Court Opinion

ID: 3838319
Source: CourtListenerOpinion
Date Created: 2016-07-06 08:07:18.924035+00
Date Added: 2024-06-11T13:45:36.357485
License: Public Domain

[EDITORS' NOTE:  THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *Page 3 
On January 21, 1926, plaintiff herein, as trustee, instituted suit to foreclose a mortgage lien on real property created by a trust deed given to secure the payment of three several promissory notes for $2,500 each, executed by Robert Krims and Marie N. Krims, his wife, to the Willamette Valley Mortgage Loan Company, an Oregon corporation. The notes and deed bear date April 19, 1919, and on April 21, 1919, the deed was duly recorded at page 228, Book 97, Mortgage Records of Marion County, Oregon.
Some time subsequent to the execution of the notes and trust deed and the institution of this suit, defendants Robert Krims and Marie N. Krims conveyed to defendant Alfred P. Dobson all their right, title and interest in the real property described in that deed.
Defendant J. Weiner, the owner of a subsequent mortgage lien, filed an answer consisting of a general denial, and an affirmative defense wherein he pleaded
See 7 R.C.L. 1003. *Page 4 
an estoppel by reason of a decree rendered in a prior suit. The answer discloses the following facts:
On May 15, 1919, defendants Robert Krims and Marie N. Krims, his wife, made and delivered, for value, a promissory note for $10,000, payable to the order of J.F. Duffy, secured by mortgage of even date therewith upon the real property described in the trust deed hereinbefore mentioned. This mortgage was recorded at page 396, Book 97, Mortgage Records of Marion County, Oregon, on May 19, 1919. On May 12, 1925, Duffy assigned the mortgage to defendant J. Weiner, who thereby became, and at the time of the institution of this suit was, the lawful owner and holder thereof. On June 1, 1925, Weiner filed a complaint in the Circuit Court of the State of Oregon for Marion County, naming as defendants, among others, B.F. Giesy, Trustee for the Willamette Valley Mortgage Loan Company, and Willamette Valley Mortgage Loan Company, and alleging, among other things, that no part of the promissory note had been paid save and except the sum of $6,000. He averred:
"B.F. Giesy, as Trustee of the Willamette Valley Mortgage Loan Company, a corporation, Aurora State Bank, an Oregon corporation, J.F. Duffy, Willamette Valley Mortgage Loan Company, a corporation, and Alfred P. Dobson, as the plaintiff is informed and believes, claim to have some right, title or interest in and to the real property described in said mortgage alleged in paragraph 3 hereinabove, and that any right, title, interest or claim of said defendants, of any or either of them, in and to said property, is subordinate in time and inferior in right to the rights, powers and privileges of plaintiff herein, and plaintiff alleges the mortgage hereinabove described in paragraph 3 is superior in time *Page 5 
and right to any and all right, title and interest claimed by the Aurora State Bank, a corporation, J.F. Duffy, Willamette Valley Mortgage Loan Company, a corporation, and Alfred P. Dobson."
The complaint prayed:
"That said defendants herein described, and each of them, and all others claiming or to claim by, through or under them, be barred and foreclosed and enjoined from asserting any right, title, lien or interest in, to or upon said last above-described real property, or any part thereof, except the statutory right of redemption. * *"
On the trial of the instant suit, the court sustained a demurrer to the above affirmative matter alleged in the answer, and rejected the judgment-roll as evidence of the defendant's plea in bar. Defendant appeals.                         AFFIRMED.
Does the decree rendered in appellant's foreclosure suit — case number 17607 — constitute an estoppel by judgment against the plaintiff in this suit? This is the question involved herein. There appears to be no question concerning the facts. The unpaid promissory notes, made and delivered to the plaintiff, and the trust deed given to secure their payment, were made in good faith and for a valuable consideration, and that deed was duly recorded in the mortgage records of Marion County. About a month after the execution and recordation of the *Page 6 
deed, Robert Krims and Marie N. Krims, his wife, for a valuable consideration, made and executed to J.F. Duffy their promissory note for $10,000, secured by mortgage upon the same real property described in the above deed, which mortgage was duly placed of record. The record clearly shows that, before the entry of the decree in case number 17607, the mortgage which the plaintiff now seeks to foreclose was prior in time and prior in right. How does that foreclosure proceeding affect the paramount mortgage?
Section 423, Or. L., provides:
"Any person having a lien subsequent to the plaintiff upon the same property or any part thereof, or who has given a promissory note or other personal obligation for the payment of the debt, or any part thereof, secured by the mortgage or other lien which is the subject of the suit, shall be made a defendant in the suit, and any person having a prior lien may be made defendant at the option of the plaintiff, or by the order of the court when deemed necessary."
