Dudley v. Congregation of Third Order of St. Francis

• Decision Date: 06 June 1893
• Citation: 34 N.E. 281,138 N.Y. 451
• Parties: DUDLEY v. CONGREGATION OF THIRD ORDER OF ST. FRANCIS.
• Court: New York Court of Appeals Court of Appeals

138 N.Y. 451

34 N.E. 281

DUDLEY

v.CONGREGATION OF THIRD ORDER OF ST. FRANCIS.

Court of Appeals of New York.

June 6, 1893.

Appeal from supreme court, general term, first department.

Action by Augustus P. Dudley against the Congregation of the Third Order of St. Francis. From a judgment of the general term (19 N. Y. Supp. 605) modifying a decree of the special term dismissing the complaint and granting affirmative relief of defendant, plaintiff appeals. Affirmed.

Shepard & Prentiss, (Wm. H. Shepard, of counsel,) for appellant.

Thomas G. Barry,(Peter B. Olney, of counsel,) for respondent.

O'BRIEN, J.

It is important in the determination of the legal questions arising upon this appeal to get a clear view of the precise nature and character of the action. The complaint alleges that on or about the 21st day of July, 1888, the defendant, a domestic corporation, for the purpose of securing to the plaintiff the payment of the sum of $2,000, with interest, executed and delivered to the plaintiff a bond in double that sum, conditioned for the payment of the debt in one year from date, with semiannual interest; that, as collateral security for such payment, the defendant also executed and delivered at the same time to the plaintiff a mortgage upon certain real estate therein described, which contained a promise or covenant for the payment of the debt at the time and in the manner stipulated in the bond; that the debt was not paid, but default made in the conditions, upon the performance of which both instruments were to become void. The prayer for judgment is that the lands be sold, and the proceeds applied upon the debt, and in case of a deficiency that the defendant be adjudged to pay the same. The answer averred that the defendant was incorporated under the act for the formation of charitable, benevolent, and other societies, being chapter 319, Laws 1848. That no order of the supreme court was ever made permitting the defendant to mortgage its real estate, as required by chapter 50 of the Laws of 1854, and the execution and delivery of the mortgage was therefore put in issue by a denial of these allegations in the complaint. For another defense it was separately stated that the bond was not the obligation of the defendant; that it was executed, together with the mortgage, by or under the direction of certain persons named, who had previously usurped and intruded into the office of directors, which places they held wrongfully, to the knowledge of the plaintiff, when the bond and mortgage were executed and delivered, and that subsequently, in an action brought by the people, they were ousted, and the rightful and lawfully elected directors reinstated; that the instruments were not sealed with the corporate seal, or executed or delivered by any corporate authority. It is stated that evidence was given in support of both defenses, but in the disposition of the case the courts below have passed upon but one of them. It was not claimed that the court had ever given its assent to the execution or delivery of the mortgage, and it is found that no such assent was given, and no application therefor ever made. There are also findings that the defendant carried on and maintained St. Elizabeth's Hospital upon the lands covered by the mortgage; that both the bond and mortgage were executed by and under the direction of persons who at the time were in possession of the offices of the corporation, and it was authorized by persons who, at the time, assumed to be, and were in fact, acting as the trustees and directors, though they were afterwards ousted from these places by the judgment of the court. It was held that the mortgage was void for the reason that it was made without the order of the court, and that the plaintiff was not entitled to a judgment at law upon the bond. The record, therefore, presents two questions: (1) The validity of the mortgage; (2) the right of the plaintiff to recover in this action a general judgment at law upon the debt evidenced by the bond, in the event that the mortgage is invalid.

The better opinion and the weight of judicial authority is in favor of the view that the English statutes passed in the reign of Elizabeth, restricting religious and charitable corporations from alienating their real estate, have been adopted and followed by the courts of this state in determining the powers which such corporations possess to alienate or incumber their real property. It may be true, as the learned counsel for the plaintiff contends, that these statutes, as such, were never introduced here, but the principle embodied in them became the rule of our courts and the policy of the legislature in dealing with questions of the same nature and character, and therefore a part of our municipal law. Madison Ave. Baptist Church v. Baptist Church in Oliver St., 46 N. Y. 141;De Ruyter v. St. Peter's Church, 3 Barb. Ch. 122;Bogardus v. Trinity Church, 4 Paige, 178. But the question whether these statutes were or were not actually adopted here we do not regard as an important or practical one in this case. This court is firmly committed to the doctrine that section 11 of chapter 60 of the Laws of 1813 (3 Rev. St. [Banks' 8th Ed.] p. 1888, § 11,) which is substantially identical in language with that now under consideration, operates to forbid sales of the real estate of religious corporations without the assent of the court, though the statute in terms simply makes it lawful for the chancellor to make the order in case he shall deem it proper. Madison Ave. Baptist Church v. Baptist Church in Oliver St., supra; Reformed Church v. Schoolcraft, 65 N. Y. 134, 143;Christie v. Gage, 71 N. Y. 189, 190;Manning v. Society, 27 Barb. 53;Madison Ave. Baptist Church v. Oliver St. Baptist Church, 73 N. Y. 82. The act of 1854 (chapter 50, § 1) applied to benevolent, charitable, scientific, or missionary societies, but as it is almost identical in terms, and as it must be presumed to have originated in the same general policy, and was intended to prevent the same abuses, it should receive the same construction, as the act of 1813, which applied to religious corporations. It cannot, we think, be doubted that the legislature intended to and did enact that compliance with that statute should be absolutely necessary to the validity of any mortgage of real estate which corporations of the class described therein should execute and deliver. It was assumed that without the statute such corporations could not mortgage their lands at all, and the legislative intent was to permit them to do so only when the assent of the court was first obtained. Therefore the mortgage in question lacked an element indispensable to its validity, and the courts below properly denied to the plaintiff a judgment of foreclosure.

The ruling of the court refusing to allow the plaintiff to prove the loan and recover a judgment at law upon the debt remains to be considered. An action to foreclose a mortgage is a proceeding in a court of equity which is regulated by statute. Code Civil Proc. c. 14, tit. 1, art. 4, § 1626. The holder of a bond and mortgage...