CHAPTER XXXIII. PROCEEDINGS ON SURPLUS MONEYS. PRACTICE-DISTRIBUTION BY SURROGATE'S AND SUPREME COURTS -APPLICATION FOR SURPLUS-APPOINTING REFEREE-HIS POWERS AND DUTIES-WHAT MAY BE LITIGATED -TESTIMONY SIGNED-REFEREE'S REPORT § 745. Distribution of surplus by surrogate.— The New York Code of Civil Procedure' provides, that "where real property, or an interest in real property, liable to be disposed of as prescribed by the statute, is sold in an action or a special proceeding, to satisfy a mortgage or other lien thereupon, which accrued during the decedent's life-time, and letters testamentary or letters of administration upon the decedent's estate, were, within four years before the sale,' 1 N. Y. Code Civ. Proc. §§ 2798, 2799. The words "within four years before the sale," as used in the Code Civ. issued from a surrogate's court of the state, the surplus money must be paid into the surrogate's court from which the letters issued." "Where money is thus paid into a surrogate's court, and a petition for the disposition of property, as prescribed by the statute, is pending before him, or is presented at any time before the distribution of the money, the money must be distributed as if it was the proceeds of the decedent's real property, sold pursuant to the decree." These sections of the Code of Civil Procedure are very similar in language to those of the former statute.' The former statute was held not to apply to a foreclosure by advertisement,' and for that reason it is thought by some that these sections of the Code do not now apply, where a foreclosure is conducted by advertisement. It is certain, however, that whether these sections do or do not apply to such proceedings, the surplus proceeds of a sale made under a decree of foreclosure, rendered more than four years after a grant of letters testamentary or of administration, are to be distributed in the action, though the judgment directing. the sale was entered within the four years." $746. Distribution of surplus by surrogate - Foreclosure by advertisement.-The New York Code of Civil Proc. $2798, and the words "making the sale" in Laws of 1871, chap. 834,-relating to the payment into the proper surrogate's court of surplus moneys arising on the sale of real property, if letters testamentary or of administration have been issued within a certain time,-refer to the date of the sale, and not to the commencement of the action or proceedings resulting in the sale; White v. Poillon, 25 Hun (N. Y.) 69 (1881). 1 See Laws of 1867, chap. 658, as amended by Laws of 1870, chap. 170. 2 See Loucks v. Van Allen, 11 Abb. (N. Y.) Pr. N. S. 427 (1871); German Sav. Bank v. Sharer, 25 See White v. Poillon, 25 Hun (N. Y.) 69 (1881). Upon the distribution in the surrogate's court, under $2799, of surplus moneys arising on a foreclosure, where there is, under a will, a life tenancy in the lands sold, the fund must be invested and the income paid to the beneficiary until the determination of the life estate. The surrogate can not order the payment of a gross sum in lieu thereof. Zalırt's Estate, 11 Abb. (N. Y.) N. C. 225 (1882), citing Arrowsmith v. Arrowsmith, 8 Hun (N. Y.) 606 (1876); Procedure' provides, that "the commencement or pendency of an action or special proceeding, having for its object the sale, either absolutely or contingently, of property liable to be disposed of as prescribed by this statute; or the foreclosure by advertisement of a mortgage thereupon; or any proceeding to sell such property, taken pursuant to a judgment, or by virtue of an execution, does not affect any of the proceedings taken in the surrogate's court for the sale of such property, unless the surrogate so directs. After making a decree directing a mortgage, lease or sale, the surrogate may, and in a proper case, he must, stay the order to execute the decree, with respect to the property affected by the action, or special proceeding, or by the proceedings then pending, until the determination thereof, or the further order of the surrogate with respect thereto. If, in the course thereof, a sale of any of the property has been made, before making the decree in the surrogate's court, the decree must provide for the application of the surplus proceeds belonging to the decedent's estate. If such a sale is made afterwards, the directions contained in the decree, relating to the property sold, are deemed to relate to those proceeds.' $747. Distribution by supreme court.-The New York Code of Civil Procedure provides, that "an attorney or other person who receives any money, arising upon a sale, made as prescribed in the title regulating foreclosures by advertisement, must, within ten days after he receives it, pay into the supreme court the surplus, exceeding the sum due and to become due upon the mortgage, and the costs and expenses of the foreclosure, in like manner and with like effect, as if the proceedings to foreclose the mortgage were taken in an action, brought in the supreme court, and triable in the county where the sale took place." The Code provides further, that "a person who had, at the time of the sale, an interest in or lien upon the property In re Igglesden, 3 Redf. (N. Y.) McJimsey, 1 Edw. Ch. (N. Y.) 551 375, 378 (1877). IN. Y. Code Civ. Proc. § 2797. 