Summary
deciding whether mortgagee's partial assignment of mortgage injured other interests
Summary of this case from Margaretten Co. v. Illinois Farmers Ins. Co.Opinion
November 22, 1967
Appeals from (1) order granting defendant-respondent summary judgment with regard to surplus moneys remaining after a foreclosure and sale of certain property, and (2) orders denying defendants-appellants leave to intervene. On August 15, 1964 plaintiffs held a first mortgage on the real and personal property of P.B.S. Swan Lake Resorts, Inc., defendant corporation, hereinafter P.B.S. The defendants-appellants were the holders of junior mortgages on the same property. On said date, the corporation failed to make a payment of principal and interest totaling $12,876. After a demand for payment was made by the plaintiffs, P.B.S., which was then insolvent and had filed a petition for reorganization under the Bankruptcy Act, was permitted by the United States District Court to issue certificates of indebtedness for the purpose of paying the mortgage installments then in default. Plaintiff bank agreed to lend the necessary amount on the certificates of deposit only if the certificates were guaranteed by five individuals, represented here by the defendant-respondent. Shortly after the making of this loan and the subsequent curing of the default, plaintiffs assigned a junior participating interest in the first mortgage in the amount of $12,876 to a trustee for the benefit of the guarantors. In August, 1965 another default occurred on the first mortgage and this foreclosure action was begun by plaintiffs. The defendant-respondent cross-claimed for foreclosure of the junior participating interest. Defendant-appellant, Goldstein and Goldstein, filed an answer to the complaint and cross-claimed asserting the superiority of the Roosa and Goldstein mortgages over the junior participating interest in the first mortgage, and denying the validity of the assignment of that interest to the trustees for the guarantors. This answer was subsequently withdrawn pursuant to a stipulation among the parties allowing plaintiffs to proceed with the foreclosure and sale and reserving the issues raised by the cross claim for a subsequent determination by a Justice of the court. Thereafter, the defendant-respondent moved to amend the judgment of foreclosure and sale granted on April 21, 1966 so as to grant summary judgment on the cross claim. The defendants-appellants moved to intervene and oppose the motion. Special Term granted the motion for summary judgment and denied the motions for intervention, as well as a subsequent motion for a rehearing. Defendant-appellant Roosa's basic contention on this appeal is that the holder of a junior participating interest has no right to bring foreclosure, since to do so brings about a fragmentation of liability under the mortgage and a multiplicity of actions. No such rule can have any impact where, as in this case, foreclosure of the junior interest is sought simultaneously with that of the senior interest. Nor can section 1315 Real Prop. Acts. of the Real Property Actions and Proceedings Law have any application here, since the holder of the senior interest has not refused to foreclose, but has actually begun such an action. The holders of junior interests are not injured by either a total or partial assignment of a mortgage by a mortgagee. Defendant-appellant, Goldstein and Goldstein, make the additional argument that the defendant-respondent has two interests: (1) in the first mortgage and some other interest in the certificates of indebtedness — it is not clear what the nature of this interest would be — and (2) that the rules of marshalling of assets require that the defendant-respondent first proceed on the certificates. We know of no rule of law which provides that one must first proceed on a junior interest before proceeding on a senior interest. Special Term in granting summary judgment to the defendant-respondent, found that no triable issue of fact had been raised by the pleadings. We find nothing in the record before us to warrant a disturbance of this conclusion. Orders and judgment affirmed, with costs.
While an assignment of an interest in a mortgage would not be consistent with an acceptance of a note as a direct payment on principal, it appears that the intention of the parties was that the note only be treated as a forebearance to foreclose on the part of the assignor and that payment by the guarantors would actually be a purchase of the mortgage and debt to the extent of such payment. It would be inequitable to treat the mechanics adopted by the assignor and assignee as a reduction in the mortgage debt and giving effect to their clear intent in no way prejudices any fixed rights of the appellants. Accordingly, the granting of summary judgment allowing simultaneous foreclosure of the assigned part of the mortgage was proper since in reality it was all one mortgage. The remaining contentions of the appellants are without merit and the matters should be affirmed.