Home Insurance v. Smith ( 1882 )

Daniels, J.:

The property out of which the money in controversy has arisen, was in his lifetime owned by John B. Dunham. In May, 1866, he executed a mortgage upon it to secure a part of its purchase-price. In February, 1873, he died, and by his will devised this property to his widow, his two sons John B. and David TL- Dunham, and his grandchild Annie P. Dunham, as tenants in common. And by a proceeding in partition which resulted in a judgment in August, 1880, the land described in the mortgage was set off to the two-sons David H. and John B. Dunham. Before this partition was made, and in January, 1877, the department of public parks on behalf of the mayor of the city of New York instituted proceedings for opening and widening Morris avenue and appropriating to that object a part of the property included in the mortgage. These proceedings on the 16th day of November, 1880, and after the entry of the judgment setting off this property to David H. and John B. Dunham, were confirmed by the Special Term of this court and they included an award amounting to the sum of $14,314 for so much of the property as was required for the purposes of this avenue. As David H. and John B. Dunham had prior to that time acquired the title through the judgment in partition to the property, it followed that this award became payable to them, subject only to the payment of the mortgage still remaining a lien upon the residue of the property. And under the well settled principles of equity, the latter was required to be first sold to realize and pay the mortgage indebtedness before this fund could properly be resorted to for that purpose. The principle applicable would seem to be the same as that which governs the partial alienation of property mortgaged, and that is, that the party holding the mortgage shall first resort to the portion of the property still vested in the mortgagor, his heirs of devisees before that which may have been alienated can be sold or appropriated for the satisfaction of the mortgage debt. For in no other practicable manner could the amount be certainly ascertained which should be paid out of the fund upon the debt. By the confirmation of the award included in the commissioners’ report, the part of the property taken for opening and widening the avenue became vested in the city. (Matter of Opening Eleventh Avenue, 81 N. Y., 437, 453). And this award was substituted for it. The fact that an appeal was taken from the order of confirmation and prosecuted until a final decision was obtained upon it, on the 18th day of October, 1881, in the Court of Appeals, in no manner changed the effect of the confirmatory order. For by the final decision made that order was affirmed, and it consequently was left in full force and effect as it had been made by the Special Term in November, 1880. These proceedings therefore had as completely changed the title to so much of the land as was required for the avenue, as a voluntary conveyance of it, executed by David II. and J ohn B. Dunham to the city would have done. And as they were at the time of the entry of the confirmatory order, the owners of the property, it followed that the award was payable to them,, subject only to the previous satisfaction of the mortgage. To that extent and to that extent alone the lien of the mortgage was removed from the land and attached to the award made payable because of its appropriation. And for that reason the assignment of the mortgage by the mortgagee to the plaintiff, and its subsequent foreclosure and the sale had under it, entitled the purchaser to no more of the property than that remaining after excluding what was required for the street. That was all the land that the mortgage continued an encumbrance upon, after the residue had been devoted to a public purpose, and in case that failed to produce the mortgage debt the plaintiff, in that event, was entitled to resort to the award to make up the deficiency, but it had no other right or authority over it.

The result of these considerations is that the purchaser, under the foreclosure judgment, obtained no title whatever to the award made for the land taken for the avenue; for having been acquired by means of the proceedings taken by the city, it was no longer liable 'to be sold under the mortgage.

The lien upon it was divested and transferred to so much only of the award as might be required to extinguish it; and accordingly the assignment of it by the purchaser under the judgment gave the plaintiff no legal right to the money in controversy. The circumstance that the title conveyed by means of a foreclosure is that encumbered by the mortgage at the time when it was given, will not change the rights of the parties in this respect. For the part of the land itself for which the award was made, was as completely excluded by the proceedings from the mortgage as though it had never been encumbered by it.

The rights of the parties, after-that, were confined to the fund and not to the property out of which it originated. And the extent of that to which the plaintiff succeeded as the assignee of the mortgage was limited to the amount of money required for the payment of the mortgage debt after the sale of the remaining portion of the property.

The right to the balance of the award, vested in the person owning the equity of redemption. By virtue of their title, this money belonged to them, at least so much of it as would remain after the payment of the mortgage debt. That followed necessarily from the fact that they owned the property at the time when it was appropriated by virtue of the order confirming the report, subject only to the payment of this mortgage.

After the proceedings were instituted for opening and widening the avenue and in February, 1879, while they were pending, David H. and- John B. Dunham entered into an agreement with the respondents, by which they agreed to pay them thirty per cent of the amount of the decrease of assessments or increase of awards in the proceeding for opening and widening the avenue, for the services to be rendered by them in procuring such increase of award and decrease of assessment. Under this employment the respondents devoted their services to the reduction of the assessments and the increase of the awards, and in that manner they obtained a material reduction of assessment upon other lots owned by the Dunhams, and an increase in the amount of the awards themselves. These changes under the terms of the agreement entitled the respondents to the amount directed to be paid to them by the order from which the appeal has been taken. For nothing has been made to appear justifying a presumption that their claim to this payment was not a meritorious one or not fully justified by the circumstances found to have been proved. It is true that when the agreement itself was made the parties making it were only' authorized to charge their half of the fund to be created by the award, but that circumstance in no manner affects the respondents’ right to this compensation. For before the fund itself was created they acquired the remaining interest in the property, for the taking of which it was awarded, and thereby subjected it wholly to the terms of their agreement. They became the sole owners of the fund, subject only to the lien of the mortgage upon it for the payment of the amount remaining after the sale of the residue of the property included in the mortgage.

And by virtue of that title they were legally authorized to subject it to the charge created upon it by the agreement which they made. So much of it certainly as is required to satisfy the claims of the respondents under the terms of this agreement was not required for the satisfaction of the mortgage, and from the facts as they have been made to appear, and the legal principles applicable to them, the order from which the appeal has been taken appears to have been clearly warranted.

It should therefore be affirmed, with the usual costs and disbursements.

Davis, P. J., and Beady, «I., concurred.

Order affirmed, with ten dollars costs and disbursements.