Walsh v. Robinson

Montgomery, J. March 22, 1892, defendants Robinson and Paul executed a mortgage in the sum of 115,000, collateral to a note of like date, covering a large amount of property in Detroit. Under the terms of the mortgage, portions of the property covered were released from time to time until there remained incumbered by the mortgage lots 74 to 93, both inclusive, of Tait’s Subdivision. This mortgage finally came into the hands of the State Savings Bank of Detroit. A second mortgage, covering lots 74 to 93, above described, was executed by Carman G. Paul on the 12th of December, 1893, to Mary A. Coquillard, to secure the payment of a note of $1,200. There were three subsequent mortgages executed by a purchaser from Paul, named Nicholas E. Manuel, and payable to John H. Walsh. The savings bank mortgage was paid down from time to time, but, the balance remaining unpaid, foreclosure proceedings were commenced, and a commissioner’s deed was made to the bank on the 13th of June, 1900. At the time this foreclosure proceeding was taken, the defendant Colby was the owner of the equity of redemption, subject to the savings bank mortgage, the Coquillard mortgage, and the three Walsh mortgages. After the foreclosure was had, and before the time for redemption expired, the bank agreed with Mrs. Coquillard, the holder of the second mortgage, that, in case no redemp — 18 — tion was made, the bank would accept $2,093.15 for the property. Mrs. Coquillard, through complainant, as trustee, bought of the bank its interest, and took a transfer of title. Colby, contending that the foreclosure of the bank had cut off all the subsequent mortgages, but had not defeated his title for the reason that he was not made a party, tendered to complainant the amount due on the savings bank mortgage, and demanded a release of the title. This tender was refused, and the complainant brings this bill to foreclose as against the defendant Colby the savings bank mortgage and the Coquillard mortgage. A deficiency decree was asked against defendant Robinson. A decree passed in favor of the complainant for the foreclosure of the two mortgages, and defendant Robinson appeals from so much of the decree as fixes a personal liability upon him, and the defendant Colby appeals generally from the decree. The position taken by the defendant Colby is this That, as he was not made a party to the first foreclosure proceeding, that proceeding was ineffectual to bar his equity of redemption, but that, as the subsequent mortgagees were made parties, the proceeding is valid as to them, and bars their mortgages; that it results that the defendant Colby, although not a party to that proceeding, may profit by it to the extent of being relieved from all the mortgages except the first, and can discharge his property of all the liens by a tender of the amount due on the first mortgage. We have not adopted the language of counsel in stating the proposition. Nevertheless we think we have accurately defined the result of his contention. The proposition needs only to be stated to show its inequity. Yet, if the rigid rules of law require that this result should follow from the acts of complainant and his grantor, our only duty is to apply the rules. A large number of cases are cited by counsel for defendant to the proposition that the first foreclosure proceeding is binding upon all the parties to that litigation. But in none of the cases cited by defendant was the question — 19 — presented in the aspect which it bears here, in most of those cases, as well as in others in which this subject has been treated, the question arose out of the failure of the senior incumbrancer to make the junior incumbrancer a party. The courts have in such cases uniformly held that the foreclosure operated to cut off the equity of redemption if the owner of that interest was a party, but that the proceeding was not effectual to defeat the rights of the junior mortgagee. In different jurisdictions different remedies are applied. In England the rule seems to be that the junior incumbrancer has only the right to redeem on paying the prior incumbrance; but in some of the States it is held that he may demand a resale of the property. Stewart v. Johnson, 30 Ohio St. 24. It is also in some instances stated generally that the failure to make the owner of the equity of redemption a party to the bill of foreclosure renders the proceeding void. 2 Jones, Mort. § 1406; Watts v. Julian, 122 Ind. 124 (23 N. E. 698). But if we assume, for the purposes of this decision, that the decree is to be given full force as against the subsequent lienholders, and is not binding upon the defendant Colby, what follows? Were these liens discharged for the benefit of the defendant, so that he may discharge his obligations and release his property upon payment of the first mortgage only ? Or should it be held that so much of the interest in this property as was not represented by the first mortgage was held in two rights, the one of which vested in the junior mortgagees, the other in the defendant as the owner of the remnant of the equity of redemption, which latter right was subordinate to all prior liens ? If, then, a decree passes binding upon the junior mortgagees in favor of the senior mortgagee, what passes by the sale ? The only answer is that the interest of the junior mortgagees would pass. The defendant is in no position to complain that the title in this property which is superior to his own has been merged in the purchaser at the foreclosure sale, nor can he