Opinion
1893-04-30
MOULTON v. CORNISH.
C. M. & G. E. Dennison, for respondent, E. J. Richardson ( Samuel Keeler, attorney), for appellant.
Appeal by defendant from a judgment of the General Term of the Supreme Court, Fourth Department, modifying and as modified affirming a judgment of the Special Term of that court.
The action was brought by Emily A. Moulton against Nehemiah N. Cornish for an account of what was due her as purchaser of a portion of the premises sold under the foreclosure of a mortgage held by her in an action to which the defendant, a junior mortgagee, had not been made a party; and to compel defendant to pay the amount that should be found due her, or in default thereof, that he and those claiming under him, be debarred and foreclosed of all right, title and equity of redemption in the mortgaged premises.
The further facts are fully stated in the opinion. C. M. & G. E. Dennison, for respondent,
I. The judgment being interlocutory no appeal lies to the court of appeals (citing McKeown v. Officer, 127 N. Y. 687;Victory v. Blood, 93 Id. 650;King v. Barnes, 107 Id. 645;Raynor v. Raynor, 94 Id. 248;Walker v. Spencer, 86 Id. 162;Cambridge Valley Nat. Bk. v. Lynch, 76 Id. 516;Clark v. Brooks, 2 Abb. Pr. N. S. 385;Tompkins v. Hyatt, 19 N. Y. 534; Tilton v. Vail, 117 Id. 520).
II. The plaintiff was entitled to a strict foreclosure (citing Bolles v. Duff, 43 N. Y. 474;Kendall v. Treadwell, 14 How. Pr. 165;Thomas on Mort. 2d ed. § 1077; Benedict v. Gilman, 4 Paige, 58;Robinson v. Ryan, 25 N. Y. 320;Jackson v. Bowen, 7 Cow. 13;Winslow v. Clark, 47 N. Y. 261; Salmon v. Allen, 11 Hun, 29; Parker v. Child, 25 N. J. Eq. 41).
III. The purchasers of the other parcels were not necessary parties (citing White's Bank of Buffalo v. Farthing, 101 N.Y. 344). The objection should have been taken by demurrer (citing Ousterhoudt v. Supervisors, 98 N. Y. 239, as distinguished by White's Bank of Buffalo v. Farthing, above).
IV. That the effect of Code Civ. Pro. § 1626, which requires that “in an action to foreclose a mortgage upon real property, if the plaintiff becomes entitled to final judgment, it must direct the sale of the property mortgaged,” etc., is to abolish strict foreclosure is suggested by learned writers (citing Thomas on Mort. p. 731, § 1143; Wiltsie on Mort. p. 929, § 833).
V. All the purchasers under the foreclosure of plaintiff's mortgage should be parties to a suit to cut off defendant's rights (citing Bear v. American, etc. Co., 36 Hun, 400; Osterhoudt v. Supervisors, 98 N. Y. 239. E. J. Richardson ( Samuel Keeler, attorney), for appellant.
I. The provisions of the judgment were harsh, inequitable and unusual (citing Abb. Forms, No. 1798; Wiltsie, M. F. 923, 925, § 5; Bolles v. Duff, 43 N. Y. 469;Walsh v. Rutgers Fire Ins. Co., 13 Abb. Pr. 40).
II. Code Civ. Pro. § 1626, requires a foreclosure judgment to direct a sale. If that section by its mandate does not abolish strict foreclosure, such foreclosure is clearly limited to unusual cases where such an action is the only remedy by which complete justice can be rendered to all the parties in interest (citing Jones on Mort. § 1538; Thomas on Mort. 390; Wiltsie on Mort. § § 826-833, and cases cited).
III. A strict foreclosure is not authorized where plaintiff is a purchaser at a sale in a defective foreclosure of a prior mortgage, known to be defective at the time and so announced at the sale; especially after the court had granted the plaintiff leave in the prior action to correct the defect by making the omitted party defendant. MAYNARD, J.
In 1886 the plaintiff was the owner of a mortgage given to secure the payment of $8,650 and interest, upon three several lots of land in the town of Floyd, Oneida county, known as the “Klock,” “Eells,” and “Tavern” farms; and the defendant was the owner of a subsequent mortgage upon the same property, given to secure the payment of $2,500 and interest, which, with the assignments to him, were recorded in the Oneida county clerk's office.
On May 16th the plaintiff commenced an action in the supreme court for the foreclosure of her mortgage, but omitted to make the defendant a party thereto. This omission was not intentional, but the plaintiff was misled by an abstract of a search obtained from the clerk's office, from which it might have been fairly inferred that the defendant's assignment was one in a series of transfers, and that the title to his mortgage was in another, who was made a defendant, and who appeared from the abstract to be a subsequent assignee. If a full statement of the search, in the usual form, had been obtained by the plaintiff, the interest of the defendant in the mortgaged property would have correctly appeared. The action resulted in a judgment, entered December 27, 1888, decreeing a foreclosure of the plaintiff's mortgage, and a sale of the mortgaged premises by a referee, pursuant to the provisions of the Code and the practice of the court in such cases.
