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Mutual Life Insurance v. Cockerill

134 N.Y.S. 1109 Court N.Y. App. Div. Decision date 1912-05-03 English

Delivered by McLAUGHLIN, J.

Contents

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p. 1109
MUTUAL LIFE INS. CO. v. COCKERILL et al.
(Supreme Court, Appellate Division, First Department.
May 3, 1912.)

Headnote

1. Mortgages (§• 568[2] )—Foreclosure—Surplus—Confirmation of Report-Vacation—Orders.
Where the court confirmed a referee’s report, which directed payment of surplus money to the second mortgagee after foreclosure of the first mortgage, it could not, while the report stood confirmed, direct payment
p. 1110
to the trustee in bankruptcy of the owner of the equity of redemption, although it could vacate the order confirming the referee’s report and refer it back to the referee for further proof.
[Ed. Note.—For other cases, see Mortgages, Cent. Dig. §§ 1639-1646; Dec. Dig. § 568.[2] ]
2. Mortgages (§ 568*)—Priorities.
After foreclosure of a first mortgage, the surplus was claimed by the second mortgagee,- whose mortgage was executed May 28, 1909, and by the trustee in bankruptcy of the owner of the equity of redemption, under a judgment recovered April 14,- 1909, which was within four months of the filing of the petition in bankruptcy, and after the insolvency of the owner. The referee found that the trustee was not entitled to the surplus, and awarded it to the second mortgagee; his report being confirmed. Held that, the trustee having obtained, upon notice, from the United States District Court, an order that the lien acquired by the judgment creditor be preserved for the bankrupt’s estate, and the trustee be subrogated thereto, it was the duty of the trial court to vacate the order confirming the referee’s report and send the matter back for further proof.
[Ed. Note.—For other cases, see Mortgages, Cent. Dig. §§ 1639-1646; Dec. Dig. § 568.*]
Appeal from Special Term, New York County.
Action by the Mutual Life Insurance Company against Gertrude T. Cockerill and others, in which the Colonial Bank, as second mortgagee, and Hamilton M. Dawes, as trustee in bankruptcy of the owner of the equity of redemption, intervened, claiming surplus money after foreclosure. From an order denying the trustee’s motion, the trustee appeals. Modified and affirmed.
Argued before INGRAHAM, P. L, and McLAUGHLIN, SCOTT, CLARKE, and DOWLING, JJ.
Jacob J. Lesser, of New York City, for appellant.
Henry G. Sanford, of New York City, for respondent.

This action was brought to foreclose a mortgage upon real estate. The plaintiff had a judgment, and at the sale had thereunder more than sufficient was realized to pay off the mortgage, and the surplus was deposited with the city chamberlain, to be paid to such persons as might be entitled thereto. Upon the application of the respondent—the Colonial Bank, the holder of a second mortgage—an order was made appointing a referee to determine the validity and priority of claims to the surplus moneys. Prior to the hearing before the referee a trustee of the owner of the equity of the property covered by the mortgage was appointed in bankruptcy proceedings. He appeared before the referee and claimed to have a lien superior to that of the respondent. His claim was based upon a judgment recovered against the owner of the equity of redemption and others by the National Surety Company on the 14th of April, 1909. The Colonial Bank claimed to have a prior lien by virtue of a mortgage executed by the owner of -the equity of redemption on the 28th of May, 1909. The referee found, as a fact, that the owner of the equity of redemption was insolvent at the time, the National Surety Company recovered its judgment, and as a conclusion of- law that it

p. 1111
was null and void, because it was recovered within four months of the filing of the petition in bankruptcy, for which reason the Colonial Bank had the first lien. Subsequently the report of the referee was confirmed, on motion of the Colonial Bank. After the confirmation, the trustee in bankruptcy obtained, upon notice, from the United States District Court for the Southern District of New York, an order_that the lien acquired by the surety company under its judgment be preserved for the bankrupt’s estate, and that the trustee be subrogated thereto. Upon this order, and the order confirming the referee’s report, the trustee moved that the surplus moneys be paid to him. The motion was denied, and the appeal is from such order.

[1,2] The court could not, so long as the order confirming the referee’s report and directing payment to the Colonial Bank remained, direct payment to the trustee. That was a final order. It determined the right to the fund, and terminated the proceedings instituted for that purpose. The court, however, did have the power to vacate the order confirming the report, and refer the same back to the referee for further proof. Mutual Life Ins. Co. v. Salem, 3 Hun, 117 . The learned justice sitting at Special Term, as appears from his opinion, reached the conclusion that, if the trustee had a valid lien prior to that of -the Colonial Bank, the same had to be established in an action in equity. This conclusion was erroneous, because the money still remains in court, and, so long as it there remains, the court has undoubted power over the entire proceeding, which it will not hesitate to exercise in order to enforce the legal rights of the parties. The court, upon the facts set out in this record, should, in addition, have vacated the order confirming the referee’s report, and sent the matter back for further proof.

The order, in so far as appealed from, therefore, is modified, by vacating the order confirming the referee’s report, and sending the matter back to the referee to take further proof upon the claim represented by the appellant, and, as thus modified, affirmed, without costs to either party. All concur.