In re Chase Nat. Bank of City of New York

• Decision Date: 24 July 1940
• Citation: 28 N.E.2d 868,283 N.Y. 350
• Parties: In re CHASE NAT. BANK OF CITY OF NEW YORK (three cases).
• Court: New York Court of Appeals Court of Appeals

283 N.Y. 350

28 N.E.2d 868

In re CHASE NAT. BANK OF CITY OF NEW YORK (three cases).

Court of Appeals of New York.

July 24, 1940.

Appeals from Supreme Court, Appellate Division, First Department.

Proceeding in the matter of the Chase National Bank of New York for an order directing Guardian Realties, Incorporated, and the Woodbridge Building Corporation to pay over surplus, etc.; and proceeding in the matter of the Chase National Bank of New York for an order directing Guardian Realties, Incorporated, to pay over surplus, etc., and proceeding in the matter of supplementary proceedings after judgment; Chase National Bank of New York, plaintiff and judgment creditor, against the Guardian Realties, Incorporated, defendant and judgment debtor. From an order of the Appellate Division in the first proceeding, 259 App.Div. 864, 20 N.Y.S.2d 656, which affirmed several orders of the Special Term, Guardian Realties, Inc. and the Chase National Bank appeal. From an order of the Appellate Division in the second proceeding, 259 App.Div. 865, 20 N.Y.S.2d 657, which reversed on the law an order of the Special Term, the Guardian Realties, Incorporated, appeals, and certain questions are certified. From an order of the Appellate Division in the third proceeding, 259 App.Div. 865, 20 N.Y.S.2d 656, Guardian Realties, Incorporated, appeals, and certain questions are certified.

Orders in accordance with opinion.

First Case:

Two appeals: Appeal by Guardian Realties, Inc. (Chase National Bank, respondent), from order of Appellate Division which affirmed, one justice dissenting, several orders of Special Term. Appeal by Chase National Bank (Woodbridge Building Corporation, respondent) from said order of Appellate Division.

Second Case:

Appeal from order of Appellate Division which reversed on the law order of Special Term. The following questions were certified:

‘I. It being conceded that the mortgagee (to wit: The Chase National Bank of the City of New York, as Successor Trustee, etc.) had the right to maintain an action to foreclose its second mortgage on and after November 1, 1939, was the mortgagee entitled to an order for relief under section 1077-c, C. P. A.?

‘II. May a mortgagee procure relief under section 1077-c, C. P. A., with respect to an accounting period that is less than the six months specified in section 1077-c, C. P. A., where a receiver of the rents of the mortgaged property in a foreclosure action commenced by a senior mortgagee is appointed at the expiration of four months and the owner receives no rents after the appointment of the receiver?’

Third Case:

Appeal from order of Appellate Division affirming order of Special Term. The following questions were certified:

‘I. Does section 1077-c, C. P. A. permit the entry or docketing of a money judgment against the last record owner in favor of the mortgagee, where the owner fails to comply with the provisions of an order granted under section 1077-c, C. P. A., specifying an amount which the last record owner is directed to pay in reduction of the past due principal of the mortgage, so as to permit enforcement of such purported judgment by supplementary proceedings under article 45 of the Civil Practice Act?

‘II. If section 1077-c, C. P. A., is construed as empowering the court to enter such a money judgment enforcible by supplementary proceedings, is such section violative of the State and Federal Constitutions, and is the purported judgment accordingly null and void?

‘III. Was the motion to vacate the said purported subpoena improperly denied for the reason that a prior purported subpoena and supplementary proceeding were pending?’ Samuel J. Levinson, Benjamin J. Rabin, and Frank Weinstein, all of New York City, for Guardian Realties, Inc., appellant.

F. Trowbridge Vom Baur and Theodore G. Quintal, both of New York City, for Chase Nat. Bank, appellant in the first case and respondent in each of the three cases.

Max Schmer, of New York City, for Woodbridge Building Corporation, respondent.

FINCH, Judge.

These are three cases in which the appeals have been argued together. They arise out of the same facts and present the same major question, whether section 1077-c of the Civil Practice Act, which is part of the mortgage moratorium legislation in this State, imposes upon the last record owner who was not on the bond and who has not assumed its obligations, personal liability to pay to the mortgagee the amount of the surplus over and above taxes, interest and carrying charges produced during a six months' period.

