Vineland Sav. & Loan Ass'n v. Felmey

Decision Date31 October 1950
Docket NumberNo. F--1278,F--1278
Citation79 A.2d 714,12 N.J.Super. 384
PartiesVINELAND SAVINGS & LOAN ASS'N v. FELMEY et al.
CourtNew Jersey Superior Court

John O. Milstead, Vineland, for the plaintiff (Milstead & McElroy, Vineland, attorneys).

Phillip P. Wodlinger, Millville, for petitioner Millville Nat. Bank.

Alfred E. Modarelli, United States Attorney, Newark.

HANEMAN, J.S.C.

The present action results from an application for surplus monies arising from a sale held in a mortgage foreclosure. The particular question concerns the priority of two judgment creditors of the mortgagors.

The Vineland Savings and Loan Association held a mortgage executed by and encumbering certain real estate owned by the defendants James and Dorothy Felmey. On the 9th day of March, 1950 the said Vineland Savings and Loan Association filed a complaint seeking to foreclose said mortgage, joining the Corn Exchange National Bank and Trust Company by reason of a judgment held by it against the said mortgagors, obtained in the District Court of Cumberland County, which was docketed in the office of the Clerk of Cumberland County on the 18th day of August, 1949.

Thereafter, and during the pendency of the foreclosure proceedings, the Millville National Bank obtained a final judgment against James and Dorothy Felmey in the District Court of Cumberland County on May 1, 1950, which judgment was docketed in the Cumberland County Court on June 22, 1950 and in the New Jersey Superior Court on August 2, 1950. On June 21, 1950 said real estate here involved was sold by the Sheriff of Cumberland County in connection with said foreclosure, resulting in a surplus of $561.06. The sheriff's deed is dated July 18, 1950 and was delivered to the purchaser a day or two after its date.

Execution on the judgment of the Millville National Bank was issued and levy made by the Sheriff of Mercer County on the said surplus monies then in the hands of this court on August 10, 1950. No further proceedings in connection with this levy were thereafter taken.

The levy was made in the following language: 'levy upon the rights and credits of James Felmey & Dorothy Felmey * * * upon all the right, title and interest of said defendants in and to all moneys deposited with the Superior Court of New Jersey, representing surplus moneys paid into said Superior Court by the Sheriff of Cumberland County, arising out of the sale of real estate conducted by said Sheriff of Cumberland County, in the matter of Vineland Savings and Loan Association vs. James R. Felmey, et ux., et als., Docket No. F--1278--49.'

On September 14, 1949 the said Corn Exchange National Bank and Trust Company assigned said judgment to the United States of America, which assignment was recorded in the Clerk's Office of Cumberland County on April 17, 1950. A transcript of said judgment was docketed with the Clerk of the Superior Court of New Jersey on July 13, 1950.

Neither the said Corn Exchange National Bank and Trust Company nor the United States of America have taken any proceedings, either by way of answer in the foreclosure or by way of issuing execution upon said judgment.

The Millville National Bank takes the position that it is entitled to be first paid out of the surplus monies prior to the United States of America by virtue of the levy and execution above referred to, under R.S. 2:26--137, N.J.S.A. This statute reads as follows: 'Whereas, other judgments, and recognizances, besides those, or some of those, by virtue whereof the sale aforesaid was made, might affect the real estate so sold, if no provision be made to remedy the same, and whereas, the persons who have not taken, or will not take out executions upon their judgments, or recognizances, ought not to hinder or prevent such as do take out executions from having the proper effect and fruits thereof, therefore, in any such case, the purchaser, his heirs and assigns, shall hold the lands, tenements, hereditaments, and real estate by him or her purchased as aforesaid free and clear of all other judgments and recognizances, whatsoever, on or by virtue of which no execution has been taken out and executed on the real estate so purchased.'

The United States of America, on the other hand, in effect assumes the position (1) that the property levied on is In custodia legis and hence not subject to levy; (2) at the time of levy the interest of the judgment debtor in the realty had been extinguished and that the surplus funds were personalty; and (3) the levy was upon the 'right, title and interest' (rights and credits) of the judgment debtor in the fund and as such was subject to the lien of its judgment.

In order for the Millville National Bank to succeed upon its theory it becomes necessary to first ascertain whether a levy may be made on property In custodia legis.

