144 N.Y.S. 476 | N.Y. Sup. Ct. | 1913
On the 10th day of May, 1875, James M. Marvin and John Tayler Hall, as trustees for bondholders, executed their bond to Cornelius Vaüderbilt, conditioned to pay $260,000 in installments, the last of which would fall due September 1, 1880. As collateral security for the payment of this bond and on the day of its date, Marvin and Hall executed to Mr. Vanderbilt a mortgage for the same amount as the bond and in terms and conditions the same, covering property commonly known as the United States Hotel property in the village of Saratoga Springs, and to which they held the title as trustees. On the 27th day of November, 1878, this bond and mortgage was assigned to the plaintiff in this action, there being at that time unpaid thereon the sum of $200,000.
On the day of the assignment of the Vanderbilt bond
On the date on which the latter mortgage was given, the defendants, William B. Gage and John L. Perry, executed and delivered to the plaintiff their bond, which recites that they are held and firmly bound unto the Mutual Life Insurance Company of New York, in the sum of $400,000 conditioned that they will pay $200,000 to that company; $40,000, part of said principal sum, September 1,1879, and the balance thereof, $160,000 September 1, 1880, with interest at six per cent, and then continues: “It is expressly understood and agreed by and between the parties hereto that this obligation shall be and remain in full force and effect and in nowise be impaired, until the actual payment of said sum to* said obligees. And in case of a sale or transfer of any property embraced in a mortgage collateral to this bond, and in case of any agreement or stipulation between the owner or owners of said mortgaged property and the said obligees, extending the time or modifying the terms of the payment above stated, then the above mentioned obligors shall continue liable to pay the sum above secured according to the tenor of any such agreement,. unless
This bond further recites that it is given as collateral to the one given to Cornelius Vanderbilt and assigned to the Mutual Life Insurance Company.
The interest on the bond given to Vanderbilt and on the mortgages was regularly paid by Marvin and Hall trustees until March 1, 1904, when they conveyed the mortgaged premises by direction of the court to the United States Hotel Company, a domestic corporation then recently formed. Interest was thereafter paid on the mortgages by the hotel company until March 1, 1912.
On November 23, 1908, the plaintiff and the United States Hotel Company stipulated that on that date there was unpaid on the Vanderbilt bond and mortgage of principal $190,000 with interest at five and one-half per cent, per annum from September 1, 1908, and extended the timé of the payment of that bond and mortgage at that rate of interest to September 1, 1909, provided the interest was paid at that rate semiannually on the first day of March and September in each year.
This action was commenced in December, 1912. No question is made but that the plaintiff is entitled to foreclose these mortgages in this action and that there is unpaid on them of principal, interest and certain lawful expenditures connected with the care of the property, $194,534.66. Plaintiff, however, contends that it is entitled to a judgment for any deficiency against the defendants Gage and Perry which may arise on the sale of the mortgaged property because of the covenants in their bond, while those defendants urge the Statute of Limitations as a defense to their
On this issue, it is important to keep the following facts before us. The last installment of principal became due on the mortgages September 1, 1880. The extension of the Vanderbilt bond and mortgage on November 23, 1908, by the plaintiff and the United States Hotel Company to September 1, 1909, was not made until over twenty-eight years after the mortgages were due and payable. The Cage and Perry bond was executed and delivered on November 27,1878, and had therefore run within four days of thirty years at the time of the making of the extension agreement and over twenty-eight years from the time the last installment of principal became due on the mortgages and over thirty-four years at the time of the commencement of this action.
The contention of the plaintiff that there had been an acknowledgment of liability on their bond by Cage and Perry by payment of -interest, promise to pay or otherwise, will be considered later. For the present I shall consider the question presented as raised by the facts thus far stated.
