Radding v. Ninth Federal Savings & Loan Ass'n

• Decision Date: 31 March 1944
• Parties: RADDING v. NINTH FEDERAL SAVINGS & LOAN ASS'N. OF NEW YORK CITY.
• Court: U.S. District Court — Southern District of New York

55 F. Supp. 361

RADDING v. NINTH FEDERAL SAVINGS & LOAN ASS'N. OF NEW YORK CITY.

District Court, S. D. New York.

March 31, 1944.

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Levine & Meckler, of New York City (Sidney S. Levine, of New York City, of counsel), for plaintiff.

Harry Nassberg, of New York City, for defendant.

CAFFEY, District Judge.

What I shall say will be comparatively short.

We have been in the present trial five days. After the completion of my opinion I have other work to do in this case. Two decisions of the Circuit Court of Appeals have indicated to district judges that it is better that the trial judge draw the findings, rather than that they be prepared by counsel in the first instance.

The pleadings are extensive. I shall have difficulty in completing the findings prior to going into the motion part next Monday. On this account I shall not undertake to discuss every phase of the trial or to go over all contentions of counsel. If I am to be ready for the motion work it is essential that today I be brief.

This lawsuit relates to a soldier of the United States. Naturally all of us honor men at the front and appreciate the service they are rendering to our country. That feeling, however, cannot properly influence a court's decision. Judges are bound by their oaths to decide cases as best they can under the law as it actually exists. So, we are forced to disregard sentiment and to treat the controversy on its merits under the law as we construe it.

There are two actions with which we are concerned in the instant trial. One is a mortgage foreclosure which has been carried to conclusion in a state court. In the other, now pending in this court, the plaintiff seeks a stay of further proceedings in the state court or an order or judgment setting aside the state court foreclosure sale in event it has taken place.

The mortgage was given by the Parkway West Corporation. It was executed in 1939 (Exhibit 15) and ran to the defendant in this case.

The premises covered by the mortgage were leased to the N. A. C. Corporation in 1938, effective in 1939, and to run for ten years; that is, until 1948 (Exhibit 7). The rent was on an increasing scale in monthly installments of $625 for the first five years, $708.33 for the next three years and $791.67 during the last two years.

There was also an assignment of rents by the mortgagor to the mortgagee dated February 2, 1942 (Exhibit 1).

In the state court there was and in this court there is involved a statute that is of crucial and, at least in some of its aspects, is of governing effect. This is the Federal Soldiers' and Sailors' Civil Relief Act. It was passed in 1940 and amended in 1942. It is to be found in Title 50 of the United States Code Annotated, Appendix, Sections 501 to 590. For convenience I shall refer to it as the Act.

Because of the shifting of litigants in the two cases from one side to the other there is danger of confusion in our discussion. On that account I shall hereafter refer to those with whom we deal mostly by description rather than by individual names. The plaintiff in this suit will be called the soldier. The Parkway West Corporation will be called the mortgagor. The defendant herein will be called the mortgagee. The N. A. C. Corporation will be called the tenant.

On the same day, to wit: March 25, 1942, two things of importance occurred. The first was a conveyance of the mortgaged property by the mortgagor to the soldier. The second was induction of the soldier into the military service of the United States.

Primarily the Act was designed for the protection and benefit of soldiers and sailors. For the purpose of present consideration, but without definitely so deciding, I shall assume that on March 25, 1942, the soldier succeeded the mortgagor in the ownership of the property covered by the mortgage. So also for the purpose of discussion, but without so deciding, I shall assume that at the time the property was transferred the soldier owned all the stock of the mortgagor.

Out of what I have described there arise several issues. Three are of major significance. I shall take up those three in order.

As indicated at the beginning this afternoon, I shall not try to cover everything counsel have debated. Indeed, as I see it, a good many of the things said will not contribute to the determination of the dispute. Accordingly — at least for the most part — I shall limit myself to the major issues because, as I conceive and as I shall endeavor to point out, they control disposition of the case.

