Kerr v. McCreary

Calkins, C. In the year 1888 William Kerr, since deceased, being the owner of the land in controversy, two lots in the city of Hastings, conveyed thé same to the defendant Willis P. McCueary, receiving therefor $1,500 of the purchase price in cash, and a mortgage signed by McCreary alone upon the same property to secure the remainder, $2,500. McCreary conveyed the property to one Stevens, and he conveyed to McCreary’s wife, the defendant Mary B. McCreary. Her deed was recorded September 27, 1890. Default having been made in the payment of a part of the debt, the mortgagee on October 16, 1891, instituted an action in foreclosure against McCreary, prosecuting the same to judicial sale, at which the mortgagee was the purchaser. He secured an order of confirmation in which the sheriff was directed to execute to him a deed .of the premises. A deficiency judgment was also obtained against the mortgagor, which was afterwards satisfied and released of record. In the petition for foreclosure, Mary B. McCreary was named in the title of the case as a defendant. Throughout the proceeding no other reference was made to her, and no relief was asked as against her. She was not served with summons, nor did she enter her appearance. This action was instituted by the plaintiffs, who are William Kerr’s grantees, in which they allege that the sheriff’s deed was duly executed and delivered, and that it was never recorded and has been lost. The plaintiffs further allege that they and their grantor entered into the possession of the property in March, 1893, the date of the confirmation, and that they have continuously thereafter remained in the open, notorious and adverse possession of the same under a claim of title. Plaintiffs prayed that the court decree them to be the owners of said property, and that the claim of defendants and each of them shall be removed, canceled and held for naught. The defendants filed separate answers, but we need to consider only that of Mary B. McCreary, who — 317 — alleged the facts above set forth regarding the foreclosure proceedings, and the obtaining by the plaintiffs of the title which was obtained by their grantor in the foreclosure proceedings. Plaintiffs contend that the purchaser at a judicial sale receives whatever title the mortgagor possessed at the time the mortgage was given; that the purchaser upon confirmation was entitled to possession even as against the mortgagor’s grantee, who was not made a party; and, further, by her deed from the mortgagor, Mary B. Mc-Creary obtained only the equity of redemption, that is, the interest remaining after the incumbrance has been paid, and that her only right now, or at any time, has been to redeem from the mortgage; that, notwithstanding the fact that she was not made a party in the foreclosure proceeding, that proceeding is not void as to her; and that the title passed to the purchaser and to his grantees subject only to the rights of Mary B. McCreary to redeem. The contention has support in the decisions of many courts in jurisdictions presumably where a mortgage is held to convey the iegal title. Such a rule is probably applicable also where one interested in the title and having the right to possession is properly made a defendant in the foreclosure proceedings, whereby upon foreclosure the purchaser acquires the right to possession. In such cases a subsequent lienor or perhaps the mortgagor’s grantee has only a right to redeem. Section 853 of the code provides that the sheriff’s deed, conveying property upon foreclosure, “shall vest in the purchaser the same estate that would have vested in the mortgagee if the equity of redemption had been foreclosed, and no other or greater; and such deeds shall be 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, and against their heirs respectively, and all persons claiming under such heirs.” The decisions of this court firmly establish that in foreclosure proceedings the pur — 318 — chaser at a judicial sale upon foreclosure of a mortgage acquires the title of all parties to the action, and nothing more. In Dodge v. Omaha & S. W. R. Co., 20 Neb. 276, it is said: “And we take it to be equally well settled that the rights of all persons not parties are wholly unaffected thereby (meaning by the judicial sale). Therefore the foreclosure of the mortgage, terminating in the sale, could Only affect the rights of the parties to the action. The purchase of the property by plaintiff was only the purchase of the title of the mortgagor at the time of the execution of the mortgage, and his right to redeem, leaving unaffected the after-acquired rights of the defendant.” The defendant had not been made a party to the foreclosure. It seems to the author that the phrase “at the time of the execution of the mortgage,” appearing above, as explanatory to the title acquired by the purchaser, was inadvisedly used. Such language is proper when used with reference to title superior to that of the mortgagor at the time of the execution of the mortgage, or where the mortgagor did not own all the title to the land mortgaged. It is apparent from the decision in Dodge v. Omaha & S. W. R. Co., supra, that the purchaser did not acquire all the title owned by the mortgagor at the execution of the mortgage, as the after-acquired rights of the railroad company remained unaffected. In Monroe v. Hanson, 47 Neb.30, it is said: “It is the general rule that no person can be affected by any judicial proceedings to which he is not a party, and a judgment takes effect only between the parties and gives no rights to or against third persons. * * * So a foreclosure is only effectual against those interested in the title who were parties.” The case last cited was a foreclosure of a mechanic’s lien, but under our statute the rights of interested parties and the necessity of making all interested parties defendants are the same in the foreclosure of mortgages. See, also, Green v. Sanford, 34 Neb. 363. In Eayrs v. Nason, 54 Neb. 143, it was said: “Appellant’s