Burger v. Greif

Grason, J., delivered the opinion of the Court. On the 15th of December, in the year 1874, Cornelia L. Henderson and others conveyed to John Faulstich two leasehold lots in Baltimore City, which are particularly described in their deed, and on the same day Faulstich executed a mortgage of the same lots to Cornelia L. Henderson to secure the payment of two thousand dollars. On the 28th of December, 1874, Faulstich sub-leased a part of these lots, which is described in the lease to Burger, it being part of the second lot conveyed by the Hendersons to Faulstich. On the 14th of September, 1876, Faulstich assigned all his interest in these lots to G-ebhard, subject to the mortgagé to Cornelia L. Henderson, as also to a mortgage which he had executed to the Broadway National Building Association, each dated the 15th December, 1874. On the 24th April, 1878, G-ebhard mortgaged one of the lots designated as lot No. 1, to Max and Levi Greif, to secure the payment of fifteen hundred dollars. On the 5th November, 1878, Gebhard assigned all his interest in the lots to Bernard Fjinke, subject to the mortgage to Cornelia L. Henderson. A decree was afterwards obtained for the sale of the lot mortgaged by Gebhard to Max and — 524 — Levi Greif; the lot was sold to Max Greif for $1150, and a deed for that lot was afterwards, on the 29th January, 1879, executed to him by M. Starr Weil, the trustee, to make the sale. On the 10th February, 1879, Cornelia L. Henderson, assigned her mortgage on both lots and the mortgage note to Alexander G. Dolfield, and on the following day, 11th February, 1879, Bernard Funke conveyed one of the lots, assigned to him-by Gebliard, to Frederick Burger. On the 7th March, 1879, Dolfield obtained a decree for the sale of all the mortgaged property described in the mortgage to Henderson, and Frederick C. Cook was appointed trustee to make the sale. On the 15th day of March, Max Greif, the appellee in this case, filed his bill against Dolfield, Burger and Cook, the trustee, in which, after setting forth the various conveyances of, and liens on the lots as hereinbefore stated, alleged that he had offered to pay the whole debt, secured by the Henderson mortgage, provided Cook, the trustee, would assign said mortgage to him, but that said offer had been refused by Cook, the trustee, and Dolfield. It further charged that Dolfield and Burger had combined and confederated for the purpose of relieving Burger’s portion of said lots from the effect of the mortgage and threatened to first sell the lot of Max Greif, which, he alleged, was of greater value than the amount of the whole mortgage debt, interests and costs. It further charged that the complainant was entitled to pay off the whole mortgage debt, interest and costs, and have the mortgage and decree assigned to him so as to protect himself and his property from sale, and so that he could have the other lots sold ‘'fin the order in which, according to the rules of equity, said property should be sold for the satisfaction of said mortgage claim, interests and costs,” and it is claimed that lot Ho. 2, described in the bill as Ho. 4, shall be first sold, and secondly, the reversion-of the sub-lease in that portion of lot — 525 — No. 2, which is described as lot No. 3 in the bill, subject to the interest of the sub-lease thereon, and that, if there should not he realized from such sales, an amount sufficient to pay the mortgage debt, interest and costs, then the complainant should hold his property discharged from the effect and operation of the mortgage. An injunction was also prayed, restraining a sale of the property of the complainant under Dolfield’s decree, until a sale of the other parts of said lots should have first been made. The Circuit Court passed an order on the first day of April, 1879, consolidating the two cases, and ordering that on payment into Court of the mortgage debt, interest and costs, the trustee, Cook, be enjoined from making sale of the property as directed by the decree of March 7, 1879. Answers were filed, • evidence was taken, and upon final hearing the Circuit Court, on the 8th January, 1880, passed a decree directing lot No. 4, mentioned in the hill, to he first sold by Cook, trustee, and if the proceeds of that sale should prove insufficient to satisfy the mortgage debt, interest and costs, that the reversion of the sub-lease in the lot mentioned as lot No. 3, should he sold, and if the proceeds of these two sales should prove insufficient for the purpose,that then the complainant should have the right to pay the difference in discharge of his lot No. 1, from the mortgage debt. The decree further directed the sum of money paid into Court, being the amount of the mortgage debt, &c., he repaid to Max Greif, the complainant. From this decreethese appeals have been taken, and the question presented is, whether or not the lots in question should he sold in the order directed by that decree. The rule is too well settled to need the citation of authorities in its support, that where one person has a lien upon two funds, or two pieces of property, and another holds a lien upon but one of those funds or pieces of property, that the first lienor will he compelled, in equity, to seek satisfaction of his claim from that fund or piece of — 526 — property which is not covered by the lien of the second lienor, before resorting to the fund or property' which is covered by the second lien. This rule has b§en adopted and enforced so as, if possible, to enable all the lienors to receive payment of their claims, it being deemed inequitable that the first lienor should exhaust the fund or property to which alone the second lienor could look for payment, while he had another fund or property from which his claim could be, in whole or in part, satisfied. There is another rule, which, we think, after a careful examination of the authorities, may be considered as settled — and that is, that where a party gives a mortgage upon his property, and afterwards conveys his equity of redemption to different parties at different times, the property so conveyed is liable for the mortgage debt in the inverse order of its alienation; or, in other words, that the property last conveyed must be exhausted in payment of the mortgage debt before the mortgagee can resort to that which was-conveyed before it in point of time. While the decisions in some few of the States hold that the mortgaged property is equally bound in the hands of all parties to whom it may have been conveyed. The great weight of authority is in support of the