Opinion
No. 5569.
February 5, 1931.
APPEAL from the District Court of the Eleventh Judicial District, for Jerome County. Hon. H.A. Baker, Judge.
Action by Mable R. Gerken against Davidson Grocery Company et al. to vacate a judgment of foreclosure and to quiet title to real property. Judgment for plaintiff. Reversed.
Fisher Coffin, for Appellants.
There is a rule in equity to the effect that where the mortgagor's grantee has paid off a senior mortgage in ignorance of the existence of the junior mortgage, he may have the senior lien revived and be subrogated to the rights of the former holder thereof as against the intervening junior lien. ( Capitol Nat. Bank v. Holmes, 43 Colo. 154, 127 Am. St. 108, 95 Pac. 314, 16 L.R.A., N.S., 470.)
It is generally held, however, that where the junior lien was duly recorded, or where the difficulties of the mortgagor's grantee arise from his own negligence, the foregoing rule in equity will not be invoked, and he will be held to have released the property from the lien of the senior incumbrance. ( Stastny v. Pease, 124 Iowa, 587, 100 N.W. 482; Conner v. Welch, 51 Wis. 431, 8 N.W. 260; Haydon v. Huff, 60 Neb. 625, 83 N.W. 920; Garwood v. Eldridge's Admrs. Heirs, 2 N.J. Eq. 145, 34 Am. Dec. 195; Hargis v. Robinson, 63 Kan. 686, 66 P. 988.)
There is some authority to the effect that where foreclosure proceedings are commenced against community property which, before suit brought, has been transferred by the mortgagor, both the husband and wife being owners of the community legal title, must be made defendants and that if either is omitted, the decree is void as to both. ( Dane v. Daniel, 28 Wn. 155, 68 P. 446; Sloane v. Lucas, 37 Wn. 348, 79 P. 949.)
In Idaho it has been held, however, that if the husband be made a party defendant, although the wife is omitted, she will not be permitted to recover the land without payment of the debt. ( Fales v. Weeter Lbr. Co., 26 Idaho 367, 143 P. 526.)
Since an action to quiet title is an action in equity wherein the maxim applies, that he who seeks equity must do equity, a mortgagor, or his successor in interest cannot quiet his title against the mortgagee without paying, or offering to pay, the mortgage debt, payment whereof may be required by the court as a condition precedent to the granting of such relief. This rule applies whether the party seeking to quiet his title be personally liable for payment of the mortgage debt (5 R. C. L. 664, sec. 36; Brandt v. Thompson, 91 Cal. 458, 27 P. 763; Booth v. Hoskins, 75 Cal. 271, 17 P. 225; Ephraim v. Nevada California Land Livestock Co., 282 Fed. 610; Mack v. Hill, 28 Mont. 99, 72 P. 307; Machold v. Farnan, 20 Idaho 80, 117 Pac. 408), or is merely the owner of the legal title, but not personally liable for payment of the mortgage debt. ( Chapman v. Hicks, 41 Cal.App. 158, 182 P. 336; Johnston v. San Francisco Sav. Union, 75 Cal. 134, 7 Am. St. 129, 16 P. 753; McMillan v. Davenport, 44 Mont. 23, Ann. Cas. 1912D, 984, 118 Pac. 756.)
James R. Bothwell and W. Orr Chapman, for Respondent Gerken.
The fact that the purchaser at a foreclosure sale under a first mortgage has previously bought the equity subject to a second mortgage, which he did not expressly stipulate to pay, does not prevent his acquiring a perfect title against that mortgage by the purchase. The mortgagor is estopped from denying the title he has set forth in his mortgage, and all parties to the foreclosure suit are estopped from disputing the title acquired by the purchaser under the sale, and such purchase will not be treated as a redemption. (3 Jones on Mortgages, 8th ed., p. 626, sec. 2122; Brown v. Winter Sherry, 14 Cal. 31; Zuege v. Nebraska Mortgage Co., 92 Kan. 272, Ann. Cas. 1916B, 865, 140 P. 855, 52 L.R.A., N.S., 877; Security Mortgage Co. v. Herron, 174 Ark. 698, 296 S.W. 363; Security Mortgage Co. v. Harrison, 176 Ark. 423, 3 S.W.2d 59.)
The rule that a mortgagee in possession is entitled to retain possession until the debt has been paid is solely one of equity, and to justify its application the circumstances must be such as to make it inequitable to eject him before payment. The rule is not extended to or applied against the claims of one neither legally nor morally bound to pay the debt or against one who holds a title superior to the lien of the mortgage. ( Faxon v. All Persons, 166 Cal. 707, 137 P. 919, L.R.A. 1916B, 1209; 3 Pomeroy's Equity Jurisprudence, 4th ed., sec. 1189, p. 2817; Fontana Land Co. v. Laughlin, 199 Cal. 625, 48 A.L.R. 1308, 250 P. 669.)
This is a suit to quiet title to certain real property. The original owners, Eugene G. Gauss and Lydia M. Gauss, husband and wife, incumbered the property by the execution of three mortgages, respectively, to Equitable Savings Loan Association on August 25, 1919, W.A. Heiss, October 1, 1919, Davidson Grocery Company, June 24, 1923. On February 25, 1925, the mortgagors conveyed the property by quitclaim deed to Glen Gerken, husband then and at all times since of Mable R. Gerken, plaintiff, and respondent herein: deed was recorded March 2, 1925.
