172 Misc. 686 | New York County Courts | 1939
On November 28, 1928, the defendants Wielandt made and executed a bond and mortgage in the principal sum of $30,000, of which bond and mortgage the plaintiffs are now the owners. Having been made prior to July 1, 1932, the bond and mortgage are subject to the provisions of the so-called moratorium legislation, chapters 793 and 794 of the Laws of 1933, as amended. The defendants having defaulted in the payment of a semi-annual installment of interest and in the payment of a town tax and a school tax, which the plaintiffs thereupon paid, the latter have now instituted an action containing four causes of action, (1) to foreclose the mortgage in the principal sum of $30,000, the plaintiffs having elected to declare the principal due for the non-payment of interest and taxes; (2) an action to recover the unpaid installment of interest; (3) an action to recover the unpaid town tax which the plaintiffs have paid; (4) an action to recover the unpaid school tax which the plaintiffs have paid.
Plaintiffs move for an amendment of their complaint which is not contested and is allowed. By their answer, the defendants have set up affirmative defenses substantially as follows:
To the first cause of action to foreclose the mortgage, they set up as a defense that the market value of the mortgaged premises equals or exceeds the amount of the indebtedness. Similar defenses are set up to the causes of action as to interest and taxes, namely, that the market value of the premises equals or exceeds the principal of the bond and mortgage plus the arrears of interest and taxes. The answer also sets up, as affirmative defenses, that the claims for interest and taxes are part of the single mortgage indebtedness which is included in the first cause of action and that the plaintiffs may not recovo:, therefore, upon separate causes of action for interest
The plaintiffs move to strike out from the answer so much of the affirmative defenses as relate to the second, third and fourth causes of action, to sever those causes of action from the first cause of action, for judgment on the pleadings in favor of the plaintiffs against the defendants on those causes of action without prejudice to the plaintiffs’ rights on the first cause of action.
By cross-motion, the defendants have moved to dismiss the second, third and fourth causes of action, or, in the alternative, for an order staying the plaintiffs from proceeding thereon.
It would seem, therefore, that the question raised by the pleadings and the motions is whether, as claimed by the defendants, a mortgagee who commences an action to foreclose a mortgage is restricted to his relief in that action and may not bring separate actions or causes of action for -unpaid interest and taxes; or whether, as contended by the plaintiffs, the latter may sue for the unpaid interest and obtain judgment without prejudice to their right to foreclose the mortgage.
In Johnson v. Meyer (242 App. Div. 798; affd. without opinion, 268 N. Y. 701) the complaint alleged the making of the bond and mortgage and the agreement therein by the defendant to pay interest semi-annually and to pay taxes as they accrue. The action was not brought to recover the principal of the bond or to foreclose the principal of the mortgage but was brought only to recover unpaid installments of interest and, also, unpaid taxes which had been paid by the plaintiff. The defendant, by answer, alleged that the market value of the property exceeded in amount “ all sums due the plaintiff under the bond ” and that, therefore, under section 1083-b of the Civil Practice Act, the plaintiff may not have judgment if the fair and reasonable market value of the property equals or exceeds the amount which might be claimed as a deficiency and that the fair and reasonable value of the premises there in question was not less than the amount recoverable as a deficiency. The Appellate Division held that sections 1077-a, 1077-b and 1083-b of the Civil Practice Act do not prevent the plaintiff from suing for interest which had accrued and was unpaid and for taxes which
It seems necessarily to follow, therefore, from the decision in Johnson v. Meyer (supra) that the words “ indebtedness secured by a mortgage ” refer only to the principal of the bond and mortgage and not to arrears of interest and/or taxes. In that case, however, no question was raised with reference to the right of the plaintiffs to proceed to recover upon the bond or by foreclosure of the mortgage as, there, the action was solely to recover arrears of interest and taxes.
