Hill v. Buffington

Winslow, J. The purchase of the tax certificate by Buf-fington must, under our statute and decisions, be held to have amounted to the payment of the tax for the protection of the estate, and for the mutual benefit of both of the mortgagees and the mortgagor. Buffington could not thereby acquire a tax lien upon the land paramount to that of the first mortgagee, nor could he take a tax title which would cut off the first mortgagee or the owner of the equity of redemption. He acquired thereby simply a “further lien” upon the'land as against the mortgagor and all persons then claiming under him; not a lien independent of his mortgage lien, or superior to it or to that of the first mortgage, but of the same nature as his mortgage, and constituting simply an addition to the mortgage debt of the amount due on the certificate when he acquired it. Stats. 1898, sec. 1158; Burchard v. Roberts, 70 Wis. 111. His lien by virtue of the tax certificate which he held was apparently paramount to the lien of the plaintiff’s prior mortgage, but not really so. But the fact that such lien was not paramount to plaintiff’s mort — 530 — gage, and that no valid tax title could be obtained thereon, is not necessarily decisive of this case. The plaintiff has come into a court of equity, and must, upon familiar principles, do equity; and this rule applies as well to the statutory action under sec. 3186, Stats. 1898, as to the common-law action to remove a cloud from title. Hart v. Smith, 44 Wis. 213. By the payment of this tax by the second mortgagee the plaintiff received a distinct and substantial benefit in the protection of his lien from extinction, which could have been accomplished in no other way save by the plaintiff himself paying the tax. Is it, in any sense, equitable to allow the plaintiff to avoid the reimbursement of the defendant for the payment of this sum by which the plaintiff’s title has been secured to him ? We think not. Reference to a well-established principle of equity jurisprudence as applied to the law of principal and agent will throw light upon the question. While an - agent charged with the duty of caring for his principal’s real estate cannot acquire a valid tax title thereto, still, if he does acquire a tax deed, equity will content itself with setting aside the tax title upon condition only of the principal’s reimbursing the agent for the money he would himself have been obliged to expend to discharge the lien had the agent not acquired it, with interest thereon. Dana v. Duluth T. Co. 99 Wis. 663. The principal must do equity by rehnbursing his unfaithful agent so far as the agent’s expenditures were beneficial and •necessary to protect the principal’s title. The present case would apparently call for the application of equitable principles more loudly than the case of the agent, because in the agent’s case there is an attempted fraud and breach of trust, which element is entirely lacking in the case before us. It was strongly argued, however, that the defendant was barred from making any claim by the judgment of foreclosure of the plaintiff’s mortgage, because the defendant was made a party to that action and the judgment therein — 531 — contained the usual provision cutting off the defendants from all right, title, interest, or equity of redemption in the mortgaged premises. This presents a question of some difficulty, but we think that, under any proper construction of the judgment in the light of the allegations of the complaint, it cannot be said that the question of the equitable rights of the defendant in respect to the tax certificate in question is affected by that judgment. Probably it could have been litigated in that action, and, had the complaint therein alleged that the defendant’s interest under the tax certificate was subject to the plaintiff’s lien, or merely rested with the usual allegation as to defendant’s claims being subordinate to that of the plaintiff, and had the judgment above referred to been rendered upon such a complaint, it would be hard to see why the defendant’s rights would not have been barred. But the complaint not only failed to allege that the defendant’s tax lien was subject to the plaintiff’s mortgage, or to rest on the usual allegation as to priority of the plaintiff’s mortgage over defendant’s claims, but industriously alleged that the mortgaged premises had been sold for the taxes of 1893 (being the taxes in question), and that the sale was still unredeemed, although the plaintiff then knew that the defendant held the certificate; thereby seemingly recognizing the tax certificate as representing an existing tax lien on the property. This was certainly affirmative notice to the defendant that his claim for taxes paid was not attacked in that action, and doubtless the defendant let that action go to judgment by default relying on this plain recognition of the apparently existing tax lien. In view of this allegation of the complaint, we think that the judgment must be construed simply as cutting off the defendant’s ■second mortgage lien, and not as affecting the question of the taxes, or clothing him with the right to demand of a court of equity the removal of the apparent cloud on his title, consisting