Armstrong v. McLean

In proceedings supplementary to executions issued on several judgments, amounting to upward of $5,000, against George Riley, the plaintiff was appointed receiver of his property. The purpose of this action was to require the defendant to turn over to the plaintiff certain land contracts and a bond and mortgage assigned by Riley to the defendant, to secure the payment of a certain indebtedness of Riley to the defendant of $3,636.41, or the proceeds of such securities in excess of the amount remaining unpaid of such indebtedness. The nominal value of those securities was $8,300. The trial court found that the amount of that particular indebtedness had been reduced to $2,012.02 by the application which had been made thereon, by operation of law, from the proceeds of a judicial sale of real property on foreclosure x>f mortgages given by Riley to secure all his indebtedness to the defendant, amounting to upward of $40,000. The foreclosure by action of those mortgages of Riley to the defendant resulted in net proceeds of $19,411.36, and in a deficiency of $21,520.20, for which judgment was perfected in favor of the defendant against Riley. Those proceeds of the sale in that foreclosure action constituted 47.42 per cent, of the total amount of the indebtedness of Riley to McLean, as found by the court; and the application therefrom of that percentage on the amount of that particular debt mentioned of $3,636.41, with interest upon it, would reduce the debt to $2,012.02; and, as the defendant had received from some of those securities an amount in excess of the last-mentioned sum, judgment was directed that the defendant pay to the plaintiff such excess, and hand over to him the residue of the securities so taken by the defendant for th'e payment of such debt. Treating the mortgages foreclosed by the defendant’s action as security for the payment of all the indebtedness of Riley to him, the'other creditors of Riley could insist that the net proceeds of the sale should be applied pro rata on the several debts the payment of which the mortgages were intended to secure. This, upon recognized equitable principles, is the general rule applicable to such cases, although it has no application to voluntary payments. And, since such proposition must be deemed settled by judicial authority in this state, the reasons upon which it is founded need no special consideration on this review. Bridenbecker v. Lowell, 32 Barb. 9 ; Orleans County Nat. Bank v. Moore, 112 N. Y. 543 ; 21 St. Rep. 609 . It is therefore assumed that the debt of $3,636.41 was. by the legal application upon it of sufficient of the proceeds ■of the mortgage foreclosure sale, reduced to $2,012.02; but it ■does not follow that the plaintiff was entitled to the entire excess

■There is some evidence tending to prove that the defendant’s judgment may have been reduced about $10,000 by the application of the surplus resulting from the foreclosure of a prior mortgage upon some of the property covered by one of the mortgages which was foreclosed in his action. Whatever the fact is in that respect may be made to appear on another trial. The view taken is that, upon the evidence undisputed, the plaintiff was not entitled to take from the defendant the entire amount of the securities first above mentioned in excess of that remaining unpaid upon the debt they were taken by the defendant to secure, but that, because the defendant was also a judgment creditor of Riley, he, having them, was entitled to share pro rata with the plointiff in ■the amount of such excess.

The judgment should therefore be reversed, and a new trial granted; costs of this appeal to abide the final award of costs.

All concur.