The bond of Cage and Perry Avas given as collateral to the Vanderbilt bond and mortgage and they thereby became sureties for the payment of that indebtedness. That bond expressly states that it is given as collateral to the bond of Marvin and Hall so there can be no doubt of the intention of the parties from that statement and by the other transactions to which reference has been made to constitute them sureties for the performance of the obligation of the principal obligors. The law favors them to the extent that it does not extend their obligation or liability by implication. They must be held to what they have agreed but when
The same rules are applied, however, in the construction of contracts of suretyship as are applied to the construction of contracts in general. But when the construction and meaning of a surety contract is determined then the law holds that the liability under it shall not go beyond its precise stipulations. If ambiguous language has been used in a contract .of surety-ship, its language will be construed most strongly against the guarantor. Bamble v. Cuneo, 31 App. Div. 413; Crist v. Burlingame, 62 Barb. 351; Smith v. Molleson, 148 N. Y. 241; Catskill Nat. Bank v. Dumary, 206 id. 550.
With these principles in mind we come to a consideration of the construction- of the bond of Gage and Perry and their liability under it.
The bond in question is not a continuing guaranty in the sense in which those words are ordinarily used with reference to obligations of suretyship. A continuing guaranty contemplates a succession of liabilities, which, as they accrue, the guarantor becomes liable for. It is prospective in its operation and is generally intended to provide security in respect to future transactions within certain limits. The bond of Gage and Perry, however, had relation only to a debt that had been in existence for three years at the time it was given and the amount of which was certain. The language of this bond does not suggest the incurring of any new liability nor addition to the amount of the
Upon contracts for continuing guaranties, a right of action accrues with each freshly incurred liability and new rights of action arise upon them from time to time. In the present case, the right of action could be single only. It accrued on the 1st day of September, 1880. The bond under which Gage and Perry became liable for that indebtedness and the mortgages for which that bond was collateral or surety did not contemplate any new or additional obligation and no such new obligation is claimed to have been incurred.
Now a cause of action undoubtedly accrued to the plaintiff as suggested by counsel for defendants Gage and Perry on their bond on September 1,1880, because it is stipulated in that bond that they would pay $40,000 September 1, 1879, and $160,000 September 1, 1880. But the liability on that bond, as a promise to
An action upon a sealed instrument must be brought within twenty years after the cause of action has accrued. Code Civ. Pro., § 381. The periods of limitation prescribed by the Code of Civil Procedure must be computed from the time of the accruing of the right to relief by action to the time when the claim to that relief is actually interposed by the party. Id. 415. After a mortgage debt has been due twenty years there is a conclusive presumption of payment in the absence of proof of part payment within that period. Ouvrier v. Mahon, 117 App. Div. 749; Forbes v. Reynard, 113 id. 306, 309. A mortgage more than twenty years past due is presumed to have been paid and does not constitute a cloud upon title (Belmont v. O’Brien, 12 N. Y. 394; Paget v. Melcher, 42 App. Div. 76, 82), and when payment of a sealed instrument for the payment of money is, prima facie, presumed from lapse of time, such presumption has the same force and legal effect as if the fact had been proved in any other manner. Martin v. Stoddard, 127 N. Y. 61.
The plaintiff, however, contends that the obligors in the bond in question agreed by the language used in their bond that it should remain in force so long as the guaranteed bond remained in force and that they would recognize and be bound by any agreement of renewal or extensions made between the original mortgagor and mortgagee and to support this contention call attention to this language in the bond: “ this obligation shall be and remain in full force and effect
The language of the first sentence quoted adds nothing to what is imported in the words by which the obligors became bounden and covenanted to pay. Every obligor, in a bond remains bound until payment in some form. Nothing is added to-the force of the situation by stating what the law implies. It would add nothing to the effect of a promissory note nor extend its time of payment to add a statement at the end of the note that the same should remain in full force and effect and in nowise be impaired until its actual payment. The promise that the obligation should ‘ ‘ remain in full force and effect ’ ’ until ‘ ‘ the actual payment of said sum ” does not constitute a new engagement which fixes a different period of limitation from that which attaches to the whole debt.