The premises were first advertised by the referee to be sold on March 2, 1889. Before that time the plaintiff discovered that the defendant was a necessary party to the complete foreclosure of her mortgage, and she procured the sale to be postponed until March 16th, and made a motion, at a Special Term held at Syracuse on that day, for an order granting her leave to amend the summons, complaint, lis pendens, and judgment in the action by inserting therein the name of this defendant, and adjudging and decreeing that he be forever barred and foreclosed of all right, title, interest, and equity of redemption in the mortgaged premises, or for such further order or relief as the court might deem proper to grant. Upon the hearing of that motion the court made an order, which was entered, and which has not been reversed or vacated, directing that, upon payment of $10 costs, the plaintiff might, if she so elected, open the judgment in the foreclosure suit and amend the summons, complaint, lis pendens, and all subsequent proceedings, by making this defendant a defendant in that action and inserting the necessary allegations for that purpose, and that the amended summons and complaint be served on him, and that he have the usual time to answer.
The plaintiff did not avail herself of the privilege afforded by this order, and on March 16, 1889, the referee proceeded to sell the mortgaged premises. At the opening of the sale, and before selling, the referee announced and read the conditions of sale, which were in the usual form, except the last paragraph, which was in these words: “(7) The property is sold free and clear of any and all rights of dower, charge, or lien upon the same, except that it is claimed by one Nehemiah N. Cornish [the defendant in this action] that he is the owner, by assignment, of a mortgage made by Ichabod C. McIntosh to Miriam M. Kellogg, covering the premises in question, dated February 1, 1878, to secure the payment of $2,500, which mortgage was recorded in Oneida county clerk's office, February 13, 1878, and is a second lien upon said mortgaged premises. Cornish has not been made a party defendant to this action.” The plaintiff bid off the property known as the “Tavern Farm,” and the referee on the same day executed to her a deed, and very soon thereafter she went into possession. The sale was confirmed on the 6th of April, and on April 9th this action for a strict foreclosure was brought. The other farms were bid off by other parties, who have not been made defendants in this action.
The plaintiff has recovered a judgment, which, as modified by the General Term, decrees: (1) That the defendant's mortgage is an existing lien on the lands purchased by plaintiff upon the foreclosure of her mortgage, and was not affected by such foreclosure, because not made a party to the action. (2) That, if the defendant desires to redeem the land bid off by the plaintiff upon her mortgage, he shall, within ten days from the service of a copy of the judgment, give the plaintiff notice of his desire and intent to do so. If such notice is not given within the time specified, it is ordered and adjudged that the defendant, and all persons claiming under him, do stand and be forever barred and foreclosed of and from all right, title, interest, and equity of redemption of, in, and to such premises, and all leins which he may have had thereon at the time of the commencement of the foreclosure action, by virtue of his mortgage or otherwise, are to be adjudged as cut off and foreclosed, and the plaintiff shall hold the title thereto free from such leins, and the defendant shall pay the costs of the action. (3) If the defendant gives notice of his intention to redeem within the time required, the plaintiff may apply on notice to the Special Term for the appointment of a referee to take and state the account of the plaintiff, and to determine her interest in the mortgage debt, as applicable to the lands bid off by her, and the referee's report shall be made up according to certain directions contained in the judgment, and shall fix and determine the amount the defendant shall be required to pay upon such redemption; and the amount so found due by the referee, with the interest thereon, shall be paid by the defendant within six months from the service of a copy of the report, and if paid within such time the payment shall operate as a redemption of the premises from the plaintiff's mortgage, and her title acquired at the sale shall become vested in him, and she shall, by a proper conveyance, convey the premises to him free and clear from the lien of her mortgage, and neither party shall have costs of the action. But, if the defendant fails to complete the redemption in the manner and within the time specified, it is ordered and adjudged that the lien of his mortgage is cut off and removed, and the plaintiff is deemed to hold the premises free and clear of such lien, and the defendant shall pay the costs of the action.
The material facts are not disputed, and we are of the opinion that upon the proofs submitted, and the findings of the trial court, the plaintiff was not entitled to the relief granted to her in this judgment. The equitable remedy known as a “strict foreclosure” of a real-property mortgage, has never been recognized in this State, save in a very limited class of cases. In England it was the prevailing method of procedure until the enactment of St. 15 & 16 Vict. c. 86, § 48, known as the “Chancery Improvement Act.” It had its root in the common-law doctrine that upon the execution of the mortgage the mortgagee acquired the fee to the land, and, upon default in payment, a right to the possession, and the mortgagor had no estate or interest therein, and no right of possession, after default had been made in the payment of the mortgage debt. The mortgagee's remedy was by ejectment, and in a court of law it was not an available defense for the mortgagor to plead that he was willing and ready to pay the debt if he had once suffered a default to occur.
