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Real estate record and builders' guide: v. 20, no. 499: October 6, 1877

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Real Estate Record AND BUILDERS^ GUIDE. YoL. XX, NEW TOR]?, SATURDAY, OCTOBER 6, 1877. No. 499. Published Weekly by C^^ %ml Estate '^nox^ ^ssonatxon, TERMS. O^'E, YBAR, in advance....$10.00. Communicafcions should be addressed to C. W, SAVEET, Nos. 345 AND 347 Broadway. FORECLOSURES. The decUne of real estate values from a high to a low plane, involves the widespread mipair- ment of mortgage securifcy. Depreciation is no respecfcor of tifcles. Ifc assails alike the legitimate and well selected morfcgage and the usurious and speculative one. After the decline has reached a cerfcain stage, the values fail to represent the fuU amount of the mortgage sum, and in this ease, were other security lacking, the transfer or sur¬ render of the property to the mortgage creditor would, in many cases, be an advantageous dispos¬ al of it. Not a few dealers in unimproved and unproductive property have found themselves in this predicament, where they would gladly sur¬ render the real estate for the cancelment of their obligation and release from their indebtedness. Bufc the pecuUar features of real estate indebted¬ ness efiEectuaUy precludes such an easy escape. As is weU known to the majorifcy of our readers, and as has been fully explained in these columns, the bond which accompanies a mortgage involves a personal security or obUgation, which entangles in the transaction all ofcher properfcy belonging to the debtor, so that mortgagees in theu- extremity are permitted to appropriate not only the residuum of value left in the real estate, but to attack the personal fortunes of the bondsman and of every subsequent o^^^ler, who may have assumed the payment of the original bond. This feature of fche bond and mortgage has developed no little com- pUcationat the present time, and has given rise to many nice questions of law as to the UabiUty of the original bondsman and his co-obUgors. The idea of being beld responsible for a debt long for¬ gotten and dismissed from memory on account of the remote alienation of the property to which it was attached, is to say the least a hard one to i-econcUe to ordinary convictions of propriety and equity The disinclination to respond to such de¬ mands is frequently shown in the courts, where surprised and reluctant debtors seek to avaU themselves of every loop-hole and technicaUty that the law affords for escaping responsibiUty. The nature and Umit of this peculiar obUgation would furnish the subject matter for an interest¬ ing legal thesis. The multitude of iUustrations which has arisen of late would furnish a varied and luminous exposition of the entire subject. The penalty thus involved becomes one of pecuUar hardship in the case of bmlders and lot speculators —those whose ownership of propei-ty at the best is only transient and for a specific purpose ; that is, the'gaining of a limited possible profit. But in their case, the ownership too often necessitates the incurring of large obUgations in the way of mortgages. Tbeyjaxe obliged under the prevalent practice and custom to attach then- personal obli¬ gations to every mortgage thus given. A business of average extent, either in house bmlding or lot speculating, though pursued upon the most con¬ servative methods, wUl generally involve the principals in entanglements of this kind aggregat¬ ing many fold the total capitalor wealth they may be possessed of. If, in after years, auy considera¬ ble number of these mortgages have to go by de¬ fault and be brought to foreclosure in times of depreciation or dullness Uke the present, the prin¬ cipals connected with them are Ukely to become hopelessly embarrassed, even though they may have long since parted with their interest in the mortgaged property. This feature of personal liabiUty in mortgage loans has saved many a debt that would other¬ wise have been hopeless where the original bonds¬ man or .some co-obUgor has been compeUed to discharge the indebtedness and seek to reimburse himself as best he can out of the mortgaged premises. This is apt to happen where the atten¬ dant loss is moderate or trifling as compared with the total wealth of the one who responds. The altitude which values reached during the late speculation and the extent to which the business of speculative ventures was can-ied led to the issue of great nimibers of mortgages, speciflcaUy large in amount and aggi-egating an enormous total. No wonder then that such hordes of dealers have succumbed entirely before the aval¬ anche of foreclosure suits that have culminated since the panic. Some unlocked for and surpris¬ ing instances have been developed during the past few years of the deUberate evasion