51 N.Y.2d 638 | NY | 1980
Lead Opinion
OPINION OF THE COURT
A mortgage which contains a dragnet clause, securing not only the bond referred to in the mortgage but in addition any and all further loans from the mortgagee to the mortgagor, subject only to the limitation that the maximum amount secured at any time shall be the original principal amount, secures not only the original $2,500 obligation but also a later $6,800 note of the mortgagors to the mortgagee. Each obligation is secured to the extent of $2,500, though should foreclosure be required it cannot be had for more than $2,500. Moreover, such a provision is binding upon the mortgagors’ grantee who takes title after the later loan, except to the extent that the grantee can establish an estoppel against the mortgagee. Because defendant Mary Fioravanti, grantee from the mortgagors, has failed to meet her burden of presenting evidentiary proof of the estoppel upon which she seeks to defend, the order of the Appellate Division affirming the award of summary judgment to the plaintiff bank in this mortgage foreclosure action should be affirmed.
The complaint alleges that on May 9, 1966 defendants William V. Fioravanti III and Thomas J. Fioravanti executed to the bank their bond in the principal sum of $2,500 secured by a mortgage on real property in the Town of Caroga, which was duly recorded and on which a mortgage tax
By deed dated January 4, 1974 defendants William and Thomas Fioravanti conveyed to defendant Mary Fioravanti the Caroga real property. The deed is not part of the record before us but Mary Fioravanti’s affidavit states that she “assumed the payment” of the mortgage and her brief contains a similar statement. At the time the foreclosure action was begun the 1966 bond had been paid in full but there remained due on the 1973 note the sum of $3,026.54, that amount apparently being the deficiency after foreclosure of the Amsterdam property. The complaint in the present action alleges that of the balance due on the 1973 note $2,500 is secured by the 1966 mortgage and that mortgage tax of $12.50 has been paid in addition to that paid in 1966.
Of the several defenses and arguments offered by Mary Fioravanti the only ones that require discussion are payment, estoppel and the absence from the 1973 note of any
Analysis of the payment and estoppel arguments urged by defendants will be aided if we first draw a distinction which has not been clearly drawn in our prior decisions. Mortgages for future advances or obligations, recognized by English law since at least 1716 (Gordon v Graham, 7 Vin Abr 52, pl 3), have likewise been long recognized in New York (e.g., Hendricks v Robinson, 2 John Ch 283, 309, affd sub nom. Hendricks v Walden, 17 Johns 438; Bank of Utica v Finch, 3 Barb Ch 293; Note: 8 St John’s L Rev 340). Generally such mortgages fix the amount up to which future loans are secured (e.g., Mowry v Sanborn, 68 NY 153) though they may be equally valid when no amount is fixed or limit set (e.g., Merchants’ Nat. Bank of Whitehall v Hall, 83 NY 338; Robinson v Williams, 22 NY 380). Of importance also, concerning priority of the mortgage as
Though distinguishable from the future advance provisions above referred to in that the parties usually have neither a plan of future advances nor a fixed sum in mind when the mortgage is executed (see Note-: 47 Iowa L Rev 432, 435), a provision of the type in question in the present case is conceptually also a mortgage for future advances because it will cause the mortgage to secure not only the note or bond to which it refers but also other notes executed or indebtednesses incurred by the mortgagor or mortgagors. Such provisions, inserted by the lender to give itself first call upon the security for future loans are couched in different language than the future advance provisions above referred to and are often referred to as “dragnet” clauses (Osborne, Nelson, Whitman, Real Estate Finance Law, § 12.8; Blackburn, Mortgages to Secure Future Advances, 21 Mo L Rev 209; Debts included in provision of mortgage purporting to cover unspecified future or existing debts [“dragnet” clause], Ann., 172 ALR 1079; Notes: 56 Tex L Rev 733; 5 Memphis State U L Rev 586; 47 Iowa L Rev 432; 38 NY Jur, Mortgages, § 58, p 107; 59 CJS, Mortgages, § 178, p 222). Though looked upon with disfavor in some States and never referred to in our decisions by the term “dragnet” or previously distinguished by us from future advance provisions of the type first discussed above, we have in Farr v Nichols (132 NY 327) enforced such a provision against a later mortgagee of the same premises (see, also, Brown v Kiefer, 71 NY 610). In Farr we held it inferable from the $15,000 principal sum of an earlier mortgage given to secure payment of “any and all notes, checks and drafts indorsed” by the mortgagee and the fact that but one $3,000 indorsement had been made at the time the earlier mortgage was executed that a “series of indorse
