagor defends upon the grounds that the plaintiff refused to loan or advance any part of the consideration named in the bond and mortgage; and that both instruments are void for want of consideration. •

At the time of making the mortgage, Guelich procured Swan to indorse his promissory note for $1,700, payable ten days after date at the First National Bank of Utica, upon

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the assurance that Wheeler was to loan him the amount secured by the bond and mortgage, with which he would pay the note. The note was discounted by the bank, was dishonored, and Swan was duly charged as ah indorser; it still remains unpaid, and is held by the bank. Swan was ignorant of the alleged defense of want of consideration, until after his time to answer had expired.

Whether the mortgage is valid, or invalid, depends upon the transactions which occurred between the mortgagor on the one part and the mortgagee and his assignee (this plaintiff) on the other part. If valid, the plaintiff is entitled to recover the amount secured; but if it is invalid, the mortgagor is entitled to have the instruments surrendered, and the mortgage canceled of record. Swan was not a party to these transactions, and he does not claim that the mortgagee or the plaintiff knew of his indorsement or the terms upon which he gave it. Assuming that the consideration of the mortgage had never been advanced, and that the mortgagor might have recovered the amount of the plaintiff in an action, or compelled the plaintiff to have specifically performed his agreement, still this does not aid Swan, who is not the assignee of the mortgagor, and there being no privity by contract between the plaintiff and Swan, and the plaintiff not having perpetrated a fraud upon Swan, he has established no right to intervene in this action for the purpose of compelling the plaintiff to pay (if not already paid), the consideration of the bond and mortgage for the benefit of Swan or the bank. These views lead to an affirmance of the order. /

The order is affirmed, with ten dollars costs and printing disbursements.

Martin, J., concurs; Hardin, P. J., not sitting.