The Chase National Bank of the City of New York is the holder, as trustee, of a second mortgage upon certain premises of which Guardian Realties, Inc., is the last record owner. On December 31, 1938, Guardian acquired the property without assuming the mortgage by grant from the Woodbridge Building Corporation, which in turn had acquired the property in 1931 from the 100 William Street Corporation, the mortgagor. Default in amortization of the principal was made on April 1, 1937. Pursuant to section 1077-c, Chase made an application on June 22, 1939, to determine the surplus produced by the property for the period June 1, 1938, to May 1, 1939. This is the first such application made by Chase which sought relief against both Guardian and Woodbridge. On September 11, 1939, Special Term handed down an opinion which granted Chase's application as to Guardian, but only for the period January 1, 1939, to June 30, 1939. As to Woodbridge, Chase's application was denied altogether because it was not the last record owner. An examination of Guardian's books followed and as a result of a series of orders it was determined that Guardian had derived a surplus for the period mentioned above of $20,841.60, and that Chase was entitled to enter a money judgment against Guardian for that amount. From the affirmance of these orders Guardian appeals. Chase appeals from so much of the order of the Appellate Division as affirmed the denial of its application for relief against Woodbridge. These appeals constitute the first case.

On November 17, 1939, Chase made a new application for the determination of the surplus for the period June 30, 1939, to November 1, 1939, but only against Guardian. Guardian appeals upon questions certified to this court by the Appellate Division which granted the application and reversed the order of Special Term denying Chase's second application. This is the second case.

Pursuant to section 773 et seq. of the Civil Practice Act, Chase, by service of a subpoena, commenced supplementary proceedings to enforce its judgment against Guardian, obtained as a result of the first application made by Chase for the determinationof surplus moneys. Guardian appeals upon certified questions from the order of the Appellate Division affirming the order of Special Term which denied Guardian's motion to vacate the subpoena. This is the third case.

First case. Guardian's appeal. Stated briefly, the major question upon this appeal is whether the last record owner of property, subject to a bond and mortgage as to which default has been made in the principal, is personally liable to the mortgagee for the amount of the surplus in excess of taxes, interest and carrying charges. Guardian also raises the point that the amount of the surplus has been improperly determined.

Personal liability for the accrued surplus depends upon the proper construction of section 1077-c of the Civil Practice Act.

The argument of Chase is to the effect that when the Legislature granted a moratorium to the property owner and prevented the mortgagee from foreclosing, the Legislature was constitutionally bound to afford the mortgagee the equivalent of the possessory value of the realty upon which he has a lien as security for the debt. This is said to require that the mortgagee be entitled to whatever surplus is produced by the mortgaged premises and that the property owner who remains in possession be personally accountable for the amount of the surplus as it accrues from time to time. The argument is pressed upon us that if the statute be construed as not providing for such personal liability on the part of the owner in possession, then the moratory legislation is unconstitutional. Cf. Home Building & Loan Ass'n v. Blaisdell, 290 U.S. 398, 54 S.Ct. 231, 78 L.Ed. 413, 88 A.L.R. 1481;Worthen Co. v. Thomas, 292 U.S. 426, 432-434, 54 S.Ct. 816, 78 L.Ed. 1344, 93 A.L.R. 173;Worthen Co. ex rel. Board of Com'rs of Street Imp. Dist. No. 513, of Little Rock, Ark. v. Kavanaugh, 295 U.S. 56, 63, 55 S.Ct. 555, 79 L.Ed. 1298, 97 A.L.R. 905;Wright v. Vinton Branch of Mountain Trust Bank of Roanoke, 300 U.S. 440, 57 S.Ct. 556, 81 L.Ed. 736, 112 A.L.R. 1455. Whatever may be the merits of the constitutional question, the case at bar presents the narrower inquiry as to whether the Legislature in fact has intended to create such a new obligation on the part of the property owner. If the Lagislature has not so intended, and if Chase be correct in its argument on the constitutional question, still Chase would not be entitled to obtain the relief which it seeks in this proceeding, for it is not within the province of this court to rewrite the enactments of the Legislature. The constitutional question must remain until such time as it is raised in an appropriate case. Cf. Great Falls Mfg. Co. v. Garland, Attorney-General, 124 U.S. 581, 8 S.Ct. 631, 31 L.Ed. 527.

In support of its position, Chase relies upon part of the concluding clause of the first sentence of section 1077-c, which provides that ‘then the court may make an order directing the payment of such surplus * * *.’

It is urged that by force of the term ‘an order directing’ a party to pay a sum of money, there is necessarily comprehended personal liability of the party against whom the order is directed. On the other hand, Guardian contends that there is no personal liability imposed by an order under section 1077-c and that the court in...