Case Name: Stewart v. Johnson
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1876-12
Citations: 30 Ohio St. 24
Docket Number: 
Parties: Stewart v. Johnson.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 30
Pages: 24–32

Head Matter:
Stewart v. Johnson.
1. Where a senior mortgagee forecloses his mortgage without making a junior mortgagee of the same premises a party to his action for the foreclosure, the rights of the junior mortgagee remain unaffected and are not prejudiced by such foreclosure.
2. It is the right of a mortgagee, as against his mortgagor, to foreclose the mortgage; but under the statute, he can foreclose only by a sale of the mortgaged premises; a junior mortgagee may therefore maintain an action for the foreclosure of his mortgage against those having an interest in the premises, to subject the same to the payments of the liens thereon, without having first paid off the prior mortgage.
3. Where the prior incumbrancer is in possession of the premises, objecting to the sale thereof, and there is not more than enough realized from the sale at the suit of the junior incumbrancer, to satisfy the prior incumbrance, the holder of the prior incumbrance should, as a general rule, recover his costs in the action from the party bringing the same.
Error to the District Court of Eranklin county.
The original action was brought by A. A. Stewart, in the Court of Common Pleas of Franklin county, against Anderson Lewis, and the defendants Johnson, Sessions and Jeffrey, partners, for the sale of certain premises mortgaged by Lewis to Stewart, to secure a note to him for $875. The mortgage was dated and filed for record November 30, 1870.
Johnson and others, filed an answer, in which they set out, in substance, that they became the assignees of certain -notes made by said Lewis to one John Stothard, for the purchase-money of the same premises, which notes were secured by a mortgage thereon, dated the 4th day of January, 1868, and on the same day filed for record; that on a default in the payment of the last four of said notes, said partners, on the 17th day of February, 1871, filed a petition to sell said premises, and that such proceedings were therein, had, that said Johnson and others, as partners, became the purchasers at the sheriff's sale; and on the 27th day of April, 1871, received a deed in fee simple for said premises, ■and went into possession thereof.
Johnson and partners claim to own said premises in fee ■simple, and deny that Stewart has any interest therein. They aver that they had no notice of Stewart’s mortgage.
Stewart replied to the answer, denying he had due notice of the pretended proceedings of Johnson and others, and avers that he believes the premises are sufficient to pay the claim of the plaintiff and said defendants; but this is denied by defendants.
The other plaintiffs in error, Carpenter, Hankins & Co., were not made parties by Stewart, but, on their own application, became parties to his action daring its pendency. By leave of the court, they filed their answer and cross-petition February 16, 1872. No answer or reply was ever made to this answer and cross-petition by any of the parties to this action. It sets forth, in substance, that on the ,20th day of April, 1869, Carpenter, Hankins & Co., recovered a judgment against one Ward and said Lewis for ■$890.62 ; that on the 14th day of June, 1860, they caused an execution to be issued thereon which was levied on the premises in controversy herein, on the 11th day of July, 1870. They say they were never made parties to any proceeding to sell said premises; and that their lien is still in force. They aver that the alleged sale of the premises to Johnson and others, was for less than their real value, and they ask that there -may be a re-sale thereof, and for other proper relief.
At the February term, 1872, the case was submitted to tbe court on the pleadings, exhibits, and testimony, and, finding the amounts claimed by Stewart aud Carpenter, Hankins & Co., to be due to them, the court ordered that if Lewis, or Johnson and his partners, did not pay said amounts, said premises should be re-sold, etc.
Johnson and others appealed to the district court. At-the May term, 1872, the cause came on to be heard “ upon-the facts disclosed in the pleadings of the several parties, thereto, and no other or further evidence being offered by either party, the same was submitted to the court ón said facts.” “ The court, on the averments and facts so submitted,” found the equity of the case to be with the defendants, Johnson and others, and dismissed the petition of the-plaintiff, Stewart, and the cross-petition of Carpenter and others, and overruled their motion for a new trial, and rendered judgment against them for costs.
Neither Stewart nor Carpenter & Co., were parties to the-action brought by Johnson & Co.; and the land sold for more than enough to pay the notes secured by the mortgage foreclosed in that suit.
This petition in error is prosecuted to reverse the judgment of the district court.
Henry C. Noble and Lorenzo English, for plaintiffs in error :
First. What is the legal effect of the proceedings to sell the premises upon the Stothard mortgage by Johnson and others, in their action, to which the other lienholders were-not parties ?
If Anderson Lewis, the mortgagor, had-made a voluntary conveyance of all his interest in the premises, on the 27th day of April, 1871, to Johnson and his partners, we suppose no one would think that such sale would affect the rights of the other lienholders or impair their remedies. How does a judicial proceeding, to which the lienholderswere not parties, give any greater right to the purchaser than such voluntary conveyance ? It is merely an involuntary conveyance of the mortgagor’s interest, by the ma chinery of the law, instead of a voluntary one. Frische v. Kramer, 16 Ohio, 125, 139; Myers v. Hewitt, 16 Ohio, 449 Childs v. Childs, 10 Ohio St. 339.
