Quackenbush v. . O'Hare

O’Brien, J. The order appealed from disposed of surplus moneys amounting to the sum of $2,737.75, arising upon the foreclosure of a mortgage made by the defendant to one Elizabeth Hillenbrand, February 28,1884, and recorded the following day. It was subsequently assigned to the plaintiff and covers certain premises on Second avenue in the city of 27ew York. The controversy in regard to the surplus was between the defendant Cannon on the one hand and the defendants Washburn & Barnes on the other. The referee reported that Cannon was entitled to have his claim paid out of the fund first, and this report was confirmed at the Special Term, and the order of that court affirmed at General Term. Washburn & Barnes are the only parties who appeal to this court. *488 It appears from the findings that the defendant Cannon is the owner of a mortgage of $2,000, dated January 9, 1885, and recorded July 22, 1885, which covers the premises sold under the decree of foreclosure in the action, and it is beyond all dispute a lien next to that of the mortgage foreclosed by the judgment upon which the surplus arose. But this mortgage is a lien on three separate pieces of real estate: (1) The house on Second avenue which was sold under the judgment in this case, and from which the surplus came; (2) certain premises on Seventy-fourth street; (3)' certain premises on West, Third street. Washburn & Barnes hold a junior mortgage for over $3,000, dated January 28, 1887, and recorded February 11,1887, covering the Second avenue property only. The Murray Hill Bank holds a mortgage of $2,500, dated November 11, 1886, which covers the Seventy-fourth street property only. One Steers holds a mortgage of about $11,000, dated February 2, 1887, covering the West Third street property only. One Suydam is the owner of a mortgage of $2,000, dated July 9, 1885, which covers the three pieces of property, and the same has been assigned to Cannon as trustee for the owner. Washburn & Barnes insist that they should have the surplus to pay their mortgage, which is a lien next to that of Cannon, and that he should be driven to a sale of the other two pieces of property covered by his mortgage, which they claim is abundant security for the payment of his debt. But the Murray Hill Bank, holding a mortgage on the Seventy-fourth street property, objects to this, as its security will thereby be endangered. Steers also objects, as this will endanger his security, which is confined to the West Third street property only, while Cannon, holding a mortgage on the three pieces, also objects. The lien of Cannon upon the land, next to that of the mortgage foreclosed, was transferred from the land to the surplus fund. No one claims that he has not the first lien, and the only question is whether he can be prevented from enforcing his prior lien to enough of the surplus money to satisfy his mortgage. The owners of the Seventy-fourth *489 street and West Third street property are not parties to this action. Had all the parties interested in these two pieces of property been made parties to this action, and all the property sold and the proceeds in court, it is possible that a court of equity could apply the doctrine of sale in the inverse order of alienation, or would so marshal the securities as to accomplish the purpose which Washburn & Barnes seek to attain in these proceedings. (Burchell v. Osborne, 119 N. T. 486.) But that must be done in an action for that purpose where the whole fund resulting from the sale of all the pieces of property is under the control of the court, and all the parties interested are before it. There is no room for the application in a proceeding like this, and upon facts such as exist here, of the equitable rule that where a creditor has a double fund to which he may resort for satisfaction of his debt, and another creditor has only one of these funds, the first creditor will be required primarily to resort to that fund for the satisfaction of his debt, over which he has the exclusive control. That rule, of course, implies the right of the creditor with the double fund or security to appropriate both funds if necessary. The attempt is made in this proceeding to displace the prior lien of Cannon not by payment, but by proof which, it is claimed, shows that the remaining two pieces of property are sufficient to pay the debt. But the owner of a mortgage cannot be deprived of his lien on the application, in a proceeding like this, of a junior mortgagee upon proof, however strong or apparently conclusive, that he still has sufficient property to pay his debt. The court cannot release a lien without actual payment merely because witnesses testify, and the referee finds, that the holder of the lien has other property of his debtor to which he can resort for the satisfaction of his debt. Had Washburn & Barnes offered to pay the prior mortgage held by Cannon, and demanded an assignment of it, it is possible they might be subrogated to all the rights and to the position of Cannon, and after receiving the surplus money here be entitled to call upon the owners of the Seventy-fourth street and West Third street property to contribute towards the payment of the mortgage, *490 But whatever equitable rights they might have in an appropriate proceeding, it is quite clear that they cannot in an application for surplus money, displace the prior lien by proof or finding that the other property is sufficient in value to pay and discharge the debt secured by the lien. Their remedy, if any, is by means of some other proceeding. The order should, therefore, be affirmed, with costs. All concur, Andrews and Gray, JJ., in result. Order affirmed.