Lumbermen's Mortgage Co. v. Stevens

Leon E. Stevens and Clifton A. Stevens commenced an action in the court of common pleas to quiet their title to certain real estate in Ottawa county, and from a decree rendered in that court the Lumbermen's Mortgage Company prosecutes error.

The facts in the case are not controverted. Steve and Mary Filyo were the former owners of the real estate, and had executed a first mortgage thereon for $7,000 to the National Bank of Port Clinton. Thereafter they executed a second mortgage to the Lumbermen's Mortgage Company, upon which there is a balance due of $6,830.66, with interest. These mortgages were placed on record, but neither the bank nor its attorneys had actual knowledge of the existence of the mortgage held by the Lumbermen's Mortgage Company. In July, 1929, the bank commenced foreclosure proceedings, but failed to make the Lumbermen's Mortgage Company a party to the action. Such proceedings were had that a judgment was rendered in favor of the bank for $7,473.05, the court finding that its mortgage was the first lien upon the premises, and thereafter the property was sold at sheriff's sale and purchased by the bank for $5,250, and said sale was duly confirmed by the court. In December, 1929, the bank sold and conveyed the land by warranty deed to Leon E. Stevens and Clifton A. Stevens for the sum of $6,000, of which amount $2,000 was paid in cash and the balance secured by mortgage on the premises, the purchasers having no knowledge of the existence of the mortgage held by the Lumbermen's Mortgage Company. Subsequently, when Leon and Clifton Stevens learned of the existence of that mortgage, they commenced this action for the purpose of obtaining a decree quieting their title to the real estate, and the mortgage company then set up its second mortgage.

The trial court adjudged that the Lumbermen's Mortgage Company, which was a non-resident of the county of Ottawa, should have the right to deposit with the clerk of the court the sum of $50 to secure the costs which would result from a resale of the real estate, and that, if it failed so to do, the title to the property should be quieted in Leon E. Stevens and Clifton A. Stevens. The court further found and adjudged that, if such deposit were made by the company, it would be entitled to an order of sale for the premises, and, on such sale being made, the proceeds should be applied to payment of the lawful taxes and assessments on the premises, the costs of the suit, and then to payment of the claim of the plaintiffs, Leon E. and Clifton A. Stevens, in the sum of $7,000, with interest, and, subordinate to that, applied to payment of the lien of the Lumbermen's Mortgage Company for the amount of its claim of $6,830.66, and the remainder of the purchase price paid to Steve and Mary Filyo.

The plaintiff in error contends that the trial court erred in holding that the claim of the plaintiffs below was prior to the mortgage of plaintiff in error, and in holding that plaintiffs below were entitled in any event to more than $6,000, and in requiring the mortgage company to deposit security for costs.

The rights of the parties to this litigation do not seem difficult of ascertainment. The Lumbermen's Mortgage Company had the second mortgage on the premises, and, as it was not made a party to the foreclosure proceedings, its rights were not in any way affected thereby, being neither enlarged nor diminished. The National Bank of Port Clinton, which held the first mortgage, and became the purchaser of the property at sheriff's sale, retained all its rights as mortgagee for the protection of its title, and, when it conveyed the property by warranty deed to Leon E. Stevens and Clifton A. Stevens, the latter became subrogated to its rights for the protection of their title. It is true that Leon E. and Clifton A. Stevens had only paid $2,000 in cash, and had secured the remaining $4,000 of the purchase price by a mortgage on the premises, but they were entitled to the benefit of their bargain, and, if the real estate should be taken from them by a resale under the second mortgage, they would have a remedy against the bank on the covenants of warranty.

Under no circumstances is the second mortgagee entitled to any of the proceeds until the claim of the first mortgagee has been satisfied in full. There is no controversy between the purchaser and the bank, and all parties agree that the bank's $7,000 mortgage was the first lien. The bank and its grantees are represented by the same attorneys, and make the same claim, and it is immaterial to the Lumbermen's Mortgage Company whether on a resale the amount due under the first mortgage be paid to the bank, or its grantees, or divided between them.

The case is of an equitable character. The trial judge, finding that the real estate on a resale would probably not bring more than enough to pay the taxes, costs of resale, and the first lien, was justified in requiring the holder of the second mortgage to give security for such additional costs as would accrue by reason of the resale. The principles governing actions of this kind have been frequently enunciated, as is shown by the following authorities: Stewart v. Johnson, 30 Ohio St. 24; Holliger v. Bates, 43 Ohio St. 437, 2 N.E. 841; Childs v. Childs, 10 Ohio St. 339, 75 Am. Dec., 512; Quinn PlumbingCo., Inc., v. New Miami Shores Corp., 100 Fla. 413,129 So. 690, 73 A.L.R., 600, and annotations.

In some of its aspects the case at bar is similar to Eythe v.Commercial Bank Savings Co., 40 Ohio App. 150, 178 N.E. 425, and Peoples State Bank of Wauseon v. First National Bank ofNapoleon, 40 Ohio App. 374, 178 N.E. 702.

Finding no prejudicial error, the judgment is affirmed.

Judgment affirmed.

LLOYD and WILLIAMS, JJ., concur.