Thompson v. Hemenway

Mr. Justice Ricks delivered the opinion of the court: The contention of appellants is, that the Moline State Savings Bank, which foreclosed the $6000 mortgage and purchased the property at the sale, and Porter Skinner, the assignee thereof and testate of appellees, who received the assignment of said certificate of purchase from said bank, were parties complainant in the suit of the Rock Island National Bank et al. against the J. S. Keater Lumber Company and appellants and other persons, and are bound by the provisions of the decree entered in that suit; that the effect of the sale under the decree in that suit was to vest in appellants, who were the purchasers at that sale, title to the premises both under the mortgage foreclosed and under the lien of appellants’ judgment in the Federal court and also of the interests in the premises held by the various parties to the suit; that the decree in that suit is res judicata as to rights of the parties in the premises; that the decree of foreclosure of the Moline State Saving's Bank’s mortgage was entered on July 8, 1899, after appellants had become the purchasers at the sale under the decree in the suit of the Rock Island National Bank et al. against the Keater Lumber Company et al., and that said decree, under which appellees claim title, was had and entered without appellants being made parties thereto, and that the only effect of such decree and sale was to vest in Porter Skinner, under the master’s deed, an equitable assignment of the mortgage of the Moline State Savings Bank. Appellees deny that the Moline State Savings Bank was a party to the decree in the foreclosure of the Deere blanket mortgage at the suit of the Rock Island National Bank and others, and say that, if it shall be held that said bank was a party to said proceeding, the decree therein was only binding upon said bank, and those claiming through or under it, as far as the matters in that case were actually litigated; that the rights of the Moline State Savings Bank under the mortgage through, which appellees claim title were in no manner in question in that suit, and that the decree did not and could not make the lien of the Deere blanket mortgage superior to the lien of the prior mortgage held by the Moline State Savings Bank; that the judgment in favor of appellants in the United States Circuit Court was not and could not be enforced by a decree of the State courts, and that all the title that appellants got must depend upon and relate to the Deere blanket mortgage, which was a junior mortgage to that of the Moline State Savings Bank, and that under it appellants could only obtain the right of redemption from the mortgage through which appellees claim. It therefore becomes material to first inquire whether the Moline State Savings Bank was a party to the foreclosure proceedings under the Deere blanket mortgage. , While it is true that some of the bank officers say that they do not think Judge Wilkinson was actually employed by the bank to enter its appearance and' prosecute and join it in the prosecution of the bill in that case, it does appear that Judge Wilkinson, at the time the second amended bill was filed, in January, 1893, signed the bill as solicitor for all the parties complainant, including the bank; that Mr. Charles F. Hemenway, its cashier, and Mr. Porter Skinner, who was president of the bank, were also parties complainant, and a copy of the note, marked “Exhibit M,” which the bill alleged belonged to the bank and was secured by the Deere blanket mortgage, was in the handwriting of Mr. Hemenway, the cashier of the bank. Judge Wood, one of the attorneys of the Moline State Savings Bank, who foreclosed the mortgage through which appellees claim, testified that about the time he filed the bill to foreclose that mortgage, which was in December, 1893, he knew that the Moline State Savings Bank was a party to the foreclosure proceeding in the other case and discussed the matter with the officers of the bank, and the record shows that a decree was not entered in the former proceeding until November, 1896, so that the officers of the bank, and its attorney, Judge Wood, had notice, more than three years before the termination of the suit, that it was a party, and so far as the record or evidence discloses it remained a party to it, and without any effort to dismiss or any protest, until the final decree and during the appeal of the case to this court. Not only did it remain a party to the suit with the Rock Island National Bank, under the Deere blanket mortgage, until the final determination thereof, but the record also shows that the proceeding for the foreclosure of its own mortgage was suspended and no decree taken until after the affirmance by this court of the decree under the Deere blanket mortgage. By the allegations in the bill of the Deere mortgage foreclosure proceeding the validity and lien of appellants’ judgment in the Federal court were put directly in question, the complainants in their bill alleging that if appellants had any lien it was subordinate to the Deere mortgage, and that mortgage on its face purported to be subordinate to the mortgage of the savings bank, and it was a matter of material interest to the savings bank that appellants’ judgment, which was prior in date to both, should be declared subservient to the lien of the Deere mortgage, as that would also make it subservient to the lien of the savings bank mortgage. The Deere mortgage case was earnestly contested at every stage, and the officers of the savings bank, as individuals, were materially interested in the proceeding and parties complainant to it, and it is incredible that they would be ignorant of the fact that the bank which they represented and which claimed to have an interest in the fund secured by the mortgage was a party thereto. It was not necessary that the savings bank should specifically or particularly employ Judge Wilkinson and authorize him to join it as complainant in the bill with the Rock Island National Bank in the foreclosure of the Deere mortgage in order to bind it as a party. It is sufficient that the suit was prosecuted in its name with its knowledge, and decree rendered therein after such knowledge without objection on its part. (2 Ency. of Pl. & Pr. 682; 24 Am. & Eng. Ency. of Law,—2d ed.