Hart v. Beardsley

Sullivan, C. J. This was an action by Atlee Hart against H. C. Beardsley, Sarah J. Beardsley and George B. Owen, trustee, to foreclose a real estate mortgage. No evidence was taken at the' trial, but upon the facts actually or constructively admitted by the plaintiff in his pleadings the court found in favor of defendants and gave judgment dismissing the petition. The case was submitted in this court on an agreed printed abstract which is in substance as follows: December 31, 1894, H. C. Beardsley and wife executed to Geo. B. Owen, trustee, a mortgage for f1,800 on land in Dakota county, Nebraska, which mortgage recited that it was a first mortgage. This mortgage was drawn by the plaintiff in this case, Atlee Hart, the written portion being [147] in Ms handwriting, and was recorded on January 8, 1895. December 29, 1894, Beardsley and wife executed another mortgage for $500 to the plaintiff herein, Atlee Hart, which is the mortgage here in question. This mortgage was also drawn by Hart, is in his handwriting, and recites that it is “subject and second to a mortgage hereinafter to be given for eighteen hundred dollars,” and it is alleged in defendants’ answer, and not denied by plaintiff, that this clause referred and was intended to refer to the $1,800 mortgage given to Geo. B. Owen, trustee, and the plaintiff accepted his mortgage with that understanding; and after the $1,800 mortgage had been delivered to Owen, this second mortgage was also filed for record on January 8, 1895, but prior to the other mortgage. October 6, 1899, Owen filed a petition in the district court of Dakota county seeking a foreclosure of his mortgage for $1,800, making Hart a party defendant and alleging that he, the said Hart, had or claimed to have some lien upon or interest in •the mortgaged premises, and.that such lien or interest was junior and inferior to the lien of the plaintiff’s mortgage. The prayer of the petition was that the $1,800 mortgage be adjudged to be a first lien, and for a decree of foreclosure. A summons was issued and served on Hart, who appeared, but failing to answer, was defaulted. Thereupon a decree was rendered, which recited that the mortgage of George B. Owen, trustee, was a first lien upon the premises here in question and “paramount and superior to any right, title, lien or interest in and to or against the same of any of the defendants” in said action; and also adjudged that in case the defendants in said cause should fail for twenty days from the entry of said decree to pay or cause to be paid to the said Owen the sum of $2,658, found to be due upon his mortgage, with interest and costs, the defendants, and all of them, should be foreclosed of all equity of redemption or other interest in the mortgaged premises, that said premises should be sold, and that an order of sale should be be issued to the sheriff commanding him to sell the premises and bring the proceeds into court. An order [148] of sale was issued by the clerk November 19,1900, and the premises were valued at the sum of $3,200. The register of deeds in making his return to the sheriff certified the Hart mortgage as a prior lien, and the appraisers in making their appraisement deducted it, together with a tax lien amounting to $246, from the gross valuation, and appraised the “interest of the defendants” in the action at $2,454. Neither party sought to have the appraisement set aside, and the plaintiff, Owen, as trustee, bid in the mortgaged premises for $2,800, with full knowledge of the deduction of the Hart mortgage, but in reliance upon the decree as fixing the rights of the parties, and without making any deduction for, or taking into account, the Hart mortgage. The sale was confirmed by the court without objection by either party, and a deed executed to Owen, who was given credit upon his bid for the amount due upon his mortgage. Hart neither claimed nor received any part of the proceeds of the sale. Prom these facts it clearly appears: (1) that the Hart mortgage was in truth a junior lien; and (2) that Owen bought the property without intending to assume the lien, and in the belief that it would be divested by the sale. It is contended by counsel for Hart that the $500 mortgage having been deducted by the appraisers from the gross value of the land, it is still, notwithstanding the sale, a valid and enforceable lien. It may aid us in determining the question thus raised to inquire what is the meaning of a judicial sale. What does the court undertake to sell and what does the purchaser expect and intend to buy? If the sale is conducted on the theory that the real interest of the debtor, and of all the parties to the action, is the thing offered for sale, then the purchaser gets that interest, whatever it may be. But if the meaning of the transaction is that the thing offered for sale is the interest of the debtor as fixed and determined by the appraisers, then it may, with reason, be asserted that the deducted lien represents purchase money which the vendee can not rightfully refuse to pay. At the common law the thing offered at an execu [149] tion sale was tbe real interest of the debtor, and at a foreclosure sale the thing offered and sold, unless the decree otherwise provided, was every right, title and interest of all the parties to the action. Freeman, Executions, 