Farmers' Loan & Trust Co. v. Bankers & Merchants' Telegraph Co.

Van Brunt, P. J.:

The grounds upon which the appellants base.their appeal seem to be as follows: First. That the plaintiff has mistaken its remedy in seeking a foreclosure by action, when the mortgage explicitly provides for a foreclosure by advertisement, and explicitly excludes every other method. Second. That the decree provides for fore, closure for both principal and interest, whereas the principal is not yet due.

Our attention has not been called to any case or text-book, nor *406have we been able to find any in which the questions involved in this controversy have been discussed or adjudicated. The rule is undoubtedly well established that the mere presence of a power of sale contained in a mortgage does not exclude other modes for foreclosure provided by law, but it is in addition to them. In the case at bar, however, the mortgage by its terms expressly prohibits any sale under the mortgage otherwise than by or wnder the authority of the trustee and in the manner therein provided, a provision which was not contained in any of the powers of sale as to which the rule above mentioned has been held to apply. In discussing this question it may be conceded that in the case of the mortgage of property which is situate wholly within this State and subject to the jurisdiction of its courts, that the parties cannot by their agreement deprive ■ the courts of the jurisdiction which they would otherwise have to enforce rights acquired under the mortgage, but it is equally true that they may by agreement provide the method for the enforcement of their rights in those cases where the property mortgaged is situate out of this State and beyond the jurisdiction of its courts unless contrary to some statutory regulation upon the subject. (Elliott v. Wood, 45 N. Y., 71, and cases cited.)

The statute of this State regulating the foreclosure of mortgages by advertisement, relates solely to mortgages of property situated within this State, and as no evidence is offered to show that there is any statute relating to foreclosure of mortgages in any of the other States in which property covered by the mortgage in question is situate, and as were it not for our statute regulating the foreclosure of mortgages the parties to a mortgage in this State might agree to any method of sale, even without notice, (Lawrence v. Farmers’ Loan and Trust Co., 13 N. Y., 200; Davey v. Durrant, 1 De Jex & Jones, 535) which might suit their purposes, the parties to the mortgage in question had at least the right as to the property situate in other States to regulate, by agreement, the method of its sale. It seems, also, equally clear that the courts of this State cannot by its decree, or by a sale made by an officer appointed by it, or by a conveyance executed by such officer, affect the title to property without the limits of the State (Elliott v. Wood, supra), and, therefore, by a sale under the decree entered in this *407action by tbe referee therein named, no title could possibly be conveyed to such of the mortgaged property as is situate in other States.

It is probably this fact that caused the insertion in the mortgage in question of the strong and apparently exclusive power of sale therein contained. It was known by the parties to the mortgage as it was found hy the learned court upon the trial of this action that the property mortgaged was situate in various States; that its value depended upon its being kept together and operated as one system and that it should not in any event be sold except as an entirety, and could not be otherwise sold without destroying, the value of the property.

The parties to the mortgage knew that no- title could be conveyed by a foreclosure in equity and a sale under a decree- of forceclosure in equity by an officer appointed under' such decree to- property situate in States other than the State-in which action was brought, and they therefore carefully provided that no sale should be made otherwise than by and under the authority of the grantee in the mortgage, who alone could cpnvey a title, by virtue of the- power contained in the mortgage, to property situate in other states, in order that the property might be sold as a whole and to the best advantage. This, certainly as’far as the property situate in other states is concerned, was a valid agreement, and the mortgagors and their successors have a right to demand its execution,.

The ‘plaintiff in its bill, seems to have anticipated that the defendants might have some rights, under the power' of sale provided -for in the mortgage, to insist upon the observance of its conditions, for it alleges the appointment of receivers in the various ■States, of the'property of the mortgagors situate therein, and the "possession by such receivers, of the mortgaged property, and that in ■consequence it has been hindered and impeded in taking possession of the mortgaged property'- as provided by the mortgage, "and in selling the same as in said mortgage required, and that it is ■impossible to execute the power of sale in the way and manner specified and provided in and by the mortgage.

These allegations in the complaint, except as to the appointment of receivers of the mortgagors’ property, are denied in the answer and no proof seems to have been offered to show that the plaintiff *408has made any effort whatever to take possession as required by the mortgage, and consequently the questions involved in this appeal must be disposed of as though there were no impediments in the way of the mortgagee taking possession of the property as required by the terms of the mortgage.

No purchaser at a sale under the decree in this action could ever be compelled to take title, because this court is powerless to enforce its own decree.

A purchaser at a foreclosure sale cannot be compelled to take title unless he can obtain j>ossession upon the production of his deed, and if the court cannot put him into possession he will not be compelled to take. Recognizing this rule, the decree appealed from provides that the purchaser of the property sold be let into the possession, use and enjoyment thereof, and that all persons in possession thereof deliver the same to such purchaser on the production of the referee’s deed or other proper evidence of the sale and purchase of said property. This provision of the decree the purchaser is entitled to have enforced, and how it can be made effective in respect to property in other States which it is admitted is in the possession of receivers appointed by the courts of those States, and over whom the courts of this State have not the slightest jurisdiction, has not been shown.

It would seem clear, therefore, that no sale can be had such as has been contemplated by this decree, and that the court should not decree any sale, as under such sale only the property in this State could be sold, which would almost destroy the value of the property mortgaged, it being possible, as far as appears from the evidence in the case, for the mortgagee to enforce his rights by a method not entailing such great disaster upon the security of the mortgage. It may be true that as far as the property in this State is concerned our statute regulates the method of foreclosure by advertisement, and the regulations therein provided must be complied with, but -they may be fulfilled as well as the provision of the mortgage 'in respect to the method of foreclosure and sale, and if this course is pursued a good and perfect title may be given by the mortgagee to the purchaser tipon a sale as to all the property mortgaged, whether situate in this State or in other States.

The.use of the words “sale thereof * * * as may be decreed *409by a court of competent jurisdiction ” in no way militates against the views above expressed, as we have attempted to show that there is no court which can decree and enforce a sale of all the property mortgaged, and that it was for that reason, probably, that the parties agreed upon the power of sale inserted in the mortgage.

In view of the conclusion to which we have arrived in respect to the propriety of the decree appealed from, it may not be necessary to consider the remaining question as to whether or not the principal of the bonds has become due, but it may be best to briefly consider the question. The provision of the bond is that “ In the event of non-payment of any interest coupons hereto attached, if such default shall continue for six months after maturity and demand of payment, the principal of this bond shall become due in the manner provided for in the said mortgage.”

The mortgage provides that upon the happening of certain events that the mortgagee may enter and take possession of the mortgaged property and sell the same, and that in the event of such taking possession, or in the event of any such sale, then, and in either such case, the whole principal sum of each and all the bonds then outstanding and unpaid shall thereupon forthwith become due and payable. The bonds became due, therefore, upon the contingencies, viz.: either upon the taking possession of the property by the trustees or by a sale thereof, neither of which having taken place, the conditions have not been fulfilled, and the principal therefore is not yet due.

The judgment appealed from must be reversed and a new trial ordered, with costs to the appellants to abide the event.

Brady and Daniels, JJt, concurred.

Judgment reversed, new trial ordered, costs to appellant to abide event.