The language used in the bond to the effect that the mortgage might be extended without affecting the liability of the obligors to pay presents a more difficult and complicated question. The promise to pay under this clause of the bond depended upon the happening of a possibility which might or might not have materialized. Can it be said that the defendants’ liability was not fixed and that the statute did not begin to run until the cause of action ripened under the extension agreement? The extension agreement might or might
The language used in the bond is to receive a reasonable construction. ,We have already noted that the obligors under it are not liable beyond its precise stipulations. In my judgmént the parties intended to provide that the time for payment of the Vanderbilt bond and mortgag-e might be extended without releasing Gfage and Perry, they having in mind that an extension of the time of payment by the principals without authority from the sureties would release the latter. What the parties desired evidently to do was to provide that whatever extension should be given was not to affect the obligors on the Gfage and Perry bond but that such extension, whatever it might be, was to be within the life of that bond, and the liability as obligors thereon. Any other construction of this bond would put the financial future of Gfage and Perry wholly in the hands of the plaintiff. If the contention here suggested be accepted, then the statute had run in favor of the obligors when the extension agreement was made. I am of the opinion that this construction of this bond should prevail. But the Statute of Limitations bars the action, I think, for another reason.
It is not stated in the clause of the bond under con
It is urged by plaintiff’s counsel, however, that by the language referred to “it was intended that no matter how long the Mutual Life Insurance Company of New York might defer the time of payment and no matter how it might modify the terms of payment, William B. Gage and John L. Perry should continue liable as guarantors. No release or discharge by operation of law, whether it arose out of an understanding or agreement between the Mutual Life Insurance Company of New York and the owners of the equity of redemption or even the Statute of Limitations was to discharge Messrs. Gage and Perry.” And plaintiff’s counsel asserts that it is competent for a party to contract to waive the Statute of Limitations in the contract creating the obligation in advance of the expiration of the statutory period for an unlimited time. In support of this contention he cites Foley v. Royal Arcanum, 151 N. Y. 196, in which it was held that the insured in a policy of life insurance might waive the provisions of section 834 of the Code of Civil Procedure in the contract of insurance and that such waiver would be enforceable in an action afterward brought upon the policy. The difference, however, in the two cases is obvious. The language of Thayer, J., in Adreveno v. Mutual Reserve Fund Life Assn., 34 Fed. Repr. 870, cited by the Court of Appeals in its opinion in the Foley case, at once discloses the difference between the provisions of that section of the Code and the Statute of Limitations. Judge Thayer in the Adreveno case said: 1 ‘ The statute is construed in this state as conferring a privilege, merely,
If the contention of plaintiff’s counsel is correct then the Statute of Limitations can be waived in advance for an unlimited time. I do not understand that this can be done. An agreement made at the inception of a liability to the effect that the Statute of Limitations will never be interposed as a defense would be flying in the face of the statute. A consideration of public policy is embodied in the Statute of Limitations and while its provisions may be waived at a trial by not pleading the statute its provisions cannot Tie waived in advance for unlimited time.
In Shapley v. Abbott, 42 N. Y. 443, 452, an action had been brought, as to which there had been an agreement not to plead the Statute of Limitations. Judge Earl, writing, says: “A party may, undoubtedly, without trenching upon public policy, waive the defense of usury, or of the statute of frauds, or of the statute of limitations, by omitting to set up the defense when sued. And he may waive his statute exemption by turning out exempt property when the officer comes with the execution; but no case has occurred to me in which a party can, in advance, make a valid promise that a statute founded in public policy shall be inoperative. ’ ’
Therefore, notwithstanding the language in the bond to the effect that the defendants Gage and Perry
Further the extension agreement was not made within the life of the original debt, embraced in the Vanderbilt bond and mortgage, nor within the life of such debt as described in the collateral bond executed by Cage and Perry, as more than twenty-eight years had elapsed from the time such extension was made. At the time the extension agreement was made no liability had existed against Cage and Perry on their bond for over eight years. If any liability was created against them by the agreement between plaintiff and the hotel company on the 23d day of November, 1908, it had to be a neiv one for the old one was outlawed on that date. I am of the opinion that the terms of the bond did not permit a revival of a liability which the law presumed was barred without the consent or concurrence of the obligors. On the 2d day of September, 1900, the day after the twenty year statute had run against their liability, on their collateral bond, Cage and Perry by operation .of the statute in the eyes of the law were just as free from liability as though they had on that day paid the amount unpaid on the Vanderbilt bond in cash. The only difference would be that in one case the proof of the payment would be actually made and in the other case it would be presumed to have been made. It is true that the effect of the Statute of Limitations is only to bar the remedy and does not pay the debt (Hulbert v. Clark, 128 N. Y. 295), while payment discharges it, but, so far as the legal liability of the debtor is concerned, the one is as effectual as the other.