of the uncanceled certificate, although, as — 532 — before stated, the tax lien, as well as tbe second mortgage lien, had ceased to exist. Plain principles of estoppel would seem to prevent the plaintiff from now claiming that his judgment by default cuts off a claim which he expressly recognized and accepted in his complaint. The judgment must be construed as referring to such rights and interests of the defendant as were litigated in the action, or might properly have been litigated under the pleadings. Pelton v. Farming 18 Wis. 222; Gilchrist v. Foxen, 95 Wis. 428. Furthermore, the relief granted by a default judgment cannot exceed that demanded by the complaint. Upon the whole case the judgment is right and must be affirmed, irrespective of the fact that Buffington has no lien on the property that could be enforced under his mortgage or otherwise, but merely controlled a situation clouding the plaintiff’s title, which cloud, under the circumstances, a court of equity might properly refuse to remove except upon condition that the party invoking and receiving its aid do equity to Buffington by reimbursing him for an outlay which inured to his benefit. By the Oourt.— Judgment affirmed. Oassodat, O. J. I heartily concur in the affirmance of the judgment in this case, and much that is said in the opinion of my brother Winslow; but I am unable to understand some of the reasoning by which such conclusion is reached. If the tax certificates held by Buffington were not liens upon the land “superior to the plaintiff’s first mortgage;” if they were only “ apparently paramount to the lien of the plaintiff’s prior mortgage, but not really so; ” if “ the tax lien, as well as the second mortgage lien, had ceased to exist— then I am unable to perceive any ground, legal or equitable, for holding that the plaintiff should repay to Buffington what he had advanced for such tax certificates, and interest thereon, as a condition of setting, them aside as — 533 — clouds upon his title. If those things were all so, then I am unable to perceive how those tax certificates gave Buffing-ion “ a further lien upon the land.” If the purchase of such tax certificates gave Buffington no lien upon the land “ independent of his mortgage lien,” but only a lien “of the same nature as his mortgage, and constituting simply an addition to the mortgage debt oi the amount due ” on the certificates when he acquired them, then I am unable to perceive why the foreclosure and sale under the plaintiff’s prior mortgage, which it is conceded cut off Buffington's subsequent mortgage, did not also cut off his mortgage debt, including what he so paid for such tax certificates, thus said to be an addition to the mortgage debt. The sense in which the word “ lien ” has been used may account for some of the differences of opinion, and perhaps some confusion in the discussion of the question. If it is used in the sense that when Buffington, as such mortgagee, purchased such tax certificates they continued as liens at law, drawing the high rate of interest as such certificates, entitling him to tax deeds, with the right to enforce the same, then I apprehend that under the decisions of this court all would agree that such tax certificates were not such liens. But if it is used in the sense that such tax certificates were liens superior to the plaintiff’s mortgage, but cognizable only in a court of equity,— as I think they were,— then, as it seems to me, the judgment in favor of Buffington was eminently proper and should be affirmed. But, if such certificates were not liens in equity superior to the plaintiff’s mortgage, then I see no reason why they should not be set aside without the condition of repayment. Our statutes did not, in my judgment, prevent such tax certificates from continuing to be liens in equity paramount to the plaintiff’s mortgage. The original statute authorized any person who had a lien by mortgage upon any lands on which the taxes had not been paid to “pay such taxes, and — 534 — the interest and charges thereon,” and that the tax receipt taken therefor should “constitute an additional lien on such land, to the amount therein specified and the interest thereon and the amount so paid and the interest thereon ” should “be collectible with, as part of, and in the same manner as,, the amount secured by the original lien.” Sec. 116, ch. 15,. R. S. 1849; sec. 161, ch. 18, R. S. 1858. By ch. 123, Laws of 1860, the statute upon the subject was modified so as to read substantially as found in the revisions of 1878 and 1898, secs. 1158, 1160. It will be observed that the original statute only constituted the receipt for taxes “-paid ” by such mortgagee “ an additional lien,” etc. The amended statute gave a “ further lien,” not only for taxes paid, but also for money paid to redeem the mortgaged premises from tax sales. The manifest purpose of 'the first of these sections, was to secure to such original lienholder the repayment of any money he might voluntarily expend in paying any taxes on such real estate, and also any money he might voluntarily pay to redeem such real estate from tax sales, with interest upon the amounts so expended and paid, as prescribed, and giving him a lien therefor upon the