
    Irving Savings Institution, Plaintiff, v. Arthur E. Smith and Others, Defendants, Impleaded with Margaret J. Smith, Appellant, and Harris Solomon, Respondent. William F. Bantje, Trustee in Bankruptcy of Arthur E. Smith, Respondent.
    
      Default in not appea/ring on a/ reference in, proceedings to distribute surplus money — what terms should be imposed on. an application to hare the default excused, and the referee’s report set aside.
    
    
      ■ After'the referee, appointed in a proceeding to distribute surplus moneys arising on a foreclosure sale, had reported that a second mortgagee was entitled to the-entire surplus, a third mortgagee, who did not appear before the referee, although she had notice of the hearing, applied to have her' default excused and the report set aside. The. court granted the motion upon condition that the moving party would.file an undertaking to the effect that if she failed upon the rehearing to establish the validity and the priority of her mortgage overall other liens represented by parties who participated in the former hearing she would pay all costs and expenses of the rehearing, including stenographer’s, fees, and pay to the parties participating in the former hearing all losses and additional expense which they might suffer by reason of the delay occasioned by the rehearing.
    
      Held, that the court having in granting the rehearing necessarily reached the conclusion that the default was excusable, it was its duty to place the moving party in precisely the same position that she would have occupied if she had not made the default;
    That, as this could be done by requiring the moving party to pay the fees of the referee—including stenographer’s charges,, if any — and the fees of "witnesses incurred or paid intermediate the moving party’s failure to attend the hearing and the filing of the referee’s report, this was the only condition which the court should have imposed.
    Appeal by the defendant, Margaret J. Smith, from so much of an order of the Supreme Court, made at the New York Special Term and entered, in the office of the clerk of the county of New York on the 17th day of November, 1904, as imposes conditions upon the opening of a default in proceedings for the distribution of moneys arising upon the foreclosure of a mortgage.
    
      Frederick H. Kellogg, for the appellant.
    
      L. M. Isaacs, for the respondent Harris Solomon.
    
      Elmer E. Cooley, for the respondent trustee in bankruptcy.
   McLaughlin, J.:

Arthur E. Smith executed three mortgages upon real estate in the ..city of New York'—the first, for $75,000, to the plaintiff; the second, for $12,000, to one Solomon, and the third, for $11,198, to the appellant Smith. Subsequent to the execution of these mortgages mechanics’ liens were filed aggregating several thousand dollars — the mortgagor adjudged a bankrupt and a trustee in bankruptcy appointed. The plaintiff foreclosed its mortgage and after the payment of the amount due, including interest and costs, there remained a surplus of $13,580. Proceedings were thereupon taken by the appointment of a referee to ascertain and report the amount due Solomon or any other person who had a lien upon such moneys and the priority thereof. The appellant Smith claimed that the Solomon mortgage was invalid in whole or in part but, notwithstanding her attorney had notice of the hearing before' the referee, he neglected to attend. He claimed that his neglect in this respect was due to the fact that lie had an arrangement with attorneys representing, other lienors, by which the amount claimed to be due on the Solomon mortgage was to be reduced to such a sum that his-client would receive a substantial amount upon her mortgage. . At, the hearing before' the referee, the Solomon mortgage was allowed for the .full amount claimed, which exhausted the entire surplus. The referee having made a report, the appellant moved that the same be set aside, her default be excused, and a rehearing had. The • 1 . ■ (f motion was granted upon condition that she file ah undertaking of an approved surety company to the effect that if she failed' upon the rehearing .to sustain the validity of her mortgage and the priority thereof over all other liens represented by the parties who participated in the former hearing, then she would pay all costs and expenses of the.rehearing, including the reasonable charges of a stenographer to be employed by" the referee, and also pay to Solomon or any other of said parties all losses which they might suffer by reason of the. delayed payment of the surplus moneys occasioned by the rehearing and also all additional expense to which he or they might be put by reason thereof. The order also provided that Upon the rehearing all the evidence which had been taken Upon tbe prior hearing should stand and that the report’of the referee theretofore filed should stand as confirmed and conclusive.

The appellant appeals from so much off the order as imposes .conditions. .1 think the order, in so far as appealed from, should be modified by striking out the conditions • imposed, and inserting, in place thereof a provision ’requiring the appellant to pay the fees of the referee — including stenographer’s charges, if any — and the fees of witnesses incurred or. paid intermediate the appellant’s failure to attend the hearings and the filing of the referee’s report. The court, in granting the rehearing, necessarily reached the conclusion that the appellant’s attorney’s failure to attend before the referee was excusable. This being, so, the appellant ought to be put hi precisely the same position that she would have been had her attorney attended, but in doing this it would be unfair to impose the expense which was incurred after his failure to attend upon the other parties. These expense's, so far as appears, were. incurred in' good faith, and ought, therefore, to be paid by her. . By requiring the appellant to pay this expense all of the'parties are pláeed in precisely the same position which they occupied before the default-took place.

If 'the Solomon mortgage is' invalid, either in whole or in part,, then the appellant ought to be afforded an opportunity to show that, fact, and there does not seem to be any good reason why, under the-facts presented, she should be required to give an undertaking to pay all of the damages sustained, including expenses incurred by the - other parties to the reference. Not only this, but it is difficult fosee how she is given such an bpportunity under the order appealed from if the report of the referee heretofore filed * * * shall, stand as confirmed and conclusive.”

So much of the order as is appealed from, therefore, is modified' as indicated in this opinion and as thus modified affirmed, without: costs to either party.

Van Brunt, P. J., Patterson, Ingraham and Laughlin, JJ.,. concurred.

Order modified as directed in opinion and as modified affirmed,, without costs.  