Mehlhop v. Cent. Union Trust Co. of New York

• Decision Date: 27 February 1923
• Citation: 138 N.E. 751,235 N.Y. 102
• Parties: MEHLHOP v. CENTRAL UNION TRUST CO. OF NEW YORK.
• Court: New York Court of Appeals Court of Appeals

235 N.Y. 102

138 N.E. 751

MEHLHOP

v.CENTRAL UNION TRUST CO. OF NEW YORK.

Court of Appeals of New York.

Feb. 27, 1923.

Action by Herman Mehlhop against the Central Union Trust Company of New York. Judgment for plaintiff on a directed verdict (114 Misc. Rep. 464,187 N. Y. Supp. 431) was reversed by the Appellate Division (200 App. Div. 1,192 N. Y. Supp. 444), and plaintiff appeals.

Judgment of Appellate Division reversed, and that of Trial Term affirmed.

Appeal from Supreme Court, Appellate Division, First Department.

Eugene Cohn, of New York City, for appellant.

Orville C. Sanborn, of New York City, and Hersey Egginton, of Brooklyn, for respondent.

CARDOZO, J.

One Haebler was the owner of a parcel of real estate in the city of New York. A past-due mortgage for $30,000 held by the Central Union Trust Company, the defendant, was a lien upon the land. Haebler was not liable upon the bond, but he was anxious to prevent the foreclosure of the lien. To that end, he obtained the assurance of the defendant's representative that the mortgage would be extended for three years if a payment of $3,000 was made upon account. The understanding then reached was indefinite and inchoate. Details were left to be settled upon the signing of the written contract which was to be drawn by the defendant's lawyers. Duplicate instruments were thereupon prepared and forwarded, unsigned, to Haebler. They were dated January 6, 1916. They called for an extension, not for three years from their date, but for three years from January 8, 1915, when the mortgage had matured. They required Haebler to assume the payment of the debt, and provided that payment should be accelerated in a number of contingencies. The debt was to become due, for illustration, if two or more fire insurance companies should refuse to issue policies of fire insurance covering the mortgaged property, or if Haebler or any subsequent owner of the premises should fail to furnish the mortgagee or any proposed assignee of the mortgage with a certificate showing the amount then due upon it, and whether there were any offsets or defenses thereto. None of these terms had been part of the informal understanding.

In the interval between the preliminary arrangement and the preparation of the documents, Haebler made a conveyance of the mortgaged property to the plaintiff. Both men were represented by the same attorney, Mr. Cohn. The documents when received, were changed by inserting the plaintiff's name and address for those of his grantor, and his signature was added. They were then left with the defendant together with a certified check for $3,750 drawn by Mr. Cohn to the defendant's order, and another check, uncertified, made out in like form, for $29.50, the fees and disbursements of the defendant's lawyers. The larger check was for accrued interest, $750, as well as for the agreed installment of the principal. Both checks were retained by the defendant and collected. Till then it had not observed that the plaintiff had been substituted for Haebler as a party to the contract. On learning of the change, it wrote to the attorney that it would not sign the extension without the signature of Haebler and his assumption of the debt. Mr. Cohn called a few days later at the defendant's office and saw the man in charge of the real estate department. He gave notice that the $3,000 had been paid in fulfillment of one of the terms of a proposed contract of extension, and that, if the company was not satisfied with the contract as tendered, the money must be returned. The defendant refused either to sign or to repay.

An action of foreclosure followed. The plaintiff in that action, the defendant here, alleged in its complaint that $3,000 had been paid on account of the principal, and that the residue of the debt was due. The defendant, the present plaintiff, denied that the payment had been made on account of a past-due mortgage, and alleged that in accepting it the mortgagee had consented to an extension of the mortgage, and that the suit was premature. The court upon the trial of that action found against the defense. It found that ‘no agreement purporting to extend the time of payment of said principal sum of said bond and mortgage was ever executed and delivered by plaintiff and the time of payment of said principal sum was never extended.’ It found also that ‘the payment of $3,000 made on January 7, 1916, was a payment on account of said past-due bond and mortgage.’ Judgment of foreclosure followed. The plaintiff, deprived by that judgment of the benefit of the extension, brought this action to recover the $3,000 as paid upon a consideration which had failed. The trial judge gave judgment in his favor. The Appellate Division reversed, and dismissed the complaint. The plaintiff has thus lost both the extension and the money.

We think the money should be repaid. Neither Haebler nor the plaintiff as personally liable for the payment of the mortgage debt. Each of them was free, if he chose to make tender of something in reduction of the lien, to affix to the tender such conditions as he pleased. Nassoiy v. Tomlinson, 148 N. Y. 326, 331,42 N. E. 715,51 Am. St. Rep. 695. A condition was affixed, but the defendant has ignored it. The money was tendered, not in fulfillment of an existing duty, but as the price of a promise to be given in exchange for it. When the promise was withheldthe...