In order to mitigate the hardships of this relation, equity permitted the mortgagor and his privies to redeem by discharging the mortgage debt, and by restoring to him the possession of the land if the mortgagee had taken possession. As it might be uncertain whether the mortgagor or subsequent lienors would ever avail themselves of the right of redemption, it was, while outstanding, a serious impediment to the alienation of the mortgaged property; and equity would therefore entertain an action to compel the parties entitled to this right to exercise it by paying, within a reasonable time, the amount of the mortgage debt, or be forever barred or foreclosed of the right of redemption; and in case of redemption the decree provided that the mortgagee should reconvey the lands to the mortgagor or other party redeeming. This proceeding has been termed a “strict foreclosure,” but it is apparent that it has no appropriate place in a system of laws and jurisprudence where it has been declared that the mortgage does not operate as a conveyance of the legal title, but is only a chose in action constituting a lien upon the land, as security for the debt or other obligation of the mortgagor. The courts of this State have refused to adopt it as an authorized remedy in ordinary cases, and in this respect have followed the practice of the civil, rather than of the common, law. In 8 Amer. and Eng. Enc. Law, 186, 187, tit. “Foreclosure,” it is stated that strict foreclosure is very rarely resorted to in the American courts; that in a large majority of the States it is not recognized; that in two it is the usual mode of procedure; and that in six of the States, including New York, it is permitted in exceptional cases. The plaintiff here rests her right to this remedy principally upon the fact that she was the owner of a prior mortgage, which she had foreclosed, and that she became the purchaser of a part of the mortgaged property at the foreclosure sale, and that the defendant's subsequent mortgage was not cut off or affected by the foreclosure, because she did not make him a party to the foreclosure action. Before the sale occurred she had full knowledge that the defendant was the owner of the second mortgage, and leave was given her by the court to make him a party to the action, and so conclude him by the judgment, which she declined to accept, but caused the sale to proceed, and purchased the property upon such terms that, both expressly and in legal effect, her purchase was subject to the lien of the defendant's mortgage. Under such circumstances no case was made for a resort to this unusual, exceptional, and severe remedy.
It is insisted that, under the provisions of the Civil Code relating to foreclosure actions, such a judgment as the one entered herein, cannot be rendered in any case; but it is unnecessary to determine that question upon this appeal. We may assume that, in a proper case, jurisdiction still exists to relieve a purchaser at a foreclosure sale, who finds that, by reason of some defect in the proceedings, the lien of a subsequent incumbrance has not been extinguished; but the facts here shown are not sufficient to authorize the exercise of that jurisdiction. We think that in such cases the purchaser must show that he purchased in good faith, relying upon the regularity and sufficiency of the foreclosure proceedings, and that the subsequent lienor had knowledge of the sale, and permitted the purchaser to make the purchase, without disclosing the existence of his incumbrance, or calling attention to the defect in the proceedings.
In 2 Jones Mortg. p. 421, § 1540, it is stated that a strict foreclosure is proper “where a mortgagee or purchaser is in possession under a legal title from the mortgagor, for the purpose of cutting off subsequent liens or incumbrances, as in case one has purchased in good faith at a mortgage sale, which is not conclusive against some incumbrancer not made a party to the suit, and the purchaser has gone into possession.” The cases have been very rare in this State where the remedy has been invoked, but we fail to find a case where it has been applied to relieve a party who buys with full knowledge of the outstanding incumbrance, and subject to it.
In Kendall v. Treadwell (5 Abb. Pr. 26) the practice in strict foreclosure cases received an exhaustive examination by Judge BIRDSEYE, and the prominent feature of the case was the good faith of the plaintiff in making the purchase, and the acquiescence of the subsequent incumbrancers in the validity of the proceedings under which the plaintiff acquired his title. The action to foreclose the mortgage had been prosecuted in the county court, and after judgment and sale, the supreme court, in another case, had held that the act conferring jurisdiction upon county courts in foreclosure suits was unconstitutional, and its judgments were therefore void. The subsequent lienors were all parties to the action in the county court, and did not question its jurisdiction. The learned judge, in summarizing the grounds upon which the plaintiff's right to equitable relief rested, said (page 22): “He was in possession, claiming to be owner, under a title apparently good. He took his original title, and has made all his subsequent advances and payments upon the faith of the act of the legislative authority of the State, and of judicial tribunals established by the State. No objection was then made to the jurisdiction of the court.”
In Benedict v. Gilman (4 Paige, 58) the bill was filed against subsequent judgment creditors, and the principal question was whether the plaintiff was entitled to an allowance for permanent improvements; and the chancellor, in disposing of this question, says: “It is charged in the bill in this case, and admitted by the answer, …. that the complainant was ignorant of the existence of these judgments until after he had made permanent improvements upon the premises to a considerable extent. Under such circumstances it would be inequitable and unjust to give the defendants the benefit of those improvements without compelling them to pay an equivalent therefor. The case would have been different if the complainant had made the improvements with a full knowledge of the defendant's equitable right to redeem.”
