State v. Titus

By the Gourt,

Paine, J.

This action was brought to foreclose a mortgage given to the state for the purchase money of school lands. The appeal presents a contest between the defendants Williams and Taylor, who were subsequent purchasers of portions of the mortgaged premises, as to which was entitled to have the land of the other sold first. The facts material to this question are as follows. After this mortgage to the state, the first conveyance of any portion of the property was of lot 11 in block 2, which was mortgaged to French to secure the payment of five hundred dollars. This mortgage was foreclosed by 'French, and a judgment rendered in his favor, as the owner of which he was made a defendant in this suit. The next conveyance was of lots 3 and 4 in block 10, which, together with other lands, were mortgaged to the defendant Taylor to secure three thousand and five hundred dollars. After this the defendant Williams purchased the equity of redemption in lot 11, covered by the French mortgage.

It further appeared that after this suit was begun, the defendant Taylor had become the owner of the French foreclosure judgment, and also that he had foreclosed his own mortgage for thirty-five hundred dollars, and that after a sale of the lands covered by it he had a judgment for deficiency of seven hundred and sixty-three dollars against the defendants Titus, the mortgagors, which judgment, however, was rendered after the purchase of lot 11 by Williams.

Upon these facts Taylor claims the right to have lot 11 sold to satisfy the balance due the state, before lots 3 and 4, which were covered by his mortgage. The counsel for the appellant denied this right, and devoted his whole argument to show that such a right could not be derived from Taylor's judgment for a deficiency, inasmuch as that judgment was rendered after the Tituses had sold the equity of redemption in lot 11 to Williams, so that it never became a lien on that lot. But this argument seems to be based upon a misapprehension of the ground upon which the principle of selling lands, in foreclosure cases, in the inverse order of subsequent alienations, has been established. That right rests entirely upon the priority of interest acquired in the tract covered by the common mortgage. Thus, A owns a tract of land and mortgages it to B; 0 afterwards, desiring to purchase a portion of it, examines the title, and being satisfied that the remainder of the land is of sufficient value to satisfy B’s mortgage, he buys, knowing that as against A he can compel such remainder to be first sold on a foreclosure. This right as against A is very clear and universally admitted. And then, in order to establish the doctrine under consideration, it is held that whoever after-wards buys any part of that remainder from A, with knowledge of C’s conveyance, takes it subject to its liability to be sold before C’s portion to satisfy the prior common mortgage.

This equity, as between such subsequent purchasers, has sometimes been denied, and it has been contended that they should bear the common burden in proportion to the values of their respective parts. But the rule has become well established ; it has been frequently acted on by this court, and notwithstanding any criticism upon it that has fallen under our observation, we think it rests upon solid and satisfactory grounds. The right of the first purchaser as against his vendor, being conceded, it seems necessarily to follow that no subsequent purchaser from that vendor, knowing of this right, should be allowed to defeat it.

If then Taylor has any right, as against.Williams, to have lot 11 sold first, it grows not out of his judgment for a deficiency on the foreclosure of his own mortgage, but out of the fact that he acquired his interest in lots 3 and 4 before Williams acquired his in lot 11. If the French mortgage was out of the case, then his right would be clear. As he had acquired an interest in ldts 3 and 4 before Williams purchased lot 11, the latter would have to be first sold. But the existence of that mortgage, as an outstanding incumbrance on lot 11, made pri- or to any interest acquired by Taylor, seems to be a fact that cannot be overlooked in determining the rights of these defendants. What effect should be given to it is a question V which has occasioned us considerable difficulty, which has been increased by the peculiar fact that the foreclosure judgment on that mortgage is now owned by Taylor himself. But we have come to the conclusion that this mortgage created an equity in favor of lot 11 to have the balance of the land covered by the state mortgage sold first, and that this equity is available to the defendant Williams as the owner of that lot, notwithstanding the mortgage interest out of which it arises is now owned by Taylor. This conclusion has been reached in view of the following considerations.

First, that this mortgage created such an equity will of course be conceded, as that necessarily follows from the principle already discussed, and upon wbicb Taylor relies.

If French still owned tbe judgment in his favor, he would have the right, as against Taylor, to have the lots covered by Taylor’s mortgage sold before lot 11. And in that event Williams, as the owner of the equity of redemption in lot 11, would have received the benefit of the equitable right of French. So if Williams had paid the amount due on French s mortgage, or had purchased his judgment instead of Taylor, it being for his interest not to have the estates merge, a court of equity would undoubtedly have allowed him to avail himself of the equity growing out of that mortgage, to have the balance of the land first sold. This being so, although the fact that Taylor now owns that mortgage interest might seem at first sight to change the result, yet we think it ought not to have that effect, for the reason that the amount of that interest must come out of the lot, and that is precisely what Taylor seeks to accomplish. He himself alleges that lot 11 is of sufficient value to pay the judgment on the French mortgage and also the balance on the state mortgage. If the lot does this, that is if it pays to Taylor the amount of the French foreclosure judgment, then the owner of the lot ought to be able to avail himself of the equity growing out of that judgment, or interest represented by it, to have the other lands sold first. He should then be considered as in the same position as though he had paid the mortgage to French, or had purchased the judgment. And if this is so, it would seem that Taylor should not be allowed, by purchasing that judgment and holding it while this state mortgage is being foreclosed, to defeat an equity in favor (of lot 11, as against other lots covered by the state mortgage, and then turn round and make that lot pay this judgment. If "the lot is to bear the burden of the French mortgage, its owner should be entitled to any equities created in its favor by the existence of that mortgage.

There is no other proof of notice of the equities growing out of these several conveyances than what arose, from their being recorded. But if this right of having lands sold in foreclosure in the inverse order of alienation is to exist at all, it must be held to be within the protection, of the recording act. We have found very little in the books upon this subject. But in the case of La Farge Insurance Co. vs. Bell, 22 Barb., 54, the question is very ably discussed, and it is held that the purchaser of a portion of a tract covered by a mortgage acquires not only a title to the portion so purchased, but also an equitable interest in the balance, to have that first charged with the payment of the mortgage, and that, therefore, the record of his deed is notice of his right to any purchaser of a portion or the whole of such balance. Sec. 35, chap. 86 of our statutes, is substantially like that on which this decision was made.

The judgment must be modified so as to direct a sale of the remainder of the tract before lot 11, at the cost of the defendant Taylor, and the case remanded to be enforced accordingly.