Russell v. Duflon

Parker, J. The plaintiff’s claim against defendant Duflon, of the surplus money in question, is, I think, not well founded. There is no pretence that Duflon received any more of the money bid upon the sale than the amount of his mortgages and costs. The plaintiff, however, claims that by selling the property under the power of sale in the mortgages, he became, as to the surplus moneys, a trustee for the benefit of the parties entitled thereto, by virtue of any liens thereon, so that he is liable, as such trustee, for such purposes, although it was never paid to him. I confess I am unable to see how he incurred such obligation, unless the money came to his hands. It cannot be said, I apprehend, that a mortgagee who accepts a mortgage, with a power of sale, thereby becomes a trustee for all subsequent encumbrancers. Nor is there anything in his proceeding to sell under the power which creates such relation. There is no implication of any undertaking on his part for the benefit of subsequent encumbrancers. The power is for his own benefit, exclusively; and so is the sale under it. So far I can see no chance for making him'a trus — 404 — tee for encumbrancers. There is nothing which he holds in trust; not the mortgaged premises, them he does not hold at all, they go, on the sale, to the purchaser. The purchase money, to the extent of the sum due on the mortgage and costs, when paid to him, is his absolutely. He may sue the purchaser on his bid, perhaps, but, if in the capacity of trustee* it is only as trustee of the mortgagor, and' not of the subsequent encumbrancers. When the money is received by him, and he has notice of the lien, then, I apprehend, is the first time that the relationship of trustee and cestui que trust arises between him and the subsequent encumbrancers.. The authorities cited by the plaintiff’s counsel to show that he is trustee (2 Story’s Eq. Jur., §1231; 1 Turner and Russ., 469; and 1 Ves., Jr., 478), are all to the effect, merely that a covenant or agreement to charge an estate or a fund with a payment, as a general principle, in equity, as against the party making it, raises a trust. The mortgage, doubtless, contains an agreement, or a condition assumed by the mortgagee to pay the surplus to the mortgagor. So that, as between those parties, the trust may well arise. But, as between the mortgagee and the lien holder, I can see no foundation for a trust, before the money, constituting the surplus, is paid over to the former. In Bevier v. Schoonmaker (29 How., 411) an action by the owner of the equity of redemption under a sheriff’s sale, who was also the holder of the lien on the mortgaged premises, next in order to the mortgagee, was allowed to maintain an action against the mortgagee, who was himself the purchaser, under a statute foreclosure, for the surplus money in his hands after the sale. But there the plaintiff stood in the shoes of the mortgagor, and was the eldest judgment creditor, and the defendant had the surplus moneys in his hands. The case of Matthews v. Duryee (45 Barb., 69) recognizes the liability of the party holding the surplus, to an action by the party entitled to it (in that case the widow of the mortgagor) to recover it. And Kirby v. Fitzgerald, and Delaware and Hudson Canal Co., v. the Same (31 N. Y. R., 417), was the — 405 — case of two suits brought against the same defendant for surplus moneys in his hands, arising from the sale, under a statute foreclosure, of certain mortgaged premises, on which the respective plaintiffs had judgment liens. In these suits the defendant obtained leave to pay the money into court, and the plaintiffs litigated their respective rights to it before a referee. In all these eases, relied upon by plaintiff’s counsel, the defendants had the surplus in hand; but no case has been cited by the learned counsel, and I find none, where an action has been sustained against the mortgagee, who foreclosed and sold the premises, under a statute foreclosure, for a surplus arising on the sale, which never came to his hands. On principle, I do not see how he is liable for such surplus to a mere encumbrancer. I am of the opinion, therefore, that the decision and judgment of the Special Term, as to Duflon, is right, and should be affirmed. The defendant, Lockwood, is differently situated from Duflon, in regard to the surplus. His answer shows that he claimed the whole surplus, and that it all went into his hands. There has been no question, throughout the whole litigation, that he had it, but the question has been whether or not he was entitled to it; or, if not to the whole, to what part of it. An interlocutory reference was had to ascertain what was the actual surplus, and what amount of it Lockwood-was, under his mortgage, entitled to recover. The report of the referee, as modified by the court under plaintiffs’ exceptions to it, fixed the amount of surplus arising from the interest of Elmendorf in the premises, at $4,142.68, and the net amount uf Lockwood’s lien on the premises at $1,896.26; thus leaving in his hands from the day of sale, a balance of $2,246.42, over and above what he was entitled to retain. Upon the trial at Special Term, the order thus made was, of course, adopted and acted upon, and it was found that ‘Lockwood received the whole of said surplus, and that his lien upon it was the said sum of $1,896.26 ; that the plaintiff, on the day of sale, was entitled to the said balance of — 406 — $2,246.42, and to recover the same of Lockwood, with interest from the day of sale, and to judgment against him therefor. The plaintiff excepted to the finding of fact, that Lockwood's lien amounted to $1,896.26, and to the third and fourth conclusions of law, to wit, that Duflon is not liable for any part of the surplus moneys, and that neither party to the suit shall have costs as against the other. The other conclusions of law, therefore, are unquestioned by the plaintiff. These are: 1. That plaintiff was entitled, on the day of sale, to $2,246.42 of the surplus. 