Veach v. Schaup

Stockton, J. The first question raised in the argument by complainant, is, as to the validity of the proceeding in foreclosure by Milner against Catharine Gilmer. It is claimed that Schaup, as the subsequent grantee of the ten acres, and assignee of the equity of redemption, should have been made a party to the suit, and that not having been ’made a party, he is not bound by the decree. Whether or not it was necessary to make a subsequent incumbrancer a party to the proceedings in foreclosure, has not been determined by the Code, nor so far as we are informed, has the question been adjudi* cated by this court. Under the act of 1848, section 4, in force when this mortgage was given, the mortgagee in proceedings to foreclose, must make the mortgagor, and all persons actually occupying the mortgage estate, parties. It is claimed — 199 — by the complainant, that by virtue of this provision, and the doctrine that the law in force at the time of the execution of the mortgage, enters into and becomes a part of the contract, Sehaup should have been made a party to the foreclosure suit. "While we cannot recognize the principle to the full extent claimed by the "complainant, we have no hesitation in holding, according to the well settled fules of chancery proceedings, that all persons having an interest in the equity of redemption, should be made parties to a bill of foreclosure; and if any incumbrancers, whether prior or subsequent, are not made parties, the decree of foreclosure does not bind them. Story’s Eq. Pleadings, § 193; Adams’ Eq. 815, note. In New York, it has been held that, where the vendee of the mortgagor was not made a party, and there had been a foreclosure and sale, the proceedings were void as to such vendee, and he might maintain ejectment against a purchaser under the chancery proceedings. The decision was based on the ground, that the mortgagor having parted with his interest before the bill filed, and his vendee not having been made a party, the purchaser at the sale under the foreclosure, acquired no interest in the premises, except as against the mortgagor. Watson v. Spence, 20 Wend. 260. In Ohio, it has been held, that the proceedings are not void, but that the vendee of the mortgagor, not made a party to the proceedings in foreclosure,' may have a bill to redeem'. Frische v. Kramer, 16 Ohio, 125. To the same effect is the doctrine in Illinois, in the case of Bradley v. Snyder, 16 Ill. 263 ; see also Haines v. Beach, 8 John. Ch. 459 ; Ensworth v. Lambert, 4 Ib. 605 ; 2 Hilliard on Mort. 79, 88. Applying the doctrine established by the above authorities, to the present case, we find that at the time the proceedings in foreclosure commenced, Catharine Gilmer had conveyed all her interest in the mill premises to Sehaup ; and the latter, not having been made a party to the suit, is not bound by it, and has, to say the least, the right to redeem the ten acres in the hands of Birge, from the lien of the mortgage to Milner. Yeach, as to all the rights of Sehaup — 200 — in the premises, is his representative, and may redeem in the same manner that Schaup might. Whatever equity Schaup would be permitted to set up against Birge, is equally good in the hands of Yeach. Schaup, however, is not seeking any relief against the title obtained by Birge, and to all appearance seems to be resisting the claims set up by Yeach, to have the mill property subject to the payment of his mortgage. What then are the rights of complainant under such circumstances ? There is no question made by defendants, as to the right of Yeach to have his money from Schaup ; and we are of opinion, that he is entitled to a decree of foreclosure against all the interest of Schaup in the mortgaged premises, but what-that interest is, may involve another inquiry. But we are of opinion, that the District Court erred in dismissing his petition, with only a personal judgment against. Schaup, thereby declaring that he had no interest in the land upon which the mortgage conveyed any lien, and that the same was taken away by the paramount lien of Birge, under the first mortgage and the sheriff’s sale under it. Now, we are not of opinion, that the purchase by Birge, under the Milner mortgage, extinguished, all the right of Schaup in the premises. Had he been made a party to the suit of foreclosure, and had he made no objection to the decree, or taken no steps to redeem the mill property from the lien of the mortgage, his interest might have been extinguished by the decree and sheriff-’s sale to Birge. But Schaup had purchased the ten acres of Catharine Gilmer in good faith, and for a valuable consideration; and although he had notice of the pre-existing mortgage to Milner, yet he took possession, and made his improvements under the supposition — indeed with the express agreement of Milner— that the lien of the mortgage as to the ten acres, was released. These facts would