Brown v. Bellamy

• Decision Date: 21 February 1991
• Citation: 170 A.D.2d 876,566 N.Y.S.2d 703
• Parties: Francis K. BROWN, Respondent, v. Leon D. BELLAMY, Sr., et al., Appellants.
• Court: New York Supreme Court — Appellate Division

Page 703

566 N.Y.S.2d 703

170 A.D.2d 876

Francis K. BROWN, Respondent, v. Leon D. BELLAMY, Sr., et al., Appellants.

Supreme Court, Appellate Division,

Third Department.

Feb. 21, 1991.

Carter, Conboy, Bardwell, Case, Blackmore & Napierski (Susan M. Di Bella, of counsel), Albany, for appellants.

Linnan, Bacon & Shea (Douglas M. Spector, of counsel), Albany, for respondent.

Before MAHONEY, P.J., and CASEY, WEISS, CREW and HARVEY, JJ.

MAHONEY, Presiding Justice.

Appeal from an order of the Supreme Court (Prior, Jr., J.), entered April 5, 1990 in Albany County, which, inter alia, granted plaintiff's motion for summary judgment on the issue of liability.

Plaintiff owned a parcel of commercial real estate located on U.S. Route 9 in the Town of Colonie, Albany County. In March 1976, plaintiff leased the property to defendant Leon D. Bellamy, Jr. who, in turn, assigned the lease to defendant Pancake House, Inc. Thereafter, application was made to obtain a construction loan from Marine Midland Bank (hereinafter the Bank) to erect a restaurant on the property. The Bank refused to make the loan unless it was secured by a mortgage prior in right and interest to plaintiff's ownership of the property. Therefore, to induce the Bank to agree to the loan, plaintiff executed a subordination agreement, dated November 17, 1976, making his ownership of the property secondary to a mortgage subsequently given by Pancake House to the Bank in exchange for the construction loan. Additional guaranties were eventually executed in favor of the Bank by Leon D. Bellamy, Jr. as well as by defendants Leon D. Bellamy, Sr. and Bellamy of Corinth, Inc. The loan proceeds were used to construct a restaurant on the property known as the International House of Pancakes.

In May 1982, Pancake House was found to be in default of payment on the construction loan and the Bank subsequently commenced an action in foreclosure against, among others, plaintiff and defendants herein. Plaintiff did not seek judgment over against defendants as mortgagor and guarantors of the mortgage and, by order entered May 14, 1985, Supreme Court, inter alia, granted foreclosure in favor of the Bank. Before a foreclosure sale was conducted, plaintiff paid the Bank in full satisfaction of the mortgage and other expenses and then sold the property himself for an amount in excess of $46,000 over payments he made to the Bank.

On January 14, 1989, plaintiff commenced this action seeking, inter alia, reimbursement of moneys expended to satisfy the mortgage. Plaintiff alleged that he was subrogated to any and all rights held by the Bank against defendants and therefore entitled to recover any amounts due thereunder. Both sides moved for summary judgment. Supreme Court granted summary judgment in favor of plaintiff on the issue of liability, holding that plaintiff was subrogated to the interests of the Bank and entitled to collect from defendants those amounts paid in satisfaction of the construction loan. This appeal by defendants ensued.

We concur in Supreme Court's finding that plaintiff is eligible to invoke the equitable principle of subrogation. An equitable doctrine, subrogation recognizes a right of recovery where

* * * one party pays a debt for which another is primarily answerable and which in equity and good conscience should have been discharged by the latter, so long as the payment was made either under compulsion or for the protection of some interest of the party making the payment, and in discharge of an existing liability (Gerseta Corp. v. Equitable Trust Co. of N.Y., 241 N.Y. 418, 425-426, 150 N.E. 501).

These principles of the equitable doctrine of subrogation have been extended, rather than restricted, where, as here, one's property is put at danger because his lessee has failed to pay a debt he is legally obligated to pay (see, Menorah Nursing Home v. Zukov, 153 A.D.2d 13, 18, 548 N.Y.S.2d 702). Further, since the right is founded upon principles of equity, no contract between the owner of the endangered asset and the defaulting defendant is required. Unlike contractual subrogation, where the subrogee's rights are defined in an express agreement, the rights of a landowner against his defaulting lessee as equitable subrogee arise independently of any contract (see, Federal Ins. Co. v. Andersen & Co., 75 N.Y.2d 366, 553 N.Y.S.2d 291, 552 N.E.2d 870).

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