Second. The district court seemed to think that, admitting the above principles, the only remedy in such a case-by the lienholder, not a party, was to redeem the premises from the prior lien, omitting to consider that the prior lien-holder had purchased the mortgagor’s interest. Passing-that question, if the only remedy of a junior lienholder in Ohio was to redeem the prior lien ordinarily, then this would be so in this case, for the cases all say the proceedings in the ease to which such lienholders are not parties-are unaffected. But if, in Ohio, junior lienholders, in any case; can proceed by bill to enforce their lien, by asking a sale of the premises, and for the ascertainment of the order of liens and the distribution of the proceeds of such sale to the lienholders in their order of priority, then can it be done in this case, for their rights are unaffected by the former proceeding, to which they wore not parties.
We did not, until the decision of the district court, suppose there could be any doubt as to the usual and authorized practice in Ohio. We supposed that the junior lien-holder had the right to a sale of the premises without offering-to redeem. In fact, we supposed section 374 of the code was. intended to simplify and unify the proceedings in equity on a mortgage to the one result, that of the sale of the premises in all cases. But however this may be as to the purpose of this section, there is no doubt but a junior lien-holder has the right to ask for a sale of the premises, if he does not wish to redeem. 1 Hilliard on Mort. 332, sec. 2 Horton v. Warner, 3 Edw. Chv. 106, 107, 108; Holloway v. Stuart, 19 Ohio St. 472.
L. J. Critchfield and Collins & Atkinson, for defendants in error:
I. The plaintiffs in error were not, nor was either of them, entitled to an order for the sale of the premises, on the ease made in the pleading.
It is well settled in Ohio, by a uniform current of decisions, that, after conditions broken, the legal estate in mortgaged premises becomes absolute in the mortgagee, as between him and the mortgagor, or those claiming under them, and remains so until satisfaction. Band v. Kendall, 15 Ohio, 671; Heighway v. Pendleton, 15 Ohio, 736; Frische v. Kramer, 16 Ohio, 125; Nolan v. Urmston, 18 Ohio, 277; Childs v. Childs, 10- Ohio St. 344; Allen v. Fverly, 24 Ohio St. 97, 114.
By the sale and assignment of the notes and mortgage, the assignees took the place and acquired all the rights of the mortgagee under the mortgage and in the notes. In equity the assignees of the'mortgagee took his absolute estate. Kirk v. Smith, 9 Wheaton, 308.
November 30,1870, Lewis, the mortgagor, gave a second mortgage on his interest in the premises to Stewart. That interest was nothing but an equity of redemption of a legal estate, absolute in the first mortgagee, the equity being a right to redeem by paying the first mortgage debt.
Neither the mortgagor nor either of the junior lienholders redeemed or offered to redeem, but permitted the mortgaged premises to go to sale under proceedings on the first mortgage. Johnson, Sessions & Jeffrey became the purchasers, and went into possession of the premises.
To that proceeding the junior lienholders would have ‘been proper parties, but they were not necessary parties. Rowan v. Merch, 10 Humph. 359 ; Mack v. Grover, 12 Ind. 254, 255; Valentine v. Havener, 20 Mo. 133.
We do not understand the practice in Ohio to be as counsel for plaintiffs in error state, that a junior lienholder has the right to a sale of the premises, as against a first mortgagee, if he does not wish to redeem.
Section 374 of the code does not contemplate such practice. All it provides for is the proper distribution of the proceeds of sales in cases in which sales might be made in conformity with previous well-settled practice.
II. The plaintiffs in error were not entitled to any relief under the pleadings.
The only relief junior lienholders can have, as against a senior and first mortgagee, after condition broken, and in possession, is to be allowed, in a proper case, to redeem, by paying the first mortgage debt. But no such case was-made either by Stewart or Carpenter, Hankins & Co. in the-court below.

Opinion:
Day, Chief Judge.
The controversy relates to three Henson the same land — a senior and a junior mortgage, with an intervening judgment Hen. All being valid incumbrances, the holders of the senior mortgage brought suit to foreclose-their mortgage, and, without making the subsequent incumbrancers parties to the suit, purchased the land at the-sale ordered in (heir suit, at a price something above-the amount secured by their mortgage, and went into possession of the land. Against these parties and the-mortgagor the subsequent incumbrancers brought their action to have an account, and to have the land re-sold to pay off the incumbrances, according to the priorities of their respective Hens. Whether they have the right to have this done, where, as in this case, all the claims are past due, is-the question to be determined.
On the one hand, it is claimed that the only right the-plaintiffs have is that of redemption, and not of a re-sale. On the other hand, it is claimed that the sale of the premises, in the suit to which the plaintiffs were not parties,, does not affect their rights, and that they may bring the-land to sale to satisfy all the Hens thereon, without first paying off the Hen prior to theirs.
