Opinion
10-28-1885
SEMON v. TERHUNE and others.
E. A. & W. T. Day, for complainant. J. Garrick, for defendant.
Final hearing on bill to foreclose and answer.
E. A. & W. T. Day, for complainant.
J. Garrick, for defendant.
RUNYON, C. This suit is brought to foreclose a mortgage dated and acknowledged September 17, 1880, and recorded on the fifteenth of October following, given by the defendants John G. Semon and wife to Richard M. Johnson, upon lands in Jersey City, to secure the payment of $750, and interest, according to the condition of Semon's bond to Johnson. The bill states that the mortgage was given for purchase money on the sale of the mortgaged premises by Johnson to Semon, but the fact is not admitted by the answer. The deed to Semon was dated September 30, 1880, was acknowledged October 1, 1880, and recorded on the twenty-fourth day of November following. The bill states that while the date of the mortgage is prior to that of the deed, the mortgage was not delivered until the time of the delivery of the deed; but this is not admitted by the answer. Johnson assigned the mortgage February 9, 1881, to James M. Connor by assignment of that date, recorded February 16, 1881. On the second of June, 1884, James M. Connor assigned it to James P. Connor, executor, etc., of William C. Connor, deceased, and he assigned it September 4, 1884, to the complainant. When John G. Semon bought the property of Johnson it was incumbered by a mortgage for $1,000, given September 10, 1866, by William Nattrass,who then owned the premises, to Jane C. Vreeland. That mortgage came to the hands of Jacob C. Terhune by assignment. He died June 15, 1882. His executors were the defendant John V. H. Terhune and Peter Schoonmaker. September 27, 1882, they filed a bill in this court to foreclose that mortgage. The only defendants to that suit were John G. Semon and his wife. There was a final decree in that suit by default. It was entered February 5, 1883, and the execution was issued thereon for the sale of mortgaged premises, which under it were sold May 3, 1883, to John V. H. Terhune for $500, and a deed therefor was given to him by the sheriff. He took possession under his deed, and has been in possession ever since. The bill asks that an account be had with him, and that the property be sold to pay in the first place to him the amount which may be found to be due to him in respect of the first mortgage, and then to pay the complainant what may be found to be due to him on his mortgage, with costs, and that any balance of the proceeds of the sale be paid to Terhune. Terhune, by the answer, admits the making and recording of the complainant's mortgage, and states that the omission to make the holder thereof a party to the foreclosure suit upon the first mortgage was due to the fact that the record of the complainant's mortgage was indexed in a wrong place. The answer further alleges that in 1884 the then holder of the complainant's mortgage threatened to sue John G. Semon for the money due upon the bond, and that the latter then paid it, and took an assignment of the bond and mortgaged to the complainant, who has no interest in them, but holds them for the use and benefit of John G. Semon, and subject to his control. The complainant filed no replication, and the cause comes in for hearing upon bill and answers.
