Converse v. Michigan Dairy Co.

• Decision Date: 12 February 1891
• Citation: 45 F. 18
• Parties: CONVERSE v. MICHIGAN DAIRY CO. et al.
• Court: U.S. District Court — Western District of Michigan

45 F. 18

CONVERSE v. MICHIGAN DAIRY CO. et al.

United States Circuit Court, W.D. Michigan, Southern Division.

February 12, 1891

Fletcher & Wanty, for complainant.

Blair Kingsley & Kleinhans, for defendants the Fourth National Bank of Grand Rapids and the German Bank of Sheboygan.

SEVERENS J.

Upon the hearing of this cause the German Bank of Sheboygan and the Fourth National Bank, defendants, urge and insist that the court cannot adjudicate their rights in the lands mortgaged, because their rights, as asserted, are paramount to those of the mortgagor, and hostile thereto; and it is further insisted by them that an attempt to litigate those rights on this foreclosure bill would make the proceeding multifarious. Decisions of the state supreme court are referred to in support of the proposition that upon a bill to foreclose a mortgage only those matters can be litigated which affect the equity of redemption, and that parties claiming titles or liens originating prior to the mortgage cannot properly be made parties to the suit. But I do not understand the rule to be declared inflexible by those decisions. However that may be, the rule in the courts of the United States has long been settled differently, where the mortgage is of the fee, and the sale prayed is of the property so mortgaged. Finley v. Bank of U.S., 11 Wheat. 304; Hagan v. Walker, 14 How. 29. In the case of Dial v. Reynolds, 96 U.S. 340, there were wholly conflicting titles. Here the banks assert a lien upon the title of the mortgagor's grantor, not in hostility to his title, but in recognition of it, and they claim, at least such is the legal effect of their position, that they have not a paramount title, but, to the extent of their claim, a paramount lien, upon the ground that as to them Clay's deed to the company was fraudulent. As to them the deed was not wholly void. The title passed and was mortgaged by the dairy company. Bump, Fraud. Conv. (1st Ed.) p. 451. But, independently of this, the lien the banks assert did not originate until after the mortgage was executed. As creditors at large, or having no levy, they had no lien. It is true the facts in pais upon which they found their lien and which they bring forward as evidence, existed previously; but they connect themselves with the property only by the levy subsequent to the mortgage. Maynard v. Hoskins, 9 Mich. 485; Tyler v. Peatt, 30 Mich. 63; Griswold v. Fuller, 33 Mich. 268; Root v. Potter, 59 Mich. 498, 26 N.W. 682; Bank v. Bates, 120 U.S. 556, 7 S.Ct. 679.

Under the law of Michigan, there is no lien by judgment merely. I think the complainant has the right to have the validity of this lien determined before the mortgaged property goes to sale; otherwise, the bidding must be for something of dubious title and value, and the satisfaction of the mortgage debt be seriously imperiled by this supervening levy. A mortgagee ought not to be left in such a predicament.

The question whether collateral controversies shall be litigated in a foreclosure suit is in large measure one of convenience and where the interests of the parties require it, and it is necessary in order to administer adequate relief, the court should take cognizance of the collateral questions. Story, Eq. Pl. Sec. 539; Shepherd v. Pepper, 133 U.S. 651, 10 S.Ct. 438. It may be that if the sale by Clay to the company was fraudulent, as alleged, and the complainant had notice of it, the banks have a paramount lien. That is matter for adjudication. The suggestion that the suit is thus made multifarious is late when made at the hearing. The answers of the banks do not present that as a ground of objection, but, at least by strong implication, invite adjudication. It is true they ask postponement until certain proceedings alleged to be pending in the ...