In Fredd v. Darnell, 107 N.J.Eq. 249 at page 253, 152 A. 236, at page 238 (Ch. 1930), the court said: 'It is a general rule that money or other property in the hands of an officer of a court is regarded as being In custodia legis, and in consequence ordinarily cannot be reached by execution in the absence of legislative authority. That rule appears to be based upon a necessity, incident to orderly judicial procedure, for any court which has acquired primary jurisdiction over property to continue the exercise of that jurisdiction free from embarrassments or conflicts with other courts arising from subsequent claims against the same property. Since a levy ordinarily embodies the elements of dominion and control of the property levied upon, such a levy upon property In custodia legis may seriously interfere with orderly administration by the primary tribunal. Accordingly the test of immunity of property In custodia legis may in general be said to be whether substantial confusion or embarrassment to the initial jurisdiction would result from the enforcement of process against the property by another tribunal.'

No confusion or embarrassment would be attendant upon a levy made as here, and hence the property is not immune from but is rather subject to such a levy.

The second and third arguments of the United States of America concern themselves not only with the character of the property involved but concurrently with the manner in which a priority may be obtained by a judgment subsequent in date over a judgment prior in date of recovery.

The priority which is accorded to a junior judgment over a senior judgment where a levy is made on realty results from R.S. 2:26---137, N.J.S.A. This statute, paraphrased, makes provision that the purchaser at a judgment execution sale shall obtain title free, clear and discharged from all other judgments and recognizances. The court, by analogy, determined that the mere issuance of execution and levy on real estate by a judgment creditor resulted in a priority for such judgment creditor over all other judgment creditors, regardless of the date of docketing, and that an actual sale thereunder was not requisite for such a result.

In Clement v. Kaighn, 15 N.J.Eq. 47 at page 57 (Ch. 1862), the court said: 'The statute, in terms, relates merely to the title which a purchaser by virtue of a sheriff's sale under an execution at law shall acquire. It declares that the purchaser under a sale by virtue of an execution issued upon a junior judgment shall hold the land clear of all judgments upon which no execution has been taken out and executed on said land. In effect that gives to the junior judgment, by virtue of which the land is sold, priority over the senior judgment upon which no execution hath been sued out and executed upon the land. But the design of the statute is to give to the plaintiff in the junior judgment upon which execution is first sued out 'the proper effect and fruits thereof.' The operation of the statute cannot, therefore, be limited to the case of a sale under the junior judgment, where no execution hath been sued out upon the senior judgment and levied upon the land. For if that were so, it would enable the plaintiff in the prior judgment to sue out and levy his execution upon such judgment after the levy under the execution upon the junior judgment, and thus defeat the express object of the statute by preventing the plaintiff in the junior execution 'from obtaining the effect and fruits thereof.' To give effect, therefore, to the statute, it is necessary to hold that the plaintiff in the junior judgment, by suing out and levying the first execution upon the land, acquires a priority of lien, which cannot be affected by any execution subsequently issued, nor by any mode in which the land may be sold. The issue of the execution upon the junior judgment and its delivery, duly recorded, to the sheriff, destroys the priority which was enjoyed by the older judgment, and transfers it to the junior judgment. It reverses the priority of the encumbrances, no matter in what mode the land may be sold. This, I think, must have been the result if there were no further provision upon the subject. But the statute further declares, that where sundry executions issue against the goods and lands of the same person, then the like priority and preference shall be given as is given in writs of execution against goods only, viz., they shall bind the property from the time that the writ, duly recorded, shall be delivered to the sheriff. Nix. Dig. 248, sec. 3, 4; 722, sec. 3.'

See also Riverside Building & Loan Ass'n v. Bishop, 98 N.J.Eq. 508, 131 A. 78 (Ch. 1925); Swift & Co. v. First National Bank of Hightstown, 114 N.J.Eq. 417, 168 A. 827 (Ch. 1933); Lippincott v. Smith, 69 N.J.Eq. 787, 64 A. 141 (E. & A. 1905).

Under a proper state of facts, therefore, a levy upon realty under a judgment may, in and of itself, succeed in establishing a priority in lien thereof.

One of the elements required to make such a priority effective under R.S. 2:26--137, 137, N.J.S.A. is that the property levied upon be realty.

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