Case Name: De Ruyter vs. The Trustees of St. Peter's Church, and others
Court: New York Court of Chancery
Jurisdiction: New York
Decision Date: 1848-02-21
Citations: 2 Barb. Ch. 555
Docket Number: 
Parties: De Ruyter vs. The Trustees of St. Peter’s Church, and others.
Judges: 
Reporter: Barbour's Chancery Reports
Volume: 2
Pages: 555–559

Head Matter:
De Ruyter vs. The Trustees of St. Peter’s Church, and others.
Where a person who has an equitable interest in a building erected upon premises belonging to another, by having advanced money for the erection thereof, is in possession of the premises, under an agreement with the owner, at the time of the execution of a mortgage thereon to a third person, and continues in possession down to the time of the sale of the premises, by a master, under a decree obtained in a suit brought to foreclose such mortgage, the complainant in the foreclosure suit, and the purchaser ai the master’s sale, are bound to take notice of the equitable rights of the tenant, if any such exist; such possessbn being constructive notice to them of his rights.
The equitable claim of the person in possession, under such circumstances, will not be cut off by the foreclosure of the mortgage, and the sale of the premises, unless he w%s made a party to the foreclosure suit. And he may still enforce such claim against. the -mortgaged, premises-,, in. the hands of the purchaser sat« the master’s sale.
Where it does not appear that a person wno was in possession of mortgaged premises claiming to have an equitable interest'therein,-prior to the mortgage, was a party to a suit brought-to foreclose such mortgage, the purchaser at the master’s salewillbe -.presumed to have bid upon the property- with-reference to such claim ofithe tenant jin possession ;,.and it. will be"presumed, that..the .amount of the,- proceeds- óf the sale were diminished pro tanto.
Accordingly, the tenant will have no "claim upon the surplus moneys arising from the sale bf the mortgaged premises; under the'decree of foreclosure; -such proceeds nbt ‘having been. .produced by a sale of the equitable, interest ;of'the tenant in the ; premises.
Whether a parol agreement, made by the trustees of an incorporated religious society, with an individual, for the right to use the real estate of the corporation, and an • advancement of money-for the erection - bf -buildings on such-real estate;.and the . taking, posscssion of the premises pursuant to- such agreement, wilt give to such , personi an equitable interest in the -permanent .use .and possession of the premises, without rent 1 Qucere.
Where a person has an equitable lien upon the surplus moneys, arising from the -saie of mortgaged premises under.a decree óf foreclosure, his proper course is to deliver notice of his- claim, to the- master who makes the sale,-or.-to file.it- with the •clerk in-.whose-office the surplus.moncys are deposited-by the.master. . Or in case an order of reference has been entered, upon the.application of some other claimant, before he is aware of his rights, he should then go before the master, upon the reference, and present and establish his claim there. And where he neglects to do so, without any excuse, the court will not settle his right to such surplus moneys, upon petition.