land, as stated. In the absence of such statute, such original lien-holder might not have*been able to recover back the money so voluntarily paid and expended, especially in the absence of any agreement to that effect in the mortgage or instrument creating the original lien. The manifest purpose of the other section was to prevent the original lien from being “ discharged as to the persons mentioned in sec. 1158 until the monejr thus paid for taxes, charges, interest, or redemption, with interest thereon as aforesaid,” should first be “repaid,” and to authorize such original lienholder to recover the amount so paid and expended, and the interest thereon, in any judgment obtained by him to enforce his original lien. It will be observed that neither of these sections mentions tax certificates purchased or obtained by any — 535 — such original lienholder, nor tax deeds taken thereon by such original lienholder. The rights of the mortgagee, as the purchaser and holder of such tax certificates, are by the statutes to be determined by equitable principles as at common law. In New York it has been held that, “In the absence of any special covenant to that effect, a mortgage imposes no duty upon the mortgagee to protect the interests of the mortgagor, and the former is not prohibited from acquiring an adverse claim to or lien upon the mortgaged premises, and from enforcing it with the same effect as a stranger might.” Cornell v. Woodruff, 77 N. Y. 203, 205, 206. That case followed Williams v. Townsend, 31 N. Y. 411. This last case seems to have been expressly approved by Chief Justice DixoN in Sturdevant v. Mather, 20 Wis. 585, 586, but it was not essential to the decision of that case. In the same volume it was held tlaat: “Where a second mortgagee of land purchases on foreclosure of his mortgage, he cannot acquire cun absolute title, free from the lien of the first mortgage, through an assignment to him of an outstanding tax certificate, and a deed issued thereupon. . . . Such assignment (whether made before or after the foreclosure sale) must be regarded, prima facie, merely as a redemption of the land from the tax sale.” Smith v. Lewis, 20 Wis. 350. To the same effect, Fisk v. Brunette, 30 Wis. 102; Lybrand v. Haney, 31 Wis. 230. These decisions are based upon the general principles of equity, and are in no sense governed by the statute. The general rule is that the mortgagee is protected, in equity, in the payment' of taxes and assessments upon the mortgaged premises. 2 Jones, Mortgages, § 1080. Counsel for the plaintiff seemingly rely upon a Michigan case, where the mortgagees, after having redeemed the mortgaged premises from a tax sale, foreclosed their mortgage, and bid in the land for the amount due on their mortgage, without any reference to what they had paid to redeem the — 536 — land from the tax sale. Thereupon the mortgagor redeemed from the foreclosure sale, and thereafter such mortgagees filed a bill in equity to enforce a claim against the land for what they had so paid to redeem the land from the tax sale. In refusing the relief prayed for, Mr. Justice Cooley, in behalf of the court, said: “All that complainants could claim by virtue of the mortgage they were bound to claim in those proceedings, and they could not, at pleasure, split up their demand, and make the parts the subjects of separate suits.” Vincent v. Moore, 51 Mich. 619. That decision was not based upon any statute, but upon a well-recognized principle of the common law. The same is true of the Missouri case relied upon,— Horrigan v. Wellmuth, 77 Mo. 542, 545, 546. "While it was there held that the claim of the mortgagee who had paid taxes “ must be enforced as a part of the mortgage debt, and not by an independent action against the mortgagor as for money paid to his use, or under claim of subro-gation to the lien of the state or municipality,” yet it was there further held that “ payment of the debt secured by a mortgage will not extinguish the lien of the mortgage as a security for taxes properly paid by the mortgagee.” The court said: “ It appears that the amount of the mortgage debt was paid to the plaintiff by the defendants on December 19, 1877, but it does not appear that any release has ever been executed, or that any entry of satisfaction has ever been made; and we think it quite clear that, as the mortgagee was entitled to receive the original debt, interest, and taxes before the defendants could demand an entry of satisfaction or a release, the simple payment of the debt and interest, without more, would no more extinguish the mortgage than the payment of the debt and taxes, without the interest, would extinguish it. Where a person having a lien or interest in or title to land acquires a tax certificate or other lien upon the same land, and justice and good conscience require it, it is the — 537 — business of a court of equity to preserve such lien and prevent its merger into the higher title or interest. Webb v. Meloy, 32 Wis. 319; Morgan v. Hammett, 34 Wis. 514, 524; Aiken v. M. & St. P. R. Co. 37 Wis. 469; Scott v. Webster, 44 Wis. 185; Gilchrist v. Foxen, 95 Wis. 428, 440. Eor the reasons given I think the judgment of the superior court of Douglas county should be affirmed.