138 N.Y.S. 216 | N.Y. App. Div. | 1912
Lead Opinion
It is unnecessary to state the facts since they are set forth in the opinion of Mr. Justice Laughlin. The authorities there cited, as it seems to me, when applied to the conceded facts, require an affirmance of the order. The trustee in bankruptcy is entitled to know just how much there is due upon the first mortgage, otherwise he is not in a position to bid intelligently at the sale. It is alleged that while the first mortgage is nominally for $300,000, it is in fact for, and there is only due, $260,000. Under such circumstances, the action being in equity, the court was justified in requiring the plaintiff to bring in the Hudson Mortgage Company, to the end that the whole controversy respecting the liens upon the land in question might be settled. I do not see how full and complete justice can be done to all of the parties unless this course be adopted.
In Sutherland v. Lake Superior, etc., Co. (1 Cent. L. J. 127) the court, speaking of the propriety of making a prior lienor a party, said: “It is not enough that a court of equity causes nothing but the interest of the proper party to change owners. Its decree should terminate and not instigate litigation. Its sales should tempt men to sober investments and not to wild speculations. Its process should act upon known and definite interests and not upon such as admit of no medium of estimation. It has the means of reducing every right to certainty and precision and is, therefore, bound to employ those means in the exercise of its jurisdiction.” While this case was reversed in the United States Supreme Court (sub nom. Jerome v. McCarter, 94 U. S. 734), on the ground that the
To permit a sale so long as the amount due on alleged prior liens remains uncertain is to deprive would-be purchasers of knowledge enabling them to bid intelligently; in other words, if the trustee in bankruptcy, in order to protect his lien, bids at the sale, he must either assume that there is due the Hudson Mortgage Company $300,000, or else take his chances in subsequent litigation having for its object the reduction of that lien to $260,000. This is a position which a court of equity ought not to compel him to take. Hull justice can be meted out to all of the parties by requiring the Hudson Mortgage Company to be brought in as a patty defendant to this action. The rights, interests and equities of all of the parties claiming an interest in the mortgaged premises, and the respective, priority, of their liens thereon, should be settled and , determined, before any judgment of foreclosure and. sale, is .entered. (Commercial. Trust Co. v. Peck, 135 App. Div. 732; Metropolitan Trust Co., v. Tonawanda, etc., R. R. Co. 43 Hun, .521; affd. on opinion below, 106 N. Y. 673.) Otherwise the sale becomes a mere speculation both as tq what is spld. nnd vfhqt is purchased. , The foregoing views aro in no Yf&j, m conflict wiftl wbaf, Wfts; held in Jacobie v. Mickle (144 237),; Brush v. Levy (54 App. Div. 296), and Lester v. Seiliere,..,(50 id. 339).; , In. the, Jacobie case the holder ,qf a .prior mortgage Wjas:m.adp..a.party defendant and the ^qmplamt, alleged the existence of ¡speh prior mortgage and in,the.fprayer for .relief, asked that the¡anrqrm.t.. due thereon be a^r|^ed;..of. sale. The owner, of the prior mortgage enffgrect default. The j udginent rendered jfollowed, the prayer, for; relief, .and s.if, w^-s,, held that the holder .of ¿the prior mortgage was conclud ed by the judgment and could, .not, thereafter "’^maintain ¡an,,action,, tq., foreclose his mortgage., ... , ... . .
The order appealed from is right and should be affirmed, with ten dollars costs and disbursements.
Clarke and Scott, JJ.,. concurred; Ingraham, P. J., and Laughlin, J., dissented. .
Dissenting Opinion
This action was commenced in the month of December, 1911, to foreclose a third mortgage on premises known as Nos. 127-131 West Twenty-fifth street, borough of Manhattan, New York. The' Hudson Mortgage-Company, which the order requires the plaintiff to bring in as a party, is the owner and holder of a first mortgage, which was given to secure a building loan, and on its face it is for $300,060. Prentice, as receiver and trustee in bankruptcy, is the owner and holder of a fifth mortgage, given to the bankrupt to secure the payment of $13,000, and his object in applying for the order was to have the amount secured by the first mortgage, which he contests, determined in this action, to the -end that the bidders at the foreclosure sale will know precisely the. amount of the lens subject to which the property is to be sold.
It would not be proper to express an opinion with respect to the merits of the claim,, concerning the amount of the lien of the Hudson Mortgage Company’s mortgage, since that company is not before the court. Suffice it to say that the contention made in behalf of the trustee in bankruptcy appears to he made in good faith, and that the facts and circumstances, indicate that it may be well founded.
The learned counsel for the appellant contends broadly that the court is without power to compel the plaintiff to bring in the Hudson Mortgage Company, and it is further contended that the order should not have been made, even if it was within the jurisdiction of the court. It appears that the first mortgage was due, and that an action for its foreclosure was pending, which the plaintiff did not see fit to press. With the first mortgage due, if the mortgagee did not see fit to bring an action to foreclose it, or even with such an action pending a junior mortgagee on foreclosing his mortgage could make the first mortgagee a party, to the end that the property may he sold free and clear of all incumbrances or subject to the hen of the first mortgage, the amount of which would he adjudicated by the decree. (Metropolitan Trust Co. v. Tonawanda, etc., R. R. Co., 43 Hun, 521; affd., 106 N. Y. 673; Guilford v. Jacobie, 69 Hun, 420. See M'Gown v. Yerks, 6 Johns. Ch. 450; Emigrant Industrial Savings Bank v. Goldman, 75 N. Y. 127; Smith v. Roberts, 62 How. Pr. 196.) The respondent did not even ask
Mo decision has been cited and -we have, found bone .construing these, provisions as- either requiring or authorizing the court to,-compel a ¡.plaintiff, finta, foreclosure action to bring" in a sénior mortgagee; against, ■ whom he demands .no -relief,. ,aS¡ a. party..,defendant,* ¡and, the, .weight:i of judicial - opinions; is, against such construction. (Jacobie v. Mickle, 144 N. Y. 237;
It follows that the order should he reversed and the motion denied.
Ingraham, P. J., concurred.
Order affirmed, with ten dollars costs and disbursements.