Seamen's Bank for Sav. in City of New York v. Smadbeck

• Citation: 293 N.Y. 91,56 N.E.2d 46
• Parties: SEAMEN'S BANK FOR SAVINGS IN CITY OF NEW YORK v. SMADBECK.
• Decision Date: 08 June 1944
• Court: New York Court of Appeals Court of Appeals

293 N.Y. 91

56 N.E.2d 46

SEAMEN'S BANK FOR SAVINGS IN CITY OF NEW YORK

v.SMADBECK.

Court of Appeals of New York.

June 8, 1944.

Appeal from Supreme Court, Appellate Division, First Department.

Action by Seamen's Bank for Savings in the City of New York against Arthur Smadbeck, as sole surviving executor of August Heckscher, deceased, to recover on a bond executed by deceased and secured by a real estate mortgage. From a judgment of the Appellate Division, 266 App.Div. 831, 43 N.Y.S.2d 270, unanimously affirming a judgment of the Supreme Court, New York County, in favor of defendant entered upon an order of the court at Special Term, Shientag, J., which granted a motion by defendant for a dismissal of the complaint under rule 106 of the Rules of Civil Practice, plaintiff appeals by permission of the Court of Appeals.

Judgment reversed and motion denied. John C. Crawley and Henry W. Proffitt, both of New York City, for appellant.

Vincent Keane and Louis W. Dawson, both of New York City, for Mutual Life Insurance Company of New York, amicus curiae, in support of appellant's position.

Julius Weiss and Roswell P. C. May, both of New York City, for respondent.

THACHER, Judge.

During his lifetime August Heckscher, the respondent's testator, borrowed from the plaintiff $100,000, for the repayment of which he gave his personal bond secured by a mortgage on real estate which he then owned. The debt fell due in November, 1937, and remains unpaid to the extent of $80,000. On February 10, 1939, after the debt became due, Heckscher conveyed the property subject to the mortgage to the Heckscher Foundation for Children. He died on April 26, 1941. The plaintiff took no steps to foreclose the mortgage but presented its claim for $80,000, the balance of the debt, to the executors. The claim was rejected and the plaintiff instituted this action against the surviving executor to recover on the bond. The foregoing facts are set forth in the complaint and it is alleged that the Heckscher estate is solvent ana able to meet all the testator's obligations including the instant indebtedness; that no other action has been commenced for the recovery of the sum secured by the bond or any part thereof and that no action has been commenced for the foreclosure of the mortgage. The defendant executor having moved for an order dismissing the complaint under rule 106 of the Rules of Civil Practice, an order was made at Special Term granting the motion and dismissing the complaint for failure to state facts sufficient to constitute a cause of action The judgment of dismissal was unanimously affirmed by the Appellate Division and leave to appeal was granted by this court.

It was held in the courts below that a mortgagee may not proceed against the general assets of a decedent's estate until he has sought satisfaction of his debt by foreclosure of the mortgage, and the complaint, which alleged that no foreclosure action had been commenced, was accordingly dismissed.

If the decedent had retained title to the land until his death then the question presented would be controlled by section 250 of the Real Property Law, Consol.Laws, c. 50, which requires the heir or devisee who takes the title from the decedent to satisfy and discharge the mortgage out of his own property without resorting to the executor or administrator of his ancestor or testator, unless the will directs that the mortgage be otherwise paid. But that statute can have no application here because the real property, subject to the mortgage, neither descends to an heir nor passes to a devisee, having been conveyed by the decedent during his lifetime to the Heckscher Foundation for Children.

Nor are we concerned with the mortgage moratorium acts in this case because the mortgage is dated after July 1, 1932. Civil Practice Act, s 1077g, as amended by L. 1934, ch. 278. Accordingly the right to enforce decedent's liability on the bond against his estate depends upon common law and equitable principles unaffected by statute, except, of course, by the statutory duty of executors with diligence to pay the debts of the deceased (Surrogates' Court Act, s 212) and the right of creditors to sue the executor upon all contractual causes of action which might have been maintained against the decedent. Decedent Estate Law, Consol. Laws, c. 13, s 116.

Had the decedent lived, the right o the plaintiff to maintain this action against him would have been clear. The holder of a bond and mortgage has two remedies: one at law to recover a judgment for the debt and the other in equity to foreclose the mortgage. Dudley v. Congregation, Third Order St. Francis, 138 N.Y. 451, 457,34 N.E. 281, 282. As between the mortgagor and the mortgagee, the bond is the principal obligation and the mortgage is security for the personal indebtedness. Matter of Wilbur v. Warren, 104 N.Y. 192, 197,10 N.E. 263, 264. It is true that upon the conveyance of the land to the Heckscher Foundation the mortgaged premises became the primary fund for the payment of the mortgage as between Heckscher and the Foundation, but the right of the creditor to resort to the bond for the collection of its debt was not affected by the conveyance. Heckscher could not, by any dealing or contract with another, impair the right of his creditor to proceed on the bond for the recovery of the debt. On the other hand, his relation to the debt was not changed by the conveyance so as to prevent him from paying the debt and proceeding against the land for his indemnity. Calvo v. Davies et al., 73 N.Y. 211, 215,29 Am.Rep. 130. These relative rights and remedies persist as between the creditor and the mortgagor's estate unless modified by statute or governed by equitable principles of marshaling applicable in the distribution of the estate.

We have seen that ...