The opinion of the court was delivered by: ABRUZZO
The National City Bank of New York has instituted this motion for an order permitting it to deposit with the Clerk of this Court the sum of $508.41 to the credit of the City of New York, as claimant, pursuant to the provisions of section 1438 of the Civil Practice Act of the State of New York, or in the alternative, that a sum equal to said amount of $508.41 be deducted from an advance payment applied for by said bank as mortgagee of a leasehold interest affecting Damage Parcel No. 55 on account of compensation claimed to be due to said mortgagee in this proceeding.
The property in question, commonly known as Wallabout Market, was owned by the City of New York. On April 1, 1941, title to said premises vested in the United States of America, by the filing of a Declaration of Taking and the depositing of the sum of $4,000,000 as the estimated just compensation. Simultaneously therewith, the Government filed a Notice and Petition in Condemnation.
Damage Parcel No. 55, involved in this motion, is one of the plots taken by the power of eminent domain by the United States of America under the Declaration of Taking filed April 1, 1941.
On May 1, 1939, Nathan Hudes and Alexander Hudes became the tenants of the City of New York under a lease which demised a plot in Wallabout Market for a term of ten years. The tenants were to pay a monthly rental and in turn covenanted that if the rent remained unpaid as provided by the lease the lease would come to an end. They further agreed that if at any time before the expiration of the term or renewal of the lease, the tenants should surrender the lease or fail to pay the rent after it became due and payable then the buildings erected thereon would revert to and belong to the City of New York without compensation to the lessees.
Apparently, these tenants caused buildings to be erected upon the property demised to them in Wallabout Market. These buildings on the leased parcel are now the subject of this controversy.
On the day of the signing of the lease, May 1, 1939, the tenants executed a mortgage on their leasehold to the National City Bank of New York. The bank recorded this mortgage and filed a copy with the Commissioner of public markets.
The tenants failed to pay the rent for the months of February to June, 1940. In June 1940, the Commissioner of Markets instituted dispossess proceedings for nonpayment of this rent and to repossess the property in accordance with the terms of the lease. A warrant was issued on November 8, 1940, by the Municipal Court, and with the execution of same on November 25, 1940, the City was restored to possession of this property.
Later and in March 1941, the bank, the moving party herein, made a motion to vacate the final order and warrant for dispossess issued in November 1940, requesting leave to be brought in as a party defendant with the right to pay the arrears in rent, taxes and water charges. It sought a dismissal of the petition in order to foreclose its mortgage on the leasehold.
In the Municipal Court, the bank's application was successful but in the Appellate Term, Supreme Court, Second Department, the City's contention was sustained; to wit, that the bank was neither a necessary not a proper party to the dispossess proceedings and that its mortgage on the leasehold was nothing more than a lien which fell when the tenants were lawfully ousted from possession. The bank made a motion for leave to appeal to the Appellate Division but that motion was denied.
About September 24, 1941, the counsel for the National City Bank served upon the Corporation Counsel a notice of intention to redeem as prescribed by Section 1438 of the Civil Practice Act of the State of New York. This section of the Civil Practice Act provides a method for the mortgagee of a leasehold to protect its rights.
Section 1437 of the Act provides the lessee with a method to regain possession of his property where there is a default. The lessees herein never sought to redeem under Section 1437. Therefore, the question at issue is whether or not the mortgagee complied with the statute in order to have its rights protected.
Section 1438 states in part: "Redemption by creditor of lessee. * * * A judgment creditor, * * * or a mortgagee of the lease * * * may at any time before the expiration of one year after the execution of the warrant, unless a redemption has been made as prescribed in the last section, filed with the judge or justice who issued the warrant, or with his successor in office, a notice specifying his interest and the sum due to him, describing the premises, and stating that it is his intention to redeem as prescribed in this section. * * *"
Pursuant to this section, the mortgagee would have until two o'clock of the day, not a Sunday or a public holiday, next succeeding the last day ...