
    John J. Phelan, as Receiver of the American Fur Company, Plaintiff, v. J. Murray Downs et al., Defendants.
    (Supreme Court, Albany Special Term,
    May, 1900.)
    1. Diversion — Following moneys which can be identified.
    Where the secretary of a mercantile company pays its moneys,' without authority from it, as a down payment upon his bid on property sold in foreclosure, a receiver of the company may, after the sale has failed, recover the amount of the bid from the referee, as it is not the business of a mercantile company to deal in real estate, and the referee has given and the company has received no value for the money.
    2. Same — Equities.
    Where, after the sale has failed, there is a resale at a price which satisfies the mortgagee’s demand, the equity of the company to recover the payment is greater than that of a purchaser of the equity of redemption to retain it, as it cannot be deemed a surplus on foreclosure and the company is under no obligation to benefit the purchaser of the equity of redemption.
    The action was brought by the plaintiff as receiver of the American Fur Company, appointed in dissolution proceedings, to recover of the defendant Downs, individually and as referee in foreclosure, an alleged unauthorized payment of $6,000 made to him by Henry F. Gillig, secretary of the said American Fur Company, as a partial payment of his bid at a sale, on February 11, 1897, in an action brought by Garrett A. Van Allen against James R. Duncan, the American Fur Company and others to foreclose a mortgage on premises formerly belonging to said company. The defendant, the First National Bank of Albany, acquired its interest in the following manner. On February 19, 1894, it recovered a judgment for $20,996.16 against the George O. Treadwell Company, which was then the owner of the mortgaged premises; the mortgage to Van Allen then constituting the only lien on the premises. On January 4, 1897, the sheriff sold the mortgaged premises upon an execution issued under said judgment, and the bank bought the equity of redemption for $15,000, receiving a sheriff’s certificate of sale which was duly recorded on the same day.
    Nussbaum & Coughlin (Lewis E. Carr, of counsel), for plaintiff.
    Bailey & Dugan (J. Newton Fiero, of counsel), for defendants Downs, as referee and individually, and The First National Bank, of Albany.
   Betts, J.

The defendant Downs was appointed referee to sell premises Nos. 480 and 482 Broadway, in the city of Albany, in an action to foreclose a mortgage. The defendant, The First National Bank of Albany, was the owner of the equity of redemption in these mortgaged premises at the time of sale. By the terms of sale announced by the said Downs, as referee, the purchaser was required to pay fifteen per cent, of the purchase money to the referee at the time and place of sale. The premises were bid off February 11, 1897, by the defendant, Henry F. Gillig, for the sum of $40,000.

The defendant Gillig was at that time secretary of the American Fur Company, of which the plaintiff, John J. Phelan, is now receiver. Gillig paid this $6,000 required by the terms of sale to the referee at that time, with funds taken from the American Fur Company without authority.

The purchaser by said terms of sale was required to complete his purchase by paying the remaining $34,000 to the referee on the 15th day of February, 1897. Gillig did not pay the balance of the purchase price at that time, nor at any other time, although notified so to do by the referee. The premises were subsequently put up by the referee under a new notice of sale, and were sold for a less amount, i. e., $29,850, a deed delivered to the purchaser at that sale, and the proceeds thereof first applied to the payment of the mortgage debt, costs and expenses of the sale, and a considerable surplus remaining was paid into court and still remains undistributed.

The $6,000 still remains in the hands of the referee, he having been directed by an order of the court in the foreclosure action to-retain that sum until a further order of the court.

John J. Phelan, subsequently to these transactions, was appointed receiver of the American Fur Company and directed to bring this action.

This action is brought for a judgment directing the defendant, as referee, to pay to the plaintiff, as owner thereof, the said sum of $6,000, and asking judgment of this court to restrain the defendant from paying this sum of $6,000 to any defendant or any other person.

The defendant Downs, as referee or individually, asserts no claim to this $6,000.

The defendant, The First National Bank of Albany, claims it is entitled to this fund by reason of being the holder of the equity of redemption at the time of sale.

The $6,000 was deposited by the referee in the First National Bank of Albany, and still remains there to his credit.

.The question presented here is solely between the plaintiff and the defendant, The First National Bank of Albany.

The $6,000 was the money of The American Fur Company. It was taken from its deposit in bank. There is no dispute of that. Its business was mercantile, and did not embrace the buying of real estate. Gillig was not directed by it to buy the premises in question. So far as appears it was entirely a venture of his own. He had no authority whatever to take the funds of the company to make this purchase, or to pay for the premises, having made the purchase.

The plaintiff in the foreclosure action was paid and a surplus remains.

The $6,000 is no part of the surplus money remaining on the foreclosure of a mortgage. That is properly money remaining as the proceeds of a sale of the mortgaged premises, and after payment of plaintiff and costs of foreclosure and sale. There is only one completed sale in a mortgage foreclosure. The statute provides for a sale, not sales. The judgment directed a sale. §§ 1626, 1633, Code Civ. Proc.; Supreme Court Rules 61-64.

The referee recognized this by paying into court and reporting the actual surplus and by making a separate report as to this $6,000. The Court at Special Term also recognized this by approving of the referee’s action in regard to the actual surplus, and directing him to hold this $6,000 fund until its further order.

This $6,000 was a fund gathered by the way towards a sale, and is no part of the proceeds of sale. This fund might have been charged by the Court at Special Term with the extra expense made necessary by the bid of Gillig, but it did not do so, nor was any application apparently made for that purpose, and those expenses have now been paid and the amount thereof was not shown on this trial.

This $6,000, not being a surplus on mortgage foreclosure, it follows that the defendant, The First National Bank of Albany, as the owner of the equity of redemption in the mortgaged premises has no statutory lien on it or claim to it.

Now as to the equities between the plaintiff and the defendant, The First National Bank of Albany.

This $6,000 belongs to the American Fur Company, or its receiver, and should properly go towards discharging its debts, or be divided among its stockholders,, unless a superior equity to it has been shown by the said First National Bank of Albany.

While the action of Gillig in obtruding himself into the judicial sale apparently has injured the defendant, yet it was through no fault shown of the American Fur Company, to whom the money belonged. This is not a contest between Grillig and The First National Bank of Albany. It does not even appear in this case to what extent Grillig’s act did reduce (if any) the actual surplus, as the referee under the direction of the court abandoned Grillig’s bid and readvertised the premises. So that the measure of loss in the price obtained for these premises would be the difference between the amount bid by the next highest bidder to Grillig and the $29,850 for which premises were sold, the amount of which difference does not appear.

The American Fur Company was under no obligation to bid on this sale or to create a fund to satisfy the claim of The First National Bank of Albany against these mortgaged premises. If the bank thought that $29,850 was not the full value of the mortgaged premises it should have made the purchaser pay more or taken the premises itself. This it did not do, and, having failed to protect its rights at this judicial sale, it cannot now come into court and make good its loss from the fund wrongfully taken from the American Fur Company.

The American Fur Company received no value whatever for this $6,000 wrongfully taken from it. It has stopped its transfer by the party to whom it was paid without authority by its secretary.

Money thus diverted can be followed at the suit of its rightful owner and restoration made where the parties in whose possession it is found have parted with no value for it. American Sugar Defining Company v. Fancher, 145 N. Y. 552; Roca v. Byrne, id. 182, and cases cited.

The defendant, The First National Bank of Albany, parted with no value for this $6,000, nor did the referee.

The $6,000 should be returned to the plaintiff, and a judgment may be entered accordingly. ".......

Judgment accordingly.  