Rogers v. Ivers , 30 N.Y. Sup. Ct. 424 ( 1881 )

Hardin, J.:

The Special Term fell into an error in supposing that upon a reference as to surplus moneys that it could not be determined that the conveyance was fraudulently made of the premises from Fox to a third party, and by him to the wife of Fox, and that Iiannady, a judgment creditor and lienor, had not a standing to make an attack upon such conveyances as fraudulent upon such a reference. (Miller v. Case, Clark’s Chy., 406, and note of cases there cited; Bergen et al. v. Snedeker, 9 Weekly Digest, 320; reversing same case as reported, under title of Snedeker v. Snedeker, 18 Hun, 355 ; S. C., under title of Bergen v. Carman, 79 N. Y., 146, opinion of Miller, J.; Halstead v. Halstead, 55 id., 445.)

We must-, therefore, hold that Kannady, upon a reference to determine as to the application of the surplus moneys arising upon the sale of the mortgaged premises, would be entitled to attack the conveyances as fraudulent, and if successful in the attack have the money paid upon his judgments. It was, therefore, not incumbent upon him to answer, setting up such fraud in the conveyances in order to preserve his right to the surplus moneys as against Mrs. Box, the fraudulent grantee, nor to preserve his standing as to the Ivers judgment. (Chautauque Bank v. Risley, 19 N. Y., 375.) He adopted the better practice by suffering a default as to the foreclosure suit, for the plaintiff ought not to be stayed in his foreclosure, when no defense exists to the mortgage, till a determination be had between júnior incumbrancers of their respective rights as between themselves. (Miller v. Case, supra Mutual, etc., v. Bowen, 47 Barb., 618; Farmer's L. and T. Co. v. Seymour, 9 Paige, 538; Eagle Ins. Co. v. Flanagan, 1 How. Ct. of App. Cases, 311; Code of Civil Procedure, § 521.) Nor can we sanction the practice adopted in this case by Ivers. He put in an answer setting up the invalidity of the conveyances, and served notice of his demand for relief upon the plaintiff and upon Box, but not upon the defendant Kannady. This was a violation of the spirit of section 521 of the Code of Civil Procedure, if not of its letter.

The letter of that section requires a service upon the attorney for each of the defendants to be affected by the determination. If Kannady had appeared in this action he would clearly have been entitled to notice and copy of Ivers’ answer. But as the question of regularity is not before us, we do not pass upon the construction to be given to the letter of the section. As Kannady was in default, not having served an answer, the judgment could not regularly “be more favorable to the plaintiff than that demanded in the complaint.” (Code of Civil Procedure, § 1207.)

If Kannady’s judgments were prior to Ivers’, and to the levy of his attachment, then he had a statutory lien which the court had no power to divest him of at the instance of the plaintiff, or at the instance of the co-defendants. (Chautauque Bank v. Risley, 19 N. Y., 375.)

Certainly no such result should be accomplished in the absence of any demand in the complaint of that character, and in the absence of any notice of any such relief sought by a codefendant. Nor do we think the court had any rightful power to direct the surplus over the plaintiffs mortgage debt to be paid to Ivers and Mrs. Fox. The statute declares that all such surplus moneys “shall be brought into court.” (2 R. S., 192, § 159 ; Denton v. Nanny, 8 Barb., 620 ; Shepard v. O’Neil, 4 id., 126.)

"Whatever the effect of the direction contained in the referee’s report in violation of the statute just quoted may be, as regards Ivers and Mrs. Fox, or the plaintiff in this action (whifeh we do not determine), we think that it cannot have any effect upon the rights of Kannady. He was entitled to have the surplus arising upon the sale after payment of the plaintiff’s mortgage debt and costs brought into court, “ subject to the order of the court,” and had the right to rely upon that provision of the statute.

It is insisted by the learned counsel for the respondent that it was a matter of discretion whether the ‘judgment should be set aside or modified, or whether Kannady should be turned over to an action, and that the order is not appealable. This position is untenable: (1.) If it was discretionary this court may review the exercise of such discretion. The case of Beards v. Wheeler (76 N. Y., 213) merely holds that such a discretionary matter is not reviewable in the Court of Appeals. (See, also, 59 N. Y., 315, “Anonymous.”) (2.) The judgment, if allowed to stand as entered, might embarrass the remedy in another action by way of an estoppel or bar. (3.) The relief to be given can more expeditiously and orderly be obtained upon motion and by means of a reference in this action. (4.) Besides, as we have before seen, a reference may be used to determine the right to surplus moneys; and as the party has sought this mode of relief it is not a good answer to say that he might have another mode.

