Corporate Investing Co. v. Mount Vernon Metal Products Co.

Kelby, J.: The question argued on this appeal is whether a referee in surplus proceedings has general equitable jurisdiction to entertain claims which are purely equitable in nature, or, as contended by the Products Company, his jurisdiction is limited to the allowance of liens wMch are stietly legal, with equitable jurisdiction only extending to consider matters in avoidance of, or defense to, such legal claims, as, for instance, fraud in the origin thereof. In Bergen v. Carman (79 N. Y, 146, 151) the Court of Appeals announced the rule that since the object of the reference was to ascertain to whom the surplus belonged, a tMs opens a door to an inquiry -as to the character of all liens wMch may be presented,” the reasoning of the court being that where jurisdiction of a court of equity was once acquired, such court as a general rale has the right to proceed and do justice to all the parties. Perhaps that case standing alone would be subject to the limitation that the general language used was in reference only to-the assumption of equitable jurisdiction of matters presented in defense to a legal lien. But in the light of such of the cases as have followed Bergen v. Carman no such limitation survives. In Tator v. Adams (20 Hun, 131) jurisdiction of the referee was sustained to try the question whether, in a conveyance, a certain clause wMch, unreformed, stood in the way of a claim to the surplus, was inserted by mistake. In sustaining the jurisdiction it was said that Bergen v. Snedeker (21 Alb. L. J. 54, sub nom. Bergen v. Carman, 79 N.Y. 146) had settled the doubt suggested by earlier cases as to the power of the referee to investigate “ every question * * * tending to show the equities of the claimants.” That observation was later adopted by Mr. Justice McAdam in Wilcox v. Drought (36 Misc. Rep. 352). In Bowen v. Kaughran (1 N. Y. St. Repr. 121) it was held that where the intent in executing certain written instruments was to assign shares of the surplus moneys, the referee, despite the absence of express words of assignment, had power to report in favor of the instruments as equitable assignments, and thus save the circuity of action which would be necessitated by remitting the claimants to a suit in equity to establish their equitable claim. The report of the learned referee in that case was approved and Ms opinion adopted by Chief Justice Sedgwick. (Bowen v. Kaughran, supra, 130.) In Crombie v. Rosenstock (19 Abb. N. C. 312) certain liens of materialmen were invalid for defects of form or lack of [276] record, but there was a clause in the deed which had transferred the property to the mortgagor, stating that the conveyance was “ Subject * * * to * * * all contracts outstanding relating to said premises and the building now in course of erection and construction thereon,” and the materialmen claimed that thereby they were given an equitable lien upon the surplus. The same referee (Wilbur Larremore) entertained the claim as “ of a purely equitable nature,” and cited the cases from Bergen v. Carman (supra) down to Bowen v. Kaughran (supra), as establishing the rule that “ wherever the facts would warrant the filing of a bill in equity to declare a lien on a fund, a referee in surplus proceedings may hear and determine the application to declare such lien, and, if he is of opinion that it should be granted, report directly in favor of the holder thereof.” His report was approved by Freedman, J. Mr. Justice McAdam later cited the case, among many others, in Wilcox v. Drought (supra) as authority for the general proposition that “ the referee may inquire into and determine all questions of law and fact, usury, fraud or the like, and every question tending to show the equities of the claimant, to the end that it may be decided in such proceedings finally and on the merits to whom such surplus moneys belong.” The possibility of two trials, or the actuality of two trials, is not of importance. As to the doctrine of election of remedies, or of the objection of “ another action pending,” the first only applies where there is a choice between two remedies, which proceed upon “ opposite and irreconcilable ” claims of right (Henry v. Herrington, 193 N. Y. 218), and the second requires complete identity of parties, cause of action and judgment sought (Cornell v. Bonsall, 176 App. Div. 798), and is “ subject to this limitation, recognized in all the cases, that full relief can be obtained in the first proceeding.” (Cullen, J., in Matter of Hood, 27 Hun, 579.) None of these conditions exist in the present situation, where on the one hand we have a suit in equity, which may possibly result only in a judgment in personam, and on the other the proceeding quasi in rem, against the fund, which is to be distributed before the other suit comes to trial. And finally, the objection of another action pending is not matter in bar, as in effect made here by the award of the surplus to the Products Company, but is matter only in abatement, or stay of proceedings in one action or the other, until the issue has been determined. (1 C. J. 1163.) The remaining question discussed in the briefs is whether, on the facts indicated in the offer of proof, there would be adjudged the equitable lien claimed. Upon this point the Silversmiths Company relies upon the alleged fact of payment by it of sums which reduced the amount of the mortgage foreclosed, and in reality [277] produced the surplus. The lien would thus seem to rest upon the principle of subrogation, as well as upon the authorities cited to the effect that where an agent, in charge of his principal’s property, has made advances for its benefit, he has a lien for reimbursement. (Pom. Eq. Juris [4th ed.] § 1235.) Respondent contests the idea of a lien upon the authority of the decision of the appeal to this court in Mount Vernon Co., Silversmiths, Inc., v. Mount Vernon Metal Products Co., Inc. (202 App. Div. 753), where the lis pendens was ordered discharged. It appears, however, by uncontradicted statements in the briefs on both sides, that after that appeal the complaint was amended, and the merits of the amended complaint have never been considered and are not in the present record for consideration. The scope of the amendment appears in the appellant’s brief, and the appeal record on the former appeal shows that no such averments were in the original complaint, which rested entirely upon the express terms of the contract for the management of the property by the Silversmiths Company. As the complaint has been amended, the former decision of this court cannot be accepted as authority upon the cause of action as disclosed in the amended complaint, without either the amended complaint before us, or without the proof which would be competent under it. This proof the referee has refused to receive and has, therefore, never weighed. It cannot be said that the proof would not establish the equitable lien, until we see what the proof is. The final order in surplus proceedings should be reversed on the law, with costs, and the proceeding remitted to the same referee to take proof of the alleged equitable lien of the Mount Vernon Company, Silversmiths, Inc. Kelly, P. J., Manning, Young and Kapper, JJ., concur. Final order in surplus proceedings reversed on the law, with costs, and proceeding remitted to the same referee to take proof of the alleged equitable lien of the Mount Vernon Company, Silversmiths, Inc.