This was an appeal, by the petitioner Mary Ann Ely, from an order of the vice chancellor of the first circuit, denying the appellant’s petition with costs. ' The petitioner stated, among other things, that she was one of’the members of a religious society devoted to the education and .amelioration of the condition of the children of.poor and .indigent parents;; .that about five-years ¡before - the giving-.,of the mortgage-upon the ’house and lot. in Bar¿Iay-streét,in the city of’New-York, to the complainant in this cause, the trustees of St. Peter’s church, - a religious corporation which then was the owner of ¡the ¡-lot, represented-to hen tliafcthe building which $ the- corporation was about to erect upon the lot was to be used as a schoolhouseifor poor children; and that it might be occupied as such by her, or any other .member, of the-society-to which she belonged, .who was i willing.; to occupy the same as a school .house ; .that, in consequencenf such .representations, she advanced to the treasurer, of the corporation $3750,,to assist in , the erection of the said house; that the moneys .so advanced by,her were received and* accepted,by .the. trustees, .under an agreement - or. under-, standing that-the house .was to be used and .occupied by her, and other members.of.the .society to which, she belonged, for the purposes of a school; .and .that the moneys so advanced by her were-actually applied and expended, by the trustees, in the erection .and completion of- such school house; The petitioner further stated, that.upon. the .completion of the house5 possession thereof was delivered to her, to, be used by her, and her associates for, the purpose of- a school,, and thatshe-, so- used the same, pursuant to .her agreement with .the. trustees, up, to the time of. ¡the sale, thereof. under the decree, of iforeclosure .in this cause; ¡that upon the sale .the premises produced a,surplus of about $2500 ; that the corporation had become' insolvent,' and, previous to the master’s -sale, had. made an assignment of all its property.to trustees.-for the payment of its debts; .and that-the assignees, and Eliza Gallagheiy Alice Lalor and others, who were judgment. creditors of the .corporation, had filed their claim= to , the .surplus moneys. She therefore-pyayed for an-order directing the payment .of. the.surplus moneys to her, or .for such other relief in the premises as she might be entitled to., The plaintiffs in the two judgments, who were named in the petition, had notice of the presentation .thereof, and appeared by. their counsel and putin affidavits-stating their claims to the surplus moneys,- as judgment creditors -.of the .corporation. They aho showed that at the time .the petition was, sworn to, no proceedings had taken place before the master; so that the-petitioner might have come, in and proved, her .lien before him, if she had in.reality;any valid olaim to the.surplus money?.
J. E. Develin, for the appellant.
L. Livingston, for the respondents.

Opinion:
The Chancellor.
The equitable interest of the appellant, m the property sold under the decree in this cause, if she had any, was prior to the execution of the complainant's mort gage. And as her petition states that she was in possession of the premises at that time, under her agreement with the trustees of the corporation, and down to the time of the sale by the master, the complainant and the purchaser at the master's sale were bound to take notice of her equitable rights, if any such existed; such possession being constructive notice to them. (Chesterman v. Gardner, 5 John. Ch. Rep. 29. Grimstone v. Carter, 3 Paige's Rep. 421. Gouverneur v. Lynch, 2 Idem, 300. Brown v. Anderson, 1 Monro's Rep. 201. Tuttle v. Jackson, 6 Wend. Rep. 226, and cases there cited.) Her equitable claim upon the property, therefore, was not cut off by the foreclosure and sale, unless she was made a party to the foreclosure suit; and she may still enforce it against the house and lot, in the hands of the purchaser, who bought the same at the master's sale with constructive notice of all the equitable rights which her advance of the $3750, and the taking possession of the premises under the alleged agreement with the trustees of the corporation, gave her. It does not appear by the petition, or otherwise, that the appellant was a party to the foreclosure suit. The purchaser, therefore, must be presumed to have bid upon the property with reference to her claim to an equitable interest therein prior to the giving of the mortgage, and at the time of the sale, and that the amount of the proceeds of the sale was diminished pro tanto. For this reason she has no claim upon these surplus moneys; which have not been produced by the sale of her equitable interest in the premises. It is not necessary, therefore, to inquire whether a parol agreement with the trustees, and the advancement of her money and taking possession pursuant to such agreement, could give her an equitable interest in the permanent use and possession of real estate, without rent, where the trustees with whom she dealt could not themselves sell their interest in the estate without a previous order of the chancellor. (Laws of 1817, p. 241, § 1.)
Again; if the complainant had any equitable lien upon the surplus moneys in this case, which I think she had not, her proper course, under the rule of this court, was to deliver the notice of her claim to the master who made the sale, or to file it with the clerk in whose office the surplus moneys were deposited by the master. Or, in case an order of reference had been entered, upon the application of some other claimant, before she was aware of her rights, she still was authorized to go before the master, upon the reference, and to present and establish her claim there. (Hulbert v. McKay, 8 Paige's Rep. 654.) That course was still open to her when the petition in this cause was sworn to; and no reason is staled in her petition for subjecting the other claimants to the expense of coming hereto oppose her application for the surplus moneys, upon affidavits. The vice chancellor, therefore, upon being satisfied that the petitioner had no equitable lien upon the surplus moneys, might very properly have charged her with those expenses.
The order appealed from must be affirmed, with costs.