Neither Gerken nor his wife ever assumed the mortgages or undertook their satisfaction. On August 19, 1925, Heiss, the second mortgagee whose mortgage had been recorded October 7, 1919, instituted foreclosure proceedings against the original mortgagors, Davidson Grocery Company, the third mortgagee aforesaid and appellant here, and Augusta Clouchek, a judgment creditor. In that action, neither Gerken nor his wife were made parties nor did either ever appear therein. Appellant, Davidson Grocery Company, having been served with summons, defaulted. Decree of foreclosure was entered; and on January 23, 1926, the property was sold by the sheriff at public auction to Glen Gerken for the cash sum of $798.29, the whole amount due upon the judgment, including interest and costs. There was no redemption; and subsequently the sheriff issued Gerken a deed to the premises, which deed was recorded February 24, 1927. On February 26th following, appellant, Davidson Grocery Company, commenced an action to foreclose its mortgage. The defendants joined were the Gausses, W.A. Heiss, Glen Gerken and H.W. Clouchek, executor of the estate of Augusta Clouchek, deceased. Glen Gerken's wife, respondent, Mable Gerken, was not joined as a party or served with summons, nor did she appear personally or by attorney: Gerken defaulted and did not contest the Davidson Grocery Company's mortgage. Decree was entered, the premises bid in by appellant, Davidson Grocery Company, to whom later was issued the sheriff's deed, since which time appellant through tenants has been in possession of the property, no redemption having intervened. Respondent brought this suit against appellant and the sheriff to secure a decree vacating the judgment of foreclosure and quieting her title to the premises aforesaid. Trial resulted in a judgment as prayed for, hence this appeal.
Respondent contends first that, inasmuch as the subject matter is concededly community property, she was not bound by the decree in appellant's foreclosure action, not having been made a party thereto, and, second, that the proceedings were void, since appellant having been joined in the Heiss action defaulted therein and wholly failed to redeem from the ensuing sale. The first contention will be admitted at the outset. Not so fast, however, with respect to the second. Respondent argues that, since she and her husband had not obligated themselves to pay off the Heiss mortgage, they were not necessary parties to its foreclosure, and the fact that they were not so joined did not in any manner affect the court's jurisdiction to enter the decree and order the property sold. For this reason, she earnestly insists upon the validity of the sale, the legality of her husband's purchase at such sale, and the dereliction of appellant in not having redeemed therefrom; in other words, the decree, although ineffective as to herself and husband, was a decree good and binding upon each and every party to the suit. By the same token, what was there to invalidate the decree in appellant's foreclosure action to which husband Gerken was a party, necessary or otherwise? The court had the same or broader jurisdiction there than it had in the former action. Its judgment unappealed from stands as a solemn adjudication as to all the parties thereto, and it cannot now be attacked collaterally, unless void on its face, except for fraud. No fraud has been charged against appellant; and the judgment-roll shows no want of jurisdiction of either the immediate parties or the subject matter. The contention is not only untenable but inconsistent with the position respondent takes with respect to the Heiss suit.
But there is another reason that precludes Chancery's listening to respondent. This court held in Fales v. Weeter Lbr. Co., 26 Idaho 367, 143 P. 526, that, although the wife be omitted in the foreclosure action, where the husband has been made a party defendant, she will not be permitted to recover the land without payment of the debt. This principle has too often been applied to require lengthy citation of authority. "He who seeks equity must do equity." There is no more firmly established rule than that the liability to pay a mortgage debt rests upon the mortgaged land as well as upon the mortgagor. A mortgagor cannot without paying his debt quiet title as against the mortgagee: and the same rule applies to the grantee of a mortgagor, who takes the land while it is still burdened with a lien for the security of a debt. Said the court in Faxon v. All Persons, 166 Cal. 707, 137 P. 919, 925, L.R.A. 1916B, 1209:
"Where the plaintiff is himself the debtor, the applicability of the present rule is apparent. No different situation is presented where the plaintiff has bought the land before the right to foreclose the mortgage has become barred. In such case he acquired the property subject to a valid existing lien, which was, presumably, taken into account in fixing the purchase price. Such property, when he acquired it, was bound by the debt, and it would be as inequitable to relieve him of the burden without payment as it would to thus free the original debtor."
This case was approved by Chapman v. Hicks, 41 Cal.App. 158, 182 P. 336: it is the doctrine in Montana. ( McMillan v. Davenport, 44 Mont. 23, Ann. Cas. 1912D, 984, 118 P. 756.)
There is one point more that should not be overlooked. Gerken, the purchaser at the Heiss sale, was not a stranger to the title. The mortgage had been placed on the premises by his grantors, the Gausses. Aside from a personal liability to pay, he stood in the Gausses' shoes as far as appellant's mortgage was concerned. After a foreclosure sale, subsequent equities are binding on the purchaser's title where the mortgagor himself becomes the purchaser and the equities were placed there by himself. (42 C. J. 256, par. 1905; 3 Jones on Mortgages, 8th ed., par. 2429.) Having constructive notice of appellant's mortgage at the time he took the quitclaim deed, and not having contested the Davidson Grocery Company's mortgage in its foreclosure, to which proceeding he was a party, Gerken could no more have evaded that subsequent equity than could his grantors: he could not keep the land and at the same time gainsay the burden. In effect, all he had done was to clear the land of the Heiss mortgage: appellant's mortgage remained unaffected. ( Landau v. Cottrill, 159 Mo. 308, 60 S.W. 64, 67.)
Judgment reversed, costs to appellants.
Givens, Varian and McNaughton, JJ., and Koelsch, D.J., concur.
Petition for rehearing denied.