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Bergen v. Snedeker

8 Abb. N. Cas. 50 Court N. Y. Court of Appeals ; English

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BERGEN v. SNEDEKER.
N. Y. Court of Appeals ;
November, 1879.
Again, December, 1879.

Headnote

[Reversing Snedeker v. Snedeker, 18 Hun, 355 .]
Foreclosure.—Surplus Moreys.—Reverence.—Fraudulent Conveyances.—Appeal.
An order of the general term, reversing an order of the special term, confirming the report of a referee awarding surplus moneys in foreclosure, and directing that,the case be referred to the referee to report as to priority of liens, is not a final order, and not appealable to the court of appeals. But if such order imposes costs of the appeal upon the appellant, absolutely and not conditionally, it is in that respect a final determination from which an appeal can be taken.
On a reference to ascertain to whom surplus moneys obtained on a
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foreclosure sale belong, the referee may inquire as to the character of all liens which may be presented, whether fraudulent or valid.
On a reference as to surplus moneys, a lien may be attacked on the ground of fraud, whether the action be partition or foreclosure. And it is a convenient practice in the disposition of claims in such cases, instead of a distinct and separate action for that purpose.
Where a debtor has made a fraudulent conveyance of his real estate, a subsequent judgment creditor may sell under his execution, and the purchaser will have the right to impeach the conveyance in an action at law to recover the premises. Iq such a case he may, but he is not bound to, file a creditor’s bill to set aside the conveyancer.
Appeal by one of the defendants from an order of the general term of the first department of the supreme court reversing an order of the special term awarding the surplus in a foreclosure suit to the appellant.
The action was brought by George W. Bergen against Seaman N. Snedeker, Jennie E. Snedeker his wife, John H. Clayton, Coles Carman and others, to. foreclose a mortgage upon certain premises in Queens, county. Judgment of foreclosure having been obtained, the premises were sold, and a surplus of $728 was realized.
An order of reference was thereupon granted to ascertain and report the liens and their priorities upon this surplus money.
The referee found that Seaman N. Snedeker, by a conveyance, dated November 3,1874, executed by himself and Jennie E. Snedeker his wife, for the expressed; x consideration of $600, and acknowledged May 24,1875, and recorded June 9, 1875, conveyed the mortgaged premises to James H. Campbell, subject to the mortgage, but without payment thereof being assumed by the grantee.
That, thereafter the latter conveyed the same premises to Jennie E. Snedeker, by conveyance dated June 8, 1875, and recorded August 21, 1875.
That about the time of the first conveyance from
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Snedeker and wife to Campbell, two other pieces of property were conveyed by them to him, and subsequently eonveyed by him to Snedeker’s daughter without consideration.
That, after the conveyance to Campbell, Snedeker remained in possession of the premises, and continued to occupy them until after the foreclosure sale.
That at the time of these conveyances Snedeker was largely in debt, his creditors were suing him, and within two months he made a general assignment for their benefit.
That the conveyances were made for the purpose of putting his property where it could not bé reached by his creditors, and were in fraud of their rights.
That by a mortgage dated May 1,1877, and recorded May 23, 1877, Snedeker and his wife mortgaged the same premises to John H. Clayton for $800. That prior thereto Clayton had been retained as counsel to defend the title of Mrs. Snedeker in certain actions which, had been commenced by various judgment creditors of her husband to have the above mentioned conveyances set aside on the ground of fraud; and that this mortgage was given in payment of the services of Clayton rendered and to be rendered therein, and that it was taken by him with full knowledge of the alleged fraud.
That in July, 1875, several judgments were obtained against Snedeker, and under executions issued under some of them the sheriff sold all the right, title and interest of which he was seized or possessed on July 6, 1875, in the premises in question, to Coles Carman, who received the sheriff’s deed therefor, March 31,1877.