We are referred to our decision in McLean v. Stewart (14 Hun, 477) in respect to the power of a Special Term to alter or change a decision made upon a trial at a former term. But that case does not question the power of this court to set aside an unauthorized judgment, when the party affected thereby has not been heard or brought before the court for the purpose of considering the questions involved in the judgment. (See Code of Civil Procedure, § 1207.) We are referred to Stevens v. Veriane (2 Lans., 90), and we have examined it and do not find anything there which aids the respondents here. In that case the defendants and plaintiff had been heard before a referee in'a mortgage foreclosure case, and the referee exercised a judicial discretion in awarding costs, and it was very properly held that the court at Special Term could not review, revise or disturb the award of costs made upon and as a part of the trial of the issues. The parties had all been heard, and the discretion of the referee was the law of the case until reversed on appeal. It was binding upon the parties who sought to disturb it at Special Term, and it was very correctly held by the General Term of the fifth district that the Special Term was right in refusing to overhaul the decision made by the referee.

In the case in hand the decision of the referee upon the question of costs, so far as the plaintiff is interested therein, and so far as Fox and wife are interested therein, and so far as Ivers is interested therein, 'or either of them as between themselves, is binding and conclusive until reversed upon appeal, but it is not binding upon the defendant Kannady. The defense set up by Ivers related to a controversy between him and Fox and wife, and not to the claim made by the plaintiff. Iiis success before the referee as against Mrs. Fox, must have been the predicate for the award of sixty-five dollars, the costs to Ivers. As against her, the award presumably is right and must be allowed to stand until questioned by her; but as against Kannady and the judgment represented by him, the determination upon the merits, as well as regards the costs, must be held ineffectual. If an application had been made to the court by the plaintiff or by Ivers and Fox, and a judgment been given thereon as against Kannady and the other defaulted defendants, it might have presented another question. But in the absence of any direction by the court, we ought to hold the determination and award of costs inconclusive as to Kannady. We conclude for the reasons already stated, viz.:

First. The order of the Special Term must be reversed, with ten dollars costs and disbursements, to be paid by Ivers and Mrs. Fox.

Second. The motion made at Special Term should have been granted, setting aside so much of the judgment as to Kannady, and the judgments represented by him, as exceeds the usual and ordinary judgment in foreclosure cases.

Third. The decision of the referee as to the surplus arising upon the sale of tbe premises (after paying tbe mortgage debt and costs), must be held inoperative as between tbe plaintiff and Kannady, and tbe judgment represented by bim, 'and also inoperative between Ivers, Fox and wife, and Kannady, and the judgments represented by bim, so far as it assumes to affect or prejudice the rights of Kannady (as judgment-creditor or as assignee of judgments) in the surplus moneys.

Fov/rth. It must be declared that as to Kannady it was required by statute that the surplus arising from tbe sale be paid into court to await tbe order of tbe court.

Fifth. That as to Kannady and the judgments represented by bim, tbe direction to pay sixty-five dollars costs out of tbe surplus, and the judgment of Ivers out of tbe surplus, and tbe balance thereof to Mrs. Fox, was inoperative and unauthorized.

Sixth. Tbe motion, to tbe extent just stated, should be granted with ten dollars costs against Ivers, Fox and Mrs. Fox.

Seventh. Leave should also be granted to Kannady, Ivers, Mrs. Fox and other defendants to file within twenty days any claim be or they may have to such surplus moneys with tbe clerk of Jefferson county.

Eighth. And Kannady or the other defendants may also, after such claim shall bo filed, apply for tbe appointment of a referee to determine all claims to said surplus moneys, upon notice to tbe plaintiff, tbe defendant Ivers, tbe defendant Fox and bis wife, and all other persons interested therein.

And for an order directing tbe defendant Ivers to pxay into court tbe whole of tbe moneys received by bim out of such surplus, and for an order directing Mrs. Fox to pay into court, by depositing with tbe county treasurer of Jefferson, tbe moneys received by her out of such surplus moneys, to await tbe final award to be made by tbe court, after the determination of all claims to the surplus moneys arising upon such sale. (Code of Civil Procedure, § 1292 and § 1323.)

It will be further provided in tbe order to be entered that the sale stand as valid.

We conclude to reverse the order appealed from, with ten dollars costs and disbursements, and to direct an order to accord in substance with the views already expressed. Tbe terms of tbe order to be settled upon five days’ notice before Justice Hardin, and after being so settled the same shall be entered in Jefferson county clerk’s office.

Talcott, P. J., and Rumsey, J., concurred.

Order appealed from reversed, with ten dollars costs and disbursements, to be paid by Ivers and Fox and wife, and motion granted with ten dollars costs, as indicated in the opinion of Hardin, J. The order to be settled before Hardin, J., on five days’ notice.