Court Opinion

ID: 3388767
Source: CourtListenerOpinion
Date Created: 2016-07-05 18:46:45.877981+00
Date Added: 2024-06-11T12:53:10.096737
License: Public Domain

In November, 1924, Shoreland Company, a corporation, executed a mortgage to Bay View Estates Corporation to secure the payment of a debt of one million one hundred fifty thousand dollars. The mortgage described many tracts of land numbered from one to thirty-three inclusive. The mortgage and notes were assigned by the Bay View Estates Corporation to the Biscayne Trust Company on May 9, 1925, which company on May 13, 1927, assigned them to the Third Mortgage Corporation.
Subsequently to the execution of the mortgage the Miami Shores Company acquired title to the encumbered lands. This transaction occurred in March, 1925. On January 14, 1927, the Miami Shores Company executed to Quinn Plumbing Company, Inc., a corporation, a mortgage on lots numbered 10 to 14 inclusive of Block 25, Miami Shores, *Page 427 
according to a plat recorded in the public records of Dade County, to secure a debt of $35,954.53, evidenced by five promissory notes. The property covered by this mortgage is included in tract numbered 23 of the original mortgage.
On May 14, 1927, the Third Mortgage Corporation begun its suit against the Shoreland Company and Miami Shores Company to enforce' the original mortgage and obtained a final decree on January 6, 1928. The Quinn Plumbing Company, Inc., the holder of the second mortgage on Lots 10 to 14 of Block 25, Miami Shores, was not made a party to the suit.
The property described in the original mortgage was sold under decree of the court to the "New Miami Shores Corporation" for the sum of $590,000. The amount decreed to be due to the Third Mortgage Corporation was $493,292.42 with interest as of December 22, 1927. The proceeds of the sale after the payment of costs and expenses of the foreclosure proceedings, were applied upon the amount decreed to be due to the Third Mortgage Corporation, leaving a balance due to that corporation from Shoreland Company and Miami Shores Company in the sum of eighty-eight thousand five hundred twenty dollars and fifty-one cents.
There appears to be some errors in the statement of this transaction as it appears in the bill of complaint in the instant case. The balance due the Third Mortgage Corporation should be $118,390.51, even then the "costs and expense of said foreclosure proceedings" seem to have amounted to the sum of $245,098.09.
In April, 1928, the New Miami Shores Corporation exhibited its bill in chancery in the Circuit Court for Dade County against Quinn Plumbing Company, Inc., in which the facts as stated in substance above were alleged and in which the further allegation was made that the Shoreland *Page 428 
Company mortgage contained a provision to the effect that the mortgagor should be entitled to secure the release and discharge of any of the property mortgaged from the lien of the mortgage "upon payment to the mortgagee of a standard partial release price upon the lots designated as per plats of said entire property; that said mortgage provides for the release of Lots 11 to 14, of Block 25, Miami Shores, upon the payment to the mortgagee of the sum of $2,116.40, for each lot required or asked to be released, and the sum of $2,180.28 for the release of Lot 10, Block 25, Miami Shores."
These lots constitute the property covered by the mortgage to the Quinn Plumbing Company, Inc., and constitute part of the South 1/2 of the Southwest 1/4 of the Northwest 1/4 of the Southwest 1/4 of Section 6, Township 53 S., Range 42 East, which was subdivided into lots and block and with other lands so subdivided comprised the subdivision known as Miami Shores. To obtain a release from the Shoreland Company mortgage of the lots covered by the mortgage to Quinn Plumbing Company, Inc., would require the payment to the mortgagee or its assigns in the original mortgage of the sum of $10,645.88. The special prayer of the bill in the instant case is that the Quinn Plumbing Company, Inc., be required to pay to the complainant that sum of money at eight per cent interest and in default of such payment that the defendant and all persons claiming under it be barred and foreclosed of and from all right, title and interest in and to the property described in said mortgage and every part thereof, which language refers to the property described in the Quinn Plumbing Company, Inc., mortgage. There is also a prayer for general relief and for summons in chancery.
The defendant demurred to the bill upon several grounds which in substance were: first, there was no indebtedness *Page 429 
due from the defendant to complainant; second, that the defendant was not a party to the foreclosure proceedings recited in the bill; third, that the allegations of the bill constituted no grounds for a foreclosure of the original mortgage on a portion only of the lands described therein as against the defendant; fourth, that the defendant never agreed to "pay the indebtedness for which decree is sought" and, fifth, that the complainant is not entitled to a foreclosure of the mortgage "against the lands described in the bill of complaint." The demurrer was overruled and the Quinn Plumbing Company, Inc., appealed.