The right to a judicial sale of the mortgaged property to pay the mortgage debt is, in this State, one of the incidents of the mortgage contract; and if the mortgagor is in default, the mortgagee is entitled to the enjoyment of this right unimpaired. It can only be secured to him by a sale, in an action or proceeding to which he is a party; for in all such cases the sale is made for the benefit of all the parties interested, and the proceeds are distributed among them in the order of the priority of their respective liens. This was the view taken by the General Term of the eighth district in Peabody v. Roberts (47 Barb. 91), where Judge DANIELS, delivering the opinion of the court, said (page 94): “The second mortgagee possessed the right to maintain an action upon it for the foreclosure of so much of the equity of redemption as remained in the mortgagor at the time when it was recorded, and for a satisfaction of the debt secured by it, by a sale of the mortgaged premises. This right has, from the time of the civil law, been secured to the mortgagee, as an incident to, and growing out of, the mortgage itself.” And again, at page 95: “This right is so important in these cases that the holder of the mortgage cannot be deprived of it without at the same time very sensibly impairing and depreciating the security created by the mortgage; and, as such, it is an essential attribute of property, which positive legislation even cannot destroy, without impairing the obligation of the contract out of which it arises.” This is a just interpretation of the literal terms of the instrument, for the mortgage expressly authorizes the mortgagee, in case of default, to sell the mortgaged premises, and out of the proceeds satisfy the mortgage debt. Where it is a second mortgage, and the mortgagee is made a party to the foreclosure of a prior mortgage, full effect is given to this power of sale, by means of the sale directed in the action or proceeding, which, as we have seen, is made for the benefit of all the parties served with process or notice. It is not necessary to hold that in no case can the right to sell be held in abeyance, but the right cannot be denied or suppressed unless some adverse, dominating equity requires it. If in this case the plaintiff had purchased and taken possession in ignorance of the existence of defendant's mortgage, and the defendant, having knowledge of the prosecution of the foreclosure action, had made no disclosure of his encumbrance upon the property, and the purchaser was thus misled to his prejudice, it might well have been held that it would be inequitable to permit the defendant to exercise the power of sale in his mortgage, and it might properly have been decreed that, unless he reimbursed the plaintiff, his interest in the property should be deemed extinguished. Other cases might be suggested where such form of relief would be just. But in all cases equitable grounds for such a procedure must be shown. It is not a matter of discretion with the trial court whether a remedy of this kind shall be applied. The proofs must bring the case within the exceptional class in which it is permitted, and then the measure of the relief to be granted, or the conditions upon which it will be allowed, are to a certain extent discretionary.
As to this defendant, the plaintiff is only a mortgagee in possession. It is true she has also acquired the title of the mortgagor, and has extinguished the liens of all other encumbrancers who were made parties to the foreclosure action. But she occupies no better position with respect to the defendant than if she had taken a deed from the mortgagor, and an assignment of the other encumbrances, and had gone into possession. As to the defendant, her mortgage is still unforeclosed, and the estate which the mortgagor had when he executed the defendant's mortgage is still subject to its lien. The plaintiff may at any time foreclose her mortgage, as against the defendant, notwithstanding the former defective foreclosure (Brainard v. Cooper, 10 N. Y. 356;Walsh v. Insurance Co., 13 Abb. Pr. 33;Franklyn v. Hayward, 61 How. Pr. 43). It imposes no hardship to require her to pursue such course if she wishes to rid the title of the lien of defendant's mortgage. She will be as fully protected upon such a foreclosure as she would have been upon the original foreclosure, had she made him a party to it.
The plaintiff may have the ordinary decree of foreclosure against the defendant in this action, if she so desires, and all persons who are necessary parties defendant are brought in. It is not seen how any relief can be afforded without the presence of the purchasers of the other two parcels of the mortgaged premises. If it is sought to reforeclose plaintiff's mortgage, they are unquestionably necessary parties, as the owners of separate portions of the property mortgaged, and by their purchases they have respectively acquired an interest in plaintiff's mortgage. If the court is asked to apportion either the plaintiff's or the defendant's mortgage between the three farms, they are necessary parties to a determination of that question. They would not be bound by any judgment rendered in this action which adjudged the extent of the lien of either mortgage upon their respective properties, and such adjudication would be necessarily involved in the ascertainment of the amount of either mortgage equitably chargeable upon the several parcels.
In such a case the objection of a defect of parties is available, although not raised by demurrer or answer. The plaintiff is not entitled to the equitable relief sought, if it appears that a complete determination of the controversy cannot be had without the presence of other parties, and the court must direct them to be brought in ( Code, § 452); and where it appears upon appeal that this has not been done, the court will reverse the judgment, although the issue is not made by the pleadings (Bear v. Telegraph Co., 36 Hun, 400). If the plaintiff obtains leave to amend by bringing in all necessary parties, she may have a decree for a foreclosure of her mortgage as against the defendant, and a sale of the mortgaged premises, in which decree the equities of the different purchasers, as between themselves, can be properly adjusted, and the court can direct the application of the net rents and profits upon the mortgage debt, in ascertaining the amount which the plaintiff and her co-owners of the mortgage are entitled to receive upon a sale of the property. In general terms, we think this is the extent of the relief to which she is entitled under the pleadings and proofs in this action.