Considered against that background, the provision of the 1966 mortgage quoted above is a dragnet clause which secures each advance by the bank to the extent of $2,500 (the original principal sum) but not more than a total of $2,500 at any one time. This is so because the words “In addition to the bond or obligation above mentioned,” “any and all further loans or indebtedness,” “further or future advances or readvances,” and “to the present or to any future owner of the mortgaged premises” make abundantly evident the intent of the parties that while the real property was not to constitute security for more than $2,500 at any one time, more than the one loan or indebtedness of $2,500 was intended to be secured by the mortgage. Moreover, the stipulation that “the maximum amount secured * * * thereby at any time in the future” (emphasis added) is the “original principal amount” of $2,500, when read together with the reference to “future advances or readvances,” establishes that, subject only to the maximum amount for which foreclosure may be had, each further loan or indebtedness is secured by the mortgage, the mortgage being “a continuing security” for the “floating debt intended to be secured thereby” (Bank of Utica v Finch, 3 Barb Ch 293, 298, 303, supra; see Jones, Mortgages [2d ed], p 279; 38 NY Jur, Mortgages, § 54, pp 101-102). Here, as in the Bank of Utica case, the 1973 “further * * * indebtedness” was incurred before Mary Fioravanti took title so we deal with “no right or pretended right of any grantee or incumbrancer attaching at all until after the advances were made” (id., at p 298). That the 1973 note was for a sum in excess of $2,500 is of no moment, for the mortgage made clear that the real estate constituted security for each further indebtedness but not in excess of $2,500 thereof.
Viewed in this context, payment of the 1966 note could not terminate the bank’s right to foreclose the mortgage. If payment of the original $2,500 bond terminated all right to the security without regard to further loans by or indebt
With respect to estoppel, the mortgage provides only that the mortgagor will on request give a written statement of the amount due and whether any offsets or defenses exist. A mortgagee may, of course, be estopped by a certificate furnished pursuant to section 274-a of the Real Property Law, but no such certificate is claimed to have been given by the bank. A mortgagee may also be estopped by his conduct from foreclosing, but to defend against a summary judgment motion in a foreclosure action it is incumbent upon the real property owner who relies upon an estoppel defense to produce “evidentiary proof in admissible form * * * sufficient to require a trial [of that defense] * * * mere conclusions, expressions of hope, unsubstantiated allegations or assertions are insufficient” (Zuckerman v City of New York, 49 NY2d 557, 562). Here we are informed by Mary Fioravanti’s attorney’s affidavit that the claimed estoppel arises from the bank’s “statment submitted to the purchaser, setting forth a balance due upon the mortgage upon which" the purchaser relied” but the only support for that claim is the statement, made in the same affidavit by the attorney “speaking for Mary Fioravanti”, that “the sellers delivered to the buyer a statement showing the balance then due upon the mortgage.” Whether the statement referred to was made by the sellers or was one received by them from the bank and, if from the bank, whether simply a periodic billing statement or the more formal statement provided for by section 274-a of the Real Property Law, we are not told. We cannot assume that it was the latter and if it was the former the bank would not be estopped by it, as Mary Fioravanti argues. Unlike the public weigher’s certificate involved in Glanzer v Shepard (233 NY 236, 238-239), a bank’s periodic billing statement is not submitted with “the end and aim” that it be presented by the mortgagor receiving it to a potential purchaser; it is, rather, simply a statement of the status of the original bond or note secured by the mortgage.