The complainant's theory seems to be that as purchaser of the property under the foreclosure sale it became subrogated to the rights under the Shoreland Company mortgage of the Third Mortgage Corporation which acquired the mortgage from the Biscayne Trust Company, which acquired it from the Bay View Estates Corporation, the original mortgagee; that being subrogated to such rights it may compel the Quinn Plumbing company to exercise its right of redemption from the lien of the first mortgage by paying to the complainant the sum which under the terms of the first mortgage the mortgagor would have been required to pay to the original mortgagee to redeem Lots 10 to 14 of Block 25 from the lien of the first mortgage.
The right to so redeem those lots was a right reserved to the mortgagor which was foreclosed in the suit to foreclose that mortgage. If the right ever existed in the junior mortgagee, the defendant in the instant case, it existed under the principle that by paying such sum to the original mortgagee the junior incumbrancer would be subrogated to the first mortgagee's lien upon the lots for a proportional part of that creditor's claim on the indebtedness against the mortgagor. So that by such redemption *Page 430 
the junior lienor would hold a first lien upon the lots as security for the payment of the indebtedness to it plus a proportional part of the indebtedness held by the first mortgagee. But the right to redeem is to satisfy and remove the lien. The rights to foreclose and to redeem afford mutuality and neither can exist without the other. See Chaires v. Brady,10 Fla. 133; Connor v. Connor, 59 Fla. 467, 52 So. R. 727.
So if the junior lienor had redeemed the lots from the lien held by the first mortgagee and been subrogated pro tanto to the first mortgagee's lien upon those lots the mortgagor would still have had the right to redeem which would not have been effective unless it exercised the right of redemption from the lien of the second mortgage. But the right to redeem is optional in the junior mortgagee and if he could have been compelled in equity by the first mortgagee to exercise that right the Third Mortgage Company waived its right to compel such redemption by the foreclosure proceedings in which it did not make the junior mortgagee a party.
Now the purchaser of the premises at the foreclosure sale, the complainant in this case, acquired only such title and rights as the mortgagor and its grantee had and became subrogated to the rights of the first mortgagee to perfect any errors which may have rendered the foreclosure proceedings void or voidable. In such case the purchaser becomes an equitable assignee of the mortgage and of the debt it secured where at the sale he paid the full amount due on the decree of foreclosure. See 25 R. C. L. 1357.
The right which the mortgagor had before foreclosure of the first mortgage is the right to redeem the land from the lien of the junior mortgage, but that is not what the bill seeks. It seeks to compel the junior lienor to redeem the land from the lien of the first mortgage which has become *Page 431 
merged in the title acquired by the purchaser. If the junior lienor redeems the land from what does he redeem it? It is not the theory of the bill that by paying such sum to the complainant the latter is divested of title to the land which becomes vested in the defendant, nor is there any offer to convey the title to the defendant in such case which if it could affect the complainant's right at all it would be the part of equity to do.
The failure of the Third Mortgage Corporation to make the Quinn Plumbing Company, Inc., a party in the foreclosure proceedings was its own error which entailed no liability upon the defendant in this case. The purchaser at the foreclosure sale had constructive notice of the existence of the second mortgage and was charged with notice that the holder of it was not made a party to the proceedings. It was not a necessary party, it is true, but by making it a party some inconvenience could have been avoided.
A second incumbrancer who is not made a party to foreclosure proceedings in the enforcement of a prior mortgage is only affected and can only complain when there is a surplus of proceeds from the foreclosure sale after paying the prior lien. His right to the surplus cannot with propriety arise until it shall be ascertained that there is a surplus and this cannot be shown before the mortgaged premises have been sold and the debt of the prior incumbrancer with all costs fully discharged. See Wilson  Herr v. Haywood, 6 Fla. 171; Rich v. Eichelberger,13 Fla. 169.
Obviously if the proceeds of the sale were more than sufficient to pay the prior debt and costs or the property sold subject to the second mortgage, the holder of the second lien would be required to pay nothing in order to redeem.