of this special UabiUty by parties who were esteemed to be solvent and in easy circumstances. Not a few cases have occurred where reputable and wealthy men have transferred valuable estates, free of mortgage or Ughtly encumbered, into the hands of third parties apparently for no other purpose than to escape judgments for deficiency in the foreclosures of mortgages with which they were inextricably entangled. It must be a bitter and humiUating ordeal for a man of spirit and integ¬ rity to pass through, and the willingness to take this step reveals the light estimation and slack recognition which this hai-sh and unnatural claim meets with among reputable men. The lessons which are now being so bitterly leai-ned to be of any value, should deter future operators from issuing mortgages on a large scale, or may result in a general movement to divorce if possi¬ ble the bond from the mortgage. Two and only two alternatives present them¬ selves to the embarrassed mortgage debtor, either bankruptcy, or, if otherwise solvent, a transfer of his estate, In Ueu of these, at the discretion of the mortgage creditor, a compromise might be arranged whereby the mortgagee on receiving a legal transfer of the hypothecated property would release the debtor from further UabiUty. Such magnanimity is doubtless contrary to the promptings of average hiunan nature, and yet more than one case has come to our knowledge of the exercise of such forbearance. One notable and praiseworthy instance deserves recording •vvliereiii a leading land proprietor was. the sym- pathiadng creditor,.and forgave arrears of inter¬ esfc and taxes in a single transaction amounting to fuUy one hundi-ed thousand dollars, although one of the debtors concerned was more than able to respond to the deficiency. We forbear, however, to parade the personaU- ties of this transaction, as they are known to but few, and it is sought to envelop them in a veil of privacy. We would commend, however, to wealthy corporations, and individuals now so ex¬ tensively engaged in the work of foreclosures, to discriminate and exercise the utmost forbearance in deaUng with delinquent debtors, and seek, where ifc is possible, in justice to their substantial rights, to arrange compromises with innocent and unconscious mortgage debtors, who have become liable through the accident of an imcanceUed or forgotten bond. We are aware that no legal remedy for such cases exists, and that no char¬ itable considerations could be successfuUy urged. But a proper magnanimity on the part of mort¬ gage holdei-s might save many a valuable com¬ mercial reputation without incurriag any irre¬ mediable personal loss. The extremity of debtors is also shown in the many legal devices resorted to in the way of dUatory defences to mortgages, resulting in a long postponement of the foreclosure sale. The commonest method is to institute a series of bogus conveyances of the properfcy, compeUing the mortgagee to commence new suifcs after each conveyance. When the matter fairly gets before the courts the judges are apt to indulge a sentimental and tedious leniency towards defendants that prompts them to entertain aU sorts of dUatory motions and ex¬ cuses, so that a stubborn and well-contested battle is often fought before the final decree of foreclosure can be obtained. After this step is reached a fresh battery of motions and counter- motions, injunctions and postponements is opened upon the luckless plaintiff to the acfcion, whose stock of patience is pretty siu-e to be exliausted long before the referee invests him with the title to the mortgaged premises. Such cases, though usuaUy rare, have become sufficiently numerous of late to develop into a separate branch of prac¬ tice—a branch, it is needless to add, that requires in its practitioners pecuUar skUl at the law. Such tactics usually apply to productive property, and the benefit accruing to the debtor is the coUection of rents long affcer payments of interest and taxes have ceased, so that the creditor is involved in extra and unnecessary Uens, without being able to derive any income from the property. The field of foreclosures in this city during the pasfc three years presents an interesting study. WhUe the stream has been continuous and ua- abating, ifc may be truly said that the heart of the best property in New York has scarcely been touched—the foreclosures applying chiefly to the extreme periphery of the city, nibbling, as it were, the outer edges. We could count on our two hands the pieces of property of real merit and productiveness that have been brought to foreclosure, and these have found quick purchas¬ ers, genei-ally at prices exceeding the mortgage debt. The one feature pf surprise and regret is the extent to which our fiduciary institutions have involved themselves in unwise and injudi-