rule we have stated. The decree of the Court below is based upon the latter rule, and the question is, whether the facts in the case now before us bring it within that rule. It will be borne in mind that, after the deed of assignment of both the lots by Eaulstich to Gfebhard, that the latter mortgaged lot No. 1 to Max and Levi Greif on the 24th April, 1818, subject ’to the Henderson mortgage in common with lot No. 2. This mortgage was to secure the payment of the sum of fifteen hundred dollars. Gebkard then assigned all his interest in both lots to Bernard Eunke after proceedings had been commenced by Max and Levi Greif to foreclose their mortgage. The appellee, Max Greif, became the purchaser of lot No. 1 at the trus — 527 — tee’s sale, which was made subject to the operation of the mortgage to Cornelia L. Henderson. The price he paid for it was eleven hundred and fifty dollars, when the proof shows that the lot was worth from three thousand to three thousand five hundred dollars. It is evident, therefore, that he was enabled to purchase at the price named solely because this lot, in common with the rest of the land, was subject to the lien of the 'Henderson mortgage, which fact was announced and made known to the persons who attended the sale. Where a party purchases at a judicial sale, subject to a prior mortgage, it is to be presumed that he bids no more than the value of the equity of redemption. The appellee, having purchased at the trustee’s salé, subject to the operation of the Henderson mortgage, would be hound equally with the other purchasers to pay his portion of the mortgage debt in proportion to the value of his lot, had it not been for the fact that the deed of assignment, executed by G-ebhard to Funke, in express terms, charged the payment of the Henderson mortgage on the two lots so assigned to Funke, the consideration for the assignment being the sum of sixty dollars and u the payment of the mortgage hereinafter referred to,” it being the Henderson mortgage. One of the exceptions to the rule we have referred to is, that where the mortgagor sells part of the mortgaged land, and by the deed charges the payment of the mortgage debt on the land so conveyed, the land so charged must be exhausted in satisfaction of the debt before any other parts of the mortgaged lands can he resorted to for payment, whether they remain in the hands of the mortgagor, himself, or have been conveyed to other parties. Welch vs. Beers, 8 Allen, 152; Caruthers vs. Hall, 10 Mich., 40. After the deed of assignment to Funke, the appellee purchased lot Ho. 1 at trustee’s sale, subject to the Henderson mortgage, and took his title subject to the charge, in common with lot Ho. 2 in Funke’s hands, to pay the — 528 — Henderson mortgage — each lot being liable for its proportion of the debt in proportion to its value at the time of its sale. But there is still another exception to the rule that property sold by a mortgagor must be resorted to for payment of the mortgage debt in the inverse order of its alienation, and that is where full value has not been paid for the land, but it has been sold subject to the mortgage ; and the purchaser’s liability to pay his proportion of the debt forms part of the consideration of his purchase. This principle is sustained by the cases referred to on this point in the appellants’ brief, to one of - which only do we deem it necessary to refer, as announcing the only just and equitable rule in such cases. In Carpenter vs. Koons, 20 Pa. State Reps., 226, 227, Black, O. J., in delivering the opinion of the Supreme Court, says: “A man who purchases part of a tract covered by a mortgage, buying the title out and out, clear of incumbrances, and paying a full price for it, has a clear right to insist that his vendor shall allow the remainder of the mortgaged premises to be taken in satisfaction of the mortgage debt before the part sold is resorted to. This being the right of the vendee against the mortgagor himself, the latter cannot put the former in a worse condition by selling the remainder of the land to another person. The second purchaser sits in the seat of his grantor, and must pay the whole value of what he bought towards the extinguishment of the mortgage before he can call on the first purchaser to pay anything. The first sale having thrown the whole burden on the part reserved, it cannot be thrown back again by the second salé. In other words, the second purchaser takes the land he buys subject to all the liabilities under which the grantor held it. But if the rule is to cease when the reason of it ceases, it cannot extend to a case where the first sale was made subject to a mortgage, and that is the condition of the present one.” Where all the purchasers from a mortgagor have bought — 529 — subject, to a mortgage, the obligation of each to pay the mortgage forming part of the consideration of his purchase, they all stand upon equal footing, and the mortgagee has the right to sell anjr part he may think proper for the payment of his debt, and the only remedy the party whose land is sold has, is a proceeding to compel contribution from the other purchasers. (Decided 16th March, 1881.) There was error, therefore, in the decree of the Circuit Court in restraining the sale of lot No. 1 by Cook, the trustee, and in directing a sale as prescribed by said decree. It is alleged in the bill, and has been contended in argument, that there was a combination and confederation by and between Cook, trustee, and the other, defendants, to fraudulently release Burger’s property from the operation of the mortgage, and to have the appellee’s lot sold first therefor. We think the proof is not sufficient to sustain the charge; but even if it was, and it clearly appeared that Cook, trustee, and Dolfield, were endeavoring to sell the appellee’s lot first, they were doing, as we have shown, what they had a right to do; nor can we see in what respect the appellee could have been injured thereby. It was further contended that the appellee had the right to pay the debt, interest and costs, and thereupon to have the mortgage and decree assigned to him. We do not agree to this view. The appellee could have paid the amount due with the costs of the case, and such payment would have entitled him to have contribution from the other parties who had bought parts of the mortgaged premises. Eor the reasons above assigned the decree appealed from will be reversed and the cause remanded for further proceedings, in accordance with the views expressed in this opinion. Decree reversed, and cause remanded. /