The first issue divides itself into two branches. The first inquiry under that issue is this:

Was the ability of the soldier to comply with the terms of the mortgage materially affected by reason of his military service?

If the answer to that question be yes, then, if this were an original litigation and there had been no state court proceeding, as matters stand, the soldier would be entitled to relief. On the other hand, if the answer to that question be no, then the soldier is not entitled to the relief he asks.

Under the phraseology of the Act the answer to the inquiry must be in the form of an opinion by the court that is considering the matter. I feel compelled by the proof to express the opinion that the answer is no.

I think there is one reason for this answer which is conclusive. In the circumstances, including the pressure on my time, I deem it enough to explain what I believe to be that reason.

On February 2, 1942, which preceded the date of transfer of the property and of the induction (both of which, as I have said, took place the same day) the mortgagor made an assignment of the rents to the mortgagee (Exhibit 1). The rental income to pass under the assignment was $625 a month. The monthly installments payable to the mortgagee was $612.02. Later, in December, 1943, the monthly amount payable to the mortgagee was increased to $708.33. All I have stated about payments of installments, of course, preceded the maturity of the mortgage debt.

Lest the situation be misunderstood let me repeat: The rental income to the mortgagor from the tenant, the N. A. C. Corporation, was $625 a month. The installment payable to the mortgagee monthly was $612.02. If, therefore, we deal only with the two figures (that is, the rental income from the tenant and the monthly installments which were to be paid to the mortgagee), it will be seen that monthly there would be an excess of approximately $13 a month of the rental income over the monthly payments of installments to the mortgagee.

A minor feature, as I understood the testimony, is also that there was a small store which brought in to the mortgagor an additional income from rents of $720 a year or $60 a month. Thus the total from rents left in the hands of the mortgagor after paying the installment due the mortgagee would be increased to $73 a month. This, however, is a petty matter and we need give it no further attention.

Yesterday I examined a letter dated February 2, 1942, dealing with the grace period for making payments to the mortgagee (annexed to Exhibit 1). Under the terms of the mortgage itself the grace period was 30 days. Counsel disagree as to the interpretation of the letter. However, I need not determine the difference between them. I shall assume that the letter increased the grace period by 15 days and that, therefore, there was a total grace period of 45 days.

There has been considerable discussion about payments having been made within the 45 days and, as is argued, defaults thereby being avoided. But, as is obvious from going over the figures with care, from December, 1941, relating to the November 1 installment, down to a time when at any stage there were no further payments on installments, there was not a single instance in which the period between the due date of the installment and its actual payment did not exceed 45 days. There is no exception. The failures continued down to the foreclosure action; and, so far as concerns the installments due June 1 and July 1, 1942, not only were they not paid seasonably but neither default on those installments has ever been made good in whole or in part. So that indisputably the evidence establishes that there were at least two complete defaults on the mortgage before the foreclosure suit was commenced against the soldier in the state court.

From the uncontroverted facts I see no conclusion to be drawn except that, with plenty of money to meet all the installments coming in from the tenant, there was a diversion of those funds or part thereof from the purpose to which they were obligated by reason of the mortgage and the assignment of rents. So also there is no escape from the inference that the diversion of the income was at the instance of the soldier.

To put it otherwise, if he had refrained from diversion or causing diversion there was ample income to pay the installments as they fell due. By the terms of his own obligations or the obligations of corporations he dominated, sufficient moneys had been specifically assigned to discharge the monthly installments under the mortgage as they matured. Manifestly he is not entitled to relief if the fact be, as I find it to be, that he withdrew the funds or caused them to be withdrawn from the use to which by contract they had been definitively bound. It was thus by his own acts that the mortgagor was deprived of the pledged moneys with which to make payment of the monthly installments. It was he who prevented the mortgagee from being paid.

If I be right about the facts as just recited, the answer of no to the first inquiry is clearly correct and there is no ground whatever on which I could do otherwise than to dismiss the complaint on the merits.

So far I have been dealing with the question as if the matter had been presented to me originally; that is, had come before me prior to the institution of...