Much said in the books upon the controverted question as to the necessity, in the foreclosure of a mortgage, of making all other incumbrancers parties, is not strictly applicable to our practice ; for here, in all cases of foreclosure-of a mortgage, there must be a sale of the mortgaged premises. The 374th section of the code of civil procedure is-as follows: " In the foreclosure of a mortgage, the sale of the mortgaged premises shall in all cases be ordered; . . . and the court may, in the order of sale, or on the confirma- tion of the sale, make such order touching the distribution of the proceeds of sale as may be necessary to protect and preserve the relative rights and privileges of all lienholders on such premises or on the several parcels thereof."
The policj' of the code, as evinced by this and numerous other provisions, is to avoid the necessity of a multiplicity of suits, and to preserve and enforce the rights of parties with the least possible controversy and litigation. Hence the provision, in regard to the foreclosure of mortgages, is made upon the supposition that, in accordance with other provisions of the code, all-parties having an interest in the land will be parties to the action.
Since, then, the land must be sold, and all having an interest in the laud must.be made parties, it makes no substantial difference, where all the claims are due, which one of several mortgagees brings the action for that purpose; and since'there can be no foreclosure except by sale, thbre is no good reason for requiring the prior mortgage to be paid before a junior one may proceed to subject the premises to the satisfaction of all the liens, and to this end settle in one suit the amounts and priorities of the respective liens. Accordingly, it has come to be the practice of our -courts to permit any lienholder of lands to bring all the parties in interest into court for the settlement of their liens, and for the proper application of the fund arising therefrom, to the satisfaction of their respective claims.
This, then, being the right of each of the lienholders before any legal proceedings, how are they affected by the foreclosure of the first mortgage ?
It is well settled in. this state that the rights of lien-holders, who are not made parties to the foreclosure, remain unaffected, the same as if no judicial sale had been made. Frische v. Kramer, 16 Ohio, 125 ; Childs v. Childs, 10 Ohio St. 339.
It is true' that the grantee of the equity of redemption, when not made a party to the foreclosure, has nothing but the right to redeem, as against the prior mortgagee or purchaser of the premises. He has no rights as mortgagee, •and therefore can not demand a sale. But a junior mortgagee stands in a different position. He has the right of foreclosure, which can be done only by a sale of the premises.
Now, in this case, the holders of the first mortgage.be•came the purchasers of the mortgaged premises at the sale •on their own foreclosure; they then stood, as to the intervening lienholders, as prior mortgagees holding the equity of redemption of the mortgagor. The junior mortgagee • then had the same rights against them that he had, by virtue of the mortgage, against the mortgagor. Had he paid off their mortgage, and obtained possession of the land, he could not have foreclosed the equity of redemption which they then held as against him, without a sale of the land; therefore he had the same right to bring his foreelosure against them that he would have had against the mortgagor, if there had been no sale. Nor can the prior mortgagees justly complain of what is the result of their own negligence, for they had actual or constructive notice of the other liens existing when they brought their foreclosure, and are presumed to have known that their proceedings, to which such lienholders were not made parties, in no way prejudiced them. They must therefore submit to the inconvenience of a suit, which they might and ought to have prevented* by making the proper parties to the foreclosure of their own mortgage.
But as they gained by that foreclosure what they would have obtained if they had procured the voluntary conveyance of the mortgagor's equity of redemption, they ought not to be subjected to costs, where they object to a resale, if such sale does not bring more than enough to satisfy their prior lien and costs; for then the plaintiffs will have gained nothing by their suit.
In New York, under a practice similar to our own, and in a case much like this, the chancellor sums up the point in controversy in this case as follows :
" In England, the court does not decree a sale of mortgaged premises, but merely allows the second incumbrancer to file a bill to redeem from the first incumbrance, and that' the junior incumbrancers may redeem both of the prior' ones, or be foreclosed. And the complainant there is, in all cases, required to ofier to redeeem the first incumbrance. But here, where the puisne creditor has the right to a" sale-of the estate to satisfy the debt, after applying so much of the proceeds of the sale as may be necessary to pay the-debt and costs of the prior incumbrancer, he is not required to offer to pay the first incumbrance. All that the priorincumbrancer has a right to ask, even when he is in possession under his incumbrance, is that he shall not be subjected' to useless costs, when the proceeds of the sale will not probably be sufficient to pay the amount of his debt, with interest, and the costs of foreclosure." Vanderkemp v. Shelton, 11 Paige, 28.
The English rule no longer prevails here. The legislation of the state, and the practice that has grown up under-it, has brought into practical effect a rule more nearly like that said to prevail in New York.
It follows that the district court erred in dismissing the-petition and cross-petition of the plaintiffs, and that its judgment must therefore be reversed.
Judgment accordingly.