Opinion
06-02-1893
GRAY, State Treasurer, v. CASE et al.
W. Y. Johnson, for complainant. McCarter, Williamson & McCarter, for defendants.
(Syllabus by the Court.)
Bill by George R. Gray, state treasurer, against William E. Case and others, to foreclose a mortgage. Decree for complainant.
W. Y. Johnson, for complainant.
McCarter, Williamson & McCarter, for defendants.
BIRD, V. C. The facts upon which this case is to be determined have been agreed upon by counsel, and are, in substance, asfollows: Adair was the owner of the mortgaged premises in fee simple on the 2d day of March, 1868. On that day he made application to the commissioners of the sinking fund for a loan of $6,000. On March 20, 1868, he executed a bond for $6,000, and delivered it to said commissioners, and also a mortgage upon the premises mentioned in the bill of complaint, to secure the payment of said bond, which said mortgage was recorded on the 28th day of March, 1868, in the clerk's office in the county where the said lands lie. Adair conveyed said lands to Henry Westcott by deed dated November 17, 1870, subject to the lien of said mortgage, which said deed was recorded in the said clerk's office on the 18th day of November, 1870. The Easton & Amboy Railroad Company, a corporation organized under and by virtue of an act of the legislature entitled "An act to consolidate the Bound Brook & Easton Railroad Company and the Perth Amboy & Bound Brook Railroad Company, supplementary to the charters of said companies," approved April 2, 1872, (P. L.1872, p. 1017,) on September 3, 1872, by their attorneys, made application to Judge Depue for appointment of commissioners to condemn a portion of the lands in question for railroad purposes, and that an order was made the same day, fixing the 17th day of September for the appointment of such commissioners, which order was duly served upon the owner and tenant on September 6th and 7th. They were appointed on that day. They caused notice to be given to the owner and tenant of their meeting on October 19th. On October 24th they made their award in writing, awarding Westcott $318 for his land and $678 for his damages; and the award was filed on the 30th day of October, 1872. On the 2d day of July, 1872, said Westcott made application for an additional loan of $4,000 upon said lands. On the 12th day of October he executed and delivered to the said commissioners his bond for $10,000, and gave a mortgage upon said premises to secure the payment thereof, which mortgage was recorded in the clerk's office where the said lands lie on the 26th day of October. On the 23d day of October, $4,000 was paid said Westcott by the clerk, and the said $6,000 mortgage given by Adair was surrendered to said Westcott, which he caused to be canceled on the 26th day of the same month. The said award was paid to the said Westcott. Neither the state of New Jersey nor the sinking fund nor the complainant had any notice of the said condemnation proceedings, nor was either of them made parties thereto, nor had either of them any knowledge of the payment of the said award to said Westcott. The complainant has succeeded to all the rights, powers, and duties of the commissioners of the sinking fund. Upon these facts the complainant claims that his mortgage is superior to the rights of the defendants under the condemnation proceedings to the full extent of the amount due upon his mortgage as set forth in his bill; but, if not to the entire balance due thereon, then to the extent that he may be entitled to thereon under the said Westcott mortgage of $6,000, as if the same had not been canceled of record. On behalf of the defendants it is insisted that because the commissioners of the sinking fund, under whom the complainant holds, took their title during the pendency of the proceedings for condemnation or pendente lite, their and his rights were subject to such proceedings; that, the $6,000 mortgage having been canceled, it falls under the same condemnation. It is also insisted that if at the time of the execution of the $10,000 mortgage the commissioners hud any rights from want of notice as to the $6,000, the amount or the prior mortgage, which formed so much of the $10,000 mortgage, all such rights have been lost to the complainant because of his unreasonable delay. Notwithstanding the severity of the rule that those who deal with property which is at the time subject to litigation do so at their peril, and can acquire no better title than results to the party litigant, it seems to have been established in all its rigor in New Jersey. Pugh v. Gardner, 14 N. J. Law J. 72; Den v. Jones, 1 N. J. Law, 181; Tayor v. Woodward, 10 N. J. Law, 3; McPherson v. Housel, 18 N. J. Eq. 299; Allen v. Morris, 34 N. J. Law, 159; Haughwout v. Murphy, 21 N. J. Eq. 118, 22 N. J. Eq. 531; Bellamy v. Sabine, 1 De Gex & J. 564. Yet, before we can determine whether the case in hand is within the rule under consideration or not, we must ascertain the reason or principle upon which the rule rests, and the facts which are the foundation thereof. The reason is the right of the suitor to be absolutely secure in the judgment or decree which he recovers with respect to the matter or thing concerning which he brings his suit as against all the rest of the world, as well as the defendant. It is true, the doctrine of public policy, looking to the suppression of needless litigation, may justly be invoked; but the rights of the individual are more fundamental if comparison may be allowed. But these fundamental rights presuppose certain facts or conditions. In every such case the presumption is that due and legal notice has been given by the filing of a bill in chancery and the issuing and service of a subpoena. Houghwout v. Murphy, supra; Beeckman v. Montgomery, 14 N. J. Eq. 106; Wade. Notice, §§ 348, 349; Lei ten v. Wells, 48 N. Y. 585; Hayden v. Bucklin, 9 Paige, 512, 514; Murray v. Ballou, 1 Johns. Ch. 566; French v. Loyal Co., 5 Leigh, 627. These authorities show that the doctrine of lis pendens is not favored by the courts, and that they who rely upon it have the burden of establishing the facts necessary to bring them within its requirements. The defendant company cannot claim the benefits of this rule. It will be observed that, in order to bring the rule into operation, there must be a complaint or petition or other proceeding filed in or placed upon the records of the office of the court in which the proceedings are had, and subpoena must be issued out or such court, and regularly served. Nothing that can be likened unto this was done in the case under consideration. On September 8, 1872, the company made application to a justice of the supreme court for the appointment of commissioners tocondemn the land and assess the damages, and an order was then made fixing September 17th for the appointment of commissioners, which order was duly served on the owner and tenant, but not on the then holders of the mortgage, under whom the complainant has his title. The commissioners were appointed on the 17th of the same month. The commissioners fixed October 19th as the time for their meeting, of which the owner and tenant had due notice. On the 24th of October they made and executed their award, and caused it to be filed on the 30th of that same month. While these proceedings were pending, the mortgage for $6,000 was upon the records of the county in which the lands lie; and during that same time the then owner of the lands was negotiating with the holders of said mortgage for an additional loan of $4,000, which they allowed to him. They agreed to secure both loans (that is, the previous loan of $6,000 as well as the $4,000) by one bond and a mortgage covering the same premises which had been included in the $6,000 mortgage. This was effected on the 26th day of October, on which day the lastmentioned mortgage, being for $10,000, was placed upon record, four days before the proceedings of the commissioners were filed.