The objection is urged that the judgment under review is not final, but interlocutory, and therefore not appealable. The judgment is peculiar in its structure, and an analysis of its provisions leads us to conclude that it finally determines all the substantial rights of the parties. It, in effect, adjudges that unless the defendant, within a prescribed time, gives the plaintiff notice of his desire and intention to redeem the lands purchased by plaintiff at the former foreclosure sale, he is forever barred and foreclosed of and from all right, title, interest, and equity of redemption therein, and the lien of his mortgage thereon cut off and foreclosed and that the plaintiff shall hold the title thereto free from such lien. If the notice is not given, no further judgment need be entered, but this decree, by the force of its own provisions, effectually destroys the lien of the defendant's mortgage. As, presumably, the time has expired within which the notice could be given, the judgment has become final, and subject to review by this court.
If the defendant had elected to proceed under the judgment, it would be a waiver of his right of appeal, and would be available upon a motion to dismiss the appeal. But the bringing of the appeal gives rise to the presumption that he has not availed himself of its provisions, and therefore, if it stands, it will be final and conclusive upon him, and will operate to extinguish his mortgage. Where a judgment fully and completely disposes of the substantial rights of the parties, at issue under the pleadings, and by the force of its own provisions may conclude the appellant without the entry of a further judgment, it must be deemed a final judgment within the purview of section 190 of the Code, although in a certain contingency, dependent upon the action of the appellant, it provides for the taking and stating of an account before a referee, and the payment of the amount found due, as a condition precedent to the enjoyment of certain rights accorded him therein. In this respect the case of Produce Bank v. Morton (67 N. Y. 199) is closely analogous. It was there held that a judgment in an action to set aside an assignment for the benefit of creditors, adjudging the assignment void, directing the assignor to account before a referee, and that a receiver be appointed to take charge of the assigned property, pay out of it the plaintiff's judgment, and hold the residue subject to the order of the court, is a final judgment, reviewable by appeal.
The judgment must therefore be reversed, and a new trial granted, if plaintiff elects, within sixty days after filing the remittitur in the court below, to proceed with the action, and applies for leave to amend by bringing in the necessary parties. If such leave is not applied for or granted, the complaint is dismissed, with costs in this court and in all courts. If leave to amend is granted, costs in this court to abide the determination of the supreme court as to the conditions upon which leave to amend may be granted. All the judges concurred.
NOTES OF CASES ON SPECIAL RELIEF IN SUITS FOR FORECLOSURE.
Lost bond and mortgage; indemnity to mortagor unnecessary.] In Stoddard v. Gailor, 90 N. Y. 575, it was held unnecessary in foreclosing a lost bond and mortgage to exact from the plaintiff's bond to indemnify the mortgagor from loss or damage, since he might safely pay the mortgage without the production of the lost instrument, if he has had no notice or knowledge of any assignment.
Interest or property covered.] Young v. Guy, 87 N. Y. 457; aff'g 23 Hun, 1. Subsequent to his entering into a contract to sell property, the owner mortgaged the premises to one who was not a purchaser in good faith and for value within the meaning of the Recording Act, by reason of his having taken the mortgage to secure a prior indebtedness. Subsequent to the recording of such mortgage the purchaser of the property completed the purchase by paying part cash and giving a purchase-money mortgage for the balance. The purchase-money mortgage was assigned to one who took it in good faith and for value.
In an action to foreclose the first mortgage, held, that the purchaser under the prior contract had a superior right and was protected as to the purchase money which he had paid after as well as before the recording of the mortgage, but that the mortgage could be enforced to the extent of the mortgagor's interest in the property, namely, to the amount of the purchase-money mortgage; and the fact that it had been assigned to a bona fide purchaser for value made no difference, as he stood in no better position than the vendor, nor was the purchaser of the property protected by payment of such morgage pending the present action.
Paramount title.] Helck v. Reinheimer, 105 N. Y. 470. Where in an action of foreclosure defendants set up in their answer a claim of paramount title, and demand judgment that the mortgaged premises be freed from the mortgage and that it be discharged of record, and the issues raised by the answer are litigated and decided without objection, the defendants will be bound by the judgment, and cannot object on appeal that the question raised by the answer could not be litigated in the action of foreclosure.
Prior title.] Cromwell v. MacLean, 123 N. Y. 474; S. C., 34 State Rep. 85. A defendant in foreclosure claiming a prior title may consent that the question as to the validity of his title be adjudicated therein, in which case the court has a right to pass upon the question.
Prior encumbrancers.] Goebel v. Iffla, 111 N. Y. 170; S. C., 19 State Rep. 105.
