Manchester Federal Sav. and Loan Ass'n v. Emery-Waterhouse Co.

• Decision Date: 18 August 1959
• Docket Number: EMERY-WATERHOUSE
• Citation: 102 N.H. 233,153 A.2d 918
• Parties: , 4 A.F.T.R.2d 5416, 59-2 USTC P 9648 MANCHESTER FEDERAL SAVINGS & LOAN ASSOCIATION v.CO. et al.
• Court: New Hampshire Supreme Court

Page 918

153 A.2d 918

102 N.H. 233, 4 A.F.T.R.2d 5416, 59-2 USTC P 9648

MANCHESTER FEDERAL SAVINGS & LOAN ASSOCIATION v. EMERY-WATERHOUSE CO. et al.

Supreme Court of New Hampshire.

Argued June 2, 1959.

Decided Aug. 18, 1959.

Booth, Wadleigh, Langdell, Starr & Peters and Charles J. Dunn, Manchester, for plaintiff.

Maurice P. Bois, U. S. Atty., Concord, and Alexander J. Kalinski, Asst. U. S. Atty., Manchester, for United States of America.

Shaines & Brown, Portsmouth, Paul V. Brown, Portsmouth, orally, for Samuel Hurwitz Co. and Atlantic Distributing Co.

Griffin, Harrington & Brigham, Portsmouth, Charles J. Griffin, Portsmouth, orally, for Katherine Ogg and Christine O. Mahar.

T. Casey Moher, Dover, for Emery-Waterhouse Co. and Manchester Supply Co., Henry M. Fuller, Portsmouth, for Rockingham Electrical Supply Co. and Gerald W. Berounsky, Joseph E. Michael, Jr., Rochester, for Weston Palmer, and Samuel A. Margolis, Manchester, for Daniel P. Creed Co., furnished no briefs.

DUNCAN, Justice.

Under well-established principles, surplus funds in the hands of a mortgagee, after foreclosure of a power of sale mortgage and satisfaction of the secured indebtedness and expenses, are the property of the mortgagor, subject however to encumbrances and liens existing at the time of foreclosure. Such liens attach to the surplus proceeds in equity, in the same order of priority and with the same effect as they bound the mortgaged premises before the foreclosure. Markey v. Langley, 92 U.S. 142, 145, 23 L.Ed. 701; Wiggin v Heywood, 118 Mass. 514; Smart v. Burgess, 35 R.I. 149, 85 A. 742. Thus the surplus after foreclosure stands in the place of the debtors' equity of redemption and is subject to the pre-existing liens, which attach thereto. Spaulding v. Quincy Tr. Co., 313 Mass. 752, 49 N.E.2d 251; Antonellis v. Weinstein, 258 Mass. 323, 154 N.E. 850. See Roberge v. Cyr, 84 N.H. 204, 205, 147 A. 901.

The lien of the United States for taxes arose on October 8, 1957, upon assessment (26 U.S.C.A. § 6322), and attached to 'all property and rights to property, whether real or personal,' belonging to the taxpayers, George T. and Christine O. Mahar. 26 U.S.C.A. § 6321. Since the plaintiff's mortgage was foreclosed prior to assessment of the taxes, the lien is upon the interest of the taxpayers in the surplus funds now held by the clerk of court.

As previously indicated, that surplus is also charged with other liens arising out of pending actions against the taxpayer George T. Mahar, and with a second mortgage which is junior to certain of the prior attachments and expressly made subject to them.

However not all liens prior in time are entitled to priority over the lien of the United States. 26 U.S.C.A. § 6323 provides that the lien of the United States for taxes 'shall not be valid as against any mortgagee, pledgee, purchaser, or judgment creditor' whose liens antedate the tax lien. 26 U.S.C.A. § 6323. With the exceptions thus stated, the lien of the United States takes priority. United States v. City of New Britain, 347 U.S. 81, 74 S.Ct. 367, 98 L.Ed. 520.

In these proceedings, the United States concedes that its lien is junior to that of the mortgagee Ogg, whose mortgage secures the payment of $2,500 and interest. It denies however that any attaching creditor holds a lien which is entitled to priority over the lien of the United States. As we understand the law upon the subject, the United States is correct in its position.

RSA 511:55 provides that attached property 'shall be holden until the expiration of thirty days from the time of rendering a judgment * * * in favor of the plaintiff on which he can take execution * * *.' The lien is lost by failure to levy execution within the thirty days. Murphy v. Hill, 68 N.H. 544, 44 A. 703. Thus it is plain that the attachment liens once held by New Hampshire Supply Company and by Weston Palmer expired prior to October 8, 1957, by reason of the failure to levy execution within thirty days after judgments were entered in their respective actions.

Four other creditors of George T. Mahar, namely, Emery-Waterhouse Company, Manchester Supply Company, Rockingham Electrical Supply Company, and Daniel P. Creed Company, made attachments which antedated both the foreclosure sale and the lien of the United States in actions which are now pending and marked continued for judgment. These creditors are not judgment creditors under the federal statute, since they have neither taken judgment nor perfected their inchoate attachment liens. United States v. Security Trust & Savings Bank, 340 U.S. 47, 71 S.Ct. 111, 95 L.Ed. 53; United States v. City of New Britain, 347 U.S. 81, 88, 74 S.Ct. 367, 98 L.Ed. 520.

It is apparent from what has been said that the mortgage of Katherine Ogg is prior to the lien of the United States. The latter lien has priority over the liens of the four creditors mentioned in the preceding paragraph. The liens of these creditors however have priority over the mortgage lien by virtue of the provisions of the mortgage. Accordingly a sum sufficient to satisfy the mortgage indebtedness to Katherine Ogg should be set apart as free from any claim of the United States. Cf. Southern Ohio Savings Bank & Trust Co. v. Bolce, 165 Ohio St. 201, 215, 135 N.E.2d 382. This sum will represent underlying interests of both George T. and Christine O. Mahar as joint tenants. Only the interest of the former is subject to the four undischarged attachments, to which the mortgage is junior; and his homestead right is exempt as against the attaching creditors. RSA 480:4. This right is in 'fifteen hundred dollars' worth of his homestead or of his interest...