Besser v. Hawthorn

Prim, J.

The principal question arising in this case results from the omission of the second mortgagee as a defendant in the foreclosure of the first mortgage. The statute in force in this state prior to 1862 was silent upon the necessity of making subsequent incumbrancers parties to suits of foreclosure. The general rule, as stated in Story on Equity Pleadings, sec. 193, was, “that all incumbrancers, as well as the mortgagor, should be made parties, if not as indispensable, at least proper parties to such a bill, whether they are prior or subsequent incumbrancers.” This rule, we think, was undoubtedly applicable in the absence of any statutory provision on the subject. In the argument of the case, counsel seem to differ very radically as to the effect of a subsequent incumbrancer not being made a party in the foreclosure of a first mortgage. It is claimed by respondent, that if he should be omitted, he would in no way be bound by the decree; while it is insisted by appellant that he would bo bound by it, and could only attack the pro *514 ceedings on the ground of fraud or collusion. The rule seems to be well settled and uniformly supported, that subsequent incumbrancers must be made parties, and if omitted, the decree will not bind their rights.

In the case of Hains et al. v. Beach et al., in 3 Johnson’s Ch. 461, the .same question raised in this case was before the court for decision, and the chancellor, in delivering his opinion, said: “It was the duty of Gardner [the first mortgagee] to have made the younger mortgagee a party to his bill; and all incumbrancers existing at the commeBcement of the suit are entitled to be parties, for they have an interest to be affected, and ought to have an opportunity of paying off the prior incumbrances. The rule, therefore, has been well settled and uniformly supported, that the subsequent incumbrancers must be parties, and if omitted, the decree will not bind their rights.” The chancellor then proceeded to cite a large number of English cases sustaining this rule.

Section 64 of the act of 1854, page 204, in providing what shall be the force and effect of deed obtained under decrees of foreclosure, provides that “ such deeds shall be as valid as if executed by the mortgagor and mortgagee, and shall be an entire bar against either of them, and against all parties to the suit in which the decree for such sale was made, and against their heirs respectively, or all persons claiming under such heirs.”

By this section of the statute, the deed is binding only upon parties to the suit and their heirs. Then we think it may be legitimately inferred from this provision, that it is not binding on persons having specific liens against the property at the time of the commencement of suit, and not made parties. It will be further observed that this section provides that such deeds shall vest in the purchaser the same .estate and no other or greater than would have vested in the mortgagee, if the equity of redemption had been foreclosed; and it “ shall be as valid as if executed by the mortgagor and mortgagee.” Then in this case, if Shultz and Stephens had conv.eyed all their rights without foreclosure to Haw *515 thorn, who now claims under the foreclosure sale, he would in that event become the owner of the prior mortgage, and of the equitable right of redemption, subject to the payment of the amount due on the second mortgage owned by Besser, the plaintiff in this suit. Then the sale under the decree in the foreclosure suit, brought by Stephens upon the first mortgage was wholly inoperative as to the rights of Besser, the second mortgagee, for the reason that he was not a party to that suit. The only right therefore, which Hawthorn acquired under that sale,' as against Besser, was the right to the prior lien upon the premises, to the extent of the amount of money due on the Stephens note and mortgage, at the time of sale, in the same manner as if Stephens had assigned that mortgage to him without foreclosure. But as against Shultz, the mortgagor, he acquired the right of redemption, subject to the payment of the amount due on Besser’s mortgage, which was a specific lien on the property. Therefore, we hold that Besser’s right to foreclose his mortgage, was not impaired, and that his mortgage remains a valid and subsisting lien on the premises, it being of record. (Vanderkemp et al. v. Shelton, 11 Paige, 28 .)

The decree of the circuit court was correct, and therefore is affirmed.