The court say: “While prior incumbrancers are neither necessary nor proper parties to an ordinary action of foreclosure, and when made such under the general allegation that they claim an interest as subsequent purchaser, incumbrancer, or otherwise, a decree will not affect them; and, moreover, if the facts upon which the plaintiff relies to defeat that prior title are stated, the defendant whose title is thus assailed may demur to the complaint upon the ground that the plaintiff has no right to bring him into court upon the foreclosure to try the validity of his title,--yet if the party so made a defendant should, instead of demurring, answer and litigate the question, and then the judgment should go against him, no case decides that the judgment would not conclude him in a collateral action, nor do those cases decide that where such facts are stated as will if admitted, subject that title to the plaintiff's mortgage, and to the relief sought, the party against whom they are alleged will not in like manner be estopped from afterwards setting up his interest against the judgment in the foreclosure action.”
Suretyship; and release of security.] Grow v. Garlock, 97 N. Y. 81. An accommodation indorser gave a mortgage to secure the payment of the note. The mortgagee, notwithstanding he knew that the maker of the note, and the accommodation indorser stood in the relation of principal and surety, released a lien on the lands of the former for the payment of the note without the consent of the latter.-- Held, in an action to foreclose the mortgage, that to the extent of the loss then sustained, the endorsee was entitled to a reduction of his liability.
Sale of sufficient land.] Andrews v. O'Mahoney, 112 N. Y. 567. In a foreclosure action, the court has power to order a sale of sufficient of the mortgaged property to pay all the encumbrances thereon, as well prior as subsequent, if such a sale is proper for the protection of the interests of all persons having liens thereon; and if no such provision is contained in the judgment of foreclosure as originally entered, the court has power, when the situation of the property and the nature and amount of the subsequent encumbrances are brought to its attention, to authorize the sale of additional land for the satisfaction thereof, and to modify the judgment accordingly.
Defining mortgage interest; fixtures excluded.] Tyson v. Post, 108 N. Y. 217. Foreclosure. Machinery attached to mortgaged premises under an oral agreement that it should belong to the purchaser, held not covered by the mortgage, though not excepted in it.
Burchell v. Osborne, 119 N. Y. 486; aff'g 26 State Rep. 163; S. C., 6 N. Y. Supp. 863. A sale by separate parcels upon foreclosure of a blanket mortgage does not wipe out the specific subsequent liens upon each particular parcel, as it is sold toward the satisfaction of the decree, but the subsequent lienors have a right to have the entire property sold for the purpose of adjusting their equities. In such a case the surplus arising upon the sale is to be regarded as a common fund distributable to all lienors upon the lands sold in the order of the dates when their mortgages became liens upon the debtors' property, subject to the limitation that no greater amount shall be paid in discharge of the liens on any lot than was realized for that on the sale.
Undivided share, bought by mortgagee, released.] Smith v. Roberts, 91 N. Y. 470. A purchase by and conveyance to a mortgagee of an undivided part of the mortgaged premises, where it does not appear that there was a payment or merger of the mortgage, or any portion thereof, operates as a release of the portion conveyed from the lien of the mortgage, leaving it to rest solely upon the portion unconveyed.
Foreclosure of, to cover right; defining interest and property covered.] Mutual Life Ins. Co. v. Shipman, 119 N. Y. 324; s. c., 29 State Rep. 742; rev'g 20 Id. 530; s. c., 50 Hun, 578;3 N. Y. Supp. 684. Foreclosure of mortgage executed by an executrix under power in trust in will for her own benefit with knowledge of mortgagee. Held, that the mortgage was confined to the interest of executrix as doweress and was not effectual as to interest of others subject to the power in trust.
Order of sale of several parcels.] Bowne v. Lynde, 91 N. Y. 92. Where a purchaser of part of the mortgaged premises assumed to pay the mortgage as a part of the purchase money,-- held, that a judgment for the foreclosure of the mortgage properly directed that the portion of the mortgaged premises which had been so conveyed should be first sold.
Sale.] Coles v. Appleby, 87 N. Y. 114; aff'g 22 Hun, 72. The rule as to the order of sale is an equitable one, and governed entirely by equitable principles. In this case, where different portions of the premises subject to the mortgage were conveyed at the same time, a direction that one of them be sold first was held, under the circumstances, proper, although the deed of such parcel had been recorded before the other.
Decreeing conveyance of land without the jurisdiction.] Union Trust Co. v. Olmstead, 102 N. Y. 729. In an action to foreclose a mortgage, where a part of the lands covered by it are situated in another State, the court, in decreeing foreclosure, may require the mortgagor to execute a conveyance to purchaser.
Application of proceeds.] Orleans County Nat. Bk. v. Moore, 112 N. Y. 543. Upon foreclosure of a mortgage given to secure several notes, the plaintiff entered a judgment by default containing directions as to the order in which each note should be paid out of the proceeds of the sale. On motion of the mortgagor such provision in the judgment was stricken out and an order made directing the proceeds to be applied pro rata.
