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Lagrave v. Hellinger

Supreme Court of New York, Appellate Division

May 5, 1911


Page 398

APPEAL by the plaintiff, Sophie Marchais Lagrave, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of New York on the 7th day of July, 1910, upon the decision of the court rendered after a trial at the New York Trial Term, a jury having been waived.


Frederick L. Taylor, for the appellant.

Harold Nathan, for the respondent.


On the 25th of August, 1898, the defendant, who was then the owner of certain real estate in the city of New York, mortgaged the same to the United States Life Insurance Company to secure the payment of a bond given at the same time in the sum of $90,000, payable in five years. The bond and mortgage contained covenants that the principal sum should be reduced by the payment of $10,000 within two years from their date and that in default thereof the whole amount should become due. A few days later the defendant conveyed the real estate in question to one Brown, subject to the mortgage, the amount of

Page 399

which was deducted from the purchase price. When the installment of $10,000 became due it was not paid and the insurance company, by resolution of its board of directors, directed its counsel to commence an action for the collection of the whole mortgage debt. Brown thereupon paid the $10,000, and had the insurance company enter into an agreement with his sister, Mrs. Kingsbury, by which it 'sold, assigned and transferred * * * unto the said party of the second part [[Mrs. Kingsbury] * * * an interest in said mortgage to the extent of Ten thousand dollars, which interest shall be second and subject to the first lien of said party of the first part, which interest said party of the first part retains in said mortgage to the extent of said sum of Eighty thousand dollars, it being the intent and agreement of the parties hereto that hereafter, as between the parties hereto the said mortgage for Ninety thousand dollars shall be regarded as if it had been originally made as a mortgage for Eighty thousand dollars to the party of the first part, and thereafter as a mortgage of Ten thousand dollars to the party of the second part, and the sums of money secured by the interest in said mortgage hereby assigned to the said party of the second part, shall at all times be regarded as between the parties hereto, as if the same were a second mortgage.' The agreement further provided that when the insurance company had been fully paid it would 'assign the said bond, together with said mortgage, to the said party of the second part, to the end that the same may be enforced by her, * * * if so desired, * * * and for the balance of such original mortgage indebtedness, to wit, the said sum of Ten thousand dollars, with interest.'

The $10,000 was paid by Brown with his own money, and the agreement of the insurance company, while in form with Mrs. Kingsbury, was in fact with him and for his benefit, and she, the day after it was made, assigned the same to him. Shortly after the agreement was made Brown conveyed the real estate to a third party, subject to the $90,000 mortgage. He held the assignment from Mrs. Kingsbury until October, 1903, when he assigned it to this plaintiff. A few days after the assignment to the plaintiff the insurance company--the $80,000 not having been paid to it--commenced an action to

Page 400

foreclose, and both of the parties to this action, with others, were made parties defendant. The defendant in this action appeared and demurred to the complaint. This plaintiff did not appear, and after her time to answer had expired the defendant withdrew his demurrer. The action was prosecuted to judgment, and resulted in a sale at which this defendant--the maker of the bond and mortgage--and another became the purchasers for an amount slightly less than the amount found due the insurance company. A judgment for deficiency for this amount was taken against this defendant, which he thereafter paid. The insurance company then assigned to this plaintiff the original bond, in accordance with the agreement made by it with Mrs. Kingsbury when the $10,000 was paid by Brown, and thereupon this action was brought upon the bond to recover that amount. The answer, among other defenses, alleged affirmatively payment and the judgment in the foreclosure action as a bar. At the conclusion of the trial the complaint was dismissed upon the merits and plaintiff appeals.

The assignment to Mrs. Kingsbury was, in legal effect, an assignment to Brown. He testified that he paid the $10,000--that it was his money--and the court so found. Notwithstanding the fact that the bond was not mentioned in the assignment by the insurance company to Mrs. Kingsbury, it was, in effect, an assignment of so much of the mortgage debt, and for the obvious reason that a portion of the mortgage could not be assigned without a corresponding portion of the debt itself. ( Merritt v. Bartholick, 36 N.Y. 44; Munoz v. Wilson, 111 id. 295.) When the mortgage was given the mortgagor was the principal debtor and the land merely security, but this relation was modified when the mortgagor conveyed to Brown. The land then became the primary source from which the mortgage had to be satisfied. (Tice v. Annin, 2 Johns. Ch. 125; McKinstry v. Curtis, 10 Paige, 503; Howard v. Robbins, 170 N.Y. 498.)

The general rule is that where land is conveyed by the mortgagor the question as to where the primary liability rests depends upon the agreement of the parties to the conveyance. If the mortgagor conveys with warranty and receives the ...

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