Quinn Plumbing Co., Inc. v. New Miami Shores Corporation

• Decision Date: 01 August 1930
• Citation: 129 So. 690,100 Fla. 413
• Parties: QUINN PLUMBING CO., Inc. v. NEW MIAMI SHORES CORPORATION.
• Court: Florida Supreme Court

129 So. 690

100 Fla. 413

QUINN PLUMBING CO., Inc. v. NEW MIAMI SHORES CORPORATION.

Florida Supreme Court, Division A.

August 1, 1930

Suit by the New Miami Shores Corporation against the Quinn Plumbing Company, Incorporated. From an order overruling a demurrer to the bill, defendant appeals.

Affirmed.

ELLIS J., dissenting. Appeal from Circuit Court, Dade County; Paul D Barns, Judge.

COUNSEL

James A. Dunn and Carl T. Hoffman, both of Miami, for appellant.

George T. Clark and Clark & Ellis, all of Miami, for appellee.

OPINION

STRUM J.

A first mortgage upon real property was foreclosed and the property sold. A mortgagee who held a second mortgage on a small part of the incumbered land was not made a party to the foreclosure of the first mortgage. The property was purchased at the foreclosure sale by one not a party to either mortgage. This suit, brought by the purchaser at the foreclosure sale under the first mortgage is for the purpose of disposing of the rights of the second mortgagee.

The first mortgage contained a conventional release clause which provided that the mortgagor could procure the release of parcels of the land upon the payment of specified amounts. This bill of complaint prays that the second mortgagee be required to redeem the lands covered by the second mortgage, by the payment of the amounts specified with reference thereto in the release clause of the first mortgage, in default whereof the second mortgagee's right to redeem be barred.

The chancellor overruled a demurrer to the bill, from which order this appeal is taken.

The right to redeem is an incident to every mortgage and belongs to the mortgagor and those claiming under him. This right cannot be extinguished except by due process of law. After the foreclosure of a mortgage, redemption may be had by any person entitled to it who was not made a party to the suit. Bryan v. Kales, 162 U.S. 411, 16 S.Ct. 802, 40 L.Ed. 1020. The purchaser at such a sale takes the premises subject to the right of a junior mortgagee, who was not made a party to the foreclosure of a prior mortgage, to redeem from the senior mortgage. Howard v. Milwaukee, etc., 101 U.S. 837, 25 L.Ed. 1081; Jones v. Williams, 155 N.C. 179, 71 S.E. 222, 36 L. R. A. (N. S.) 426; Morse v. Smith, 83 Ill. 396; Hodgen v. Guttery, 58 Ill. 431; Jones on Mortgages (8th Ed.) § 1342; Wiltsie on Mortgage Foreclosure (4th Ed.) §§ 1054, 1149; 42 C.J. 357, 372.

It is well established in this jurisdiction that the purchaser of mortgaged property at a foreclosure sale, when for any reason the foreclosure proceedings are imperfect or irregular, becomes subrogated to all the rights of the mortgagee in such mortgage and to the indebtedness that it secured. Such purchaser becomes virtually an equitable assignee of the mortgage and of the debt it secured, with all rights of the original mortgagee, and becomes entitled to an action de novo for the foreclosure of such mortgage against all parties holding junior incumbrances who were omitted as parties to the foreclosure proceedings under which the purchaser bought. Crystal R. Lbr. Co. v. Knight Turp. Co., 69 Fla. 288, 67 So. 974, Ann. Cas. 1917D, 574; Key West Wharf Co. v. Porter, 63 Fla. 448, 58 So. 599, 610, Ann. Cas. 1914A, 173; Meyer v. Florida Home Finders, 90 Fla. 128, 105 So. 267; Jordan v. Sayre, 29 Fla. 100, 10 So. 823. See also Dutcher v. Hobby, 86 Ga. 198, 12 S.E. 356, 10 L. R. A. 472, 22 Am. St. Rep. 444; Johns v. Wilson, 180 U.S. 440, 21 S.Ct. 445, 45 L.Ed. 613; Burns v. Hiatt, 149 Cal. 617, 87 P. 196, 117 Am. St. Rep. 157; 19 R. C. L. 635(452).

As against a senior mortgagee, the only absolute right of a junior mortgagee is the right to redeem from the senior mortgage. Parker v. Child, 25 N. J. Eq. 41; Jones on Mortgages (8th Ed.) § 1781. The right to seek a marshaling of the security in appropriate cases is not absolute, but rests upon equitable principles.