The court say: “The right of a creditor to apply a payment made to him by a debtor, in the absence of any application by the debtor, seems to be confined to voluntary payments.”
[The application of proceeds in this case is not within Code Civ. Pro., § 1633, which only provides for their application after the satisfaction of the mortgage debt. It would seem that the judgment should direct how the proceeds should be applied where there are several debts secured by the mortgage. Pro rata, if the complaint (as in this case, see 48 Hun, 70) makes no demand as to the order of payment; and specifying the order where the pleading and evidence show special circumstances.]
Prior liens.] Bacon v. Van Schoonhoven, 87 N. Y. 446; aff'g 19 Hun, 158. In an action to foreclose a mortgage it appeared that after the assignment of the mortgage to plaintiff and before it had been recorded, the mortgagee gave a satisfaction piece which was recorded; and upon the faith of such satisfaction another mortgage had been procured. Held, that the junior mortgagee had the priority of lien; but a mortgage purchased by such junior mortgagee after the assignment was put on record, which was prior to the mortgage held by him, but subsequent to the first mortgage, was not entitled to priority over the latter. [The Gen. T. reversed the Sp. T. and ordered a new trial. The court of appeals affirmed the Gen. T. and directed judgment absolute in favor of defendant upon stipulation.]
Prior liens; and dower right for which mortgage was given.] Pope v. Mead, 99 N. Y. 201. Where a widow joined with heirs in a conveyance, taking back a mortgage to secure her interest,-- held, upon the foreclosure of such mortgage, it must be regarded as if given for purchase money, and, to the extent of her dower right, notwithstanding its release, was a lien upon the interest of one of the heirs in the land which had been conveyed prior to a former judgment against such heir.
In the above case there were three heirs, and the decree directed that the plaintiff was first entitled to two-thirds of the net proceeds of the sale and to the value of her dower right in the other third, “to be ascertained on the principles applicable to life annuities,” and after deducting the dower interests, the judgment creditor was entitled to the residue of said one-third, so far as necessary to satisfy his judgment.
Apparent prior mortgage declared a junior encumbrance.] In Ellis v. Horrman, 90 N. Y. 466, the court declared the mortgage foreclosed to be a prior lien to a mortgage that had been recorded before it, on the ground that plaintiff's mortgage was for purchase money, and that the person to whom the other mortgage was made, was, under the circumstances, chargeable with knowledge of plaintiff's claim.
Subrogation to prior mortgage.] In Quinlan v. Stratton, 128 N. Y. 659, foreclosure was decreed subject to a prior mortgage, and conferring plaintiff the right of subrogation upon paying the prior mortgage.
Outstanding interests announced at the sale.] Cromwell v. Hull, 97 N. Y. 209. In an action of partition, certain persons claiming contingent remainders were not made parties. The purchaser at the sale under the judgment in the partition suit gave a mortgage, which was foreclosed. The judgment of sale in foreclosure was in the ordinary form, no reference being made to these outstanding interests, but notice thereof was given at the sale, and the same was made subject thereto. Held, that an order compelling the purchaser to complete his purchase was proper; and that an amendment of the judgment was not necessary, as it furnished adequate authority for the sale of the property covered by the mortgage.
Back rents of leasehold, etc.] Keeler v. Keeler, 102 N. Y. 30. In foreclosure of a leasehold, where a judgment in ejectment for non-payment of rent has been recovered, foreclosure and sale should be directed subject to the payment of back rents and only the legal costs in the action of ejectment, and not the costs allowed by stipulation of the parties in that action.
Junior encumbrances.] Burchell v. Osborn, 119 N. Y. 486; aff'g 26 State Rep. 163; S. C., 6 N. Y. Supp. 863. Where no issue has been raised in the pleadings and by the proceedings in foreclosure as to the equities of subsequent encumbrancers, they should not be determined by the decree of foreclosure and sale; but if there is a surplus after the sale, they may be adjusted in a proceeding for its distribution.
Cancellation of satisfaction.] McPherson v. Rollins, 107 N. Y. 316. Foreclosure. Satisfaction piece of the mortgage foreclosed executed by a trustee, which was not authorized by the terms of the mortgage,-- held, not to discharge it as to defendants claiming to be innocent purchasers.
Cancellation of satisfaction, and foreclosure with right to redeem from senior mortgage.] Clark v. Mackin, 95 N. Y. 346. In an action by an assignee of a mortgage to foreclose the same, it appeared that the assignment of mortgage to plaintiff had not been recorded; that the mortgagor without consideration had satisfied plaintiff's mortgage; and that a subsequent mortgage had been made which by assignment had come into the hands of an innocent purchaser, who had foreclosed it, and obtained a judgment for deficiency. Under these circumstances a decree was made, that the satisfaction of plaintiff's mortgage was null and void and that the same should be cancelled of record; that the lien of the second mortgage, held by the innocent holders thereof, was prior to the plaintiff's mortgage; and that the plaintiff upon paying the amount due to such holders on their judgment of foreclosure should be subrogated to all their rights under said judgment bond, mortgage and guaranty of the same by R. & Co., and directing the holders of the second mortgage “on said payment being made within ninety days,” to assign to the plaintiff their judgment bond, mortgage and guaranty.