2. That plaintiff is entitled to recover that sum of Lockwood, with interest from the day of sale, amounting to $4,170.54. 3. That plaintiff is entitled to judgment against Lockwood for that sum, with interest from date of decision. The plaintiff’s counsel claims that he is entitled, under section 329 of the Code, to review the order of the court upon his exceptions to the report of the referee. He might, undoubtedly, do so, if his exceptions to the final decision of the court brought up for review any question which would be affected by that order. But he does not except to the conclusion of the court, that the portion of the surplus to which he was entitled on the day of sale was $2,246.42, nor that the amount which he is entitled to recover of Lockwood is that amount and interest. He is not in a position, therefore, to question the correctness of that conclusion, and, as the counsel for defendant Lockwood contended in the argument, we cannot add to the amount given him by the decision. It does not alter the case that the plaintiff excepted to the finding of fact that Lockwood’s lien amounted to $1,896.26. An exception to a finding of fact does not compensate for the omission to except to the conclusions of law. (Lefler v. Field, 50 Barb., 407.) Exceptions to findings of fact aró unnecessary and unavailing. Exceptions to conclusions of law, where the cause is tried by the court without a jury, or — 407 — by a referee, are indispensable to raise any question for review. (Weed v. The N. Y. and Harlem R. R. Co., 29 N. Y. R., 616; Enos v. Eigenbrodt, 32 N. Y. R., 444.) And there is no authority for reviewing, on appeal, a decision to which no exception has been taken; on the contrary, it is plainly prohibited. (Brewer v. Isish, 12 How., 481; Code, § 268.) In reviewing the judgment, therefore, upon plaintiffs appeal, we are confined to the questions raised by his exceptions to the legal conclusions of the court at Special Term, to wit, whether Duflon is liable to him for the surplus, and whether he should have recovered his costs of the action. Hpon the first of these questions, as above sjated, I conclude the judgment is right, and, as to costs, in favor of the plaintiff, I think, inasmuch as in his contest with Lockwood each has, in part succeeded, it was well decided that neither should have costs as against the other. Defendant Lockwood has also appealed from the judgment, having excepted to each of the conclusions of law which affect him in the decision. As to him, every question decided against him at the trial or by the order modifying the referee’s report, is open to review. In regard to the main question of his liability in such a suit as this, to pay over to the plaintiff the balance of the surplus, after deducting the amount of his own prior lien upon it, there can be no doubt; and although when this suit was commenced it was uncertain whether as between the plaintiff and the Kingston Bank the plaintiff was entitled to such balance, that was no bar to the suit. The plaintiff as to such balance has established his right to it, a right which existed when this suit was commenced, although not then made plain by adjudication, as it afterward was. The plaintiff’s right did not depend upon that adjudication. The learned counsel of Lockwood is wrong, therefore, in claiming that the suit was premature. The counsel also insisted that it does not appear from the evidence in the case that the Kingston Bank judgments were, as against Elmendorf, the principal debtor, paid. The judgment record in the suit of Lockwood against the — 408 — Kingston Bank, which' includes the findings of fact and law, shows conclusively that these judgments had been satisfied by a sale of Elmendorf’s property, and the only reservation in the judgment is'in favor of the Kingston Bank against moneys and property in the hands of the sheriff. The counsel for Lockwood also makes a point upon' the question of interest upon the balance found against him. I think the court, at Special Term, was in error in charging him with interest from the day of sale. Mo notice was given to Lockwood of plaintiff’s claim to the money until the bringing of this suit, and Lockwood was not in default in withholding it from plaintiff until it was thus demanded by the suit. (Robinson v. Corn Exchange, etc., Ins. Co., 1 Robt., 14; Williams v. Storrs, 6 J. Ch. R., 353, 358.) But from the commencement of the suit interest was, I think, allowable. As to the appeal, of the Kingston Bank, I think the judgment correct. As already intimated, the evidence shows that the judgments of this defendant had been paid, so that it'was not entitled to the surplus or any portion of it. The defendant, Duflon, has appealed from that portion of the judgment which denies him costs. This is a case in which costs are in the discretion of the court, and it is not customary to reverse a decision which vests in discretion unless there has been a palpable abuse of it.- I do not see any reason to interfere with the decision of the court on this question, and am of opinion it should be affirmed. Upon the whole case, therefore, I think the judgment as to the defendant Duflon and the Kingston Bank should be affirmed, and as to defendant Lockwood that it should be modified by deducting the interest on the sum of $2,246.42 from April 26, 1855, to May 5, 1857 (the time of the commencement of this suit), as of the latter date. Potter, J., concurred. Miller, P. J., expressed no opinion. Ordered accordingly.