York Mortg. Corp. v. Clotar Const. Corp.

• Decision Date: 10 June 1930
• Citation: 254 N.Y. 128,172 N.E. 265
• Parties: YORK MORTGAGE CORPORATION v. CLOTAR CONST. CORPORATION et al. OCEAN REALTY CO. v. SAME (four cases).
• Court: New York Court of Appeals Court of Appeals

254 N.Y. 128

172 N.E. 265

YORK MORTGAGE CORPORATION

v.CLOTAR CONST. CORPORATION et al.

OCEAN REALTY CO.

v.SAME (four cases).

Court of Appeals of New York.

June 10, 1930.

Action by the York Mortgage Corporation against the Clotar Construction Corporation and others, and four actions by the Ocean Realty Company against Clotar Construction Corporation and others, which actions were consolidated. From a judgment on an order of the Appellate Division, Second Department (226 App. Div. 827, 235 N. Y. S. 50), modifying a judgment in favor of the Ocean Realty Company, entered upon a decision of the Nassau County Court, and directing judgment on new findings in favor of the respondent, York Mortgage Corporation, foreclosing its mortgage as a lien superior to certain mortgages of the Realty Company, the Realty Company appeals.

Judgment of Appellate Division reversed, and judgment of County Court modified and affirmed.Appeal from Supreme Court, Appellate Division, Second Department.

William Godnick and A. A. Forman, Jr., both of Brooklyn, for appellant.

Arthur P. Hilton, of Jamaica, for respondents.

POUND, J.

The Appellate Division modified the judgment of the County Court, Nassau county, upon the facts, made new findings, and rendered final judgment thereon in favor of York Mortgage Corporation. This court must therefore review the facts. Const. art. 6, § 7. The question arises as to the scope of such a review. Before the adoption of the Constitution of 1894, it was the duty of this court, when there was a reversal upon the facts, to review the questions of fact as well as the questions of law. The question then arose as to the jurisdiction of the General Term to review findings of fact made by the trial court. It was held that the trial justice or referee was the best judge of the weight to be given to conficting and doubtful testimony; that the appellate tribunal was not justified in reversing on the evidence solely because it would feel constrained to find the facts the other way, but should reverse only when the decision below was clearly erroneous. Baird v. Mayor, etc., of City of New York, 96 N. Y. 567, 576;Sanger v. French, 157 N. Y. 213, 224,51 N. E. 979; cf. 4 C. J. pp. 892-899, for a full statement of the old rule. This jurisdiction to review the facts was withdrawn by the Constitution of 1894. Review by the Court of Appeals in civil cases was thereby limited to questions of law. The last vestige of the right of this court to review the facts of a trial before a court or a referee was swept away. National Harrow Co. v. E. Bement & Sons, 163 N. Y. 505, 508,57 N. E. 764. When Constitution, article 6, was amended generally in 1925, the right to review the facts was, to a limited extent, revived. It was provided (section 7): ‘The jurisdiction of the court of appeals, except where the judgment is of death, or where the Appellate Division, on reversing or modifying a final judgment in an action or a final order in a special proceeding, makes new findings of fact and renders final judgment or a final order thereon, shall be limited to the review of questions of law.’

The grant of jurisdiction to review new findings was proposed by the Constitutional Convention of 1915, and was engrafted in the Constitution on the recommendation of the Judiciary Constitutional Convention of 1921 which said in its report to the Legislature (Legislative Document [1922] No. 37, at p. 19): ‘The argument is that if the Appellate Division actually makes new findings of fact and thereupon renders final judgment, the litigant decided against ought to have a review of those findings in some appellate tribunal.’ One appeal on the facts as found is thus allowed in all cases to the party aggrieved, and the jurisdiction of the Appellate Division to make its own decisions on the weight of evidence is recognized.