The referee decided that the conveyances were void as against creditors, as well as the mortgage to Clayton ; and that the sheriff’s deed conveyed the premises to Carman ; and that, therefore, after deducting the costs of the reference, one third of the surplus money should
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be retained in the hands of the county treasurer until Mrs. Snedeker’s inchoate right of dower became consummate or extinct; and that the residue of the surplus belonged to Carman, who was also entitled to the interest or income accruing on that part of the surplus retained by the county treasurer until the inchoate right of dower became consummate or extinct, and to the principal sum so retained, as soon as the dower right became extinct.
This report having been confirmed, the defendants Jennie E. Saedeker and John H. Clayton appealed.
The supreme court, at general term, reversed this decision with costs and disbursements, and directed that the case be sent to a referee to report order of liens on surplus, holding that Snedeker had no title to the premises when the judgments were obtained, and that Carman obtained none on the sheriff’s sale, and that, even if the conveyances were fraudulent, he could not attack them in such a proceeding. See Snedeker n. Snedeker, 18 Hun, 355 .
I. 'November, 1879.
From this decision the defendant Carman appealed to the court of appeals.
A. N. Wheeler, for the appellant.
A judgment creditor may impeach a prior fraudulent conveyance (Chautauqua Co. Bank v. Risley, 19 N. Y. 369 ; Erickson v. Quinn, 15 Abb. Pr. N. S. 168; 14 Johns. 493 ). A fraudulent transfer of property can be ascertained and adjudged in a reference to get surplus moneys (2 R. S. 192, § 89; Story Eq. § 64, k; Willard Eq. 48; 60 Barb. 178 ; Parker v. Doe, 2 Ch. Cases, 201; Mutual Ins. Co. v. Bowen, 47 Barb. 618 ; Schafer v. Reilly, 50 N. Y. 61 ; Halstead v. Halstead, 55 Id. 442). Recording the sheriff’s certificate was constructive notice of the rights of the purchaser (3 R. S. 5 ed. 651, § 57). The respondents neither demanded a jury trial nor ob
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jected to going on without a jury, and hence they must be held to have waived it (Hutchings v. Smith, 63 Barb. 251 ; Black v. White, 37 N. N. 320; Scott v. Barlow, 24 Id. 40; Gleasen v. Keteltas, 17 Id. 491; McKeon v. Lee, 51 Id. 30).
John U. Clayton, for respondents.
The referee had no power to inquire into the validity of the deeds and mortgage (Rule 68; King v. West, 10 How. Pr. 333 ; Husted v. Dakin, 17 Abb. Pr. 141 ; Union Dime Sav. Inst. v. Olsey, 4 Hun, 657 ; Bradley v. Aldrich, 40 N. Y. 509 ). The courts have not gone so far as to allow a trial of an action in the nature of a creditor’s bill or ejectment in such a reference (Schaffer v. Reilly, 50 N. Y. 61 ; Halstead v. Halstead, 55 Id. 442; Mutual Life Ins. Co. v. Bowen, 47 Barb. 618 , and cases cited supra). Hence Carman’s remedy was by an action (1 N. Y. Monthly Bulletin, 50, f 104). Even if the referee had power to try a creditor’s bill, the validity of the conveyances could not, in these proceedings, have been inquired into by him (Crippen v. Hudson, 3 Kern. 164; Sturges v. Vanderbilt, 73 N. Y. 391 , 392; Coe v. Witbeck, 11 Paige, 42; Genesee River Nat. Bank v. Mead, 18 Hun, 306 ; Abbott’s Forms, Complaints to set aside Assignments, &c., void as to Creditors). Carman’s ownership was subject to Clayton’s mortgage (Moselly v. Moselly, 15 N. Y. 334 ; Jackson v. Garnsay, 16 Johns. 189 ; Bump on Fraud. Conveyances, 442, 443; Weaver v. Togood, 1 Barb. 238 ; Kleinholz v. Phelps, 6 Hun, 568 ; Russell v. Allen, 10 Paige, 254; Forsyth v. Clark, 3 Wend. 637 ; Hill v. Bixby, 63 Barb. 200 ). Clayton received his mortgage without notice, from one in possession, and was a purchaser under the recording acts for value (2 R. S. 3. ed. p. 1137, § 1; Hetzel v. Barber, 69 N. Y. 1 ; 3 Abb. Dig. new ed. ¶ 132; Hope Fire Ins. Co. v. Cambrelling, 1 Hun, 493 ; Barto v. Tompkins Nat. Bank, 15 Id. 11; Reynolds v. Darling, 42 Barb. 418 ). Carman's only remedy is an action of
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ejectment (Bockes v. Lansing, 74 N. Y. 437 ; Rogers v. Sinsheimer, 50 N. Y. 649 ; Erickson v. Quinn, 15 Abb. Pr. N. S. 168; Chautauqua Co. Bank v. Risley, 19 N. Y. 370 ; Cagger v. Lansing, 64 Id. 428 ; Wheelock v. Lee, 5 Abb. New Cas. 85; Bradley v. Aldrich, 40 N. Y. 510 ; Davidson v. Associates, 71 Id. 340; Fasnacht v. Stehn, 5 Abb. Pr. N. S. 344; 3 Wait Prac tice, 11,12). The dower right should be awarded out of the whole amount of surplus, free from all costs and charges of the proceedings (Campbell v. Ewing, 43 How. Pr. 258 ). Bush v. Lathrop ( 22 N. Y. 535 ) was overruled in Monroe v. Metropolitan Bank, 55 N. Y. 41 .

