Opinion
November Term, 1903.
J. John Hassett, for the appellants.
Frederick Collin, for the respondent Chemung Canal Bank.
The real property sold to satisfy the mortgage in question being liable to be disposed of to pay the debts of Mrs. Sayles, the decedent mortgagor, upon whose estate letters testamentary had been issued within four years before the sale, the judgment of foreclosure should have provided that the surplus moneys be paid into the Surrogate's Court of Chemung county, from which the letters issued, subject to the direction of that court, and not, as was done, into the Supreme Court. (Code Civ. Proc. §§ 2798, 2799.)
Under the judgment of foreclosure there was no lien upon the property or chargeable upon the proceeds of sale which has not been paid, for the whole amount found due and directed by the judgment to be paid out of the proceeds of sale has been so paid. The balance has been paid into court as surplus moneys, and so far as the judgment of foreclosure goes they are not chargeable with a lien in favor of the plaintiff. It is true that the mortgage which was foreclosed was given by Mrs. Sayles to secure payment to the plaintiff of all moneys due at the date of the mortgage, or which might thereafter become due to him from Guy Sayles, not exceeding $15,000, but there were no sufficient allegations in the complaint and no proof before the referee appointed to take proof of the amount due upon the mortgage, and of the facts and circumstances stated in the complaint, that there was any amount whatever thereafter to become due to the plaintiff on the mortgage. The allegations in the complaint, "that there are matters pending between the plaintiff and the said defendant Guy Sayles, for the security of the performance of which said agreement was also given, which are not now determined and are not now due, but which will hereafter become due and owing from the said defendant Guy Sayles to the plaintiff herein," are altogether too general and indefinite, even if there was any proof before the referee in support thereof, which there was not, upon which a judgment continuing the security could be based, or upon which the clause in the referee's report, "that the mortgage should be continued as security for indebtedness not mentioned in the complaint herein," could properly be predicated. While there is an inaccurate recital in the judgment as to the referee's report in this respect, and the judgment contains the usual order confirming such report, there is no adjudication, nor could there properly have been, upon this complaint and the proof thereunder, that the lien of the mortgage was continued as security for any other indebtedness than that adjudicated upon and paid by the proceeds of sale. The mortgage covered two pieces of property, both of which were sold pursuant to the judgment, which contained no provisions appropriate to a case where a part only of the mortgage debt was due or authorizing the application of the proceeds of sale first to the payment of the sum due under the mortgage, and directing that the balance, or so much thereof as might be necessary, be invested for the benefit of the plaintiff, to be paid to him from time to time when any further amounts became due. It is clear, therefore, that the plaintiff had no lien by virtue of his judgment of foreclosure for the payment of any amounts that might, after such judgment, become due under the terms of the mortgage.
It is true, also, that the Chemung Canal Bank, being only a contract creditor of Mrs. Sayles, had no lien upon the surplus moneys at the time of the sale, but both the plaintiff and the bank, upon their claims as creditors of decedent being established as required by law, would be entitled to share in the distribution of the proceeds of a sale of her real property for the payment of her debts.
If these surplus moneys had been directed by the judgment to be paid into the Surrogate's Court, as the law requires, to be there distributed, they could not have been paid out except upon a citation to each person who would be entitled to share in such distribution (Code Civ. Proc. § 2799), and the respondent would have been entitled to notice, but they have in fact been paid out under an order made upon notice only to a guardian ad litem for an infant defendant, being the only party who appeared in the action.
The claim under which the plaintiff secured payment to him of a portion of these surplus moneys, and which he insists is secured by the mortgage which he foreclosed, was one upon which he recovered judgment against Guy Sayles subsequent to the judgment of foreclosure in an action for damages for an alleged breach of contract on the latter's offer of judgment. The respondent questions the validity of this judgment, and insists that the amount thereof is not a lien upon such surplus, either under the judgment of foreclosure or under the mortgage. As the case stands, the plaintiff and his attorney, to the extent of the allowance of costs paid to him out of the fund, have procured payment to themselves of portions of these moneys under an order of the court made without notice to the respondent, and without its having had an opportunity to be heard upon the alleged invalidity of plaintiff's claim.
The president of the respondent bank in the moving affidavits swears to facts showing that the mortgagor, Emma H. Sayles, at the time of her death, was indebted to the respondent in a large amount upon her indorsements of promissory notes made by Guy Sayles to the bank and duly protested for non-payment. Although the respondent is simply a contract creditor of the decedent it is entitled under section 2750 of the Code of Civil Procedure to petition for a decree directing the disposition of the decedent's real property for the payment of her debts. It, therefore, has an interest in having these surplus moneys, which represent a portion of the decedent's real property, lawfully applied to the payment of her debts, including that owed to it. That interest, too, is one which I think entitles it to make the motion which it did in this case, although it is not a party to the action. ( Dwight's Case, 15 Abb. Pr. 259.)
The appellants controvert the claim of the respondent that it is a creditor of the decedent, but that question as well as the question as to the alleged invalidity of the claim of the plaintiff to the surplus moneys can be litigated and determined in the proceedings which will necessarily follow compliance by the appellants with the order appealed from.
In the notice of motion for the order appealed from the Chemung Canal Bank asked for an order, among other things, amending the judgment of foreclosure and sale herein, if to the court such amendment may seem required by law, and striking therefrom the words "subject to the order of this court," and also that such surplus moneys when repaid to the treasurer of the county of Chemung be held subject to the further order of the Surrogate's Court of Chemung county. The order as made, while not in express terms denying this relief, does not show that it was granted and because of it not having been granted the implication is that it was denied. The bank not having appealed from the order it must be assumed to be content with it as it is in that respect. This situation has somewhat embarrassed us in affirming this order and thus enforcing compliance with the law requiring these moneys to be paid into the Surrogate's Court, for when the moneys are returned to the county treasurer, under the order appealed from, they will be there subject to the order of the Supreme Court the same as they were before they were first taken out. But notwithstanding this we see no reason why an order could not be made by the Special Term without any modification of the judgment, as soon as the order appealed from is complied with, upon the application of the bank or of any creditor of the decedent, directing that the moneys be paid out of the Supreme Court and into the Surrogate's Court to be held subject to the order of the latter court.
The order should be affirmed, with ten dollars costs and disbursements, and with leave to the respondent, or to any creditor of the decedent, to apply to the Special Term for the order last above mentioned.
All concurred; SMITH, J., not sitting.
Order affirmed, with ten dollars costs and disbursements, with leave to the respondent, or to any creditor of the decedent, after the order appealed from is complied with, to apply to the Special Term for an order directing that the moneys be paid out of the Supreme Court and into the Surrogate's Court to be held subject to the order of the latter court.