Opinion
November 30, 1970
Appeal from an order of the Supreme Court at Special Term, entered March 12, 1969 in Clinton County, which denied the motion of defendants Frederick Coty and Raymond O. Coty, as administrators of the estate of Myrtle Emilia Coty, for an order amending the judgment of foreclosure and sale entered in this action on October 9, 1968 to provide that certain parcels of land held by defendants William L. Ladue and Emily W. Ladue, as tenants by the entirety, be sold as separate parcels, first and prior to other parcels at the foreclosure sale. Plaintiff brought this action to foreclose a mortgage made by William L. Ladue and Emily W. Ladue covering five parcels of land, situate in the County of Clinton, State of New York. Title to three of the parcels was in William L. Ladue, individually, and title to the remaining parcels was in William L. Ladue and Emily W. Ladue, as tenants by the entirety. The proceeds of the mortgage were used to construct an apartment building upon one of the parcels owned by William L. Ladue, individually. The judgment of foreclosure and sale provided that the parcels should be sold separately. The parcels were listed in the judgment and notice of sale in the order in which it was proposed to sell the parcels; that is, the first parcel sold would be the parcel improved by the mortgage proceeds, then the remaining parcels owned by William L. Ladue, individually, and, lastly, the parcels held as tenants by the entirety. Defendants Coty, the holders of substantial judgments against defendant William L. Ladue, recognizing that it would be more advantageous to them to have the parcels held as tenants by the entirety sold first, obtained an order to show cause staying the sale, and seeking an order directing that the parcels held as tenants by the entirety be sold first. Special Term denied the motion and directed that only so much of the mortgaged premises be sold as may be necessary to satisfy the mortgage debt. On this appeal defendants Coty contend that the entire mortgaged premises should be sold in separate parcels; that, since Emily W. Ladue executed the bond and mortgage, she was a primary debtor; that parol evidence was not admissible to vary the terms of the instruments; and that the parcels held as tenants by the entirety should be sold first to avoid prejudice to the creditors. Subdivision 1 of section 1351 Real Prop. Acts. of the Real Property Actions and Proceedings Law provides that "The judgment shall direct that the mortgaged premises, or so much thereof as may be sufficient to discharge the mortgage debt, the expenses of the sale and the costs of the action, and which may be sold separately without material injury to the parties interested, be sold by * * * a referee." The judgment herein and the decision of Special Term are in full compliance with this section. While the court has the power under subdivision 1 of section 1351 to order a sale of all the parcels, its equitable powers also include the power to direct the order of sale of different parcels in order to protect the rights and preserve the equities of all. ( Livingston v. Mildrum, 19 N.Y. 440; 15 Carmody-Wait 2d, New York Practice, §§ 92:232, 92:233.) Thus, the court properly considered the rights of Emily Ladue, as well as of the subsequent creditors. The record here clearly establishes that the mortgage being foreclosed was given to secure the debt of William L. Ladue; that the proceeds were used primarily for the improvement of real property owned by him, individually, and that Emily W. Ladue was, as to her interest in the parcels held as tenants by the entirety, simply a surety for him. As between them his interest was primarily liable for the payment of the debt, and it is her right to have his property sold first. ( Erie County Sav. Bank v. Roop, 80 N.Y. 591.) Regardless of the form of the transaction, Emily W. Ladue, by operation of law, became surety for William L. Ladue as the principal debtor. Parol evidence was admissible to enable the court to look beneath the surface of the transaction, and determine from the facts as shown that, as between themselves, William L. Ladue was principal and Emily W. Ladue was surety. ( Bank of Albion v. Burns, 46 N.Y. 170; Dibble v. Richardson, 171 N.Y. 131.) The judgments held by the defendants Coty being solely against the defendant William L. Ladue, the liens thereof must be regarded as subordinate to the rights of defendant Emily W. Ladue. Special Term, therefore, properly considered the rights and equities of all the parties, and its order should be affirmed. Order affirmed, with one bill of costs to respondents. Herlihy, P.J., Reynolds, Staley, Jr., Greenblott and Cooke, JJ., concur.