The order of the general term reversed the order confirming the report of the referee and directed that the case be referred to the referee to report as to priority of liens.

This is not a final order; and inasmuch as upon the report of the referee as to the priority of the liens, the court at special term may hold that the moneys be retained to await the determination of a suit to be brought to test the right of the parties to the moneys, we think the order is not appealable to this court.

The appeal must, therefore, be dismissed, with costs.

All concurred, except Folg-ee, J.

II. December, 1879.

Upon granting a re-argument of the case, the following argument was handed down.

In granting the order dismissing the appeal in this case, the court overlooked the fact that the order appealed from imposed costs of the appeal upon the appellant absolutely and not conditionally, and in this respect was a final determination from which an appeal could lawfully be taken. The motion

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for a re-argument must, therefore, be granted, and the order dismissing the. appeal vacated.

In this aspect of the case, the questions presented for review upon the appeal are open for consideration.

We think that .the referee, by virtue of the order to ascertain and report the liens and their priorities in reference to the surplus moneys, had authority to inquire as to the validity of the conveyances under which Mrs. Snedeker claimed, and of the mortgage by herself and husband to Clayton. The object of the- reference was to. ascertain to whom the suplus moneys belonged ; and this opens a door to an inquiry as to the character of all liens which maybe presented. No reason exists why the fraudulent character of conveyances cannot be tested in these proceedings, as well as that of all other liens. One of the objects and purposes of a"foreclosure suit is the distribution of the fund arising upon a sale (Livingston v. Mildrum, 19 N. Y. 441 , 442; Beekman v. Gibbs, 8 Paige, 511, 512). In the case first cited, it was held that the rights and equities of the defendants, who were lienors or claimants of the equity of redemption, are as much before the court, áñd as much the objects of its care, as those of the owner of the mortgage primarily to be foreclosed. Why then should not the court have power to ascertain when liens áre fraudulent ? Where jurisdiction of a court of equity is once acquired, such court, as a general rule, has a right to proceed and do justice, between the parties. The power of the court to settle questions of this character is also, we think, fully sustained by the decisions.

In Halstead v. Halstead ( 55 N. Y. 442 ), in an action for a partition of lands, it was held that on a reference as to title, a party could attack a mortgage held by another party, on the ground that it was fraudulent and void as against creditors. It was said in the opinion by. Andrews, J., that the inquiry as to the

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existence and amount of the lien involved the further question as to its validity ; and the court, having taken possession of the fund for distribution, directs proofs to be taken as to liens, and adjudges the distribution (See also Schafer v. Reilly, 50 N. Y. 61 ; Mut. Life Ins. Co. v. Brown, 47 Barb. 618 ).

These cases fully sustain the principle that where a reference is ordered as to surplus moneys, a lien may be attacked on the ground of fraud; and it matters not, we think, whether the action be a partition or a foreclosure suit. In fact, this is a most convenient practice in the disposition of claims in such cases, without the tedious process and the expense of a distinct and separate action for that purpose. The cases relied upon to sustain a different rule are not, we think, of sufficient weight to require special consideration. King v. West, 10 How. Pr. 333 , was a special term decision ; and in whatever light the other cases relied upon by the respondent may be regarded, they are overruled by the decisions of this court already cited.

The claim that the Clayton mortgage must be sustained, even although the other conveyances are declared fraudulent and void, is not well founded. Clayton had full knowledge of the alleged frauds; knew that a suit had been brought to set aside the deeds on account of the fraud; and, in fact, the mortgage was given to him to secure the payment of his charges for defending the title of Mrs. Snedeker. It is also an answer to this position, that the sheriff’s certificate of the sale of Carman had been filed and recorded in the county clerk’s office, long prior to the mortgage ; and he had notice not only that the mortgagor’s title was fraudulent, but also of the appellant’s claim to the property by virtue of the sheriff’s sale (2 R. S. 370, §43).

As to the right of Carman to sell and acquire a title under his judgment, it is well settled that where a

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debtor has made a fraudulent conveyance of his real estate, a subsequent judgment creditor may proceed to sue under his execution, and the purchaser will have the right to impeach the conveyance, in an action at law to recover the premises (Chautauqua Co. Bank v. Risley, 18 N. Y. 369 -375). He may, but he is not bound to file a creditor’s bill to set aside the conveyance (See also Erickson v. Quinn, 15 Abb. Pr. N. S. 168).

The case of Lamont v. Cheshire ( 65 N. Y. 30 ) is not in conflict with the position stated. The same remark is applicable to Bockes v. Lansing ( 74 N. Y. 437 ). Carman was not, therefore, bound to bring ejectment, or an action to set aside the conveyances,-and had a right, we think, to contest the validity of the deeds and mortgages upon the reference.

We have carefully considered all the questions presented and the suggestions made by the respondent’s counsel, and are of the opinion the referee was right, and that the general term erred in reversing the decision of the special term. ■

The order of the general term must, therefore, be reversed and that of the special term affirmed, with costs of both parties upon the appeal to be paid out of the fund.

All concurred, excepted Folgee, J., absent.

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