assert that as to him the junior mortgage has been discharged. When he — 20 — asserts that the decree binds the interest of the junior incumbrancer, he plants himself on ground from which the equity of complainant can be plainly discerned. Reliance appears to have been placed by both parties in the court below and in this court upon, the case of Baker v. Pierson, 6 Mich. 522. We think that case clearly rules this case in favor of complainant. The facts were that one Lewis Ives, being the owner of certain land, executed two mortgages, — one to David Moore for $5,000, and one to George F. Turner for $3,000. A purchaser from Ives executed three subsequent mortgages, the last of which — that is, the fifth mortgage — was executed to Pierson. Moore foreclosed the first mortgage on the property, but failed to make Pierson a party. Upon foreclosure at a sale which was absolute, Baker, who was the administratqr of the estate of Turner, the second mortgagee, bid in the property, paying a trifle more than the amount of the Moore decree; and Pierson in that case, as did Colby in this, sought to redeem by paying simply the purchase price paid at the sale, and without paying the incumbrance held by the Turner estate. There were three opinions in the case, but every judge agreed that this could not be done, and held the property subject to a lien as against Pierson for the amount of the Moore mortgage and the full amount of the Turner mortgage. Manning, J., speaking of Pierson’s rights, said: “Such mortgagee is not bound by the foreclosure, and his rights are neither greater nor less in consequence of it; and he may file his bill to foreclose his mortgage as if nothing had been done, except he would have to make the purchaser a party, who, in such case, would be the only necessary party, if complainant should state in his bill the previous foreclosure, and treat the purchaser as the assignee of .the several interests of the parties to it in the land.” And, speaking of the rights of the purchaser at the foreclosure sale, the learned justice says: ‘ ‘ Having acquired the rights of all, he stands in their — 21 — place, and may use the rights so acquired' to protect his interest in the land, and for his benefit, in the same way and to the same extent they could be used by such parties .had no foreclosure taken place.” justice Christiancy held in that case that the administrator stood in all respects substantially in the position of a second mortgagee who has purchased in a prior mortgage to protect his own, and no subsequent incumbrancer could redeem the prior mortgage without redeeming the second, of which, under such circumstances, it forms substantially a part. In the result of this holding Chief Justice Martin distinctly concurs at page 546. It is true that some of the language used by him would seem to lend support to defendant’s contention; but the authoritative utterances in the case support the complainant’s position. This view of the case renders it unnecessary to discuss the question of the tender. It is next claimed that the holder of the intervening mortgages, Walsh, is not a party to this suit in his individual capacity, and therefore not bound by the decree. If the view of Justice Manning in Baker v. Pierson be adopted, while the complainant might have asked for a greater measure of relief than his bill prays, the subsequent liens having vested in complainant’s cestui que trust by- the purchase, those who were formerly holders of such liens would not be necessary parties. But, 'further than this, we think it is not true that complainant, Walsh, who brings this proceeding as trustee, would not be bound by the decree in his individual capacity. It is not as though he were an involuntary party. He himself is an actor in this case, asserting that, in his representative capacity as trustee, he is entitled to foreclose the liens on this property, and to a sale of the property to satisfy them, —a position wholly inconsistent with any individual claim which he might assert under the former liens. The question is ruled in principle by Baker v. Railroad Co., 91 Mich. 298 (51 N. W. 897, 16 L. R. A. 154, 30 Am. St. Rep. 471). — 22 — One other question raised by defendant Colby is that before Walsh became trustee, and while holding the Manuel mortgages, he individually paid taxes for the purpose of protecting his interest in the Manuel mortgages, amounting to $133.32, which were'included in this decree. As we have already indicated, there passed by the sale, and are now vested in the complainant, the interests of all lien-holders subsequent to the savings bank mortgage. As was held by Justice Manning in the Baker-Pierson Case, instead of asking for the payment of the savings bank and Coquillard mortgage liens, the complainant might have asked that all five mortgages be paid to him. Not having done so, it was not for the court to say that more should be allowed him than he demanded. As these taxes were but a part of the lien of the Manuel mortgages, certainly the defendant is not in a position to complain of their allowance. This discussion disposes of all points made by defendant Colby, and as to him the decree will be affirmed, with costs. In the court below no appearance was entered by the defendant Robinson, and a conditional deficiency decree was entered against him. He has thought best to appeal to this court, and the decree will be modified by striking out that provision; but, as the point was not made in the court below, no costs will be awarded. The other Justices concurred.