Shortly thereafter, however, exactly that question was presented ( Union Trust Co. of Rochester v. Kaplan, 247 App. Div. 588; 249 id. 280). There, the plaintiff sought a declaratory judgment with respect to its right as a mortgagee to bring actions at law to recover arrears of interest and taxes without thereby forfeiting its right to recover the principal by action on the bond or by foreclosure of the mortgage. The question, therefore, was squarely presented whether a mortgagee, the principal of whose bond and mortgage was due together with arrears of interest and taxes thereon, had a single and indivisible cause of action or whether there existed separate causes of action to recover arrears of interest and taxes and a separate cause of action to recover on the bond and mortgage. The court held that the cause of action was not a single and indivisible one but should be considered as arising out of an agreement on the part of the mortgagor to do three separate things: (1) to pay the principal when due, (2) to pay installments of interest as they accrued semi-annually, and (3) to pay the taxes within a specified time after they became due. The determination of the court, therefore, was that there were three separate causes of action and that the plaintiff might sue and recover judgment for arrears of interest and taxes without forfeiting or prejudicing its right to sue for or recover the principal of the mortgage indebtedness. This decision was in December, 1936. The Supreme Court at Special
In the same month of December, 1936, the Appellate Division of the Second Department made a similar determination. (Werbelovsky v. Rosen Bros. News Agency, Inc., 249 App. Div. 758.) In that case the plaintiff had brought an action to recover the principal of the bond and, in the same action, to recover the arrears of interest on the bond- The defendant had interposed section 1083-b of the Civil Practice Act as a defense not only to the cause of action to recover the principal but also as to the cause of action to recover the interest. At Special Term the plaintiff was given judgment for both principal and interest. The Appellate Division reversed as to principal but affirmed as to interest, holding that section 1083-b of the Civil Practice Act was a defense only to the cause of action seeking recovery of the principal and that such determination was without prejudice to the plaintiff's right to bring action to foreclose the mortgage if so advised. The court there said: <£ Assuming, therefore, that the properties in question were of a value that precluded any judgment in favor of the plaintiff for the unpaid principal or any part thereof as of the time inquiry was made, the plaintiff may not be denied judgment for the amount of interest due as of that date,” This decision further confirms what was said above, namely, that the word “ indebtedness,” as used in the statute, referred to the principal of the bond and mortgage alone and not to that principal plus arrears of interest, and that, in the case of a bond and mortgage, the maker thereof assumes three obligations, namely, to pay the principal, to pay the interest and to pay the taxes, which are separate obligations and may be sued upon separately,
In the following month, January, 1937, this was confirmed by the Court of Appeals (Rochester Trust & Safe Deposit Co. v. Hatch, 248 App. Div. 945; revd, without opinion, 273 N- Y, 507), The complaint there alleged seven causes of action, the first to recover the principal of the bond, the second, third and fourth to recover several unpaid installments of interest, and the fifth, sixth and seventh to recover accrued taxes which had been paid by the plaintiff. The answer set up section 1083-b of the Civil Practice Act as a defense to all the causes of action, alleging that the fair and reasonable value of the property exceeded the amount due the plaintiff for principal, interest and taxes, The Appellate Division pointed out that the question presented differed from that presented in Johnson v. Meyer (supra), because the plaintiff in the case under consideration was seeking to recover the principal of the bond as well as arrears of interest and taxes whereas the plaintiff in the
It seems clear to this court that this was a definite determination that a mortgagee might, in a single complaint, sue for the principal of the bond, stie, also, for arrears Of interest and sue, likewise, for unpaid taxes which he had paid, attd that section 1083-b of the Civil Practice Act would be a valid defense only to the cause of action seeking recovery of the principal of the bond and mortgage. The conclusion is inescapable that here Was a definite determination that three separate causes of action exist in such a case and that the mortgagee may proceed to recover judgment for arrears of interest and taxes and still maintain his action to recover the principal of the bond, in that action, however, being subject to the defense of market Value of the property under section 1083-b of the Civil Practice Act. Prom this, I can reach no Other conclusion than that, by the Use of the word “ indebtedness,” the Court of Appeals has held that the Legislature intended to and did refer only to the principal amount of the bond and mortgage. That being so in a case where the mortgagee sties to recover both the principal of the bond and arrears of interest and taxes thereon, can the situation be different when he sues to foreclose the mortgage and, at the same time, to recover arrears of interest and taxes thereon? Irrespective of the so-called moratorium legislation, the statute has for years provided that where final judgment for the plaintiff has been rendered in an action “ to recover any part of the mortgage debt/5 an adtion shall not be commenced or maintained to foreclose the mortgage unless execution on the said judgment has been returned wholly or partly unsatisfied; and that While an action to foreclose a mortgage is pending or after final judgment for the plaintiff therein, no other action shall be commenced or maintained “ to recover any part of the mortgage debt ” without leave of the court. (Civ. Prac. Act, §§ 1077, 1078.)
It is urged by the defendants, however, that the amendment of section 1083 of the Civil Practice Act by chapter 510 of the Laws of 1938 has so changed the situation that the effect of the decisions above referred to is nullified. I am unable to concur in that contention. By that amendment, the provisions of section 1083-a of the Civil Practice Act, effective only during the emergency with respect to the method of obtaining a deficiency judgment, were made applicable generally and were made so applicable not only to mortgages thereafter made, but to mortgages then existing. Its con-constitutionality was questioned in so far as it purported to be retroactive. It was sustained by this court in the unreported decisions of Ehrenberg v. Green and Lawrence-Cedarhurst Bank v. Glickman, by the Supreme Court at Special Term in Otselic Valley Nat. Bank v. Dapson (170 Misc. 514) and Tompkins County Trust Co. v. Herrick (171 id. 929) and by the Appellate Division in the Second Department in National City Bank v. Gelfert (257 App. Div. 465). Obviously, this is not of importance in the present case because the mortgage here under consideration is controlled by the so-called emergency legislation and, therefore, by sections 1083-a and 1083-b of the Civil Practice Act. However, those decisions are
From what has been said, this court reaches the conclusion that the plaintiffs’ motions must be granted and those of the defendants denied. The result is that the affirmative defenses set up by the defendants to the causes of action to recover arrears of interest and taxes must be stricken out, that those causes of action be Severed from the first cause of action and that the plaintiffs have judgment on the pleadings upon those causes of action as thus severed for the amounts due for unpaid interest and taxes; and that such judgments do not forfeit or prejudice the right of the plaintiffs, if so advised, to proceed to foreclosure for principal only of the mortgage in the event that the defaults in payment of interest and taxes are not remedied. -