The rule is very general in the United States that a junior mortgagee is not a necessary party to a foreclosure *Page 432 
proceeding of a real estate mortgage so far as the jurisdiction of the court to render a decree of foreclosure binding upon all parties to the proceedings is concerned. He is however a necessary party in order to foreclose and bar any right of redemption he has in the property by virtue of his lien and unless made a party his rights are generally not affected by a decree of foreclosure and sale thereunder. See Jones v. Williams, 155 N.C. 179, 71 So. E. R. 222, 36 L.R.A. (N.S.) 426 n; 19 R. C. L. p. 530.
Under the rule generally obtaining the purchaser at a foreclosure sale in a proceeding to enforce a prior mortgage when the junior encumbrancer was not made a party takes the title subject to the lien of the junior incumbrancer. Jones v. Williams, supra.
In Florida, however, the doctrine was early announced that the second incumbrancer is only affected and can only complain where there is a surplus after paying prior liens.
If the second mortgagee had desired to redeem the property covered by its mortgage from the lien of the first it would seem under the circumstances of the transaction that it might have done so by paying that proportion of the mortgage debt remaining due at the time of such redemption which the value of the property covered by the junior lien bore to all the property covered by the first mortgage. The equities of the case would seem to require the application of the more liberal rule of redemption. See Sutherland v. Tyner, 72 Iowa 232, 33 N.W.R. 645.
The appellee contends that its bill in this case is one for a strict foreclosure of the second mortgage held by the Quinn Plumbing Company, Inc.; that as the foreclosure proceedings of the first mortgage were irregular, imperfect or void the complainant, the purchaser of the property, became subrogated to the rights of the original mortgagee; that it became thereby virtually an equitable assignee of *Page 433 
the first mortgage and of the debt it secured. See Jordan v. Sayre, 29 Fla. 100, 10 So. R. 823; Key West Wharf  Coal Co. v. Porter, 63 Fla. 448, 58 So. R. 599; Crystal River Lumber Co. v. Knight Turpentine Co., 69 Fla. 288, 67 So. R. 974; Meyer v. Florida Home Finders, 90 Fla. 128, 105 So. R. 267.
Assuming that the failure to join the junior incumbrancer as a defendant in the foreclosure proceedings of the first mortgage was such an imperfect or irregular proceeding as to subrogate the purchaser at the sale to the rights of the first mortgagee, the action cannot be a bill to foreclose the first mortgage as against the lien of the second unless the owner of the title to the property is made a party defendant. As the owner of the title is the complainant it would be an action to foreclose the mortgage against itself which would be in effect a suit to compel redemption of the second mortgage. The doctrine of strict foreclosure of a mortgage does not obtain in this State. The doctrine rests upon the theory that the mortgagee being vested with the title to the land subject to defeasance may compel the mortgagor to redeem or in default the title to the property becomes absolute in the mortgagee. It was a doctrine which originated in the reign of Charles I by which mortgagees asked to be relieved of the mortgagor's equity of redemption. In this country, however, it has long since fallen into disuse and in some states it was never used. See Lightcap v. Bradley, 186 Ill. 510, 58 N.E. R. 221; Davis v. Holmes, 55 Mo. 349.
Assuming that the purchaser of the property at the foreclosure sale may obtain an action to compel the junior mortgagee to redeem the property from the lien of the first mortgage the basis upon which such redemption may be accomplished is not properly laid in the bill upon which the relief is sought. *Page 434 
We are not unmindful of the general rule that a junior mortgagee of a part of the mortgaged premises may redeem only on payment of the entire mortgage indebtedness. The property covered by the junior mortgage in extent and likewise probably in value constituted an inconsiderable portion of the entire estate. The debt due to the junior incumbrancer was less than a thirty-second part of the debt due to the first encumbrancer and less than one thirteenth of the balance found to be due by the chancellor to the foreclosure proceedings.
Although the property brought nearly ninety-seven thousand dollars more than enough to pay the balance due that amount and approximately one hundred and forty-eight thousand three hundred dollars more were expended in the payment of "costs and expenses of said foreclosure proceedings." If the junior incumbrancer had been made a party to the proceedings it would have had the right to question the apparently extravagant allowances for "costs and expenses" and may have succeeded in showing that a sufficient surplus existed from the proceeds of the sale to pay a considerable portion of his claim.
In view of these circumstances, I think the bill is without equity and that the demurrer should have been sustained.