Kelly v. Israel

| New York Court of Chancery | Aug 6, 1844

The Chancellor.

The objection that W. S. Warwick has no interest in the subject matter of these orders, and has therefore no right to appeal, appears to be well taken. He has been discharged under the bankrupt act, as charged in the petition and not denied. And before his discharge he had conveyed all his interest in the equity of redemption to a trustee, for the benefit of his creditors, which interest has long since been sold by the trustee. He is, therefore, attempting to interfere in a matter, in which he has no interest whatever. His appeal must accordingly be dismissed, with costs to the respondents, to be taxed.

The question whether the assignee pendente lite of an interest in the equity of redemption, or of a junior incumbrance thereon, can be heard in relation to the time or manner of selling the mortgaged premises, under a decree of foreclosure, without the delay and expense of making himself a party to the suit by a supplemental bill, do.es not arise here. For if the statements in the petition are true, the interest of De Launay accrued before the filing of the complainant’s bill in either of these causes; and a mere consent, of a party not affected by the decree, to come in and be bound by such decree, is not of itself sufficient to authorize him to interfere in the suit. So much of the order, therefore, as gives him the right to pay the money into court and to have the benefit of the decree, is erroneous..

Rogers & Sagory, however, are parties to the suit; and they have an interest in the surplus proceeds of the sale sufficient to authorize them to interfere, notwithstanding they have pledged their $20,000 mortgage to De Launay as security for the loan from him. For the loss, if any, in the collection of that mortgage, must eventually fall upon-them. The delay in selling under the decree, and suffering the interest to accumulate while the lents and profits of the mortgaged premises were being received and appropriated by other persons to their own use, was not only unjust as to Rogers & Sagory as junior incumbrancers, or as having an interest in the collection of this junior mortgage, but it also endangered the rights of Thompson, who is personally liable for any deficiency there may be, in the proceeds of the sales, to satisfy the second and third mortgages. ■ Where property, against which there has been a decree of foreclosure, is thus situated, the complainant has no right to suspend the execution of the decree, in which execution other parties are interested. And if the complainant neglects to proceed to a sale with due diligence, the court, upon the application of any other party interested in the execution ofethe decree, will commit the prosecution thereof to him; or if the decree has already been placed in the hands of a master to be executed, will direct-him to proceed to a sale, without delay, notwithstanding any directions he may receive to the contrary from the complainant or his solicitor. Indeed it is the duty of the master, without any special order of the court for that purpose, to proceed to a sale of the property with all reasonable diligence, if requested to do so, by any party to the suit who must necessarily be injured, by the delay, if the sale is stayed without a sufficient cause.

In this case, the circumstances in which the complainant’s solicitor was placed, by W. Kelly’s declining to bid on the property, after his interviews with Sagory and Mr. Argenti, and by the absence of his client, and the want of instructions how to act in such a contingency, was sufficient to justify the master,-in the exercise of a sound discretion,to postpone the sale for a reasonable time; to enable the solicitor to communicate with his client. And if the master had proceeded to sell the property on the day to which the sale stood adjourned, the extra costs of the master, occasioned by such adjournment, should have been-allowed.

But no sufficient excuse is given for the subsequent abandonment of the notice of sale; leaving the owner of the equity of redemption to enjoy the use of the property for an indefinite period, at the expense of the holders of the junior incumbrances. It was also jeoparding the rights of Thompson, who was personally liable to the complainant for the deficiency in the proceeds of the sale, if any there should be, to pay the second and third mortgages and the accumulating interest thereon. The proceedings under the. decree should not have been' abandoned, without the assent of the defendant Thompson, and of the junior incumbrancers who had an interest in having the property sold with the least possible delay. And as the expense of advertising, and of the other proceedings of the master in part execution of the decrees for the sale of the mortgaged premises, which had already been incurred, were rendered entirely useless by such discontinuance of the notices of sale, and as the whole expense must be again incurred in the execution of the decrees, I think the vice chancellor wds right in refusing to subject the surplus proceeds of the sale to a double charge for master’s fees and expenses of advertising, &c.

The proper relief to be given upon the petition and notice, however, was to direct the master to proceed and sell the property without delay; and if necessary, a receiver of the rents and profits of the premises in the meantime might have been appointed. As some parts of the premises were to be sold.under three separate and distinct decrees, it was proper to give such, directions to the master, as to the manner of selling, as to prevent a sacrifice of .the property. But in the manner in which' these orders are drawn up, there may be difficulties in the execution of .the decrees which the vice chancellor does not appear to have anticipated. For if the premises included in the first mortgage should be put up and sold, under the decree founded on that mortgage, the surplus must, as the decree and orders now stand, be brought into court to abide the litigation among the subsequent incumbrancers; and it cannot be applied by the master to the satisfaction of the decrees on the second and third mortgages, without the expense and delay of a new application to the court for that purpose. And if that part of the premis.es should be first sold under the decree upon the third mortgage, the same might be immediately put up and sold again under the decrees upon the prior mortgages. To prevent any difficulties of that kind, but. one order should be entered, in all three of the suits, directing the master as to the manner of selling and applying the proceeds to satisfy all the decrees; without the expense of bringing that part of the proceeds into court.

The orders appealed from must be reversed, without costs to either party upon the appeal of the complainant. And an order must be entered entitled in all three of these causes, directing the master who was originally charged with the execution of the decrees, to proceed to advertise and sell the whole premises embraced in the third mortgage, under the decree upon that mortgage, and on the usual notice of sale; that he sell the same in parcels, if in his opinion it can be done without diminishing the value; if that cannot be done, then that he sell the whole together ; that the purchaser take the premises discharged of the claim of any of the parties to this suit, under the decrees upon the prior mortgages; and also discharged of all equity of redemption on the part of Victor De Launay, according to his stipulation filed in the third of the above causes, in the same manner as if he were a party to the suit, and with the same right to the said De Launay to the surplus proceeds of the sale as if he had been made such party in regard to his subsequent incumbrance; that the master, out of the proceeds of such sale, pay first to the complainant or his solicitor, the amount reported due in the first of the above causes, with interest, and the costs as already taxed, and the master’s fees, commissions and expenses, other than the fees, expenses and commissions upon the notice which was discontinued ; that he then pay the amount of the debt, interest, costs, and master’s fees and commissions as aforesaid in the second of the above causes; that he then pay to the defendants Thompson and Rogers &• Sagory, or to. their solicitors, their taxable costs upon their petition and motion to the chancellor and to the vice chancellor, but not upon this appeal; that he bring the residue of such proceeds into court in the last entitled cause, and deposit the same with the assistant register, to abide the further order of the court; and that the decree in the last entitled cause be carried into full effect in all other respects. And when the surplus money shall have been paid into court, the said Victor De Launay may obtain an order of reference as to such surplus, in conformity with the 136th rule of this court, in the same manner as if he had been made a defendant in the suit; and if an order is obtained by any other person, De Launay must be permitted to attend the reference and claim such surplus, in the same manner and with the like effect as if he was a defendant and had appeared in the suit by his solicitor. The master who is charged with the sale of the premises must proceed immediately to a sale, as soon as the necessary notices can be given, and must not adjourn the sale ivithout the consent of all parties who claim an interest in the proceeds of such sale.