Prior to the adoption of the new judiciary article, the power of the Appellate Division to render final judgment had been materially enlarged by the Legislature. Code Civ. Proc. § 1317; Civil Practice Act, § 584. It might deal with the evidence in an equity suit ‘just as a trial court ought to have dealt with it’ (Bonnette v. Molloy, 209 N. Y. 167, 171,102 N. E. 559, 561), and direct judgment accordingly, making such findings as might be necessary to support the judgment (Bonnette v. Molloy, supra, page 172 of 209 N. Y.,102 N. E. 559;Lamport v. Smedley, 213 N. Y. 82, 85,106 N. E. 922). This provision is now incorporated in the Constitution. Article 6, § 8, reads as follows: ‘Upon an appeal from a judgment or an order, any appellate court to which the appeal is taken which is authorized to review such judgment or order may reverse or affirm, wholly or in part, or may modify the judgment or order appealed from, and each interlocutory judgment or intermediate or other order which it is authorized to review, and as to any or all of the parties. It shall thereupon render judgment of affirmance, judgment of reversal and final judgment upon the right of any or all of the parties, or judgment of modification thereon according to law, except where it may be necessary or proper to grant a new trial or hearing, when it may grant a new trial or hearing.’

The mere reversal of findings made by a referee or judge, on the ground that they are against the weight of evidence, still leads to a new trial rather than a final judgment (Caldwell v. Nicolson, 235 N. Y. 209, 139 N. E. 243;McDougall v. Shoemaker, 236 N. Y. 127, 140 N. E. 218), unless accompanied by a contrary finding express or fairly to be implied (Matter of Flagler, 248 N. Y. 415, 420, 162 N. E. 471, 59 A. L. R. 649). To make the new practice effective, the Appellate Division, when it reverses or modifies, is permitted to make new findings of fact. Rules Civil Practice, Rule 239.

Prior to the change, the appellate tribunal made no findings of fact. ‘In equity causes, before the days of Code practice, the appellate court was not constrained upon reversal to order a new trial, but might proceed to render whatever new decree the justice of the case required. * * * The Appellate Division has now been reinvested with that power.’ Lamport v. Smedley, supra, page 85 of 213 N. Y.,106 N. E. 922, 923. In the chancery practice the appellate tribunal ‘proceeded to make a final determination of the controversy’ (Schenck v. Dart, 22 N. Y. 420, 423); now the Appellate Division makes a full and complete adjudication on the facts (Lamport v. Smedley, supra). It is now the appropriate function of an appellate court in equity cases to determine controverted questions of fact, and render final judgment thereon. The interests of improved procedure do not lead us to limit the power of reversal by the Appellate Division to cases where the decision of the trial court is ‘clearly erroneous.’ It renders the judgment which the facts warrant.

This court has full jurisdiction, in the class of cases provided for in section 7 (supra), to review the facts as ‘found by the Appellate Division and their decision thereon.’ Forstmann v. Joray Holding Co., 244 N. Y. 22, 29, 154 N. E. 652, 654; Matter of Flagler, supra. In close cases, the Appellate Division should, and we may properly, take into consideration, in passing on the credibility of conflicting evidence, the fact that the trial judge had the advantage of seeing the witnesses. ‘In a case so close as this, let the court of first instance decide.’ Boyd v. Boyd, 252 N. Y. 422, 429, 169 N. E. 632, 634. This court will sift all the evidence, and, with due deference to the findings of fact by the trial judge, as thus indicated, ascertain whether the Appellate Division acted in accordance with the weight of evidence.

The power of the Appellate Division to make new findings of fact and a final adjudication thereon is, of course, limited to cases triable by the court, and does not extend to cases triable as of right by a jury. Middleton v. Whitridge, 213 N. Y. 499, 506,108 N. E. 192, Ann. Cas. 1916C, 856.

Five mortgage foreclosure actions were consolidated and the proceedings thereafter had in the consolidated action. The appeal involves in each case the priority of two mortgages, one held by Ocean Realty Company, the other by York Mortgage Corporation. The mortgages of the Ocean Company are prior in point of time. The mortgage of the York corporation claims priority by virtue of a subordination clause contained in the prior mortgages which reads as follows: ‘This mortgage shall at all times be and remain subject and subordinate to the lien of any building loan bond and mortgage, and to any advances thereunder, and/or a first mortgage which may be obtained by the then owner of the property from any source, provided that the amount obtained by building and loan mortgage, or permanent first mortgage does not exceed sixty per cent. of the value of the land and buildings, said value to be determined by an appraiser in any bona fide reputable lending institution doing business in the State of New York.’

The mortgage of the Ocean Company is in each case a purchase-money mortgage on a separate group of lots included in a tract of land laid out in ninety vacant lots conveyed to it by Ledton Realty Corporation on October 18, 1926. The selling price was $103,500, of which $1,200 was paid in cash and $102,300 was secured by...