Opinion
05-25-1903
NEWCOMB v. LUBRASKY et al.
L. Newcomb, pro se. I. O. Acton, for defendants.
Bill by Leveritt Newcomb against Samuel J. Lubrasky and others.
Decree for complainant.
L. Newcomb, pro se.
I. O. Acton, for defendants.
REED, V. C. This bill is filed to foreclose a mortgage given July 31, 1888, by Samuel J. Lubrasky to the Alliance Land Trust to secure the sum of $180. Lubrasky and wife on April 25, 1893, executed a second mortgage upon the same property, and including other lands, to the Franklin Land & Building Association of Salem to secure $1,600. He also made a third. Redemption in the premises covered in these mortgages was acquired by the complainant, Leveritt Newcomb. The present contest is between the complainant and the second mortgagee, the Franklin Land & Building Association, which is made a party defendant to the present foreclosure suit.
It appears that the Alliance Land Trust, on January 29, 1897, then owning the first mortgage now sought to be foreclosed by Mr. Newcomb, filed a bill for that purpose, whereupon Mr. Newcomb, as owner of the equity of redemption, filed an answer asking to redeem, and paid into court the amount due upon the mortgage, with costs, which moneys were taken out by the complainant. Subsequently, the complainant assented to a decree that the bond and mortgage should be assigned to Mr. Newcomb. The payment by Newcomb of the amount due upon the mortgage under these conditions was not a satisfaction of the mortgage, but a redemption. It put Mr. Newcomb in the position of an equitable assignee of that mortgage. Without the assignment he had the right to have the mortgage delivered to him uncanceled, and this in equity is a complete assignment. Such redemption put him in the place of the mortgagee, giving him all the mortgagee's rights against the mortgagor. He thereupon became entitled to hold it as an existing mortgage until the owner of the equity of redemption redeems it or he himself forecloses it. Jones on Mortgages, § 1086; Hamilton v. Dobbs, 19 N. J. Eq. 227.
The important question is whether Mr. Newcomb lost his right to foreclose that mortgage by reason of the effect to be given to a decree made in a subsequent foreclosure suit brought by the second mortgagee, the Franklin Land & Building Association of Salem. This suit was begun October 5, 1901. The bill sets out the subsequent incumbrances upon the property, and also contained an allegation as follows: "That on or about July 31, 1888, Samuel Lubrasky and wife made a mortgage upon the said tract to the Alliance land Trust, a corporation of the state of New York, to secure the sum of $180, which said mortgage was duly recorded and so forth, and still remains open upon said record. But your orator expressly charges that said mortgage, although uncanceled of record, has in point of fact been duly paid and satisfied, and is no longer a lien upon' said mortgaged premises, or any part thereof." The mortgage thus attacked is the same mortgage now sought to be foreclosed.
At the time the bill was filed in the suit by the second mortgagee, Mr. Newcomb was the owner of the first mortgage, and was also the owner of the equity of redemption. Both the Alliance Land Trust and Mr. Newcomb were made parties in that suit—the latter because he claimed some right or Interest in the said premises by reason of the conveyance to him of the equity of redemption. The service of the subpoena upon the Alliance Land Trust appears thus: "Service acknowledged, this fifteenth day of November, 1901, the Alliance Land Trust, William W. Banthall, solicitor." Whether this was an adequate service upon the Alliance Land Trust need not be decided. Actual service upon Mr. Newcomb is returned. No appearance or answer was filed by either of these parties. The usual decree pro confesso was taken, followed by a reference and report and final decree. The final decree directs the payment of $684 and costs to the Franklin Land & Building Association out of the proceeds of the sale to be made of the mortgaged premises, and any surplus to be applied to the payment of the subsequent; mortgage, and then, if any surplus remain, it was to be brought into court. The mortgage to the Alliance Land Trust is not mentioned in the decree.
The question is whether, by force of this decree, the complainant is now estopped from insisting that his mortgage is still unpaid. This estoppel is set up by the Franklin Land & Building Association in its answer in the present case. The "answer upon the trial made to this insistence was that the first mortgagee was" not bound to take notice of the suit to foreclose brought by the second mortgagee. The equitable owner of the first mortgage relied upon the doctrine that a second mortgagee cannot foreclose the equity of the first mortgagee. This familiar doctrine is applicable whenever a subsequent mortgagee recognizes the existence of a prior mortgage. Such subsequent mortgagee cannot compel the prior mortgagee to submit to a foreclosure of his mortgage. Such prior mortgagee need take no notice of the existence of such a suit, and unless he does come in and assent to the sale of the premises free of his incumbrance, and that his mortgage be paid out of the proceeds, any sale made otherwise of the property is made subject to the lien of such preceding mortgage. But the suit brought by the Franklin Land & Building Association did not recognize the existence of the recorded prior mortgage. On the contrary, it attacked its existence by charging that it has been paid. The bill therefore was not to foreclose the first mortgage, but to have it decreed to have been paid and canceled of record. In Gihon v. Belleville White Lead Co., 17 N. J. Eq. 536, it was said: "A man holding a second mortgage may file a bill stating that a prior mortgagehas been given, and setting up that it is fraudulent and void, or has been paid, and ask to have it so decreed, or make a person so holding it a party, and ask to have the premises sold to pay the mortgage." This practice is recognized by Mr. Justice Van Syckel in Bigelow v. Cassedy, 26 N. J. Eq. 561. He says: "Even if the bill charges the prior mortgage to be void or paid, and it turns out to be a valid subsisting incumbrance, the mortgaged premises will not be sold to pay the prior mortgage without the consent of the prior mortgagee." The charge in the bill, therefore, that the first mortgage was paid, was entirely proper, and if Mr. Newcomb had been brought into the suit because of his interest in such mortgage, and there had been a decree that this mortgage was paid, there can be no doubt that he would have been estopped from now setting up the existence of his mortgage. And although he was brought into the suit as the owner of the equity of redemption, yet, he having knowledge of his unrecorded equitable assignment of the mortgage, I think he was bound to defend against the attack made upon the mortgage. But conceding all this, I do not see how the decree, as framed, can be regarded as concluding Mr. Newcomb upon the question whether this mortgage was paid. There was no prayer in the bill for such a decree, and no decretal order was made adjudging that the mortgage to the Alliance Land Trust was paid and should be canceled of record.
The decree, so far as it directed the payments of the money to be realized from the sale of the mortgaged premises, is in no way significant respecting the existence or nonexistence of the first mortgage. There would have been no payment to the first mortgagee under the bill as framed in any event. The distribution of the money raised would have been exactly the same whether the property was sold free from or subject to the lien of a prior mortgage. Now, with the exception of the direction as to the distribution of the money raised upon this foreclosure sale, the decree contains nothing but the ordinary order that the defendants stand foreclosed from all equity of redemption in so much of the mortgaged premises as shall be sold. The first mortgagee had no right of redemption of which he could be foreclosed. He held a superior interest, which, as already remarked, could not be foreclosed in that suit. The decree, therefore, applied to those defendants only who held subsequent incumbrances or interests.
There should be a decree for the complainant.