This statement includes every material transaction, and presents to us all the publicity, of any nature whatsoever, that was given to the action of the court or of the commissioners, or of anything done by them. Nowhere does it appear that any paper having the slightest reference to these proceedings was either filed or recorded, or was served upon the commissioners who first held the $6,000 mortgage, and afterwards the $10,000 mortgage. Parties are bound by the rule above stated, because what is transacted in the courts of justice is of such a high public nature that they are presumed to have knowledge thereof; but this presumption does not arise until there has been some record showing to the public who is invoking the aid of the court, and against whom he is invoking such aid, and for what cause. All these things are wanting in the present matter. Not only does the well-settled rule require the filing of a bill of complaint, or its equivalent, and the issuing and service of a subpoena, before notice to all parties is presumed, but in this case the statute creating the defendant company expressly directs that notice shall be given to the owner and all parties interested in the land. Laws N. J. 1872, § 8, p. 317. State v. Easton & A. R. Co., 36 N. J. Law, 181, distinctly holds that a mortgagee is included among those who are interested. Mills, Em. Dom. § 103. But, the company failing to give the requisite notice, it still had the right to have equitable distribution of the award among those interested. For this purpose it was entitled to the aid of the court. Platt v. Bright, 29 N. J. Eq. 128, 31 N. J. Eq. 81. This, too, was neglected by the company. Parties who fail to avail themselves of the rights and safeguards which the law offers them cannot complain when such failure results in their disadvantage. The conclusion, therefore, is that the defendant company is still liable; there having been a sale of all of the residue of the mortgaged premises, from which was not realized enough to satisfy the mortgage by about $4,000, or about four times the amount of the award. The extent of the liability of a company is the whole amount of the award, and interest thereon from the time of the execution and delivery of the deed by the sheriff for the said residue. At that time, and not until then, the amount for which the company was liable was fixed, since it had the right to have the residue sold before it could be called upon to pay. Railroad Co. v. Booraem, 28 N. J. Eq. 450, reversing Booraem v. Wood, 27 N. J. Eq. 371.
The counsel for the defendant earnestly insisted that the doctrine of laches should be applied to the complainant. The complainant cannot be said to be in fault when he has done all that the law requires. In this case the complainant's $6,000 mortgage was recorded at the commencement of the condemnation proceedings. Nothing whatever intervened of which he had notice, until after he exchanged that mortgage for another. It seems very plain that under the law (he having no notice of the condemnation proceedings) he had 20 years from the date of the substituted mortgage in which to assert his rights. It was the defendant railroad company that was in fault in neglecting to make this mortgagee a party. This it did at its peril. Having taken the risk, it cannot charge the complainant with laches, when he simply asserts his rights within the statutory period. But the company says it was the duty of the complainant to act promptly when he discovered that it had appropriated the land to the construction of its road. I should say it was rather the duty of the company to take steps to satisfy the interest of the complainant when it discovered such interest had not been embraced within the condemnation. The complainant's interest was not secret, but open and notorious, at the time of the commencement of the proceedings for condemnation. It was a constant menace to the railroad company, but it proceeded in defiance thereof. I am unable to see how he who is guilty of such negligence can shift the responsibility therefor upon the party who has the strongest legal and equitable claims to his attention. This view seems to be fully within the spirit of the case of Platt v. Bright, 29 N. J. Eq. 128, 31 N. J. Eq. 81.
In connection with the point last considered it was strenuously urged that the complainant did not earlier assert what he now claims to be his rights because he relied upon the value of the premises not occupied by the defendant company as being abundantly sufficient to satisfy his entire claim. This at once coming from the defendant, the great probability is that it also supposed the balance of the land would be sufficient to discharge the $6,000 mortgage, and that that was the reason it did not give to the holders of the mortgage any notice of its proceedings to con demn, nor call upon this court to make an equitable distribution of the amount of the award.