Phelan v. Downs

The defendant Downs was appointed referee to sell premises Nos. 480-482 Broadway, in the city of Albany, in an action to foreclose a mortgage. The defendant the First National Bank of Albany was the owner of the equity of redemption in these mortgaged premises at the time of sale. By the terms of sale announced by the said Downs as referee, the purchaser was required to pay 15 per cent, of the purchase money to the referee at the time and place of sale. The premises were bid off February 11, 1897, by the defendant Henry F. Gillig, for the sum of $40,000. The defendant Gillig was at that time secretary of the American Fur Company, of which the plaintiff, John J. Phelan, is now receiver. Gillig paid this $6,000 required by the terms of sale to the referee at that time with funds taken from the American Fur Company without authority. The purchaser, by said terms of sale, was required to complete his purchase by paying the remaining $34,000 to the referee on the 15th day of February, 1897. Gillig did not pay the balance of the purchase price at that time, nor at any other time, although notified so to do by the referee. The premises were subsequently put up by the referee under a new notice of sale, and were sold for a less amount, i. e. $29,850, a deed delivered to the purchaser at that sale, and the proceeds thereof first applied to the payment of the mortgage debt, costs, and expenses of the sale, and a considerable surplus remaining was paid into court, and still remains undistributed. The $6,000 still remains in the hands of the referee, he having been directed by an order of the court in the foreclosure action to retain that sum until a further order of the court. John J. Phelan, subsequently to these transactions, was appointed receiver of the American Fur Company, and directed to bring this action. This action is brought for a judgment directing the defendant, as referee, to pay to the plaintiff, as owner thereof, the said sum of $6,000, and asking judgment of this court, to restrain the defendant from paying this sum of $6,000 to any defendant or any other person. The defendant Downs, as referee or individually, asserts no claim to this $6,000. The defendant the First National Bank of Albany claims it is entitled to this fund by reason of being the holder of the equity of redemption at the time of sale. The $6,000 was deposited by the referee in the First National Bank of Albany, and still remains there to his credit. The question presented here is solely between the plaintiff and the defendant the First National Bank of Albany. The $6,000 was the money of the American Fur Company. It was taken from its deposit in bank. There is no dispute of that. Its business was mercantile, and did not embrace the buying of real estate. Gillig was not directed by it to buy the premises in question. So far as appears, it was entirely a venture of his own. He had no authority whatever to take the funds of the company to make this purchase, or to pay for the premises having made the purchase. The plaintiff in the foreclosure action was paid, and a surplus remains. The $6,000 is.

Now, as to the equities between the plaintiff and the defendant the First National Bank of Albany. , This $6,000 belongs to the American Fur Company or its receiver, and should properly go towards discharging its debts, or be divided among its stockholders, unless a superior equity to it has been shown by the said First National Bank of Albany. While the action of Gillig in obtruding: himself into the judicial sale apparently has injured the defendant,, yet it was through no fault shown of the American Fur Company, towhoin the money belonged. This is not a contest between Gillig- and the First National Bank of Albany. It does not even appear in this case to what extent Gillig’s act did reduce, if any, the actual surplus, as the referee, under the direction of the court, abandoned Gillig’s bid, and readvertised the premises. So that the measure of loss in the price obtained for these premises would be the difference between the amount bid by the next highest bidder to Gillig and the $29,850 for which premises were sold, the amount of which difference does not appear. The American Fur Company was under no obligation to bid on this sale, or to create a fund to satisfy the claim of the First National Bank of Albany against these mortgaged premises. If the bank thought that $29,850 was not the full value of the mortgaged premises, it should have made the purchaser pay more or taken the premises itself. This it did not do, and, having failed to protect its rights at this judicial sale, it cannot now come into court, and make good its loss from the fund wrongfully taken from the American Fur Company. The American Fur Company received no value whatever for this $6,000 wrongfully taken from it. It has stopped its transfer by the party to whom it was paid, without authority, by its secretary. Money thus diverted can be followed at the suit of its rightful owner, and restoration made, where the parties in whose possession it is found have parted with no