249 F. 455 | 2d Cir. | 1918
This is an appeal from an order expunging R. Bleecker Rathbone’s proof of debt against the estate of Edward G. Soltmann, a bankrupt. Rathbone was the owner of a fourth mortgage for $15,000 on premises belonging to the bankrupt, subject to prior mortgages aggregating about $147,000.
After the adjudication Rathbone began an action in the state court to foreclose the mortgage, which was then overdue, filed the usual lis pendens, and obtained permission from the District Court to maintain the action and to make the receiver in bankruptcy a party defendant. Some two months or more after the trustee was elected the usual decree for foreclosure sale was made, and on November 20, 1915, the sale was had, resulting in a deficiency judgment for $16,-334.50 against Soltmann, which was duly entered of record on the docket of judgments in the office of the clerk of the county of New York December 31, 1915.
The mortgagor, or, if he has conveyed before suit brought, his grantee, is a necessary party to an action to foreclose, and, if not made a party, his equity of redemption is not foreclosed. The trustee in this case was elected after suit brought, but became vested by operation of law with the mortgagor’s title as of -the date of adjudication, which was before suit brought, section 70, Bankruptcy Act. Consequently his equity of redemption has never been barred. Winslow v. Clark, 47 N. Y. 261; Landon v. Townshend, 112 N. Y. 93, 19 N. E. 424, 8 Am. St. Rep. 712. The purchaser at such a foreclosure sale becomes assignee of the mortgage, and if he has entered into possession he becomes mortgagee in possession. This is because the land is not sold and the mortgage is sold. Townshend v. Thomson, 139 N. Y. 152, 161, 34 N. E. 891 ; Jackson v. Bowen. 7 Cow. (N. Y.) 13; Robinson v. Ryan, 25 N. Y. 320; Miner v. Beekman, 50 N. Y. 337.
It results from the foregoing that Rathbone has lost his mortgage, and that the purchaser at the foreclosure sale is the owner of it. If, upon a sale hereafter of the premises under a prior mortgage, a surplus be paid into court, the purchaser at the foreclosure sale under Rathbone’s mortgage will be entitled to it. If there remain after that a surplus, It will go to the trustee, as owner of the equity of redemption.
The decree is affirmed.