Converse v. Michigan Dairy Co.

45 F. 18 | U.S. Circuit Court for the District of Western Michigan | 1891

Severens, J.

Upon the hearing of this cause tho German Bank of Sheboygan and the Fourth National Bank, defendants, urge and insist that the court cannot adjudicate their rights in the lands mortgaged, because their rights, as asserted, are paramount to those of the mortgagor, and hostile thereto; and it is further insisted by them that an attempt to litigate ihose rights on this foreclosure bill would make the proceeding multifarious. Decisions of the state supreme court are referred to in support of the proposition that upon a bill to foreclose a mortgage only those matters can be litigated which affect the equity of redemption, and that parties claiming titles or liens originating prior to the mortgage cannot properly bo made parties to the suit. But I do not understand the rule to bo declared inflexible by those decisions. However that may be, the rule in the courts of the United States has long been settled differently, where the mortgage is of tho fee, and the sale prayed is of the properly so mortgaged. Finley v. Bank of U. S., 11 Wheat. 304; Hagan v. Walker, 14 How. 29. In tho case of Dial v. Reynolds, 96 U. S. 340, there were wholly conflicting titles. Hero the hanks assert a lien upon the title of the mortgagor’s grantor, not in bostility to liis title, but in recognition of it, and they claim, at least such is the legal effect of their position, that they have not a paramount title, but, to the extent of their claim, a paramount lien, upon the ground that as to them Olay’s deed to the company was fraudulent. As to them, the deed was not wholly void. The title passed and was mortgaged by the dairy company. Bump, Fraud. Conv. (1st Ed.) p. 451. But, independently of this, the lien the banks assert did not originate until after the mortgage was executed. As creditors at large, or having no levy, they had no lien. It is true the facts in pais upon which they found their lien, and which they bring forward as evidence, existed previously; but they connect themselves with the property only by the levy subsequent to the mortgage. Maynard v. Hoskins, 9 Mich. 485; Tyler v. Peatt, 30 Mich. 63; Griswold v. Fuller, 33 Mich. 268; Root v. Potter, 59 Mich. 498, 26 N. W. Rep. 682; Bank v. Bates, 120 U. S. 556, 7 Sup. Ct. Rep. 679.

Under the law of Michigan, there is no lien by judgment merely. I think the complainant has the right to have the validity of this lien determined before the mortgaged property goes to sale; otherwise, the bidding must be for something of dubious title and value, and the satisfaction of the mortgage debt be seriously imperiled by this supervening levy. A mortgagee ought not to be left in such a predicament.

The question whether collateral controversies shall be litigated in a foreclosure suit is in large measure one of convenience, and where the interests of the parties require it, and it is necessary in order to administer adequate relief, the court should take cognizance of the collateral questions. Story, Eq. Pl. § 539; Shepherd v. Pepper, 133 U. S. 651, 10 Sup. Ct. Rep. 438. It may be that if the sale by Clay to the company was fraudulent, as alleged, and the complainant had notice of it, the banks have a paramount lien. That is matter for adjudication. The suggestion that the suit is thus made multifarious is late when made at the hearing. The answers of the banks do not present that as a ground of objection, but, at least by strong implication, invite adjudication. It is true they ask postponement until certain proceedings alleged to be pending in the state court shall be terminated, but I know of no principle on which this could be authorized. The pendency of a suit there is no bar to the present. Besides, the complainant is not a party to that suit, and cannot be affected by it. Cook v. Burnley, 11 Wall. 659; Insurance Co. v. Brune's Assignee, 96 U. S. 588; Gordon v. Gilfoil, 99 U. S. 168. These defendants, therefore, knowing, as they must have done, that the object of bringing them in at all was in order that their claims should be cut off by the decree, and not having raised the objection of multifariousness until now, come within the scope of the doctrine repeatedly declared by the supreme court, that, if the matters were of equitable cognizance, the objection must be raised in limine, and, if not then made, it should not be entertained. Oliver v. Piatt, 3 How. 333; Nelson v. Hill, 5 How. 127; Story, Eq. Pl. § 284a.

I incline to think that the allegation, though general, in the bill, that these defendants have, or claim to have, rights and interests in the premises above described as subsequent purchasers, incumbrancers, or otherwise, taken in connection with the averments of the answers in response thereto, and the evidence it affords that the general allegation in the bill was understood to he aimed at the only one specific claim which the defendants assert, is sufficient; but, if not technically so, the bill may be amended in this particular, so as to allege the defendants’ levy, and, in a brief way, the claim of the defendants thereunder. The indorsement of the mortgage notes, and the delivery thereof to the complainant, operated as an assignment of the mortgage, and transferred to the holder of the notes the same equitable rights in the mortgage as he had in the notes. Cooper v. Ulmann, Walk. (Mich.) 251; Martin v. McReynolds, 6 Mich. 70; Briggs v. Hannowald, 35 Mich. 474; Carpenter v. Longan, 16 Wall. 271; Kenicott v. Supervisors, Id. 452; Ober v. Gallagher, 93 U. S. 199, 206. One of the rights acquired by the assignment was that of exercising the election to declare the debt due on default in the payment of the interest.

A decree will be entered for complainant to the amount of the sums advanced upon the $20,000 note, and interest, less the credits which have been stipulated, with the interest thereon from their several dates.