—737; Logan v. Trayser, 77 Wis. 579; Carpenter v. Carpenter, 99 N. W. Rep. 395.) The witness Hemenway, upon whom appellees rely to show that Judgé Wilkinson was not the counsel of the savings bank and was not authorized to join it as complainant in said foreclosure proceeding, did not remember that he himself was a party to said proceeding, or that the Moline State Savings Bank, of which he was an officer and which was granted material relief, was also a party. From the whole record we are of opinion that the Moline State Savings Bank was a party complainant to that suit and was actively concerned with it. In the foreclosure suit it was expressly found by the court that appellants had recovered a judgment against the J. S. Keater Lumber Company in the United States Circuit Court for the Northern District of Illinois on March 31, 1888, for $15,568.99, and that the same became a lien upon all real estate, lands, tenements and hereditaments of said lumber company, including the lands described in the bill of complaint as amended, and that said judgment continued to be, and was at the time of said decree, a lien upon all lands of said lumber company and the lands described in said bill. In that finding lay the chief bone of controversy in that case. It was contended by the complainants in that case that the judgment in the Federal court entered in Cook county was not a lien upon lands in Rock Island county, that execution had not issued on the judgment in time to preserve the lien, and that the circuit court could not in that proceeding enforce the lien and make it superior to the lien of the blanket mortgage. The circuit court decided adversely to those contentions and the Appellate Court and this court sustained it. No cross-bill was necessary in that case to enforce the lien of appellants’ judgment. It was proper to do so under their answer. It was so held by this court in that case. Appellees say that the only benefit or title appellants obtained to the land in question by virtue of the proceedings in the foreclosure of the Deere mortgage was the right of redemption under that mortgage; that the title of appellants cannot relate back to the date of their judgment because, first, the decree in that case does not purport to enforce the judgment, and second, the judgment has never been enforced by the levy of an execution and sale thereunder in the manner prescribed by the statute of the United States. We cannot agree with the contention that the court did not, in that decree, purport to enforce the judgment. It finds that it became a lien on March 31, 1888, that it continued to be a lien and was a lien at the time of the entry of the decree, and while it is true that the decree says that the lien of the judgment should “be transferred to and become a lien upon and against the said proceeds of the sale,” that language is only used in connection with the manner of the sale. It was made manifest to the court that it was important to sell the land, not subject to but for the judgment as well as the mortgage debt, and the order is that it be sold “free and clear of and from the lien of said judgment * * * as well as from the lien of said * * * mortgage.” We think this order not different from that ordinarily made where a judgment creditor is made a party to the foreclosure proceeding. If it can be said to have had any effect upon the judgment of appellants in addition to its enforcement, it was to make the lien of it specific as to the property involved in that suit. No case has been cited,—and we should be averse to follow it if it were,—in which it is held that where a judgment creditor is brought in to a foreclosure proceeding and the order of sale is for the satisfaction of both the judgment and the mortgage, the sale is not in execution of the lien of the judgment. There was nothing before that court but the question of liens,—the lien or # liens created by the mortgage and the lien of appellants’ judgment. If a prior judgment creditor should be made - a party to a foreclosure proceeding by a mortgagee who took his mortgage subsequent to the judgment lien, and the sale was decreed for the satisfaction of both the mortgage and the judgment lien, it would seem puerile to urge that the only title the purchaser obtained was by virtue of the mortgage lien. The power of a court of chancery to adjust the rights of various lienholders if one of them is such as gives the court jurisdiction, and to dispose of the property affected by the lien to the benefit of the holders according to priority, has been so long recognized that it would seem to be now beyond question. When the court has jurisdiction it acts upon the substance and not upon the form, and preserves instead of destroying rights. If it had the power at all to sell the property under the judgment lien in favor of appellants, then it had the power and we must hold that it intended to preserve to appellants the benefit of that sale. The savings bank being a party complainant to that proceeding is bound by