Bradley Winslow, Assignee, etc., of Nathan Whiting, a Bankrupt, Respondent, v. William Clark, Appellant

Bradley Winslow, Assignee, etc., of Nathan Whiting, a Bankrupt, Respondent, v. William Clark, Appellant. An assignee in bankruptcy acquires the equity of redemption of the bankrupt in his real estate, subject to an outstanding mortgage. Where the mortgage is foreclosed without making the assignee in bankruptcy a party, his right to redeem is not impaired. He may enforce it as against the purchaser at the mortgage sale, as his grantor. The purchaser at the mortgage sale or his grantee becomes, as to the assignee in bankruptcy, mortgagor in possession, and is a necessary party to an action to redeem. The assignee in bankruptcy cannot maintain a personal action against the mortgagor, or the purchaser at the mortgage sale, for the value of the equity of redemption as upon a conversion. Such a case is not within the thirty-fifth section of the bankrupt law. (Submitted December 21, 1871; decided January 16, 1872.) Appeal from a judgment of the General Term of the Supreme Court in the fifth judicial district, modifying a judgment entered upon the report of a referee, dismissing plaintiff’s complaint. This action is brought by plaintiff, as assignee in bankruptcy of Nathan Whiting, asking that defendant be required to convey to him certain real estate, or, in case that any was sold, he be adjudged to pay the value thereof. Nathan Whiting was declared a bankrupt on the 14th March, 1868. Plaintiff was appointed assignee May 11,1868. Defendant was the owner of a mortgage upon certain of the bankrupt’s real estate, of $2,000, upon which there was unpaid about $500. He commenced a foreclosure on the 27th April, 1868. The bankrupt was a party to the foreclosure; plaintiff was not. A judgment was obtained August 1,1868. Defendant became the purchaser at the sale, and entered into possession. Subsequently he conveyed to William Babcock. Upon the day of, and after the sale, the summons in this action was served. The referee found, as matter of law, that plaintiff was not bound by the foreclosure, but had a right to redeem; that this action could not be treated as one to redeem, as defendant’s grantee was not a party; that plaintiff could not recover the value of the premises or its proceeds.- He, therefore, dismissed complaint. The General Term modified the judgment as follows: “ If the plaintiff shall, within twenty days after notice of this judgment, enter into a stipulation admitting that the sum of $500 was, on the 9th day of August, 1869, due on the mortgage executed by Samuel D. Whiting to Horace H. Adams for $5,000, mentioned and referred to in the complaint in this action, and shall execute and deposit with the clerk of Jefferson county a deed, executed and acknowledged in due form of law, quitclaiming to William H. Babcock, the grantee of said respondent, all his (said plaintiff’s) title and interest as assignee in bankruptcy of Hathan Whiting, in and to the premises covered by the $2,000 mortgage from Uathan Whiting to Samuel D. Whiting, as described and set forth in the complaint, that then the judgment in this action and the report of the referee, and from which the plaintiff appeals, shall be so far modified as to require the defendant to pay to the plaintiff the sum of $1,700, that being the value of the said premises, less the $500, with interest from the 6th day of January, 1869, the time of the commencement of this action, amounting, in all, to the sum of $1,819.73, and that the plaintiff have judgment and execution for that amount. “ If the plaintiff shall comply with the foregoing conditions, then the said judgment be so modified, without costs to either party, as against the other. “If the plaintiff shall neglect or refuse to stipulate and to execute and deliver a deed of conveyance, as hereinbefore directed, then, in that case, the judgment in this action be affirmed, with costs.” Hubba/rd <& Wright for appellant. Hammond & Winslow for respondent. Where the facts are stated, the court is to give such relief as the parties are entitled to, whether asked for or not in the prayer of the complaint. (Marquat v. Marquat, 2 Kern., 336; Armitage v. Pulver et al., 37 N. Y., 494; Jones v. Butler, 20 How., 189; Code of Procedure, § 275.) [MAJORITY — Rapallo, J.] Rapallo, J. The defendant made an ineffectual attempt to foreclose the mortgage which he held upon the property of the bankrupt. At the time of the commencement of the foreclosure suit, the equity of redemption was vested, by operation of law, in the plaintiff, and he was not made a party to the proceedings. The foreclosure, therefore, was of no effect as to him, and his equity of redemption remained in full force. The defendant purchased at the foreclosure sale, and resold the premises to one Babcock, who was in possession at the time of the commencement of this action. Babcock was chargeable with notice of the rights of the plaintiff, and took subject thereto. He acquired only the title of the defendant, who was mortgagee in possession, and entitled only to hold until payment of the amount due upon the mortgage, which was proved by the referee to be not exceeding $500. The plaintiff was entitled, upon this state of facts, to maintain an action to redeem. But the present action was not properly framed for that purpose. Babcock was a necessary party. He was not made a party, and the objection was properly taken by the answer. The complaint was properly dismissed for this reason. (Dias v. Merle, 4 Paige, 259.) We think the court erred in modifying the judgment so as to render a personal judgment against the defendant for the value of the property, less the amount due on the mortgage, as upon a conversion of the property by the defendant. There was no conversion of the interest of the bankrupt, or of the plaintiff, in the property in dispute. This interest remained intact, accessible to the plaintiff by the proper remedy, and wholly unaffected by the attempted foreclosure. (Watson v. Spence, 20 Wend., 260; 10 Paige, 20; 3 Rob. Sup. Ct., 448; 3 B. Ch., 360.) I am not aware that an owner of an equity of redemption in real estate, which has been sold under a foreclosure to which he was not a party, has ever been allowed to recover against the mortgagee, or the purchaser at the mortgage sale, a personal judgment for the value of his interest in the mortgaged premises. Substantial justice was probably done by the judgment, as modified at the General Term; but I am unable to find any principle or precedent upon which it can be sustained. The thirty-fifth section of the bankrupt law does not aid the case. That section merely authorizes the assignee to recover from a party to whom the bankrupt has made a fraudulent sale or transfer of his property, either the property so transferred or conveyed, or the value thereof. Here there was no transfer or conveyance of the real estate in question from the bankrupt to the defendant, but a mere attempt by the defendant to foreclose a valid pre-existing mortgage, which failed to bar the equity of redemption, by reason of the omission of the defendant to make the assignee in bankruptcy a party to the foreclosure suit. The judgment at General Term should be reversed, and that entered on the report of the referee affirmed, with costs. All concur, except Gbovek, J., not voting. Judgment accordingly.