2 See Hoey v. Kinney, 10 Abb. (N. Y.) Pr. 400 (1860); Breevoort v. (1833); Stilwell v. Swarthout, 10 N. Y. Weck. Dig. 369 (1880). N. Y. Code Civ. Proc. § 2404. sold, or a part thereof, may, at any time before an order is made, as prescribed by the statute, file in the office of the clerk of the county, where the sale took place, a petition stating the nature and extent of his claim, and praying for an order, directing the payment to him of the surplus money, or a part thereof." "A person filing a petition, as prescribed in the above section, may, after the expiration of twenty days from the day of sale, apply to the supreme court, at a term held within the judicial district, embracing the county where his petition is filed, for an order, pursuant to the prayer of his petition. Notice of the application must be served, in the manner prescribed by statute for the service of a paper upon an attorney in an action, upon each person, who has filed a like petition, at least eight days before the application; and also upon each person, upon whom a notice of sale was served, as shown in the affidavit of sale, or upon his executor or administrator. But, if it is shown to the court, by affidavit, that service upon any person, required to be served, can not be so made with due diligence, notice may be given to him in any manner which the court directs." $748. Action to enforce claim to surplus. A party entitled to the surplus moneys arising from a sale on foreclosure may maintain an action therefor. Thus, where an attaching creditor recovered a judgment, and the land attached was sold on a prior mortgage under a power of sale contained therein, it was held that the attaching creditor could, by an action in equity, enforce his lien against the surplus proceeds of the sale remaining in the hands of the first 1 N. Y. Code Civ. Proc. § 2405. 2 N. Y. Code Civ. Proc. § 2406. 3 See Cope v. Wheeler, 41 N. Y. 303, 308 (1869); Matthews v. Duryee, 45 Barb. (N. Y.) 69 (1865); Bevier v. Schoonmaker, 29 How. (N. Y.) Pr. 411 (1864). The remedy of parties having a lien on the surplus, is by motion and not by action, and, except where the surplus is distrib uted by the surrogate's court, contract creditors are in no better position to assert any further equitable lien against moneys arising from the sale of a decedent's real estate, than they would be if he were living. Delafield v. White, 19 Abb. (N. Y.) N. C. 104, 109 (1887); s. c. 7 N. Y. St. Rep. 301. mortgagee.' And it has been held, that after the surplus has been paid, under an order of the court, to an assignee of the mortgagor, if the widow, who neglected to appear in the foreclosure, was not notified of the reference for the distribution of the surplus, she can maintain an action against such assignee to recover her dower in the surplus.' Where a surplus arises upon the foreclosure of a first mortgage, the claims thereon of a second mortgagee and of judgment creditors may be determined before a referee appointed by the court in which the judgment of foreclosure was rendered, and an action can not be maintained for that purpose.' A mortgagee on recovering a judgment of deficiency against the administrators of a deceased mortgagor, can not maintain an action to have his claim declared a lien on the surplus arising on the foreclosure of a mortgage on other lands given by the same mortgagor to another mortgagee; his only remedy, aside from that against the personal estate of the decedent, is by an action against the mortgagor's heirs or devisees; if they are insolvent, the court may direct the surplus to be held and applied to the judgment.* $749. Recovering surplus wrongfully paid. It is believed that where surplus moneys have been paid to a person not entitled thereto, under an order irregularly obtained, the court has authority by a summary proceeding to compel such person to restore the fund thus irregularly obtained without the proper order of the court." $750. Application for surplus moneys.-In New York, on filing the referee's report of the sale, "any party to the suit, or any person who had a lien on the mortgaged. premises at the time of the sale, upon filing with the clerk where the report of sale is filed a notice, stating that he is entitled to such surplus moneys or some part thereof, and 1 Wiggin v. Heywood, 118 Mass. 514 (1875). * Matthews v. Duryee, 45 Barb. (N. Y.) 69 (1865). 3 Fliess v. Buckley, 90 N. Y. 286 (1882). Fliess v. Buckley, 24 Hun (N. Y.) 514 (1881); aff'd 90 N. Y. 286. Burchard v. Phillips, 11 Paige Ch. (N. Y.) 66, 70 (1844). |