Alfred B. Price, Respondent, v. William Alyea and Orlando D. Hughes, Appellants, Impleaded with Edward Judson and Others

Alfred B. Price, Respondent, v. William Alyea and Orlando D. Hughes, Appellants, Impleaded with Edward Judson and Others. Mortgage — agreement to advance money on the faith of it — a subsequent lienoi• cannot enforce such agreement as against an assignee of the mortgage. John B. Cole, who had received from Edward B. Judson a purchase-money mortgage for §14,000, and had assigned it to Alfred B. Price, made an arrangement with Judson, the owner of the mortgaged premises, pursuant to which the §14,000 mortgage was satisfied, and Judson gave a mortgage for §70,000 on . the same premises to a hank and thereafter gave a mortgage for §17,000 tq Cole, who assigned it to Price, upon the faith of which latter mortgage Cole' ■ agreed to advance to Judson the sum of $3,000, which sum was never, in fact, advanced. ■ ' In an action brought by Price to foreclose the $17,000 mortgage, in which he alleged that §14,000 was due thereon, a party defendant, the holder of a mechanic’s lien,, filed against said mortgaged premises subsequent to the, giving of said mortgage, answered', setting up the agreement to advance the §3,000, and that the amount had not been advanced. Held, that the §17,000 mortgage, to the extent of. §14,000, was in the same position as the original purchase-money mortgage, unaffected by any collateral engagements of Cole to Judson; That the defendant lienor could not avail himself, as a defense, of the failure-of Cole to carry out his agreement to advance the §3,000 to Judson. Appeal by the defendants, William Alyea and another, from a judgment of the Supreme Court in favor of the plaintiff, entered, in the office of the clerk of the county of Hew York on the 30th day of July, 1896, upon the decision of the court rendered after a trial at the Hew York Special Term. This appeal was transferred from' the • first department to the second" department. The facts are that Edward B. Judson, the mortgagor, was the . owner of the property upon which the mortgage in suit was a lien. Being desirous of improving the property, he entered into an agreement with one John B. Cole to secure a loan upon the property. At this time there existed as a lien upon the property a purchase-money mortgage for $14,000 given by Judson to Cole, which Cole had assigned to the plaintiff. Cole made an arrangement ■ with the Citizens’ Savings Bank to advance to Judson .the sum of $10,000* taking as security therefor a first mortgage upon the property. This was accomplished by using $50,000 in discharge of incumbrances then upon the property and providing for the subsequent advance of $20,000 at various stages, as the- contemplated improvement should be made. Plaintiff consented to and did discharge his mortgage as a- lien prior to the bank’s mortgage, and in subordination thereto a new mortgage was executed and bond given by Hudson to Cole in the sum of $17,000. This mortgage was assigned by Cole to plaintiff, and is the mortgage in suit. Prior to the execution of. this mortgage' the said Cole entered into an agreement, in writing, whereby lie agreed to advance moneys' to said Hudson in varying amounts and times and especially agreed to advance the sum of $3,000 upon the faith of the present mortgage, and such sum represented in fact the difference in the amount secured by the mortgage which plaintiff surrendered and the present mortgage. The last mortgage makes no reference to this agreement, although it is claimed that in fact plaintiff had notice of its existence, and that the further sum of $3j000 was to be advanced upon the strength of it at the time when the same was assigned to him. The $3,000 was never advanced by Cole to Hudson or by any other person. ' The present mortgage is only attempted to be enforced for the sum of $14,000 and interest, and the judgment provides for enforcement of no more than that sum. Hudson began the erection of a structure upon the mortgaged premises, and the defendants Alyea and Hughes furnished material and performed labor for .which there remains unpaid the sum of. $933.07 for which they have 'filed a mechanic’s lien. By answer served herein they allege inter alla the existence of the written agreement heretofore mentioned between Cole and Hudson, and the giving of the present mortgage, and aver that the amount secured by the mortgage was not advanced to Hudson, and that after the lien was filed this action was commenced by collusion between the said Cole and Hudson with knowledge upon plaintiff’s part, and for the purpose of forcing Alyea and Hughes to cancel and satisfy the said lien without payment: The court found that defendant had failed to comply with the terms of the mortgage by omitting to pay the suni .of $14,000 secured thereby, together with the interest thereon. The court also found that defendants’ lien was subordinate to the lien of the mortgage. Hudgment of foreclosure of the mortgage for the sum of $14,000 with interest was ordered, and from that judgment the defendants Alyea and Hughes appeal. Hector M. Hitchings, for the appellants. Hugo S. 