Gault v. Equitable Trust Co.

• Decision Date: 03 February 1897
• Citation: 38 S.W. 1065,100 Ky. 578
• Parties: GAULT et al. v. EQUITABLE TRUST CO. OF NEW LONDON, CONN.
• Court: Kentucky Court of Appeals

38 S.W. 1065

100 Ky. 578

GAULT et al. v. EQUITABLE TRUST CO. OF NEW LONDON, CONN.

Court of Appeals of Kentucky.

February 3, 1897

Appeal from Louisville law and equity court.

"Not to be officially reported."

Action by Joseph Gault and others against the Equitable Trust Company of New London, Conn., to foreclose a junior mortgage. There was a judgment for defendant, and plaintiffs appeal. Affirmed.

W. O Harris, Lane & Burnett, and R. W. Woolley, for appellants.

Bullitt & Shield, for appellee.

PAYNTER J.

In 1874, Joshua J. Hair, the owner of certain property in Louisville, gave the Equitable Trust Company of New London Conn., a mortgage on it, to secure the sum of $5,000 evidenced by five bonds, for $1,000 each, payable five years after date. In 1875, Hair gave appellants, Joseph Gault &amp Sons, a mortgage on the same property, to secure a debt which he owed them. Hair failed to pay the sums due the Equitable Trust Company and certain taxes on the property. In 1879 it brought suit in the federal court, to enforce its mortgage lien on the property. To this suit it failed to make Joseph Gault & Sons parties. A judgment was rendered in that court enforcing its mortgage lien. By the provisions of the mortgage, the trust company had a lien for taxes and insurance premiums paid on the property, and such as were thus paid, together with the debt, interest, and costs, amounted to something like $6,500 when the property was sold. The Equitable Trust Company became the purchaser of the property under the judgment at $5,000. The sale was confirmed, and deed was made to it, and it was regularly placed in the possession of the property. The appellant Joseph Gault was present at the sale. Appellee took possession of the property in 1880, and held it until this suit was brought. It has endeavored to sell it, but has never been offered more than $6,000 for it. Nearly 10 years after the appellee took possession of the property, this action was brought by the appellants, setting up their junior mortgage; and, among other things, they pleaded that the bonds executed by Hair were bills of exchange, and their recovery barred by statute of limitations. They do not plead that the statute barred them at the time the suit was filed by the appellee against Hair, to recover judgment thereon, and enforce the mortgage lien. Counsel for appellants insist that although appellee obtained judgment on its debt, and had the mortgagor's equity of redemption sold to pay it, still the appellants can plead the statute of limitations against the mortgage debt, which was merged in the judgment debt, and all of the mortgagor's interest in the property sold to pay it. Some cases are cited which counsel claim support their contention. We have examined the cases, and are of the opinion that none of them sustain this view. If any court had delivered such an opinion, we would not follow it, because, in our opinion, to do so would be to follow a rule which had for its foundation neither reason nor justice. In Sanger v. Nightingale, 122 U.S. 185, 7 S.Ct. 1109, the statute of limitation was pleaded on a state of facts substantially the same as in this case, and the court said: "It is difficult to see from what standpoint he, in this suit, in which he is complainant, seeking to foreclose his own mortgage, can set up the statute of limitations, not as a defense, for he is not sued, and nobody is troubling him about his claim, but as a positive weapon, to set aside and annul in this collateral proceeding the decree of a court of competent jurisdiction, with proper parties before it, which foreclosed a mortgage prior in time and equal in equity to his, under which the property was sold, and passed into other hands. Certainly, the court which rendered that decree had jurisdiction of the property and of Nightingale, the defendant, who was in possession, and who had the legal title. It is equally as certain that, whether Nightingale ought to have pleaded the statute or not, he did not do so, and it is now too late to set it up as a defense to that suit." In this case there is no pretense that the statute had barred the right to recover before appellee filed its suit in the federal court. In 2 Jones, Mortg. § 1431, it is said: "The only right of a junior mortgagee who has not been made a party to the foreclosure of a prior mortgage is to redeem the property from that mortgage." The case of Bank v. Carroll, 4 B. Mon. 40, involved the question as to the rights of a holder of a junior deed of trust when the holder of a prior deed of trust, in an action to which the beneficiary of the junior deed had not been made a party, had obtained a decree therefor, and had sold thereunder the grantor's equity of redemption. The court said that, "the deed of trust for the benefit of the Carrolls being valid, and prior in time to that of the complainants, their specific prayer cannot be granted; but they, according to well-established precedents, could be entitled to relief only upon the terms of...