GREEN, V. C.
Bill by Babbitt & Lawrence against Joseph McDermott and others.
Gilbert Collins, for complainants.
Mr. Fay, for defendant George Bliss.
Frank M. McDermott, for defendant Joseph McDermott.
Robert Allen, for defendant William W. Couover.
GREEN, V. C. This is a bill in the nature of an interpleader. Complainants, stating that they have certain moneys in their hands, which are held in the nature of a trust, and claimed by various parties, seek to have their duties as trustees declared, and the direction of this court made as to the disposition of the funds. Princess Radziwill held a mortgage on the Ocean Hotel property, at Long Branch, dated October 10, 1880, made by Warren Leland, Jr., and wife, to secure the payment of $55,000 on the 16th of October, 1885, with interest; the payment being afterwards extended to October 16, 1890. The mortgage contained the usual insurance clause, authorizing the mortgagee to pay insurance premiums, and to recover the amount with the mortgage debt. Warren Leland, Jr., and wife, executed another mortgage to John Fitch, which was dated October 19, 1880, to secure the payment of $4,500, which was assigned March 13, 1882, to the Central National Bank, by which it was assigned March 7, 1891, to the defendant George Bliss. Warren Leland, Jr., and wife, executed another mortgage to the Long Branch Banking Company, dated October 19, 1880, to secure the payment of $750, which mortgage was also assigned, March 24, 1891, to George Bliss. These two mortgages were concurrent. There were other mortgages, which did not affect the question involved here. December 6, 1889, Warren Leland, Jr., made an assignment for the benefit of creditors to Joseph McDermott, who qualified, and took possession of the property. The firm of Coudert Bros., of the city of New York, counselors at law, were the attorneys in fact, as well as counsellor the Princess Radziwill; and they employed the complainants to collect the mortgage spoken of, and a bill to foreclose the same was filed in this court January 20, 1890. Alfred Walling, Jr., was appointed a receiver in the cause March 31, 1890. The house was furnished for the accommodation of guests, and this personal property was in possession of McDermott, the assignee. The mortgage of the complainants covered only the real estate, and was under the control of the receiver. It was not found feasible to make the property productive under this joint supervision, but there was an opportunity to rent the property, furnished, for the summer mouths, and thus to obtain some income from it. On May 1, 1890, an agreement was made, as the result of a conference between the complainants, McDermott, Coudert Bros., and Louis Leland, the proposed tenant, by which, on the payment of a certain amount down, it was agreed that the receiver should be withdrawn, and that the assignee should be permitted to rent the property, real and personal, for the summer, to Louis Leland. The payments to be made by the assignee were as follows: In cash, $500, on account of the interest due on the mortgage of the Princess Radziwill; $247.50, for insurance premiums which had been already paid by Coudert Bros.; and to pay July 10, 1890, $875, on account of interest on the mortgage; and on August 10, 1890, the further sum of $1,375 on the same account. The first payment, of $747.50, was made by Joseph McDermott, assignee, to the complainants, immediately following the making of the agreement, and by them was paid over to Coudert Bros. McDermott, the assignee, leased the property to Louis Leland at a rental of 10 per cent. of the gross revenue of the property. He received from Leland the money to make the first payment above mentioned, and from time to time collected other amounts from him. On July 10, 1890, he made the second payment to the complainants contemplated by the agreement of $875; and on July 28, 1890, the receiver was discharged. Joseph McDermott, as assignee, August 9, 1890, sold all the property, subject to all liens, to John Slocum for $1,000, which Slocum paid. McDermott did not make the payment of $1,375, as stipulated to be paid on August 10th, because, Slocum having become the purchaser subject to all liens, such payment would have inured to his benefit, while by retaining it he held it for the benefit of the creditors. The master's report is dated November 26, 1890, and reports that there is due to the Princess Radziwill, on her mortgage, for principal, $55,000; interest thereon at the rate of 5 per cent. from June 1, 1889, $4,086.78; and the total amount due at the date of the report, $59,086.78. So that neither of the payments of $747.50 and $875 were credited as payments on account of themortgage. Mr. Babbitt, one of the complainants, explains this by saying that, of the $747.50 paid by him to Coudert Bros. $247.50 was to repay them for insurance premiums, and properly would form no proper item in the master's report. As to the other items, that he was himself at the time of the making of the roaster's report, in Mexico, and the only one cognizant of the details of the matter. That it was part of the agreement of May 1, 1890, that his firm