When a first mortgage has been foreclosed, and a junior incumbrancer has not been made a party, the decree is valid as to those who were joined as parties, but of course is not binding upon, nor does it in any wise affect, the rights of the junior mortgagee who has been omitted. The rights of such omitted person remain precisely as they were before the proceedings were instituted. They are neither enlarged nor diminished by the defective foreclosure. McGough v. Sweetser, 97 Ala. 361, 12 So. 162, 19 L. R. A. 470. As to such omitted junior mortgagee the situation is the same as if no foreclosure had occurred. Key West Wharf Co. v. Porter, supra; Crystal R. Lbr. Co. v. Knight Turp. Co., supra; Wiltsie on Mortgage Foreclosure (4th Ed.) 1055.

The purchaser at such a foreclosure sale occupies the same position as the first mortgagee, having become equitably subrogated to his rights, which may be enforced by such purchaser against the junior mortgagee to the same extent as they could have been enforced in the original foreclosure, had the junior mortgagee been made a party thereto. The junior mortgagee may defend to the same extent as if the irregular foreclosure had not occurred.

In the absence of countervailing equities, some of which will be mentioned hereafter, when a first mortgage has been foreclosed in a suit to which a junior mortgagee, through inadvertence, was not made a party, a purchaser in possession under the sale may maintain a suit to compel the junior mortgagee to exercise his right of redemption within a reasonable time, just as he could have been compelled to exercise it in the original foreclosure had he been made a party thereto, in default of which the right of redemption of the second mortgagee may be foreclosed and barred. Key West Wharf Co. v. Porter, Crystal R. Turp. Co. v. Knight, supra; Parker v. Child, 25 N. J. Eq. 41; Shaw v. Heisey, 48 Iowa, 468; Nelson v. Bank, 199 Iowa, 804, 202 N.W. 847; Manhattan Bank v. Wamego Bank, 103 Kan. 865, 176 P. 658; 42 C.J. 356; Jones on Mortgages (8th Ed.) § 1781. There are instances, however, in which such a course would be inequitable. Morey v. City of Duluth, 69 Minn. 5, 71 N.W. 694.

If any fraud or mala fides was practiced in connection with the failure to make the second mortgagee a party, that might constitute a countervailing equity which would place the matter in an entirely different light, especially in this case in view of the extraordinarily large part of the proceeds of the sale which was devoted to 'costs and expenses,' which conceivably might have been reduced upon the objection of the junior mortgagee, so as to make the situation of his mortgage more favorable. If it were shown that the second mortgage was deliberately omitted as a party so as to deprive it of the opportunity (not the absolute right) of bidding the property up to an amount sufficient to cover its second mortgage, or to deprive it of the opportunity to contest the amounts devoted to 'costs and expenses' in order to conserve proceeds available to pay off the second mortgage, an entirely different question might be presented. But no such contention is as yet advanced. The bill sufficiently alleges, and the demurrer admits, that the omission of the second mortgagee was due solely to inadvertence; that an abstract was procured preliminary to foreclosure, and that the second mortgage did not appear thereon; that the first mortgagee having no actual knowledge of the existence of the second mortgage, therefore, did not make the second mortgagee a party. Thus the omission of the second mortgagee as a party appears from the allegations of the bill to have been an innocent omission, at least one involving no bad faith.

Those considerations just mentioned become even less important in the present aspect of this case when the well-established rule is considered that the second mortgagee who was not made a party cannot, in a suit to require him to redeem or be foreclosed, be compelled to pay the costs or expenses of the foreclosure of the first mortgage. The amount which must be paid by such junior mortgagee in order to redeem is to be determined from the first mortgagedebt, not from the decree of foreclosure to which he was not a party, and which is therefore not binding upon him. Jones v. Dutch, 3 Neb. (Unof.) 673, 92 N.W. 735; Wiltsie on Mortgage Foreclosure (4th Ed.) § 1210; Jones on Mortgages§ 1388.

Another countervailing equity which might conceivably be imposed to prevent the operation of the rule above stated would be the equitable right of the junior mortgagee, whose mortgage covers only a part of the premises covered by the first mortgage, to insist upon a marshaling of the securities. If that right were asserted and maintained (see 38 C.J. 1367 et seq.), complainant might be entitled only to a conventional decree of foreclosure by sale; the lands to be sold in such order as upon the evidence seems just and equitable. See Morey v. City of Duluth, 69 Minn. 5, 71 N.W. 694.

But the fact that complainant might not be entitled to the exact relief specifically prayed for is not ground for demurrer, if upon the facts alleged and under the general prayer complainant is entitled to any relief consistent therewith.

Upon the facts alleged, complainant is certainly entitled to a foreclosure de novo against the omitted junior mortgagee. The question is as to the propriety of the mode of relief selected. The bill of complaint alleges facts sufficient to justify relief by foreclosure and sale if that be hereafter determined to be the equitable course. So the bill is not without equity. The nature of the relief to which the complainant is ultimately entitled depends upon the defense interposed by the junior mortgagee. If no countervailing equities are shown, a decree may be entered requiring the junior mortgagee to redeem or be barred. If the...