For the foregoing reasons, the order of the Appellate Division should be affirmed, with costs.
. Whether the total tax paid is correct is not an issue in this proceeding. Section 256 of the Tax law provides that if the indebtedness which by any contingency may be secured by the mortgage is not determinable from its terms, the tax shall be computed on the value of the property covered by the mortgage.
. Nothing in our decision in First Nat. City Bank v Tara Fealty Corp. (48 NY2d 793), reversing for the reasons stated in the Appellate Division dissent (64 AD2d 460, 462-465), is contrary to the conclusion now reached. The future advance provision in Tara was in an unrecorded instrument of which the subsequent encumbrancer had no knowledge, and the Appellate Division dissent concluded that “The recording statutes protect only those interests that are recorded and only to the extent indicated in the recorded instrument,” and held, therefore, that the $100,000 referred to in the recorded instrument having been repaid the mortgage was as to a subsequent encumbrancer extinguished.
Dissenting Opinion
(dissenting). On May 9, 1966, in connection with the purchase of a home in the Town of Caroga, two brothers, William and Thomaé Fioravanti, executed a mortgage agreement with the plaintiff. That agreement provided, among other things, that the premises would secure a $2,500 debt plus interest and further that: “In addition to the bond or obligation above mentioned, this mortgage is intended to secure any and all further loans or indebtedness owed or to be owed by the mortgagor to the mortgagee, and it is stipulated that the maximum amount secured by this mortgage at execution or which under any contingency may be secured thereby at any time in the future shall be the original principal amount hereof.”
Another indebtedness as contemplated by this dragnet clause was incurred by the brothers on June 11, 1973. Subsequently, on January 4, 1974, the brothers conveyed the
While we agree with the majority that defendant failed to show the necessary elements of estoppel, the clause on which plaintiff relies being plain on the face of the mortgage, we would conclude nonetheless that there should be a reversal. The plaintiff’s failure to give defendant due notice of a referee’s proceeding to compute the amount still owed on the mortgage deprived defendant of a substantive right, since there is a basis in the record for concluding that the computations of the referee were erroneous.
The premise of plaintiff’s argument that $2,500 is still due on the mortgage is that the dragnet clause became operative on the day the brothers incurred the second debt to the plaintiff. On that date, however, by the clear wording of the clause, the property could secure no more than $2,500. There is nothing in the clause, or for that matter, anything anywhere else in the agreement which indicates that payments after that date should be totally ineffective to reduce the secured amount. Without doubt, had the brothers tendered $2,500 to plaintiff as soon as they incurred the second debt, this mortgage should have been extinguished. Plaintiff points to no contract language indicating that in this respect payments by installment are to be treated differently from payment in full. On the contrary, the majority’s holding that the monthly payments did not reduce the debt secured, and that the $2,500 lien continued to float so long as the full debt of the brothers remained unpaid, causes this mortgage to secure over the course of the payments far more than the stated $2,500 limit. Of course, this is not to say that a floating limited security arrangement cannot be accomplished, but only that we do not read the quoted language to have accomplished it here. At the very least,
Finally, it is indeed disconcerting in this era of plain English, when — we thought — the value of obtuse legal jargon had diminished, that the majority has construed the clear statement in this mortgage that not more than $2,500 be secured at any one time to mean that the property can actually be used to secure payment of over $5,000 including interest. Even more disconcerting is that this result is achieved with a mortgage designed for use by the general public. However, even leaving aside the question of whether this sophisticated interpretation could be justified on a theoretical plane, the fact remains that at the very least the clause in question is ambiguous. Certainly among the more cogent indicators of this ambiguity is that the Judges of the highest court in this State have split 4 to 3 on its meaning.
We think the whole approach of the majority misses the point: that with this type of instrument the meaning should not depend on hypertechnical dissections and legal precedent. Rather, a truly ambiguous mortgage clause such as this should be construed in favor of the borrower — not the bank which drew it.
Accordingly, I dissent and vote that the order of the Appellate Division should be reversed.
Order affirmed, with costs.