it as far as the chancellor or this court could bind it. Whether the judgment of appellants in the United States Circuit Court could be enforced by a decree of a State court without a cross-bill, or whether it could have been enforced by a decree of a State court at all in any manner, or whether the only manner in which the lien could be enforced was by execution issued on the judgment and levy on the land, were matters properly involved in that suit, and might have been, if they were not, raised and determined in it, and as to them that decree is res judicata. (Hamilton v. Quimby, 46 Ill. 90; Kelly v. Donlin, 70 id. 378; Gage v. Ewing, 107 id. 11; Scates v. King, 110 id. 456.) What was done there was done at the request and prayer of the savings bank, and it, or those claiming under it, will not be heard to say that they are not bound by it. There is much force in the argument of appellants that appellees are estopped to assert any lien of the savings bank mortgage as against this sale. The savings bank mortgage was dated December 8, 1891, was due in one year, with interest payable semi-annually in advance, and conditions of forfeiture on failure to pay interest. At the time the savings bank asked to be made a party complainant in the foreclosure of the Deere mortgage (January 31, 1893,) the mortgage it held was wholly past due and unpaid, except the first semiannual payment of interest, which was paid, presumably, at the time the mortgage was made, so that when the savings bank became a co-complainant with the Rock Island National Bank et al. in the foreclosure of the Deere mortgage, the mortgage of the savings bank could have been foreclosed and its rights adjusted in the same proceeding. Appellants invoke the well recognized rule that the doctrine of res judicata embraces not only what had actually been determined in the former suit, but also extends to any other matter properly involved and which might have been raised and determined in it, and contend that as the savings bank was a party and suffered a decree ordering the sale of the property in fee without having its rights under its mortgage saved by the terms of the decree, it is now estopped to say that its lien was superior to the lien of the blanket mortgage. Appellees answer this by saying that it did' not lie within the powers of the circuit court to decree the lien of the blanket mortgage a prior lien to the lien of the savings bank mortgage, which was prior in date and recording. Whether the rule of res judicata can be carried to the extent contended for by appellants seems to us not controlling in this case, and we do not decide it. We think it clear that the chancellor, in the prior foreclosure proceeding, did determine that appellants had a lien upon the land under their judgment; that that lien dated back to the date of the judgment in 1888, which was prior to both mortgages; that the sale was as much to satisfy that lien as it was to satisfy the lien of the second mortgage, and that the proceeds of the sale, which in this case happened to be the land itself, did not amount to as much as the judgment in favor of appellants, which was the first lien, and that therefore there was nothing realized under the sale upon the second or blanket mortgage. We also hold that for the preservation of the title of appellants and in determining who is possessed of the superior or paramount title as between appellants and appellees, appellants’ title will and should relate back to the date of their judgment. Rorer on Judicial Sales, sec. 366; 5 Cruise on Real Prop. 510; Kruse v. Scripps, 11 Ill. 98. We regard the power of the circuit court to enforce the lien of the judgment in favor of appellants under the proceeding to foreclose the blanket mortgage as settled by the decree in that case, and its affirmance by this court on that record, on the principle of res judicata. The doctrine of relation is necessarily applicable to the preservation of the title claimed under such sale. Then, if we do not go to the extent of holding that the lien of the savings bank mortgage, under which appellees claim, was lost or made subservient to the lien of the second or blanket mortgage by the proceedings through which appellants purchased the land, it leaves appellees with their mortgage still subject and subservient to the lien of the judgment in favor of appellants as it was before any of the proceedings were begun, and the right of the savings bank under its said mortgage was to redeem from the sale made by virtue of the lien of appellants’ judgment. Before any decree had been taken in the foreclosure of the savings bank mortgage appellants had become the purchasers of the land at the sale under the prior decree. Their right, then, to the land by virtue of that sale was fixed, and appellees could have exercised their statutory right of redemption through that sale, which included no part of the moneys or fund represented by the second or blanket mortgage. This they did not see fit to do, but proceeded to take a decree of sale without appellants being made parties to the proceeding or dismissing them therefrom after they had answered. We are of the opinion that that proceeding did not give them any right as against appellants, and certainly not a superior right or a superior title to that of appellants. We are also of opinion the circuit court was in error in making its holdings m favor of appellees and rendering judgment for them. The judgment of the circuit court will be reversed and judgment entered in this court for appellants, as we think no different result should or could be had by remanding the cause. Judgment reversed. Mr. Justice Hand, dissenting.