This is an action to recover from defendant City National Bank and Trust Company the sum of $5,000 assigned by Fairleigh Arms, Inc. to plaintiff John Mayo, which assignment the defendant did not honor.
The facts in this matter are largely undisputed. Defendant was the mortgagee of a construction loan mortgage in the principal amount of $750,000. The Fairleigh Arms, Inc. mortgage was dated May 11, 1966 and was duly recorded on May 13, 1966. It is stipulated and agreed that the sum of $607,500 had been advanced as of August 22, 1966, on which date Fairleigh Arms, Inc. assigned to plaintiff
the sum of $5,000 out of the future fifth mortgage advance. This assignment, consideration for which was $5,000 actually advanced for payroll use, was duly executed but unrecorded.
By instrument dated September 7, 1966 and duly recorded on September 8, 1966, Fairleigh Arms, Inc. gave to Cooper-Horowitz, Inc., a New York corporation, a mortgage in the principal amount of $50,000, which mortgage encumbered the same premises as defendant's mortgage. Defendant had actual notice of the Cooper-Horowitz mortgage by virtue of a letter, dated September 9, 1966, sent by the latter's attorneys to defendant.
Similarly, by letter dated September 21, 1966 Dominick Fondo, Esq., forwarded to defendant the original of plaintiff's assignment. Although defendant initially contended that it did not receive notice at this time, Fondo testified as to the date when the letter was sent and produced the return receipt indicating receipt of the letter by defendant. Additionally, it was stipulated at the trial that the Fondo letter was found in the bank's files. Accordingly, the court finds that the defendant had actual notice of the Mayo assignment on September 22, 1966, and hence long before the disbursements were made in connection with the fifth advance which took place on November 14, 1966.
On September 16, 1966 there was duly recorded a mechanic's notice of intention covering the subject premises, filed by P. Germinario and Sons, Inc., a plastering contractor. Neither Germinario nor Cooper-Horowitz had notice of the assignment to plaintiff.
The closing statement for the fifth advance and the testimony of William B. Shedd, Esq., who represented defendant at the closing, reveal the following disbursements:
(1) $10,000, was paid to the bank for two interim notes, dated August 19 and September 16, 1966, for advances to the mortgagor Fairleigh Arms, Inc. to meet payrolls;
(2) $10,058.74 was taken out by the bank for interest due on past advances;
(3) $45,000 was paid to P. Germinario and Sons, Inc.;
(4) $5,575 was paid to Cooper-Horowitz, Inc.;
(5) $400 was paid to the bank's attorney for legal expenses;
(6) $25 was paid by way of refund to Fairleigh Arms, Inc. on account of $58.74 which had been advanced by Fairleigh. No checks issued to Fairleigh Arms, Inc. and no payment was made to plaintiff. According to Shedd's testimony, representatives of Germinario and Cooper-Horowitz were present and each insisted upon being paid in full. The court finds that at that time Germinario had done some $100,000 worth of work on the building. After prolonged discussions, however, Germinario and Cooper-Horowitz compromised the payments on account of their claims out of said fifth advance in accordance with the amounts stated above. Cooper-Horowitz executed on that date a ...