N. Y. SUPREME COURT.

#### William H. Tator agt. Ebenezer Adams, appellant, and John Mesick and others, respondents, impleaded with others.

*Referees—their power in proceedings to distribute surplus moneys.*

In proceedings to distribute surplus moneys a question of fraud may be investigated before the referee, and every question may be examined tending to show the equities of the claimants.

*Third Department, General Term, February,*1880.

*Before*Leabhed, P. *J.,*Boaedmah *and*Bookes, *JJ.*

Appeal from order of Mr. justice Osboen, allowing exceptions to report of J. Rider Cady, Esq., referee in surplus-money proceedings. The claimant and appellant, Ebenezer Adams, had a mortgage upon the premises upon the sale of

*356which, under a prior mortgage, the surplus moneys arose. It Was conceded that this mortgage was the first lien upon the surplus moneys; that the draughtsmen of this mortgage through mistake, inserted in it a clause reserving to the mortgagor a life estate in the mortgaged premises; that neither mortgagor nor mortgagee intended to have any such reservation in the mortgage; that the draughtsmen in preparing the mortgage, copied the description of the mortgaged premises from a deed executed by the father of the mortgagor to him, in which the father reserved to himself a life estate in said premises and, generally, it was conceded, that as between mortgagee and mortgagor, the facts proven before the referee established a case for reformation of the mortgage.

After the giving and recording of the mortgage the several respondents on this appeal obtained and had docketed in Columbia county clerk’s office (in which county said mortgaged premises are situated), judgments against said mortgagor and owner of the equity of redemption.

Upon the hearing before the referee in said surplus-money proceedings the several respondents, claimed (1) that a referee in surplus-money proceedings had not jurisdiction to hear and determine the question as to mutual mistake in appellant’s mortgage, or to grant him any relief in regard thereto (2); that the appellant’s mortgage could not be reformed so as to affect or exclude the lien of the several judgments docketed in favor of respondents against said mortgagor after the recording of the mortgage and prior to said surplus-money proceedings, and that said judgments were liens upon said life estate reserved to said mortgagor, to the exclusion of the lien of appellant’s mortgage; that his mortgage was a lien simply upon the reversion.

*Oornelms*Esselstyn, for appellant,

cited *Thomas on Mort*gages, 379; *Mutual Life Insurance Company*agt. *Bowen*(47 *Barb.,*618); *De Forest*agt. *Farley*(62 *N. Y.,*628); *Livingston*agt. *Mildrum*(19 *N. T.,*440); *Beekman*agt. *357
      *Gibbs*(8 *Paige,*511); *Atlantic Savings Bank*agt. *Hetterick*(3 *Hun,*209); *Mutual Life Insurance Company*agt. *Salem*(3 *Hun,*117); *Sleight*agt. *Reed*(9 *How.,*278 ; *S. C., affirmed,*18 *Barb.,*159); *Buchan*agt. *Sumner*(2 *Barb. Ch.,*165); *Smith*agt. *Jackson*(2 *Edw.,*28); *Halstead*agt. Hal*stead*(55 N. Y., 442); *Shafer*agt. *Reilly*(50 N. Y., 61); *Bergen*agt. *Snedeker et al.*(21 *Alby. Law Journal,*54).

*A. Frank B. Chace,*for respondent,

cited *King*agt. *West*(10 *How.,*333) ; *Huested*agt. *Dakin*(17 *Abb.,*137); *Union Savings Bank*agt. *Osley*(4 *Hun,*657); *Bush*agt. *Tilley*(49 *Barb.,*599); *Cady*agt. *Patten*(55 *Barb.,*466); *Seaman*agt. *Hogeboom*(3 *Barb.,*215: *S. C.,*21 *Barb.,*404); *Dwight*agt. *Newell*(3 *N.*Y. 185).

Per Curiam.

Although there had previously been some doubt as to the powers of referees in proceedings to distribute surplus moneys, the decision in *Bergen*agt. *Snedeker et dl*(21 *Alby. L. J.,*54) has settled the matter. It is held, and wisely held in that case, that a question of fraud may be investigated before the refereeand it follows, by analogy, that every question may be examined tending to show the equities of the claimants. In the present case there is no doubt that the clause in question was inserted by accident and mistake. In an action for the purpose the mortgage would be reformed. There is no need of such an action to determine the rights as to these surplus moneys. They can be determined as well in the present proceeding. If the mortgage could be reformed as between mortgagor and mortgagee, then the liens of subsequent creditors would not prevent the reformation. Judgment, creditors have no better rights than the judgment debtor in such respects, and, therefore, these judgment creditors are not entitled to resist the equity, which, in this case, appears in favor of the mortgagee.

The order of special term must be reversed and the exceptions to the referee’s report overruled, and an order entered *358according to his report, with ten dollars costs and printing disbursements to the appellant against the respondents.

Decision of general term:

*“*Order reversed, with ten dollars costs and printing disbursements, and exceptions to referee’s report overruled, with ten dollars costs. Report of referee confirmed.”