The plaintiff, however, presents three other grounds
In April, 1903, one Charles Messenger, holding a certificate of beneficial interest in the trust property covered by the mortgages in question brought an action against the trustees of the property, making Gage and Perry and the plaintiff herein parties defendant, to determine the validity of the trust, the legal title of the trustees to the equity of redemption, to have a sale of the property and to have the trustees account. In the complaint in that action the mortgages in question are stated to exist and that there was $200,000 unpaid upon them and that Gag*e and Perry were tenants of the property. That action proceeded to judgment in October, 1903, and it was adjudged therein that the mortgages were held by the Mutual Life Insurance Company, that there was due and unpaid thereon $200,000, with interest from September 1, 1903, and that there should be a sale of the property subject to the said mortgage liens. The property was afterward sold to the United States Hotel Company subject to the plaintiff’s mortgages and the rights of Gage and Perry as lessees thereof. The judgment in. that action undoubtedly established, as contended by counsel for plaintiff, that there was then due on the plaintiff’s mortgages $200,000, which was a lien upon the property. It may also be conceded that it established that Gage and Perry, as lessees of the mortgaged property, had a personal interest therein.
There was no adjudication, however, of a liability on the part of Gage and Perry to pay the mortgage debt.
The complaint in that action made no reference to the bond of Gage and Perry and their liability on it could not, therefore, have been raised or tried by this plaintiff in that suit. It was irrelevant to any of the matters there litigated. The judgment in that case perhaps concludes Gage and Perry against questioning the amount of the mortgage debt and the extent of the liens upon the trust estate, but it does not conclude them as to the existence of a personal liability on their part for the payment of a deficiency.
The plaintiff in the Messenger action had no interest in the question as to whether Gage and Perry should pay or should not pay any deficiency which might exist after applying the mortgaged property to the payment of the liens thereon. At common law as well as by the provisions of section 521 and 1204 of the Code of Civil Procedure, the ultimate rights of two or more defendants in an action as between themselves may be determined but such determination can relate only to matters pertinent to the allegations in the complaint. In other words, if plaintiff brought an action to foreclose a mortgage against a number of defendants, one of such defendants could not properly set up by answer that another defendant was indebted to him on a promissory note and litigate that question in that action. The rights of the parties defendant to be determined
The adjudication in the Messenger action did not purport to settle the rights of the plaintiff and the defendants Gage and Perry under the collateral bond nor could such an issue have been settled under the complaint in that action. Binghamton Sav. Bank v. Binghamton Trust Co., 85 Hun, 75, 84; Kay v. Whittaker, 44 N. Y. 565; Van Allen v. Rogers, 5 Misc. Rep. 420; Smith v. Hilton, 50 Hun, 236; New York Life Ins. & Trust Co. v. Cuthbert, 87 id. 339; Jones v. Grant, 10 Paige, 348; Elliott v. Pell, 1 id. 268; House v. Lockwood, 137 N. Y. 259; Reynolds v. Ætna Life Ins. Co., 160 id. 635.
The adjudication in the Messenger action as to the amount of the mortgage debt is not in itself an acknowledgment or promise to pay on the part of the defendants Gage and Perry. Section 395 of the Code of Civil Procedure provides: “An acknowledgment or promise contained in a writing, signed by the party to be charged thereby, is the only competent evidence of a new or continuing contract, whereby to take a case out of the operation of this title. But this section does not alter the effect of a payment of principal or interest. ’ ’
There must come with every acknowledgment or promise to pay such as is required by this section a recognition or connection of -personal liability. This may be expressed or implied, but it must exist. In the case at bar this is wanting. An acknowledgment such as is required under this section miist be such that the law will imply a promise to pay the debt. Stoker v. Walter, 12 Wkly. Dig. 321.
