Opinion
Argued June 10, 1929
Decided July 11, 1929
Appeal from the Supreme Court, Appellate Division, Second Department.
Charles H. Street for appellant.
Charles H. Kelby for respondent.
The plaintiff subordinated her mortgage to the lien on a building loan agreement and mortgage executed by the Notlim Realty Corporation to the T. U. Mortgage Co., Inc. The clause of her mortgage reads: "This mortgage is and shall, at all times continue to be subject and subordinate in lien to a building loan agreement and mortgage about to be made by the mortgagor herein or its assigns in the sum of thirty thousand dollars and is and shall continue to be subordinate in lien to any and all advances made and to be made up to the said total principal sum of thirty thousand dollars and interest on security of the said building loan agreement and mortgage, and all such advances, charges and disbursements may be made without further subordinations or agreements."
The Notlim Realty Corporation entered into a building and loan agreement of the T. U. Mortgage Co., Inc., by which the latter company was to loan $30,000 to be advanced in installments and secured by a mortgage of $30,000. The first installment of $13,600 was to be made upon the filing of the building loan mortgage and the certificate of the president and secretary; upon the completion of the excavation of the said five houses $5,000 more; upon the completion of the foundation of all the houses $2,500. Other advances were to be made as the work progressed.
The T. U. Mortgage Co., Inc., advanced $21,100. Of this amount, $3,600 was a bonus or commission of 12 per cent on $30,000, which the mortgage company charged the Notlim Realty Corporation for the loan. This amount is not an advance made upon or under the building loan agreement. This provides that the first payment of $13,600 shall be made to the mortgagor for the purpose of building or construction. The evidence indicates that the advance was made to purchase building material. It was not contemplated as between the two mortgagees that the mortgagor after receiving the $13,600 should return $3,600 of it to the building loan mortgagee. As a fact, all that the Notlim Realty Corporation received on this first payment was $10,000.
The Appellate Division allowed the T. U. Mortgage Co., Inc., $21,100, the amount advanced, which included this bonus and interest on $30,000, the amount of the mortgage, $8,900 of which was not advanced. This judgment must be modified by deducting the $3,600 bonus, making the principal sum to be due on the T. U. Mortgage Co., Inc., mortgage $17,500, with interest on this amount, not on $30,000.
The judgment should be modified in accordance with this opinion and as modified affirmed, without costs.
CARDOZO, Ch. J., POUND, CRANE, LEHMAN, KELLOGG, O'BRIEN and HUBBS, JJ., concur.
Judgment accordingly.