The foreclosure proceedings upon the first mortgage were a nullity as to the holders of the second mortgage. By his purchase at the sheriff's sale under them, Terhune obtained the title of the holders of the first mortgage, and the equity of redemption of John G. Semon and his wife, but that equity of redemption was subject to the payment of the second mortgage, if that mortgage was a valid lien, of which the purchaser at the sheriff's sale had notice, upon the property; and if that mortgage were such a lien, and Terhune had taken an assignment of it after his purchase, equity would not have permitted him to enforce payment from Semon of the bond which it was given to secure, without giving Semon the benefit of a resort to the proceeds of the sale of the premises after satisfying the first mortgage therefrom. Vanderkemp v. Shelton, 11 Paige, 28. The only question on this point in this case is whether the purchaser had notice; that is whether he had constructive notice from the records. Had he consulted the record, (the index is no part of it,) he would have discovered that the title to the mortgaged premises remained in Richard M. Johnson up to September 30, 1880, and that, by a deed of that date, Johnson conveyed them to John G. Semon, who, by a mortgage recorded after, although dated before, that date, mortgaged them to Johnson. The fact that the mortgage bears date prior to the date of the deed would not, under the circumstances, have justified the purchaser in concluding thatit was given before Semon acquired title, for it might have been due to a mistake in the date of the one instrument or the other. There was at least enough upon the record to put him as a prudent man upon inquiry. He had notice of the mortgage from the record; for, in searching for mortgages by Semon from the date of his deed, September 30, 1880, he would have found the mortgage. The doctrine of the cases of Losey v. Simpson, 11 N. J. Eq. 246, and Spielmann v. Kliest, 36 N. J. Eq. 199, is not at variance with that now enunciated. The doctrine of those cases is that one who proposed to purchase land, or to take a mortgage upon it, is not bound to take notice of the record of a conveyance or mortgage made by one whose title deed has not been recorded, and the reason is that he has no clue to guide him in searching the record. But here the record showed the searcher the deed to Semon, and his mortgage to his grantor. The mortgage was indeed dated before the date of the deed, but it was recorded after the latter date, and the deed itself was on record. It is urged that, according to the record, it appears that after Semon gave the mortgage to Johnson the latter conveyed the property to him by deed of a subsequent date, and so extinguished the mortgage; for, according to the dates of the instruments, Semon had no title when he mortgaged to Johnson, and, having no title, he mortgaged the property to the person who owned it. The inference from the condition of the record would be that there was some mistake in the dates, and that in fact Johnson conveyed to Semon and then Semon mortgaged to him; or that Semon mortgaged to Johnson before he acquired title, and, having acquired title, afterwards might be estopped from denying that the mortgage was valid. The record was notice of the mortgage. But it is urged that if Terhune is chargeable with notice, Semon is entitled to no relief, because, according to the answer which is to be taken as true upon this hearing, he himself paid off the bond, the payment of which the mortgage was given to secure, and the bond was his own. But if the land had, as between him and the purchaser at the foreclosure sale, become the primary fund for the payment of that mortgage, he is entitled to subrogation on paying it off, (as he was compelled to do,) because of his personal liability thereon. The value of the premises beyond what was necessary to pay the first mortgage was the primary fund to pay the second mortgage, (Vanderkcmp v. Shelton, ubi supra,) and, under the circumstances, he is entitled to subrogation. Stillman's Ex'rs v. Stillman, 21 N. J. Eq. 126; Faulks v. Dimock, 27 N. J. Eq. 65; Tice v. Annin, 2 Johns. Ch. 125; Jumel v. Jumel, 7 Paige, 591; Russell v. Allen, 10 Paige, 249.
There will be a decree for an account by Terhune of the rents and profits from the time of the delivery of the sheriff's deed to him, in which account he is to be allowed for lawful taxes and assessments paid by him, and for moneys paid for necessary repairs. Should there be a balance against him on such accounting, it is to be credited on the amount due upon the first mortgage. Should the balance be in his favor, he is to have it as well as the amount due him in respect to the first mortgage raised and paid to him out of the proceeds of the sale ofthe mortgaged premises before paying the second mortgage therefrom. There will also be an account of what is due upon the first and second mortgages, and the property will be sold to raise and pay in the first place to Terhune the amount found to be due upon the first mortgage, after crediting any balance of rents and profits which may be found against him; and if any balance is found in his favor, he is to have the amount of it paid to him, as before stated, out of the proceeds of sale before payment of the second mortgage. He is not to have the costs of the foreclosure proceedings upon the first mortgage, nor the execution costs in that case. Van Duyne v. Shann, 39 N. J. Eq. 6. There will then be paid to the complainant the amount found due upon the second mortgage, with the cost of this suit, and the surplus, if any, will be paid to Terhune.
NOTE.
Subrogation.