[For statement as to judgment recovered in the above case, see Clark v. McNeal, 114 N. Y. 287.]
Cancellation of bond and mortgage for usury.] Chapin v. Thompson, 89 N. Y. 270. In an action to foreclose a mortgage given to secure a usurious loan, it appeared that the mortgagor had made a general assignment for the benefit of creditors, in which specific provision for the payment of the usurious debt was made by describing it in the inventory as for money loaned secured by mortgage and including among the assets the mortgaged lands with a statement that they were mortgaged to secure such debt. Held, that the judgment for defendant in foreclosure went too far in directing that the bond and mortgage should be cancelled; and that it should be modified by a declaration that it should not affect the claim of the plaintiff under the assignment.
Taxes--not provided for in mortgage.] Sidenberg v. Ely, 11 Abb. N. C. 354;S. C., 90 N. Y. 257. The rule that when the owner of mortgaged property neglects to pay taxes, assessments, or liens of a like nature imposed upon it, the mortgagee or holder of the mortgage by assignment may pay them in order to protect his security, and the amounts so paid may be added to and become part of the mortgage debt enforcible upon foreclosure,--applies, although there be no tax clause in the mortgage. To give the owner of the mortgage this right, it is not necessary that the premises should have been sold for non-payment of taxes, nor can his right to make such payment be delayed by reason of the fact that the equity of redemption is in a life tenant and a remainder-man, and that it was the duty of the life tenant to pay the taxes.
Insurance money.] Reid v. McCrum, 91 N. Y. 412. Where the owner of the fee, who by his deed took subject to the mortgage, procured insurance, and by directions of his general agent, who had charge of all his business, including insurance, indorsements were made upon the policies, making the loss, if any, payable to the mortgagee,-- held, that the latter was entitled to the insurance, although the agent had procured the indorsement to be cancelled; and the judgment should be modified so as to allow plaintiff the insurance money.
Application of insurance money.] Dunlop v. Avery, 89 N. Y. 592. Where there were two mortgages on the same premises, each containing a covenant to insure; and the mortgagor allowed the insurance for the benefit of the first mortgagee to expire, but kept the premises insured for the benefit of the second mortgagee, and the premises burned,-- held, in an action to foreclose the first mortgage, that it was erroneous for the judgment for plaintiff to direct that in case of deficiency the plaintiff had a priority of right to the insurance money, it should have been awarded to the defendant, the junior mortgagee.
Surplus--resort to other lands covered by prior mortgage.] Quackenbush v. O'Hare, 129 N. Y. 485; S. C., 42 State Rep. 104; aff'g 61 Hun, 388. Upon application for surplus moneys arising on a foreclosure sale, it appeared that there were two mortgages subsequent to the mortgage foreclosed, and that the senior one covered other lands, which were of sufficient value to satisfy it. Held, that the prior mortgage could not be displaced leaving the owner thereof to resort to the other lands for its payment. But as to whether the junior mortgagee might not offer to pay such prior mortgage and demand an assignment of it so as to be subrogated to the rights against the other real estate, quære.
Assumption of mortgage; deficiency judgment.] Gifford v. Corrigan, 117 N. Y. 257. A deficiency judgment in foreclosure may be rendered against a grantee who has assumed the mortgage, although the grantor has released him from such covenant, where the mortgage creditor has adopted and assented to it before such release was given.
Deficiency against guarantor.] Vanderbilt v. Schreyer, 12 Abb. N. C. 390;S. C., 91 N. Y. 392; rev'g 21 Hun, 537. A guarantor of a mortgage, whether for payment or collection, should be made a party to the foreclosure.
Guarantor; deficiency judgment against.] Wood v. Ludlow, 110 N. Y. 154. Foreclosure. Judgment of deficiency against guarantor.
Guarantor by independent instrument; deficiency judgment against.] In Newcomb v. Hale, 90 N. Y. 326, a deficiency judgment was allowed against one to whom the mortgage was made payable, who on assigning it to plaintiff had guaranteed the payment of the bond.
In the above case the court say (p. 331): “The guaranty of the defendant was not entered into for the benefit of the original debtor, but for his own benefit, subsequent to the original transaction and upon a new and independent consideration moving from the plaintiff. The engagement was collateral in form, but it was in substance an original undertaking, and an immediate right of action accurred thereon to plaintiff, on the mortgage debt becoming due.”
Deficiency against personal representatives.] Glacius v. Fogel, 88 N. Y. 434. Where a mortgagor who was personally liable for any deficiency arising on foreclosure of his mortgage is dead, his personal representatives may be made parties to an action to foreclose the mortgage, and a decree may be rendered therein that the deficiency be paid out of the estate in their hands in due course of administration. So held, in proceedings before the surrogate against executors for the purpose of obtaining the payment of a deficiency judgment.