was to receive $100, and the receiver $25, the first amount of which he has retained, and the other he has paid. At the time of the said agreement, Mr. Leland objected to carrying so much insurance, and Coudert Bros, undertook to have the policies of insurance canceled for him as reasonably as possible, and this was done. On Mr. Babbitt's return he paid to Coudert Bros, the additional sum of $168.84 on account of insurance, and on the trial the affidavit of Mr. Charles Coudert was submitted, without objection, showing that his firm had paid for insurance the amount of $247.50, and the further amount of $514.51. By deducting the $168.84 from the last-named amount, it would leave the sum of $345.67, which Coudert Bros, have not been specifically paid on account of insurance. These payments by the complainants, summarized, are as follows: Paid Coudert Bros., $747.50; Babbitt & Lawrence, fee, $100; the receiver, fee, $25; Coudert Bros., on account of insurance, $168.84; making a total of $1,041.34. As they received altogether from the assignee $1,622.50, it leaves a balance in in their hands of $581.16. The sheriff sold the property, March 11, 1891, to George Bliss, for $68,025. The amount due the complainants at the date of the sale for sheriff's costs, etc., was $61,274.89, leaving a surplus of $6,750.11, which the sheriff paid into this court; and on June 2, 1891, an order was made that the clerk pay this surplus to George Bliss, as the assignee of the two concurrent second mortgages. The bill states that $500 of the first payment was adjusted by the Messrs. Coudert and Mr. Bliss, but there is no evidence that that amount was credited on the interest, and Mr. Bliss says he never knew of it.
William W. Conover claims that he is entitled to the money in the hands of the complainants, on the ground that he was one of the sureties on an appeal bond of Warren Leland, Jr., in a suit brought by the Central National Bank, the holder of one of the second mortgages; that the debt involved in that suit was the same as was secured by that mortgage; and that having paid the debt, as such surety, he is entitled to be subrogated to the rights of the bank as mortgagee. He made this payment August 1, 1892, but the bank had assigned its mortgage to the defendant Bliss March 7, 1891. After that time, all rights of the bank as mortgagee ceased, and the debtor would have had the right to have had the amount received by the bank from Mr. Bliss for the mortgage deducted from the debt on which Mr. Conover was security, and any right which he may have after the payment of the debt would be against the bank.
Joseph McDermott, as assignee, claims that as he paid these moneys to the complainant for the purpose of reducing the mortgage debt of the Princess Badziwill, and, as they have not been so applied, he is entitled to the same. But the payment by the assignee of the two amounts was part of the scheme by which the property was to be made productive. He was to have the opportunity of using the real estate in connection with the personal property, which no one else had any control over. By doing so he was able to realize 10 per cent. of the net revenue of the property, of which he has paid these two amounts to Babbitt & Lawrence. It has not in any way affected his position as assignee. The amounts were really rental of the real estate, and not all of the rents which he agreed to pay therefor. He was under no obligation to any one to see that this rent was applied as a payment to reduce the amount of the Princess Radziwill's mortgage, nor did its not being so credited affect in any way the sum realized by him on his assigneeship. 1 do not see, therefore, on what ground he is entitled to this sum. Mr. Bliss is the purchaser of the equity of redemption, as well as the owner of the two second mortgages. He bought the property at the sheriff's sale, and, in consequence of these amounts not having been credited in the master's report, he was forced to pay that much more than he otherwise would. His right, both as mortgagee and as purchaser, to this money, would seem to be clear. He claims, however, by his counsel, to recover from these complainants, not only the amount of money they acknowledge to have in hand, but also $500 paid by them to Coudert Bros., which, it is insisted, has in no wise been accounted for in these proceedings; that the money was paid to the complainants on account of the interest; and that they should have seen that it was so appropriated and credited. The complainants were the counsel in the case, and there is nothing to attack their good faith in making this payment to Coudert Bros. The latter were the attorneys in fact of the owner of the mortgage, and undoubtedly would have made the proper application thereof, and, if it has not been done, will, without question, properly adjust it. They claim, as will be seen, to have paid to insurance companies $345.67 more than they have specifically received for that object, which would leave an apparent balance of $154.33 unclaimed in their hands, so far as the evidence in this case shows. I will advise a decree in accordance with these conclusions.