be sufficient to give Schaup, at least, a claim for his improvements. He had purchased the ten acres of Catharine Gilmer, for one hundred and fifty dollars, and made extensive and valuable improvements, until the property has become worth five or six thousand dollars. Certainly these improvements do not pass to Birge, under — 201 — his sheriff’s deed. All that Birge is entitled to claim under it, is the value of the land, in its unimproved condition, and as it was when conveyed to Sehaup. That was all that Milner acquired any right to, under the mortgage from Catharine Gilmer, to secure the payment of the two hundred and eighteen dollars, and that was all upon which the mortgage can be claimed to operate as a lien. Milner had, when Sehaup purchased of Catharine Gilmer, agreed to release his mortgage lien as to the ten acres. He then knew of the purchase by Sehaup, of his possession and improvements. Birge, who is his assignee, knew at the time he purchased the mortgage and decree of foreclosure from Milner, that Sehaup had already purchased and paid Catharine Gilmer for the ten acres. Schaup’s possession was notice to all the world of the interest he had in the land, whatever it was. In addition to this, Birge, after he had purchased the whole tract at the sheriff’s sale, and while he had the sheriff’s certificate of purchase in his pocket, when Yeach and Sehaup came to him to get him to draw up the mortgage for $1,200, and to take the acknowledgment of it, as justice of the peace, is silent as to any claim he has to the property intended to be mortgaged, and suffers Yeach to lend his money on a title and security which he knew to be unsafe. Now, if it was not the duty of Birge, when called on to write the deed, to make known to the parties the exact state of the title to the ten acres, and the interest which he held in it himself, it would, at least, be exceedingly inequitable to allow him to derive a positive benefit from his silence, and to take the land with all the improvements on it, which had been paid for and put there with Yeach’s money, obtained by Sehaup on the mortgage drawn up by himself. It will be proper, therefore, for the District Court to render a decree in favor of complainant, allowing him to redeem the ten acres, comprising the mill property, conveyed to Sehaup by Catharine Gilmer, from the operation and effect of the sale made by the sheriff to Birge, under the decree of foreclosure, on his paying' into court, for the use of Birge, a sum of money which shall have the same proportion to the whole amount — 202 — due on the decree assigned to Birge, as the ten acres, without the improvements placed thereon by Schaup, since his purchase, bears to the one hundred and thirty-one acres, included in the mortgage. This is making the ten acres sold to Schaup, bear its fair proportion of the whole amount of the mortgage debt. On the payment of the money into court by Yeach, the court, will by its order and decree, direct that the title of Birge in the said ten acres be released and extinguished, and render a judgment of foreclosure in favor of Yeach against Schaup, as to the mortgaged premises, and for such amount as may be found due on the mortgage, including such sum as he may be required to pay into court for Birge; and the court will further direct a sale of the mortgaged premises to satisfy the amount, decreed in favor of Yeach, with costs. No opposition has been made to the relief sought in the petition, as to the mistake in the deed from Catharine Gilmer to Schaup, and as the same is confessed, the court will decree the correction of the same. It is also claimed, that complainant is entitled to recover against Schaup, the amount alleged to have been paid by complainant to D. E. Spurr, for the conveyance by Spurr of his title to the mill property, derived from Catharine Gilmer and her husband. We do not see the justice on which this claim is founded. The deed from Catharine and Patrick Killaan was dated September 6th, 1854. At this date, to say nothing of the previous deed the parties had made to Birge of the same premises, all the title and interest of Catharine and Patrick Killaan, therein, had passed to Birge, under the sheriff’s deed of July 1st, 1854, which had been duly recorded. And although we have felt it our duty to hold, that Schaup was not bound by the proceeding in the suit wherein the decree of foreclosure was rendered, because he was not made a party; yet the proceedings were valid as to Catharine Killaan, and the sheriff’s deed passed all her interest in the mill property to Birge. This deed was recorded long before the deed to Spurr was obtained. Of all this, Spurr was bound to take — 203 — notice; and consequently lie took no title by tbe conveyance to him from Catharine and Patrick Killaan. Tbe decree of tbe District Court is reversed, and tbe cause remanded for further proceedings in accordance with this opinion.