Pool v. Gates

• Decision Date: 07 November 1925
• Docket Number: 26,170
• Citation: 240 P. 580,119 Kan. 621
• Parties: ED POOL, Appellant, v. R. C. GATES et al., Appellee
• Court: Kansas Supreme Court

240 P. 580

119 Kan. 621

ED POOL, Appellant, v. R. C. GATES et al., Appellee

No. 26,170

Supreme Court of Kansas

November 7, 1925

Decided July, 1925.

Appeal from Reno district court; WILLIAM G. FAIRCHILD, judge.

Judgment reversed.

SYLLABUS

SYLLABUS BY THE COURT.

MORTGAGES--Foreclosure by Action--Right to Surplus Proceeds. In the confirmation of a judicial sale in foreclosure of a mortgage on real property, the surplus proceeds of the sale, after paying taxes upon the real property, the costs of the foreclosure proceeding and the judgment in the foreclosure decree, should be paid to the defendant in execution.

Paul R Nagle, Robert Garvin and Evart Garvin, all of St. John, for the appellant.

C. M. Williams and D. C. Martindell, both of Hutchinson, for the appellee.

Harvey J. Burch, J. dissenting.

OPINION

HARVEY, J.:

The question presented by this appeal is the correctness of the judgment of the trial court upon the confirmation of a judicial sale in directing the application of surplus proceeds to the payment of debts not previously adjudicated.

The question arose in this way: In an action previously in this court (116 Kan. 195, 225 P. 1069) R. C. Gates obtained a personal judgment against Ed Pool upon a note for $ 15,000 and interest on one cause of action, and upon another note for $ 6,000 with interest on another cause of action, and for costs, and for the foreclosure of two mortgages given to secure the payment of such notes. The mortgages foreclosed were later in date and time of record to first mortgages upon the same land, aggregating $ 49,000, and second mortgages, given as commissions in procuring the first mortgages. One of the mortgages foreclosed recited that it was given "subject to all mortgages of record," and both of the mortgages foreclosed were in fact junior and inferior to the first mortgages and commission mortgages above mentioned. The holders of the first mortgages and commission mortgages were not made parties to the foreclosure proceedings, and they were not mentioned in the decree, hence the sheriff's sale hereinafter mentioned was necessarily subject to those mortgages. (Marsh v. Votaw, 102 Kan. 747, 172, 172 P. 30 P. 30.) The case in which the foreclosure decree was obtained was filed originally in Stafford county, being the county in which the lands were situated, but for good cause shown the case was transferred to Reno county upon a change of venue, and the decree of foreclosure was entered in that court. After the affirmance of that decree by this court (116 Kan. 195, 225 P. 1069), an order of sale was issued reciting the judgments in favor of Gates and against Pool, together with the decree of foreclosure, directed to the sheriff and commanding him to advertise and sell the real property described therein, and from the proceeds of the sale to pay, first, taxes; second, the cost and expense of the suit and sale; third, the judgments and interest; and the residue, if any, to be returned into court. Pursuant to such order of sale the sheriff of Stafford county advertised the property and sold the same, as directed in the order of sale, to R. C. Gates for $ 37,050. The amount of the judgments in favor of Gates, with interest computed to July 21, 1924, the day of sale, amounted to $ 24,651.56. The sheriff demanded of the purchaser the difference between the amount of his bid and the amount of his judgment, but payment of such amount was refused, the purchaser claiming the right to have credited upon his bid sums he had paid to take up overdue interest coupons upon the first mortgage notes, and to take up the commission mortgages, and for taxes. The purchaser presented to the sheriff a proposed form of return for him to make upon the order of sale, which return set forth his claims, which the sheriff refused to execute, but attached the same to the order of sale, and on July 24, 1924, made a return showing the facts as above stated. R. C. Gates then filed a motion to require the sheriff of Stafford county to correct his return so as to show the exact amount bid by defendant for the several tracts of land sold at the sale, and that he be allowed credit upon his bid for the amount due him upon his mortgages, and also for the amount which he had paid as interest upon the first mortgages and commission mortgages since obtaining his judgment in this case, and also for the amount of taxes which he had paid upon the land, and that the sheriff receive of the purchaser cash and make his return showing his receipt of cash for his costs and expenses of foreclosure and sale under his mortgages and for the taxes. This motion was allowed July 26, 1924, without notice to the other parties. Ed Pool then filed a motion to set aside the order allowing the motion last mentioned for the reason of lack of notice and also for the reason that the court had no jurisdiction of the subject matter nor of the sheriff of Stafford county, and also filed a motion to confirm the sale as first returned by the sheriff. Upon the hearing of these motions, August 7, 1924, both parties being present by counsel, the court suggested that counsel might agree on a form of return for the sheriff to make, and such an agreement was made. In conformity to this agreement the sheriff filed an amended return, reporting the sale of the real property, as directed by the order of sale, to R. C. Gates for $ 37,050, and--

"The said R. C. Gates claims certain credits against the purchase price for taxes and for interest and commission mortgages which he claims was a prior lien to his and which he claims he had to pay in order to protect his liens and about which. I have no knowledge. I therefore did not give him credit, and I refer the matter of the credits to the court."

and that he had received of R. C. Gates the sum of $ 1,282.65, the amount of the taxes of the land for the year 1923, and the costs of the action, and sale, which he had paid.

Whereupon the court set aside his order of July 26, 1924, and Pool withdrew his motion to confirm the sale and to confirm the return of the sheriff made July 24. Gates then filed a motion for credits upon bid and for confirmation of sale. The motion recited in detail the sums paid by Gates for past due interest on the first mortgages, for the amounts of the commission mortgages, upon which foreclosure suits had been started because of unpaid installments, and taxes for the year 1922, which he had paid to the first mortgagees, such taxes having been paid by them to prevent tax sales, and averred that he had been compelled to make these payments after the decree of foreclosure and before the sale, in order to prevent foreclosure of the first mortgages and the commission mortgages to the impairment of his lien, and moved that he be allowed to credit the sums so paid by him upon his bid, and after allowing such credits to confirm the sale. Pool objected to the allowance of such credits. The court heard evidence upon this motion and made full findings of fact; in substance, that there were first mortgages upon the land aggregating $ 49,000, and also commission mortgages; that interest and installment payments thereon were past due, that the lands had gone to tax sale, and the mortgagees had redeemed the lands from the sale of the taxes of 1922; that suits had been brought in Stafford county to foreclose the commission mortgages; that the holders of the first mortgages were threatening suit upon them unless all interest due on first mortgages, and all commission mortgages, and all taxes which they had paid, should be paid to date;...