301, 335; Jones, Mortgages, sec. 1654; Wiltse, Mortgage Foreclosures, sec. 577; Tallman v. Ely, 6 Wis., *244; Ames v. Storer, 74 N. W. Rep. [Wis.], 101; Young v. Brand, 15 Nebr., 601; 17 Am. & Eng. Ency. Law [2d ed.], 1010. In this state the rule of the common law upon this subject has not been changed. By section 499 of the Code of Civil Procedure it is provided that the sheriff or other officer selling realty on execution shall make to the purchaser “as good and sufficient a deed of conveyance of lands and tenements sold as the person or persons against whom such writ or writs of execution were issued could have made of the same, at the time they became liable to the judgment, or at any time thereafter.” And in the next section it is further declared that the sheriff’s deed “shall vest in the purchaser as good and as perfect an estate in the premises therein mentioned as was vested in the party, at or after the time when such lands and tenements became liable to the satisfaction of the judgment.” According to section 853 of the Code of Civil Procedure the effect of a deed given by a sheriff or other officer conducting a foreclosure sale is to “vest in the purchaser the same estate that would have vested in the mortgagee if the equity of redemption had been foreclosed”; and in said section it is further declared that “such deeds shall he as valid as if executed by the mortgagor and mortgagee, and shall be an entire bar against each of them, and all parties to the suit in which the decree for such sale was made.” These statutory provisions have been in no manner modified by the appraisement law, which was' designed to prevent a sacrifice of the debtor’s property by providing that it should not be sold upon judicial process for less than two-thirds of the value of his interest as fixed by the appraisers. Watson v. Tromble, 33 Nebr., 450. An execution sale still vests in the purchaser the actual interest of the execution defend [150] ant in the property sold; and a foreclosure sale, in the absence of any reservation in the decree, still transfers to the purchaser every right, title and interest of all the parties to the suit. It has been uniformly held by this court that a wrongful deduction by appraisers is not prejudicially erroneous if the land sold for two-thirds of the real value of the debtor’s interest. Drew v. Kirhham, 8 Nebr., 477; La Selle v. Nicholls, 56 Nebr., 458; Bernheimer v. Hamer, 59 Nebr., 733; Peck v. Starks, 64 Nebr., 341. These decisions go upon the assumption that the thing sold is the real interest of the debtor, and that it will bring whatever it is worth, regardless of the appraisers’ estimate of its value. This is made plain by a simple illustration: A piece of land is valued by appraisers at $1,200. Á judgment amounting to $800, void for want of jurisdiction, is deducted as a prior lien. The land is then sold for $800. According to the decisions just cited, the debtor is not injured by the appraisers’ mistake, because it did not result in a violation of any right secured to him by the appraisement law. If the thing sold was merely the debtor’s interest as fixed by the appraisers, the error would, of course, be very prejudicial, for it is evident that if the land would bring $800 when sold subject to an $800 lien it would, but for the lien, bring $1,600. In the present case Owen, relying on the law and the decree of the court, made his bid and completed his purchase. He did not understand that the land was offered subject to the lien of the Hart mortgage. He assumed that it was the business of the appraisers to fix the value of the debtor’s interest, and that it was not their business to determine the extent of the interest or character of the title which would be offered for sale and which would pass to the purchaser by the order of confirmation. He supposed the Hart mortgage would be divested by the sale and that the error made by the appraisers would be harmless if it did not deprive the mortgagor of the specific right secured to him by the appraisement law. To hold, under these cir151 cumstanees, that the amount due upon the Hart mortgage is purchase money in the hands of Owen, impressed with a trust in favor of Hart, would be to ignore an obvious and conceded truth and to base our decision upon a palpable fiction. The parties to an action are, of course, conclusively bound by the adjudications of the court, but in this case there was nothing adjudged in favor of Hart and against Owen. There was no issue between them which the appraisers had jurisdiction or authority to decide. The function of the appraisers was to fix the value of Beardsley’s interest in the mortgaged property, and they had no other duty, power or function. The reasoning by which it is sought to prove that the mortgaged premises were sold subject to the Hart mortgage is altogether artificial and, as it seems to us, manifestly unsound. But it is said that some decisions of this court, such as Koch v. Losch, 31 Nebr., 625, and Nye v. Fahrenholz, 49 Nebr., 276, can not be reconciled with a decision affirming the judgment in favor of Owen. Whether this be so we will not now stop to inquire, but if it is true that the cases referred to by counsel are in conflict Avith the conclusion reached in this case, they are unsound and wholly indefensible. The judgment is Affirmed.