56 N.J. Eq. 585 | New York Court of Chancery | 1898
This is a bill to redeem, filed by the judgment creditor of the mortgagors against a prior mortgagee, who purchased the mortgaged premises at a foreclosure sale made under its mortgage, and in proceedings to which the judgment creditors and others were parties. The defendants’ mortgage was executed prior to the recovery of complainants’ judgment against the mortgagors, and three other mortgages on the premises, which mortgages are now held by the McCall Hat Company as assignee, were also executed and delivered by the mortgagors prior to the recovery of the complainants’judgment. The mortgagors also, on May 2d, 1895, two days prior to the recovery of complainants’ judgment (May 4th, 1895), made an assignment to the defendant. Edelhof for the benefit of their creditors under the statute; but this assignment was not recorded until May 6th, 1895, two days after the recovery of complainants’ judgment. These intervening mortgagees and their assignee, and the assignee for the benefit
Rule 24, regulating the practice in such cases, is as follows:
“Where the bill in a foreclosure suit shall be ordered to be taken as confessed against a defendant, no report or decree shall be made by which his rights or claims are postponed to those of any other defendant, unless the priority of the rights or claims of such other defendant, and the facts upon which it depends, are distinctly set forth in the bill, and any controversies between such defendants may be settled upon application for the surplus moneys.”
The foreclosure bill was taken as confessed against all of the defendants, and the master’s report in the cause found the amount due the insurance company, the complainant in foreclosure, on its mortgage, on April 2d, 1897, to be $26,979.19, and on April 5th, 1897, final decree was duly entered in the foreclosure suit in the usual form, directing sale to be made of the mortgaged premise's by the sheriff of Essex county, to pay the complainant’s debt with interest and costs, and to pay the same to complainant, and to bring the surplus, if any, into court, unless otherwise disposed of. The final decree contained also the following usual clause:
“And it is further ordered, adjudged and decreed that the defendants stand absolutely debarred and foreclosed of and from all equity of redemption of, in and to the said mortgaged premises when sold as aforesaid by virtue of this decree.”
The bill in this case is not filed to set aside the sale as improvidently or unfairly made simply for the purpose of obtaining a resale of the premises upon the ground that the sale was an improper use of the process of the court, but the relief prayed by the bill proceeds rather on the assumption that the sale, as to all the parties in the original suit except the complainants, must stand. None of these original defendants, except Edelhof, are now made parties to this suit, and the claim as insisted on at the hearing is that on the redemption by complainants they are entitled to be subrogated to the entire rights of the insurance company against the other parties defendant under its decree and execution. And to the special objection made in the answers and on the hearing, that to a bill for redemption of a prior mortgage all the intervening encumbrancers must be made parties, the answer of complainant is that those intervening encumbrancers have no interest, because they have all been foreclosed of any equity of redemption by the sale and by the deed thereunder. The principal question presented at the hearing, therefore, was whether a subsequent encumbrancer who is a party to a foreclosure suit on a prior mortgage, after a sale under foreclosure and a purchase at the sale by this prior mortgagee, may, if he files, a bill before confirmation of the sale, redeem the' prior mortgage without making the intervening encumbrancers or any of the defendants in the foreclosure parties, allowing the sale to-stand as against them. I think a right of redemption of this character does not exist. Up to the time of the sale under the process, and even after decree for sale, the right of. redemption which any subsequent encumbrancer might have would probably
A subsequent encumbrancer, such as a second mortgagee or judgment creditor, is not, under our decisions, entitled merely as such encumbrancer to redeem a prior mortgage, and unless some special equity exist in the subsequent encumbrancer the prior mortgagee has a right to retain his security and may refuse to surrender it. Bigelow v. Cassedy, 11 C. E. Gr. 557. And where the right to redeem is disputed between two subsequent encumbrancers, the prior mortgagee would, as it seems to me, where he has notice of this dispute, be justified in declining to allow either claimant to redeem except by decree in a suit to which the claimants were parties. Without such decree the redemption would be at his risk. The right to redeem by either claimant could then be so controlled by decree, if necessary, as not to exclude the other from the right to redeem, if eventually established in his favor. Any person having the right to redeem a mortgage is entitled to a subrogation to the mortgagor’s rights under the mortgage and decree, but not to the conveyance of any other rights nor to any other rights than those which the mortgagor has under his mortgage, and the reason why it seems
In the present case it will he noticed that, on the bill in the foreclosure suit, the three McGall company mortgages appear as liens prior in time to the complainants’ judgment, and the present complainants did not, by any answer or other proceeding in that suit, give notice to the prior mortgagee that so far as the right of redemption was concerned their right was prior to the McGall company mortgages. The prior mortgagee, on the record as it stood, and without regard to the decision adverse to the complainants in the other cause, would have been justified in declining without further order in the cause to allow the complainants the right to redeem after final decree for sale in the suit, arid a direction to pay the surplus money into court. As between the McGall company and the complainants, the right to redemption was a right which, although prima fade belonging to the McGall company, was, in fact, a disputed equity of redemption, and the precise case exists referred to in the statutes relating to redemption of mortgages by the mortgagor. These statutes (Gen. Stat. pp. 2102 et seq.) providing for redemption of mortgages by order of courts of law; and when no bill to foreclose was pending, expressly provided (§ 3) that the right of redemption, with order to assign the mortgage, should not extend to any case where the right of redemption was controverted between different defendants in the same cause. Upon redemption by the mortgagor, the mortgagee must reassign or convey his rights as mortgagee in the premises to the person redeeming, and the qualification expressly made on redemption under order of courts of law was intended to leave the right of redemption, when disputed, to the disposition of a court, of equity.
I think, therefore, that relief to complainants based on their present bill purely as a bill to redeem against the purchaser for their own benefit, and while allowing the sale to stand as against the intervening mortgagees and the other parties to the suit, must be denied.
This direction is based on the complainants’ bill and case as presented at the hearing, treated as a bill purely for the ultimate purpose of redemption. Relief by way of setting aside the sale and ordering a resale was not prayed by the bill nor asked at the hearing, but the bill contains a prayer for general relief; and, if complainants’ counsel desire, I will, before advising decree, hear them on the question whether on the bill and proofs, as they now stand, they are entitled in this suit, and with the present parties, to a decree setting aside the sale, as to all parties to the original suit, and ordering a resale, and, if so, upon what terms.