Court Opinion

ID: 9810119
Source: CourtListenerOpinion
Date Created: 2023-08-31 21:40:11.634468+00
Date Added: 2024-06-11T13:39:23.775612
License: Public Domain

Olabk, C. J.,
dissenting. It has always been held for law in this State that a purchaser at a sale under a second mortgage acquires the property subject to the lien of the first mortgage. But that the purchaser at a sale under the first mortgage acquires the property absolutely free from the liens of subsequent mortgages. Purchasers at such sales are required therefore to examine only for prior encumbrances not as to subsequent ones.
In Gambrill v. Wilcox, 111 N. C., 42, it was held that the purchaser at the execution sale under a junior docketed judgment acquires the property subject to the lien of prior docketed judgments, but that the purchaser at an execution sale under a senior docketed judgment acquires the property free from the liens of all junior judgments. This is put upon the express ground, therein stated, that “the lien of a docketed judgment is in the nature of a statutory mortgage.” This case has been cited since in Baruch v. Long, 117 N. C., 511; Bernhardt v. Brown, 118 N. C., 710, and other cases.
*194When the sale is made under a power of sale contained in the mortgage there is no opportunity to make subsequent mortgagees parties, nor has it ever been required that notice be given to them. The second mortgagees are fixed with notice of the prior recorded mortgage by statute, and they take only the equity of redemption.
When the sale is made under foreclosure proceedings, the purchaser is not required to examine for subsequent encumbrances. He takes with notice only of the judgment which adjudges the validity of the mortgage and decrees the sale thereunder. He is not required to examine for subsequent encumbrances, any more than a purchaser at a sale under a docketed judgment or a purchaser at a sale under a mortgage with power of sale.
It has been repeatedly and most explicitly declared by this Court, Kornegay v. Steamboat Co., 107 N. C., 117; Lumber Co. v. Hotel Co., 109 N. C., 658; Williams v. Kerr, 113 N. C., 311; Gammon v. Johnson, 126 N. C., 66; that in a proceeding for foreclosure it is not necessary that the holders of junior mortgages be made parties. But if the purchaser could not get a good title at such sale unless subsequent mortgagees are made parties, then they would be necessary parties beyond question. Those decisions hold that it is advisable to make such junior mortgagees parties, and even that the court may add them ex mero motu. The reason given is that thereby they may have opportunity to participate in the surplus, if any, derived from the sale over and above the payment of the first mortgagee and the cost of proceedings, which surplus the mortgagor might otherwise dissipate. This reason looks to the convenience and advantage of the second mortgagees, but does not affect the title acquired by the purchaser.
It has been held in many cases that a docketed judgment, though a lien upon the land, does not divest the estate out of the debtor nor transfer his title and does not even make the land primarily liable for the debt. Dysart v. Brandreth, 118 N. C., 968, and cases cited in Clark’s Code (3 Ed.), p. 592. If therefore in such case, where the title and the estate still remain in the judgment debtor, the purchaser at the execution sale under 'a senior judgment takes the property divested of the lien of sub*195sequent docketed judgments without any notice being given to the holders of the sale, for a stronger reason when the land is sold under a decree of foreclosure the purchaser must take without notice of any subsequent encumbrances which are not recited in the judgment because by the first mortgage the title and the estate is transferred to the mortgagee subject only to the sale and return of the surplus, if any, to the mortgagor.
The subsequent mortgagees take only a mortgage upon the equity of redemption. The legal title and the estate are in the first mortgagee and the purchaser at the sale under the first mortgage can be no more affected by any subsequent liens than the first mortgagee himself. Indeed the purchaser at such sale is in a better condition than the mortgagee, for he takes the legal title which was vested in the mortgagee discharged of the trusts thereto attached. The purchaser is not required to see to the application of the purchase money. He has discharged his duty when he has paid the money into court at a sale under a decree of foreclosure, or has paid it to the mortgagee at a sale under power of sale, and has taken his deed.
In foreclosure proceedings, as the Court has always held, Gammon v. Johnson, 126 N. C., 66, and other cases above cited, it is advisable to make subsequent mortgagees parties that they may look to their liens upon the surplus. If not made parties in the summons, they can ask to be joined, or the court ex mero motu can make them parties. But their not being parties cannot impair the title of the first mortgagee who by virtue of his prior contract holds the legal estate, nor can it affect the purchaser who acquires the estate and title of the first mortgagee.
For the above reasons this Court has always held that junior mortgagees are advisable parties to foreclosure proceedings upon a prior mortgage, but not necessary parties. Hence, if they are not made parties the purchaser at the sale acquires, nevertheless, a good title.
It will place a new burden upon purchasers at such sales to impair their title by a constructive notice of junior* encum-brancers whom the court ordering the sale has not seen fit to make parties.
The purchaser at the foreclosure sale under the first mortgage *196in this case had a right to rely upon the uniform decisions of this Court that it was not necessary to make subsequent encum-brancers parties. But if, notwithstanding, his title is held defective, and that, too, not by setting aside the sale by motion in that cause, but in a collateral proceeding to foreclose under the junior recorded mortgage, certainly in this proceeding it is necessary to make the senior mortgagee a party. At such sale under the junior mortgage, the first proceeds must be applied to the payment of the lien of the first recorded mortgage, after payment of costs.
If, as- is suggested, the assignment by the first mortgagee is defective, the assignee (who was also purchaser at the foreclosure sale) must be made a party, and the decree should direct a repayment to him of the purchase money out of so much of the proceeds of the sale, now to be made, which are to be applied to the discharge of the lien of the first mortgage.
The foreclosure sale under the first mortgage was either valid or invalid. If valid, the purchaser got a good title. If invalid, then at the foreclosure sale under the second mortgage the lien of the first mortgage must first be paid off out of the proceeds of the sale. The first registered mortgage cannot be deprived of its priority given by statute.