180 Ind. 181 | Ind. | 1913
In November, 1902, the Veedersburg Clay Company, a corporation, owned certain real estate in Fountain County, on which was situated its manufacturing plant. It borrowed $30,000, and executed bonds therefor, secured by a mortgage on all its property. In May, 1905, it executed to appellants a second mortgage on the same property to secure notes given for valid indebtedness, in the aggregate amount of $38,000. In December, 1906, Clinton B. Marshall brought suit in the Marion Superior Court, against the company, on an unsecured claim for $500, and, on his petition, after appearance and consent of defendant, a receiver was appointed. Subsequently the receiver filed a petition, reciting the existence of the two mortgages, and
The errors assigned here arise on demurrers to pleadings, and on appellant’s motion to modify the judgment. The circuit» court rendered judgment for appellee, The Adams Brick Co., as the equitable assignee of the first mortgage bondholders, in the sum of $38,581, the same being the amount, principal and interest, of the first mortgage debt,
In appellants pleadings it is denied that any liens existed on the property, when ordered sold at receiver’s sale, which were superior to the liens of either mortgage. Appellants contend that inasmuch as they were not parties to the receivership proceedings, the latter, as to them, can in no way affect them, and that they are entitled to a decree awarding them priority of payment out of the proceeds of the proposed foreclosure sale, excepting $12,000 thereof, and interest thereon, which, it is conceded rightfully belongs to appellee, by virtue of the doctrine of subrogation. Appellee maintains that the first mortgage bondholders, by accepting the dividend ordered paid by the receiver, became bound by that decree as much as if originally made parties to the petition to sell; that appellee occupies the position of equitable assignee of the first mortgage, and consequently entitled to priority for the entire amount thereof, and that it is immaterial whether the Marion Superior Court erroneously ordered the payment of inferior liens to the extent of $6,500, as that is a matter of no concern except to the first mortgage bondholders. The trial court adopted appellee’s theory of the law. As to appellants, the order of sale by the receiver, entered by the Marion Superior Court, was a nullity, for lack of jurisdiction over their persons. Hosford v. Johnson (1881), 74 Ind. 479.
The first mortgage bondholders, by accepting the $12,000 dividend, estopped themselves from questioning the order, by virtue of which the receiver made the sale, and became bound by it as fully as if made parties to the petition; and, as to them, and the mortgagor, the receivership sale was valid.
The parties here occupy a position closely analogous to that where a first mortgagee forecloses his mortgage without making the holder of a junior lien a party to the proceeding. In such case, the rights of the junior mortgagee are unaffected. The purchaser at such sale acquires and combines the rights and interests of the mortgagor and senior mortgagee. By the deed he acquires the legal title and right of redemption of the mortgagor, and, in addition thereto equity may maintain the life of the senior mortgage for his benefit. Catterlin v. Armstrong (1885), 101 Ind. 258. The rights of the junior incumbrancer are neither diminished nor increased by such proceeding. Deming-Colburn Lumber Co. v. Union, etc., Loan Assn. (1898), 151 Ind. 463, 467, 51 N. E. 936.
In Hosford v. Johnson, supra, the Atlas Insurance Company held a first mortgage on a parcel of real estate, which became encumbered with a second mortgage. The company foreclosed its mortgage without making the junior mortgagee a party. At the sale, one Hosford became the purchaser, the junior mortgagee instituted a suit to redeem. It was contended by Hosford among other things that the junior mortgagee, in order to redeem, must pay the amount of the foreclosure judgment, and costs. In determining the matter, this court said: “The doctrine may be regarded as settled in this State, that the rights of a junior incumbrancer are in nowise affected by the foreclosure of a senior mortgage, unless he is made a party to the foreclosure proceeding. * * * This being the case, the amount of redemption money to which Hosford was entitled depended on the terms of the mortgage, and not on the foreclosure judgment, nor on the amount he paid at the sheriff’s sale. Had he purchased the property for less than the amount due upon the mortgage, the junior incumbrancers could not redeem by paying the sum of his purchase money, with interest, but they would be required to pay the whole mortgage debt.” In McKernan v. Neff (1873), 43 Ind. 503, ap
Appellants contend that no principle of equity prevents the advancement of a junior lien, where the senior one is reduced by gift, or otherwise; that under the facts here disclosed, the purchaser’s rights arise from the doctrine of subrogation only, and are not measured by the rule applicable to equitable assignees. There was no intent to reduce the first mortgage indebtedness by gift to the second mortgagee, or other person. The debt was not reduced in any other manner. The first mortgage bondholders accepted the $12,000 dividend, for the presumed reason that they thought they could do no better. Had they legally assigned the first mortgage to the purchaser, the second mortgagees could not have been heard to question the amount of the consideration received therefor. While ignorance of law does not relieve a person from the consequences of its operation, appellants are not in a position, while lawfully treating the receivership sale as a nullity, as to them, to obtain any advantage from the legal mistakes of the first mortgagee or purchaser, growing out of a transaction founded on a decree, binding on them, but not on the second mortgagees.
In a foreclosure sale under a decree to which the junior mortgagee was not a party, it seems to be the settled rule in this jurisdiction, in a subsequent action by the second mortgagee, to treat the purchaser, as
Whether the Marion Superior Court erred in decreeing the payment of the $6,500 to the holders of liens, other than the first mortgagee, is immaterial here. It is evident that appellants were not entitled to it, and were not injured by the erroneous application of such funds. The Montgomery Circuit Court did not err in treating the purchaser as an equitable assignee of the first mortgage indebtedness, and decreeing priority to the extent of the entire debt.
Judgment affirmed.