In Bloodgood v. Bruen, 8 N. Y. 362, the defendant Bruen was a witness and testified to the indebtedness in answer to a bill in chancery filed by a third party. It was said: “An admission obtained in this way cannot of itself be made the foundation of a new contract or promise.”
I gather from the cases that the promise in order to constitute an acknowledgment of a debt must recognize an existing indebtedness of the debtor (Conn. Trust & S. B. Co. v. Wead, 172 N. Y. 497), with an intention on his part to pay it. Here there was wanting the recognition of an existing debt against them by Gage and Perry and nothing to support the claim, either by direct evidence or by implication, of a promise on their part to pay it. An acknowledgment or admission that a third party owed a debt certainly could not bind the party making such admission or acknowledgment.
Prior to the making of the Vanderbilt mortgage by Marvin and Hall, the United States Hotel property had been sold under a judgment of foreclosure of a trust mortgage to them and they had taken title as trustees by a subscription agreement entered into with the bondholders under the foreclosed trust mortgage. Certificates were issued to the persons interested in the bonds which represented their beneficial interests
It appears that in 1903, by a stipulation signed by the attorneys for Gage and Perry as well as by the other attorneys in the action, the Messenger judgment was amended, and it is now claimed on behalf of this plaintiff that, because in that stipulation it was recited there was $200,000 due on the mortgages and that they were existing liens against the mortgaged property, this was such a written acknowledgment of the debt as to make Gage and Perry liable as on a new promise on their bond. Much of the discussion already had I think covers this contention. But further: 1 ‘ The right of action, once barred by statute, can only be revived by the act and assent of the party to be charged.” Bruce v. Tilson, 25 N. Y. 194, 196. While doubtless an attorney may be presumed to have authority to stipulate that a judgment against his client may be amended in formal particulars, yet nevertheless the authority of such attorney cannot be presumed but must be proved to admit the liability of his client to pay large sums of money or to waive for him the Statute of Limitations. Here there is no proof of such authority on the part of the attorneys.
In 1909 and 1911 interest was- paid on the mortgages from money raised on notes endorsed by Gage and Perry. One of these notes was taken up by the endorsers before the commencement of this action, the
There remains for examination but one other of the questions urged by counsel for consideration. Were Marvin and Hall, as trustees, the agents of Cage and Perry in the paying of principal and interest on the mortgages and did they thus prevent the statute running against the latter s’ bond? As noted, the title to the property was decided in the Messenger case to be in Marvin and Hall as trustees and the certificates of beneficial interest of which certain of them were owned by Cage and Perry were held to be personal property. The trustees were to and presumably did apply the moneys which they derived from the property toward its maintenance and the payment of the principal and interest on the mortgages. This was the performance of a duty which they owed alike to all those having certificates of beneficial interests in the trust. These moneys were theirs but for which they were to account because they came from the property. There was, however, in all this wanting the element of an acknowledgment of an indebtedness of theirs by Cage and Perry on the mortgages. There was no connection between the payments by the trustees and the obligation of Cage and Perry on their bond. The simple fact that the proceeds of the property went to reduce the in
These views lead to the conclusion that Gage and Perry are not liable on their collateral bond. I think this is in accord not only with reason but justice. No claim was made upon this bond so far as appears by the proof presented in this case until some thirty-four years after its execution. It is said that statutes of limitations are wise and beneficial, not designed merely to raise presumption of payment of a just debt from lapse of time but to afford security from stale demands after the true statement of the transaction may have been forgotten or be incapable of explanation. It is also said that such statutes are statutes of repose. If so, the claim made in this action has slumbered for so long a time that it should be barred.
A decree may be prepared in accordance with this opinion.
Ordered accordingly. .