father was the owner of the legal title to the land upon — 319 — •which the mortgage foreclosed in that suit was a lien, and was therefore a proper and a necessary party to that suit.” The appellant as her father’s heir was entitled to redeem and have the title quieted in her, because her father was not made a party to the foreclosure proceeding, which was held void as to him. We have recently held that a decree affecting the title to real estate is absolutely void as to an interested party not served with process. Payne v. Anderson, 80 Neb. 216; Wagner v. Lincoln County, 80 Neb. 473. In Hayes County v. Wileman, 82 Neb. 662, we said: “The owner of the equity of redemption is an indispensable party to the foreclosure of a tax or other lien. Alexander v. Thacker, 30 Neb. 614.” We quite agree with the plaintiffs that by her deed, so far as the mortgagee was concerned, Mrs. McCreary acquired only an equity of redemption. In other words, she obtained the title which her grantor possessed. But this carried with it all rights incident to such title. She therefore had the right to pay the mortgage, and that right continues until it is either exercised or barred. The only way to bar that right, except by her voluntary act, is a foreclosure of the mortgage by proceedings wherein she is a party. At the time she received her deed and continuously thereafter she had the right to possession. The foreclosure proceedings did not deprive her of this right. There are numerous decisions, some of which art' cited by plaintiffs, pertaining to the rights' of mortgagees in possession. Such decisions are not in point. They refer to cases wherein the mortgagee is rightfully in possession. And, unless by special agreement to the contrary, the mortgagor or his grantee has the right of possession until ousted by a sale in foreclosure proceedings in which the one owning the right to possession is a party. During the lifetime of the mortgage it is a lien on all the interest of the mortgagor possessed by him at the execution of the mortgage, and the purchaser at the judicial sale acquires such title only in the event that the mortga — 320 — gor’s grantee to whom the equity of redemption has been sold has been made a party to the action. The defendant’s prayer was that she go hence without day, and that she be declared the owner, and that her possession be confirmed, and that she have such other and further relief as may seem meet. This, we think, was tantamount to a prayer that the title to said premises be quieted in the defendant. The district court so regarded it, and rendered a judgment decreeing the title quieted in her, confirmed her right to the immediate possession of the premises, canceled the plaintiff’s deeds, and dismissed the action. The plaintiffs contend that the maxim that he who seeks equity must do equity should be applied, and that the defendant should be required, as a condition of any affirmative relief, to pay to the plaintiffs the amount bid by their grantor at the foreclosure sale. Against this contention it is argued that the defendant was not seeking-affirmative relief; but the evidence, as we have seen, shows that at the time of the commencement of the action and for some four years prior thereto the premises had been in the possession of the plaintiffs and plaintiffs’ grantors, and the effect of a judgment in accordance with defendant’s prayer would be to quiet her title and eject the plaintiffs from the possession of the premises. This relief the court had power to grant; but in asking the same of a court of equity the defendant subjected herself to the rules governing the administration of relief in that jurisdiction. The meaning of the maxim invoked is said to be that, “whatever be the nature of the controversy between two definite parties, and whatever be the nature of the remedy demanded, the court will not confer its equitable relief upon the party seeking its interposition and aid, unless he has acknowledged and conceded or will admit and provide for, all the equitable rights, claims and demands justly belonging to the adversary party, and growing out of or necessarily involved in the subject matter of the controversy.” 1 Pomeroy, Equity Jurispru — 321 — dence (3d ed.), see. 385. “This principle is not confined to any particular kind of equitable rights and remedies, but pervades the entire equity jurisprudence, so far as it is concerned with the administration of equitable remedies.” 1 Pomeroy, Equity Jurisprudence (3d ed.), sec. 388. It is further suggested that the statute of 1907 (Ann. St., sec. 10873) prevents the application of this maxim. The provisions of that statute are that, when any lien or apparent lien on any real estate shall not be enforceable by lapse of time, the owner of such real estate shall be entitled to have his title thereto quieted against such unenforceable lien or apparent lien. It will be observed from a reading of this statute that it does not in terms forbid a court of equity from enforcing the maxim under consideration in the cases mentioned therein, and it should not be construed to authorize a court of equity to cancel an apparent lien without regard to conditions usually imposed in granting such relief. We therefore recommend that the judgment of the district court be modified so as to require the defendant, as a condition of the relief granted to her, to pay to the plaintiffs the amount bid at the foreclosure sale, with interest thereon from the date of said sale, except for the period during which the plaintiffs have had possession of the property. By the Court: For the reasons stated in the foregoing opinion, the cause is remanded to the district court, with directions to modify the decree so as to require the defendant Mary B. McCreary, as a condition of the relief granted to her, to pay to the plaintiffs the amount bid at the foreclosure sale, with interest thereon from the date of said sale, except for the period during which the plaintiffs have had possession of the property. Judgment accobdingly.