Dawson v. The Dawson Bank

• Decision Date: 25 May 1867
• Citation: 15 Mich. 489
• Court: Michigan Supreme Court
• Parties: Charles Dawson v. The Danbury Bank

15 Mich. 489

Charles Dawson v. The Danbury Bank

Supreme Court of Michigan

May 25, 1867

Heard May 7, 1867; May 8, 1867. [Syllabus Material] [Syllabus Material]

Appeal in chancery from Oakland circuit.

This was a bill to quiet title.

The case was heard on bill, answer and proofs, and a decree rendered for complainant.

The facts are stated in the opinion.

Decree of the court reversed, with costs, and the bill dismissed.

G. V N. Lothrop and M. E. Crofoot, for complainant:

1. Where a party represents a prior lien derived from the same source, he and his grantees are proper parties to a foreclosure bill: Story Eq. Pl., § 186, and notes; Id., 193, and notes; Hill. on Mort. (3d ed.), p. 159, § 70; 11 Wheat. 304, 306; 11 Paige 28, 29, 39, 40; 3 Johns. Ch., 459.

2. The defendants claim that none but subsequent incumbrancers are proper parties defendant to a foreclosure suit, and that nothing but the interests in the equity of redemption can be litigated and settled in such suit.

The following are among the cases cited: 6 Paige 635; 2 Barb. 23; 3 Mich. 448; 2 Seld. (6 N. Y.), 82; 5 Id. 502, 516.

In all of the above cases the question sought to be raised, and which the courts held could not be considered, was the litigation of the title of a third party set up in hostility to the title of the mortgagor.

3. Besides the question of these mortgages being cut off by the decree in the Moss case, the question of their being an equitable lien on the premises as against the title of this complainant, notwithstanding the decree, arises.

We insist that whatever title passed to Drake at the foreclosure sale was but passing the title to Stewart, the mortgagor of Moss and others.

Drake purchased for Stewart, and as his agent.

The evidence shows that no possession was ever taken by Drake, or by Baines; nor was there any possession surrendered by Stewart, or taken from him, but he continued in possession of the premises claimed, as owner, as fully after the deed to Drake as before.

His possession and ownership was notice to all the world of his title. Drake could give no mortgage, while Stewart was thus in possession as owner, that could defeat Stewart's title. Nor could he make a deed, nor could Baines make a mortgage, that would confer equities against the possessor's real title.

The consideration expressed in the assignment to the bank was merely nominal, $ 1, and defendants claim they were assigned to secure a pre-existing indebtedness.

Whatever title stood in Drake as purchaser at sale, or Baines as his grantee, was the title of Stewart, the mortgagor, and he could not himself, nor could his grantees, trustees or agents, hold an outstanding title to defeat the mortgage title.

And to this point we cite 12 Mich. 346.

Walker, & Kent, for defendants:

1. Defendants are not concluded by the decree in the foreclosure suit of Moss and others.

a. That suit was not a proper place to litigate the claims of Baines and Litchfield to the Pontiac lot.

Their claim was prior to the mortgage of Moss and others, because derived through a prior mortgage, and it is well settled that a forclosure suit is not the proper place to litigate claims to the mortgaged premises prior to the mortgage: 3 Mich. 448; 13 Id. 409.

The bill made them parties only as subsequent incumbrancers.

b. Litchfield did not, in his answer, aver the existence of the mortgages assigned to him on the Pontiac lot, or claim any rights thereunto.

Baines did aver the conveyance from Drake to himself and the mortgage assigned to Litchfield, and sought to defend on this account, but clearly his action did not bind Litchfield.

The evidence shows that Litchfield's solicitor knew nothing of the defense set up by Baines. This defense ought not to have been litigated in that suit. Litchfield did not litigate it, and did not know that it was litigated by his co-defendant. Hence, so far as Litchfield is concerned, the case stands as though Baines's answer had not been put in.

c. Litchfield was not bound by the decree as to the mortgages held by him upon the Pontiac property because the question of their priority was not in issue between him and complainants in that suit.

The general rule is, that a decree is conclusive upon the parties to a suit only as to the point in issue: 12 Barb. 184; 14 Conn. 61.

And this doctrine is applied to cases like the one at bar in the following: 5 Seld. 502; 13 Wis. 10; 14 Id. 509; 4 Halstead Ch., 571.

d. If Litchfield were bound by the decree in the former suit, still defendants would not be. They purchased during the pendency of the suit, and are bound by everything in the lis pendens filed, but this gave them notice only that a bill was filed to foreclose a mortgage subsequent to theirs, and the bill itself could have given them only the same notice. They could not have known that the validity of the mortgages they purchased were involved in that suit: Comp. L., p. 1011, § 29.

2. The facts appearing in the case do not entitle the complainant to the relief asked, or to any relief.

a. Admitting that it is proven that Drake was the mere agent of Stewart in purchasing the premises at the sale under the Cooper foreclosure, still the purchase money was paid by Dey, and the mortgage was given as security therefor.

As against Dey, complainant had no equity more than against Cooper. Clearly, Dey, having paid a mortgage which was a lien upon the premises prior to complainant's title, was entitled to hold his mortgage against complainant's title, and defendants, having, through Litchfield, received Dey's mortgage, have all his rights.

b. Defendants are bona fide purchasers of both mortgages. They gave up for them other valuable security. They received them without notice of complainant's alleged rights. The record shows these mortgages to be prior to complainant's title.

Defendants took these assignments subject only to those equities which existed between the mortgagors and mortgagees, but not to an unknown equity between the mortgagors and those from whom complainant's title comes. It was enough for defendants that they found the legal title to have been in the mortgagors, respectively, when the mortgages were made, and knew of no equities to the contrary: 8 Mich. 395.

OPINION

Cooley, J.

The complainant filed his bill to quiet the title to certain premises formerly owned by N. P. Stewart in the present city of Pontiac.

The facts upon which legal questions arise are the following:

In July, 1855, Stewart gave a mortgage on the premises to Cooper, Storm and Smith, which was foreclosed in chancery, and a decree for sale made September 27, 1857. Notice of lis pendens was duly filed in this suit.

May 21, 1859, Stewart gave another mortgage to Moss, Medbury and Duffield, covering the Pontiac lot, and also a large amount of other real estate.

June 16, 1860, the Pontiac lot was regularly sold under the Cooper, Storm and Smith decree, and bid off by Morgan L. Drake, who had been acting as attorney for Stewart, and who undoubtedly bid for Stewart's benefit, and with an understanding that he should hold in trust for him. The sum bid was $ 1,050, which was procured from Alexander H. Dey, to whom Drake gave a mortgage to secure its repayment. It would appear from Dey's testimony that Stewart also gave collaterals for this loan.

July 20, 1860, Drake deeded the Pontiac lot to Baines, a brother-in-law of Stewart, and took back from him a mortgage conditioned for the payment of the Dey mortgage, and also four negotiable promissory notes of $ 1,000 each, the first of which fell due one year from date. We have no doubt the giving of the deed and the taking back of the mortgage were by direction and for the benefit of Stewart.

Stewart during all this...