Strobe v. Downer

13 Wis. 10

Opinion

By the Court,

Paine, J.

The material facts of this case are as follows: Matthias Thullen and wife executed to Louis Weimar, the mortgage to foreclose which this suit is brought, on the 22d day of July, 1855, and it was recorded on the 26th of the same month. Afterwards, in March, 1856, they executed a second mortgage upon the same premises, to Moses Weil, which was duly recorded, and was afterwards as signed to Downer, the appellant. The first mortgage was assigned to the plaintiff, hut the assignment was never re- _ corded. It seems that when Downer took the assignment of the second mortgage, he supposed there was no prior incum-brance on the premises, but he afterwards learned of the existence of the first, and he then commenced a suit to foreclose his own mortgage, making Louis Weimar, the first mortgagee, a party, not knowing of the assignment of that o mortgage to the plaintiff. Weimar did not appear, and a judgment of foreclosure and sale was entered, with the usual clause barring the defendants and those claiming under them, of all right, title, interest and equity of redemption, &c. A sale took place, at which Downer was the purchaser. He also testified that at the time he purchased, he supposed, upon the authority of some information he had received, that the first mortgage had been paid. He now relies on these facts as a bar to this action, which is brought by the plaintiff as assignee to foreclose the first mortgage. It seems to us very clear that unless the decree and sale in the suit upon the second mortgage, had the effect of absolutely cutting off all rights under the first, there is nothing else appearing in the case which should have that effect. The fact that Downer may have supposed that the first mortgage was paid, whatever influence it might have had on an application by him to be relieved from his purchase, could certainly have no influence upon the rights of the owner of that mortgage. It was duly recorded, which was notice to all the world of its existence. Besides this, Downer had actual notice of it, and was notified by the mortgagor himself that it had not been paid. H after this he chose to rely on the information of others, that it had been paid, he must be held to have done it at his peril. It ought not to have the slightest effect upon the rights of the holders of that mortgage. The case turns then entirely upon the effect of the decree and sale. And this might present two questions. First, what would have, been the effect upon the rights of Weimar, the first mortgagee, who was made a party to the suit, provided he had still owned the mortgage ? And second, if his rights would have been cut off, would the plaintiff, as assignee, but whose as signment had not been recorded, and of which the purchaser . had no notice, stand in any better position ?

The conclusion to which we have come upon the first question, makes it unnecessary for us to determine the second. Though if the first should be answered in the affirmative, and it should be held that Weimar’s rights would, in such case, have been cut off, and vested in the purchaser, there is much reason for holding that, under our registry laws, which make an assignee of a mortgage a purchaser, an unrecorded assignment from Weimar could not be set up afterwards against the purchaser’s title. Suppose Downer had purchased from the mortgagor, and Weimar had released the first mortgage, Downer having no notice of its assignment. Would he not then be entitled to protection, as a bona Jide purchaser, under the registry laws ? And if so, would he not be equally entitled to it, if he purchased under a judicial proceeding against Weimar, which was as competent to divest his interest as a release executed by him? These questions have suggested themselves, in our consideration of this case, but as we do not find it necessary to determine them, we shall express no opinion in regard to them. The case of Wilson vs. Kimball, 7 Fost. (N. H.), 300, is a very strong authority in favor of the rights of such an assignee. But whether that conclusion could be sustained under our registry laws, is a matter worthy of serious consideration.

But we are of the opinion that the rights of’Weimar would not have been divested by the foreclosure and sale, even if he had still held the first mortgage. His mortgage was a prior incumbrance to the one being foreclosed, and of course the right under it was paramount both to the rights of the mortgagor and to those of the owner of the second mortgage. As such he was not a necessary party to the foreclosure suit on the second. And if made a party, without any allegation contesting his title, he had a right to assume that the proceeding was to be conducted upon the theory that his claim was paramount, and therefore not subject to it It seems to be established by the authorities that those claiming title adverse to the mortgagor, or prior to the mortgage which is. foreclosed, even though made parties, are not divested of such adverse or prior . rights, by the ordinary clause in foreclosure judgments, barring the defendants and those claiming under them of all right and equity of redemption in the premises. That clause is held to relate only to such interests as are claimed subsequent and subject to the mortgage which is being foreclosed. This question is fully considered in Lewis vs. Smith, 5 Seld., 502. And it was there held that a widow was not divested of her right of dower by a mortgage foreclosure to which she was made a party, under the general allegation that she had claimed some interest in the premises, subsequent to the mortgage “or othenvise.” We can see no reason for a distinction between that case and the present. The fact that here the claim is of a prior mortgage instead of a dower right, ought not to create one. Both rights are equally paramount to the rights of the mortgagor and of the second mortgagee. Possibly the validity of either claim might be litigated in a foreclosure suit. The court in that case state that their decision does not extend to a case where one claiming a prior right is made a party in such a manner as to put that right in issue, and answers and litigates it. But as in that case there was nothing in the complaint assailing or questioning in any manner the dower right, so here there is nothing impeaching the validity or priority of the first mortgage. What was the first mortgagee called on to defend against ? It was stated in the complaint that he claimed an interest, and there was no allegation against its validity which called on him to defend. He had a right to assume that, without answering, his rights were not to be affected by the proceeding. This conclusion is fully sustained by the case of Williamson vs. Probasco, 4 Halst. Ch., 571. Assuming here that Weimar still owned the first mortgage, that case is in every respect like this, with one exception. The first mortgagee was there made a party, and his mortgage and its priority were expressly stated in the pomplaint. The decree, however, as in this case, barred all the parties of all right, &c., in the premises. But it was held that this bad no effect upon tbe rights of tbe first mortgagee. _ Tbe fact that there tbe priority of tbe first mortgage was expressly stated in tbe complaint, does not vary tbe principle. It only makes its application a little clearer. But there was really nothing more .in this complaint tending to impeach or put in issue tbe prior right of tbe first mortgagee, than there was in that. Indeed, it is fairly implied from tbe face of tbe complaint, that tbe interest claimed by Weimar was prior and paramount to tbe second mortgage. A printed blank was used, and after stating that Weimar claimed an interest, the usual clause, that such interest accrued subsequent to tbe mortgage sought to be foreclosed, is erased. Erom this it may fairly be assumed, that tbe interest claimed by him was prior to that mortgage. And certainly it is not alleged to be subsequent. And tbe general form of referring to tbe interests of other incumbrancers, which was here adopted, was allowable only with respect to interests accruing subsequent to the mortgage. Rule 83 of the old chancery rules, was like the New York rule on that subject, referred to in Lewis vs. Smith. And when tbe allegation that tbe interest claimed by Weimar was subsequent to the mortgage was stricken out, it took the case out of tbe rule allowing that mode of pleading, and required tbe plaintiff, if be wished to question tbe right of a prior mortgagee, to make suitable allegations to put it in issue. It would then fall exactly within tbe following language of Justice Denio, in Lewis vs. Smith: “ In tbe special case of a title to mortgaged premises, and a Iona fide controversy as to priority between it and tbe mortgage, the complainant in tbe foreclosure bill must state the facts upon which tbe question arises, as he insists they exist, according to the' rules of equity pleading which prevailed antecedently to the rule referred to. If be omit to do this, it will be under the pain of being obliged to show, when tbe decree is relied on collaterally, that tbe title alleged to be foreclosed was, in fact, subordinate to tbe mortgage.” ■

We think, therefore, that the rights under the first mortgage would not have been cut off, even though Weimar had owned it at tbe time of tbe foreclosure of tbe second. And, of course, tbe rights of tbe plaintiff were not affected.

Tbe judgment is affirmed, witb costs.