'Mach, for the respondent. [MAJORITY — Hatch, J. :] Hatch, J. : .The purchase-money mortgage for the sum of $14,000, given by Judson to Cole, and by the latter assigned to the plaintiff, was unaffected by any conditions of any character or by any collateral engagements of Cole to Judson or to any other person. When plaintiff consented to discharge "that mortgage lie received no consideration for so doing, except' the mortgage of $17,000, which was made subordinate to the lien of the bank’s mortgage. The legal effect of that transaction did not change the character of the mortgage security which plaintiff received in substitution of his purchase-money mortgage. The substituted mortgage remained a purchase-money mortgage to the extent of the sum secured by the first mortgage. (Jones v. Parker, 51 Wis. 218; Austin v. Underwood, 37 Ill. 438.) As. to the present defendants, therefore, their lien, without regard to any equitable rights existing between Cole and Judson by virtue-of their agreement, is made subject to the lien of the mortgage under the well-settled principles governing purchase-money mortgages. (Spring v. Short, 90 N. Y. 538; Stow v. Tifft, 15 Johns. 458; Fisk v. Potter, 2 Keyes, 64.) It was not pretended that the transaction was intended by any of the parties to work any other change in plaintiff’s security than such, as was necessary to make it subordinate to the lien of the bank’s mortgage. But as to the parties and all other subsequent incumbrances it remained as though no change had been made. The'evidence given upon the trial warranted the court in finding that default was made in payment according to the terms of the mortgage, and with this established the legal right to resort to the remedy of foreclosure was complete, and whether plaintiff exercised the right at once or delayed his right cannot be made the subject of complaint by the mortgagor or by the defendants here. ' To the extent, therefore, of the sum of $14,000, and it is only to- this extent that the right is sought to be exercised, the plaintiff has the sanction of law for his action and was entitled to the judgment rendered herein. We might well rest our decision here as a complete answer to defendant’s claim. But the assertion is vigorously made, that the agreement between Cole and Judson, when coupled with the provision as to payment contained in the mortgage, is in effect an agreement not to foreclose which equity will enforce by denying foreclosure. The maturity clause of the mortgage is that the sum secured shall be due and payable on demand, or in the alternative on the 27tli day. of April, 1896. The evidence was sufficient to show that demand for payment was made and the court so found. There is nothing in the agreement upon the subject of the foreclosure of the mortgage. How, then, can any reasonable claim be made that there existed an agreement not to foreclose ? As between Cole and Judson, if there has been a breach of the contract to-advance the sum of $3,000, we are unable to perceive how it can affect the plaintiff. He was not a party to the contract and his mortgage was not subject to it. There was never any privity of contract between plaintiff and Judson, and the lien filed by defendants does not operate to the creation of that relation. In Alyea v. Citizens' Savings Bank (12 App. Div. 574) this question was fully considered, and it was there held that the defendants could not avail themselves of a breach of contract upon the part of the bank in failing to advance money to Judson. In that case the agreement was direct between Judson and the bank. The principle is decisive in the present case.. Conditions >111011 would not avail to obtain relief cannot be made effective to resist the assertion of a-legal right where the right to relief and the assertion of the claim rest upon the same basis. But this case is still stronger, for here there was no privity of contract between plaintiff and Judson toad vanee any sum whatever. But, assuming that Judson has a legal claim against Cole, and that plaintiff is bound by notice of such claim, and that the defendants occupy Judson’s position, it would not avail to defeat this foreclosure. At the most, the breach could only be set up by way of recoupment. (Sandford v. Travers, 40 N. Y. 140.) And even this right has been held to be limited- to a-recovery of nominal damages. (Dart v. McAdam, 27 Barb. 187.) But in this case there exists no right in -the defendants to interpose' any defense, for reasons already stated. If Judson has any remedy it is by way of action against Cole for breach of contract. What right the defendants have-in that connection we do not now. consider. Much was, said Upon the argument in assertion of. the existence of a conspiracy between Cole, Judson and the-plaintiff to foreclose, this mortgage for the .purpose of cutting off plaintiff’s lien. Such claim found no support' in the evidence, and the court found against it. It follows that the judgment should be affirmed', with costs. All concurred. Judgment affirmed, with costs.