There is a wealth of authority sustaining the proposition that, as a general rule, persons holding mortgages or liens prior to the mortgage sought to be foreclosed are neither necessary nor proper parties to the suit, and that the decree can have no effect upon their rights. See 1 Wiltsie on Mortgage Foreclosure (3 ed.), § 209, and authorities cited in note 99; 2 Jones on Mortgages (7 ed.), § 1439; 19 R.C.L., Mortgages, § 332; 41 C.J., p. 892; 9 Ency. Pl.  Pr. 134; 19 Stand. Ency. of Proced. 1008; Pomeroy's Code Remedies (4 ed.), pp. 333, 334.
From our statement, it will appear that the only allegation in reference to the lien of the Willamette Valley Mortgage Loan Company is the assertion *Page 7 
of Weiner to the effect that it claims to have some right or interest in and to the real property described in the mortgage, but that such right is subordinate in time and inferior in right to his (Weiner's) rights, powers and privileges. This is a mere legal conclusion. If the company's mortgage had been paid but was unsatisfied of record, or if it was fraudulent or invalid and for that reason inferior to Weiner's claim, the pleader should have set forth the facts showing such to be the case. Whenever a litigant in a suit to foreclose a mortgage lien seeks to challenge the validity of a prior recorded mortgage, or the right of the mortgagee therein named to a superior lien, it is mandatory upon him to allege facts from which it would appear that the prior mortgage was invalid, or that it would be inequitable that such mortgagee's lien be made superior to his. Among the many authorities supporting our position in this regard, see Gregory v. Suburban Realty Co., 292 Ill. 568
(127 N.E. 119), where it is written:
"Where a first mortgagee is made defendant to a bill to foreclose a second mortgage under the general allegation that he claimed some interest in the premises, and a decree for foreclosure and sale is entered in the usual form (of foreclosure decree) barring all defendants of any right or claim, the lien of the first mortgage will not be affected." Point 5, Syl.
See, also, Smith v. Roberts, 62 How. Pr. (N.Y.) 196;Burns v. Sholl, 111 Neb. 628 (197 N.W. 393); Strobe v.Downer, 13 Wis. 10 (80 Am. Dec. 709), and valuable note;Dawson v. Danbury Bank, 15 Mich. 488, opinion by Mr. Justice COOLEY.
As illustrating the exceptions to the general rule that prior mortgagees are neither necessary nor proper parties defendant, we quote the following: *Page 8 
"A prior encumbrancer by mortgage, judgment or otherwise may be made a defendant to the foreclosure of a junior mortgage for the purpose of having the amount of his claim ascertained and paid out of the proceeds of the sale; but such a purpose must be specifically indicated and the prior claim set forth in full in the complaint." 1 Wiltsie on Mortgage Foreclosure (3 ed.), § 211.
To like effect, see 19 R.C.L., § 333; 19 Stand. Ency. of Proced., p. 1008.
In 2 Jones on Mortgages (7 ed.), section 1439, the rule is stated thus:
"When a prior encumbrancer is made a party to a foreclosure suit, there should be an allegation of the purpose for which he is made a party; as, for instance, that the rank and amount of his mortgage may be ascertained and determined by the judgment of the court, so that the mortgage can be paid out of the proceeds of the sale, or so that the sale may be made subject to the known amount of the lien. If such purpose is not indicated in the complaint nor provided for in the judgment, the prior encumbrancer will not be affected by the judgment."
See, also, Barnes v. Anderson et al., 108 Or. 503
(217 P. 836), and local citation. In that case, after declaring the general rule that questions relating to titles adverse or paramount cannot be litigated in a suit to foreclose a mortgage, we held that, if a person sued as a defendant in a foreclosure suit by his answer alleges paramount title, praying that such title be adjudicated, and is heard upon that issue, he is bound by the resulting decree. However, in rendering the opinion, Mr. Justice McCOURT, speaking for the court, said:
"When summoned as a defendant in a foreclosure suit, plaintiff might have made default, or, if so *Page 9 
advised, might have answered, setting up her adverse title with the prayer that the suit be dismissed as to her; and in either such case the subsequent decree of foreclosure would not be a bar to her right to maintain a suit or action based on her claim of paramount title."
In the Weiner suit, neither the company nor its trustee tendered to the court for adjudication any issue relating to the priority or validity of the company's lien, and Weiner made no averment that identifies the company's lien as the lien he was attempting to subordinate to his own. His pleading sought relief against the company's claim of "right, title or interest in * * real property" that "is subordinate in time and inferior in right to the right * * of plaintiff herein."
The rule calling for a liberal construction of pleadings has no application here. The record before us does not reveal a defective statement of a good cause of suit. It does, however, afford an excellent example of the Code requirement that a statement of facts, and not legal conclusions, be pleaded.
This case is affirmed.                                AFFIRMED.
BURNETT, C.J., and BEAN and BELT, JJ., concur. *Page 10