Flachs v. Kelly

Walker, J. Appellant claimed under a junior mortgage on the premises in controversy. Roth and Keller held the first mortgage on the property, and exhibited a bill to foreclose, and obtained a decree at the March term, 1861, for the sale of the premises, on default in the payment of the money. The property was sold under the decree, and bid in by them on the 3rd day of the following June, in full satisfaction of the decree and mortgage. Appellant, at the same time, obtained a decree for the sale of the premises, to satisfy his mortgage, which authorized him to redeem from the prior mortgage, or any sale which might be made under the decree for its foreclosure. To the bill filed by appellant, all persons having an interest in the premises were made parties. Roth and Keller satisfied their decree by bidding off the property at $1,815.42, and then received a certificate of purchase. Appellant, on the 21st day of May, 1861, caused the premises to be sold under his decree, and became the purchaser at the sum of $875.78, which satisfied his decree. Afterwards, and one day before the expiration of one year from the sale on Roth and Keller’s decree, he redeemed the property from their sale by paying the purchase money and interest, to the master in chancery, and took a certificate of redemption as mortgagee and grantee, which was recorded. Chatten, at the October term, 1860, and after both mortgages were recorded, recovered a judgment against the mortgagors, for $845.86. He afterwards sued out an execution, which he had levied upon the same premises, and on the 28th day of July, 1862, paid into the hands of the sheriff $979.85, to redeem the premises from the sale under, the decree foreclosing appellant’s mortgage, which he refused to receive. He then filed this bill for an injunction to prevent the sale under the execution, or to have the premises sold, and the proceeds applied in payment of the various debts, in the order in which they became liens on the property. A temporary injunction was allowed, a demurrer was afterwards filed to the bill, which on a hearing was sustained, the injunction dissolved, and the bill dismissed. This proceeding is prosecuted to reverse that decree. Did the payment of that sum by Chatten, necessary to redeem from appellant’s sale, operate as a redemption so as to authorize a sale by him, freed from incumbrance by Roth and Keller’s mortgage, decree or sale ? Or did the redemption by appellant from their sale, enure to his benefit, so as to require a redemption from both sales ? It is insisted, that by that redemption, appellant satisfied Roth and Keller’s decree, released the premises from that lien, and acquired no benefit by the transaction, but all the benefit accrued to Chatten. That it was a redemption made under the statute, and had precisely the same effect as if it had been redeemed by the mortgagors. That it was the exercise of a purely legal right, to which no equity can attach. On the contrary, it is insisted that although the forms adopted were those given by the statute, still, in equity, it had the effect of substituting appellant to all the rights of the prior mortgagees. Independent of the provisions of the statute authorizing redemptions on the foreclosure of mortgages, such would have clearly been the effect. 2 Story’s Eq., sec. 1427; Bank of United States v. Peter, 13 Pet. 234; In the matter of Coster, 2 John. Ch. 503. In Alabama it has been held, that a junior mortgagee may pay a prior mortgage, and then foreclose both mortgages, or he may foreclose his junior mortgage by making his senior mortgagee a party. Cullum v. Erwin, 4 Ala. 452; Chambers v. Martin, ib. 477. It has been held, that where a second mortgagee pays the first mortgage, if equity requires it, the law will presume that the latter assented to the use of all his securities, in order to compel payment to the former. 1 Hilliard on Mortg. 227. It is also there said, that premises, subject to a mortgage, an attachment, and a second mortgage subsequent to both, and the first mortgagee brings his bill to foreclose, making the mortgagor and second mortgagee parties, and obtains a decree, and the attaching creditor obtains a judgment and levies an execution on the premises, and pending the time limited for a foreclosure and less than six months after the levy the junior mortgagee redeems the first mortgage, it was held that he was subrogated to all of the equitable rights of the elder mortgagee, and could hold the land, as against the execution creditor, until reimbursed the amount paid. In support of the doctrine, Downer v. Fox, 5 Washb. 388, is cited. The last case referred to, fully recognizes the rule, that when a junior incumbrancer redeems from a prior lien, that intermediate or subsequent incumbrancers, in equity, must refund the redemption money, or pay all liens anterior to theirs before they can enforce their claim upon the property. In that case, the money was paid to the clerk, who no doubt was by the practice in that court, like our master in chancery, the proper receiving officer. No difference is perceived in this respect, between that payment and the case at bar. It would seem that a payment to the master authorized to receive the money, is in effect the same as if paid to the prior mortgagees. Nor is it believed, that the statute authorizing a redemption from decrees of foreclosure changed the equitable rights of parties to make a redemption, at any time before the statutory period has expired. Appellant in this case had an equitable right, independent of the statute, to redeem from the first mortgage, and to be substituted to the rights of an assignee, and as such to be reimbursed the money paid for that purpose. It is eminently just that such a rule should obtain. If such were not the rule, why require the second mortgagee to be made a party to a foreclosure, by the first ? When thus made a party, he may certainly redeem after decree, and prevent a sale of the premises, and hold the property, subject to other mortgages. The fact that he is made a party does not operate to give his redemption any additional efficacy. It is based upon its inherent justice, and from the equitable necessity of the case. If it was otherwise, in a large number of cases it would be impossible for a junior mortgagee to secure his debt, as the first mortgagee might refuse to assign his mortgage on its payment. Or if not made a party, and he afterwards filed a bill and was permitted to redeem, on the same principle it would inure to the benefit of liens junior to his, as it is the law and not the decree which gives the right to be substituted upon making the redemption. There can be no wrong in requiring Ohatten to remove all incumbrances prior in date to his judgment, before he can subject the land to its payment. He was junior in time, and must be postponed in payment. Nor does he even have any right to complain of the least hardship, as he now occupies the same position which he did when he acquired his lien. He has performed no act to change his position, and it would be inequitable in the extreme to permit him to avail himself of the vigilance and large outlays of another, to obtain an unjust advantage. The decree of the court below is reversed, and the cause remanded. Decree reversed.