It was recently held by the supreme court of Indiana, in the case of Binford v. Adams 3 N. E. Rep. 753, that the payment of a promissory note by a third person having no interest to protect extinguishes it, and the person making the payment is not entitled to subrogation. In a recent New York case it is said: "The doctrine of subrogation is a device to promote justice." Acer v. Hotchkiss, 97 N. Y. 395, 402. And a mere stranger or volunteer cannot invoke its aid, for such a person can establish no equity. Id. 403; Gans v. Thieme, 93 N. Y. 232; Nolte v. Creditors, 9 Mart. 602; Sandford v. McLean, 3 Paige, 117; Webster's Appeal, 86 Pa. St. 409. Subrogation takes place, without agreement, only where one, not a mere stranger or volunteer, has performed the obligations of another or paid his own debt assumed for a valuable consideration by another, or when he has paid incumbrances for the protection of his own title or interest, the payment of which he has not assumed by contract. Birke v. Abbott, 1 N. E. Rep. 485; Edwards v. Davenport, 20 Fed. Rep. 756. And payment by one primarily liable ordinarily extinguishes an incumbrance or debt so that no right to subrogation arises therefrom. Abbott v. Kasson, 72 Pa. St. 183; Klippel v. Shields, 90 Ind. 81; Carlton v. Jackson, 121 Mass. 592. Neither is a creditor entitled to subrogation to a lien which, but for his own laches, he might have had himself. Mechling's Appeal, 1 Atl. Rep. 326. Compare Hamilton v. Huston, 1 Atl. Rep. 549.
One who advances the consideration for a conveyance to another is entitled to a vendor's lien, or he may be considered as subrogated to the rights of the vendor. Carey v. Boyle, (Wis.) 11 N. W. Rep. 47. It is said that where a security pays a judgment against himself and principal, he becomes subrogated to all the rights of the creditor, and is entitled to an assignment of the judgment to himself or to another for his benefit, and may enforce against the principal all liens, priorities, and means of compelling payment held by the creditor. Searing v. Berry, (Iowa,) 11 N. W. Rep. 708. Where a surety for the payment of a debt receives a security for his indemnity and to discharge such indebtedness, the principal creditor is in equity entitled to the full benefit of that security, though such creditor did not act upon the credit of such security in the first instance, or even know of its existence. Richards v. Yoder, (Neb.) 6 N. W. Rep. 629. A surety in a suit to enjoin the foreclosure of a mortgage having paid the same, is entitled to subrogation. Reiner v. Schlitz, (Wis.) 5 N. W. Rep. 493. It has been held that an accommodation indorser is entitled to be subrogated to the rights of the maker where it appears that the notes were given for a machine warranted, but which proved on trial to be worthless; that the holder took with notice after maturity, and that the principal maker is insolvent. McDonald Manuf'g Co. v. Moran, (Wis.) 8 N. W. Rep. 864. It is said by the supreme court of Wisconsin that upon the payment by an insurance company of the loss sustained by the owner, from the burning of his premises, the company will be subrogated to any right which the owner had against the person causing the injury. Pratt v. Radford, 8 N. W. Rep. 606. Quære whether a company can claim to be subrogated to the rights of an officer who has taken an interest in a contract made with it. Richardson v. Welch, (Mich.) 11 N. W. Rep. 172. It is said that where the purchaser at a void sale of real estate for taxes, pays the taxes legally levied upon the real estate for subsequent years, upon a failure of his title he will be subrogated to the rights of the county to the extent of the legal taxes so paid by him, with legal interest, even though the taxes upon which the sale was had were void by reason of the default of the assessor in not filing the proper oath with the assessment roll. Merriam v. Hemple, (Neb.) 22 N. W. Rep. 775.
A creditor is not entitled to a subrogation to a lien which, but for his own laches, ha22might have had himself. Mechling's Appeal, (Pa.) 1 Atl. Rep. 326. The right to subrogation will never be enforced when it would work injustice. Kelly v. Kelly, (Mich.) 19 N. W. Rep. 580. Where a person is in manner barred, and on his own motion, in the absence of any contract that he shall be substituted in the place of the creditor, pays the debt, he will be regarded as an intermeddler, and not entitled to subrogation. Wormer v. Waterloo Agricultural Works, (Iowa,) 14 N. W. Rep. 331.
See note at end of case.