City Bank Farmers' Trust Co. v. Ardlea Inc.

• Decision Date: 17 April 1935
• Citation: 196 N.E. 34,267 N.Y. 224
• Parties: CITY BANK FARMERS' TRUST CO. v. ARDLEA INCORPORATION et al.
• Court: New York Court of Appeals Court of Appeals

267 N.Y. 224

196 N.E. 34

CITY BANK FARMERS' TRUST CO.

v.ARDLEA INCORPORATION et al.

Court of Appeals of New York.

April 17, 1935.

Action by the City Bank Farmers' Trust Company (formerly known as the Farmers' Loan and Trust Company) against Ardlea Incorporation and others. From an order of the Appellate Division of the Supreme Court in the First Judicial Department (242 App. Div. 763, 275 N. Y. S. 219), entered October 19, 1934, which unanimously affirmed, so far as appealed from, two orders of Special Term, the first denying a motion by plaintiff for a deficiency judgment against the defendants-respondents and for an order confirming the referee's report of sale, and the second denying a motion by plaintiff for an order resettling the judgment of foreclosure and sale, for judgment against the respondent, Richard Croker, Jr., and for a reargument of the first motion, but granting confirmation of the referee's report of sale without prejudice to the prior order denying confirmation, in an action to foreclose a mortgage on real property, plaintiff appeals by permission.

Affirmed.

Appeal from Supreme Court, Appellate Division, First Department.

George S. Mittendorf and Milton R. Friedman, both of New York City, for appellant.

Herman C. Storck, of New York City, for respondent.

HUBBS, Judge.

The primary question presented on this appeal is whether an independent collateral agreement to pay a part of the amount secured by a bond and real property mortgage executed and delivered more than six years after the date of the original bond and mortgage, is within the purview of section 1083-b of the Civil Practice Act, as added by Laws 1933, Ex. Sess., c. 794, § 2. The collateral agreement was executed and delivered on September 1, 1932. The Civil Practice Act, section 1083-a, as added by Laws 1933, Ex. Sess., c. 794, § 2, provides that deficiency judgments on foreclosure of real property mortgages shall be limited to an amount equal to the difference between the amount payable upon the judgment and prior liens and the fair market value of the property covered by the mortgage, the fair market value to be fixed by the court.

In this action to foreclose a real property mortgage, Richard Croker, Jr., the maker of a collateral bond for $50,000, was made a party defendant and judgment demanded against him for any deficiency which might result for an amount not to exceed the amount of his collateral bond. A deficiency existed after the sale of the property. The plaintiff moved for judgment against the maker of the original bond and against the defendant Croker on the collateral bond. The court found that the fair market value of the property covered by the mortgage exceeded the amount of the judgment and denied the motion for a deficiency judgment.

The plaintiff contends that section 1083-b has no application under the facts of this case as to the defendant Croker, as the collateral bond executed by him was executed long after the execution and delivery of the original bond and mortgage, and was not, therefore, a bond given to secure an ‘indebtedness secured by a mortgage on real property and which originated simultaneously with such mortgage and which is secured solely by such mortgage.’ Section 1083-b.

At the time section 1083-b was enacted, it was deemed advisable by the Legislature to enact emergency legislation to relieve the strain on the real property market and to afford temporary relief to those indebted on bonds and real property mortgages. To accomplish complish that purpose, section 1077-a of the Civil Practice Act was passed (as added by Laws 1933, Ex. Sess., c. 793, § 2), which suspended, during the period of the emergency specified in the act, the bringing of any actions to foreclose real property mortgages because of default in the payment of principal due on such mortgages. The new section 1077-b, passed at the same time, prevents the bringing of actions on bonds secured by real property mortgages because of default in payment of principal due on such bonds, ‘if the indebtedness originated or was originally contracted for simultaneously with such mortgage and is secured solely by such mortgage, or upon any guaranty of payment’ of any such mortgage so long as an action to foreclose such mortgage is prevented by the provisions of section 1077-a, ‘so long as interest at the rate prescribed shall be paid.’

The clear purpose of the Legislature was to prevent the foreclosure of real property mortgages for default in the payment of principal during the emergency period, also to prevent any actions on bonds given simultaneously with such mortgages and secured thereby and upon guaranties of payment of such mortgages or bonds given therewith.

Thus far the purpose of the Legislature seems clear. Did the Legislature intend, by the enactment of those sections, to limit their application to...