17 N.Y.2d 299, 217 N.E.2d 658, 270 N.Y.S.2d 604
Audino Ercolani,
Respondent,
v.
Sam and Al Realty Co., Inc., et al., Respondents, and Joseph
M. Vucker et al.,
Appellants.
Court of Appeals of New York
Argued March 23, 1966;
Decided May 5, 1966.
CITE TITLE AS: Ercolani v Sam
& Al Realty Co.
HEADNOTES
Mortgages--foreclosure--intervention by judgment creditors
of former owner--in action to foreclose mortgage and on motion to confirm
report of sale, Special Term has power to permit intervention by judgment
creditors of owner which conveyed property, allegedly by fraudulent conveyance,
to holder of equity of redemption--interest of judgment creditors is not
remote.
(1) In an action to foreclose a mortgage, on a motion to
confirm a Referee's report of sale, Special Term has power to permit
intervention by judgment creditors of the owner of real property which conveyed
the property, allegedly by a fraudulent conveyance, to the holder of the equity
of redemption.
(2) The Referee, although directed to sell "subject to
unpaid taxes", has paid such taxes contrary to the judgment of
foreclosure. Intervenors, claiming that such moneys
would become surplus moneys for satisfaction of their judgments, if their
action to set aside the conveyance as in fraud of creditors is successful, have
interests that are not too remote to permit their intervention so as to oppose
the motion to confirm.
Ercolani v. Sam & Al Realty
Co., 24 A D 2d 589, reversed.
SUMMARY
Appeal, by permission of the Appellate Division of the
Supreme Court in the Second Judicial Department, from an order of said court,
dated July 12, 1965, which affirmed an order of the Supreme Court at Special
Term (George M. Fanelli, J.), entered in Westchester
County, denying a motion by Joseph M. Vucker, Levy
Nesmith and Alma Nesmith for leave to intervene on plaintiff's motion to
confirm a Referee's report in an action to foreclose a mortgage on real
property and granting the motion to confirm the Referee's report. The following
question was certified: "Was the order of this court, dated
POINTS OF COUNSEL
Stephen Davis and Julius Hochstein for appellants. I. Any
creditor having an interest in surplus moneys, whether that interest be vested
or contingent, has the right to intervene in opposition to a motion to confirm
a Referee report of sale, where the Referee has violated the judgment and such
violation prejudices the interest of such creditor. (Goodell
v. Harrington, 76 N. Y. 547;
Eugene Nadelman, pro se, Robert J.
Hecker and Richard Katz for respondents. I.
Appellants were properly denied intervention. (Goodell
v. Harrington, 76 N. Y. 547; Goldberg v. Feltman's of
Coney Is., 205 Misc. 858.) II. The purchasers at the sale are not proper
parties upon this application. III. The Referee acted properly in making
payment of the taxes. (Termansen v. Matthews, 49 App.
Div. 163; Wesselman v. Engel Co., 309 N. Y. 27; Kronenberg v. Ellenville Nurseries & Greenhouses, 22 Misc 2d 247.)
OPINION OF THE COURT
Burke, J.
Applicants to intervene appeal, pursuant to leave granted by
the Appellate Division, Second Department, from an order of that court which
affirmed an order of Special Term, Westchester County, granting plaintiff's
motion to confirm the Referee's report of sale in this mortgage foreclosure
action, and denying appellants' motion to intervene. The following question was
certified: "Was the order of this court, dated July 12, 1965, correctly
made?"
Appellants Nesmith are judgment creditors of defendant Sam
and Al Realty Co., Inc., and appellant Vucker holds a
promissory note made by that defendant upon which an action has been commenced.
It is alleged by the appellants that, while Nesmiths'
action was pending, Sam and Al Realty Co., Inc., conveyed the real property
here in question to a newly formed corporation with no consideration for the
transfer. The grantee *301 corporation is White Plains Realty Co., Inc., the
present holder of the equity of redemption in the mortgage foreclosure action
before us. The transfer allegedly rendered Sam and Al Realty judgment proof.
There is presently pending a fraud on creditors action brought by the
appellants. If it is successful, it will put Sam and Al Realty in the position
of succeeding to White Plains Realty's claim to surplus money as holder of the
equity of redemption in the foreclosure proceedings.
The foreclosure judgment ordered the Referee to sell the
realty "subject to unpaid taxes". The sale was held and after the
purchase by the highest bidder the Referee paid the mortgage claim, as well as
other costs of the action and expenses of the sale. At this point there was a
sum of $4,158.27 remaining in the hands of the Referee. This sum was then used
by the Referee to pay taxes and tax liens against the property. A motion to
confirm the Referee's report of the sale was brought on at Special Term, the
holder of the equity of redemption, White Plains Realty, joining with the other
parties in support of the motion. The appellants sought to intervene and oppose
the motion on the ground that the Referee wrongfully considered the taxes as
expenses of the sale, in direct contradiction to the directive of the judgment
of foreclosure that the sale be made "subject to unpaid taxes". They
contend that the tax payments are properly surplus money to which the holder of
the equity of redemption is entitled. Special Term noted that the appellants
did not assert claims as direct creditors of the record holder of the equity of
redemption. For these reasons, and because the holder of the equity did not
object to the alleged misconduct of the Referee, the court ruled that it was
"without power to permit applicants to intervene in this action at this
time." The Appellate Division affirmed on the ground that the appellants'
interest is "too remote from this foreclosure action."
The question of law involved in this appeal is whether or
not the appellants' interest is too remote for the Trial Judge to have allowed
their intervention. The Judge did not deny their application in the exercise of
his discretion, but ruled that he did not have the power to allow the
intervention. The Appellate Division affirmed this ruling, again not on his
proper exercise of discretion, but rather on the ground that as a matter of
*302 law their interest was too remote. This is the question certified for
appeal.
The case of Goodell v. Harrington
(76 N. Y. 547 [1879]) is here directly in point. There the trial court allowed
an intervention by a judgment creditor of the equity holder's grantor. The intervenor alleged that the conveyance was fraudulent as to
his claim. The Trial Judge set aside the mortgage sale and ordered a resale,
and the Court of Appeals held that the Trial Judge had the power to allow the intervenor's motion for his interest was sufficient because
of the fact that the property constituted a fund from which he might satisfy
his judgment if he prevailed on the fraudulent conveyance claim.
The Goodell case is controlling.
The intervenor in both cases is a creditor of the
person who has conveyed the subject property, allegedly by a fraudulent
conveyance, to the holder of the equity of redemption. In the present case it
appears that the payment of taxes by the Referee contrary to the foreclosure
judgment was an act beyond his power, and that the appellants have such an
interest under Goodell as would allow them to
intervene in the proceedings to oppose this unauthorized payment.
The courts below were in error in holding that there was no
power to allow any of these appellants to intervene. Therefore, the motion
should be granted and the order confirming the Referee's report should be set
aside.
The order of the Appellate Division is reversed, with costs,
and the certified question answered in the negative.
Chief Judge Desmond and Judges Fuld,
Van Voorhis, Scileppi, Bergan and Keating concur.
Order reversed, with costs in all courts, and matter
remitted to Special Term for further proceedings in accordance with the opinion
herein. Question certified answered in the negative.
Copr. (c) 2008, Secretary of
State, State of New York.
N.Y. 1966.
ERCOLANI v. SAM & AL REALTY CO.
END OF DOCUMENT