Wyoming Building & Loan Ass'n v. Mills Const. Co.,

• Decision Date: 17 July 1928
• Docket Number: 1476
• Parties: WYOMING BUILDING & LOAN ASS'N v. MILLS CONST. CO., ET AL. [*]
• Court: Wyoming Supreme Court

269 P. 45

38 Wyo. 515

WYOMING BUILDING & LOAN ASS'N v. MILLS CONST. CO., ET AL. ^[*]

No. 1476

Supreme Court of Wyoming

July 17, 1928

ERROR to District Court, Natrona County, BRYANT S. CROMER, Judge.

Action by the Wyoming Building & Loan Association against the Mills Construction Company and others for the foreclosure of a mortgage. From an order modifying and order confirming the sale, plaintiff brings error.

Reversed and Remanded.

Durham & Bacheller, for plaintiff in error.

After judgment and decree fixing priority of mortgage liens plaintiff in error paid the delinquent taxes and in bidding in the property, under prior lien, bid a sum sufficient to satisfy its judgment and costs plus the amount which it had paid for delinquent taxes; the sale proceedings were confirmed; later defendants in error, Davidson and Royce moved for a modification of the confirmation order by cancelling the credit allowed plaintiff for its payment of delinquent taxes; said order was modified by the court, and plaintiff was ordered to pay to said defendants an amount equal to the amount it paid for the taxes; from this order plaintiff prosecutes error. The authorities cited by defendants in the trial court are not in point on the facts when the controversy is between encumbrancers a different rule applies, Jones Mtgs. (7th Ed.) Sec. 714. Plaintiff in error is entitled to subrogation to the claim of the municipality for taxes which it paid; the payment was as much for the benefit of defendants in error as for plaintiff in error, and both were obligated to pay the taxes; Jones v. Black, (Okla.) 90 P. 422; Kershner v. Trinidad, 201 P. 1055; Shepard v. Vincent, 80 P. 777; Norton v. Myers, (Minn.) 77 N.W. 298; 41 C. J. 1014; Skilton v. Roberts, 129 Mass. 306; Gorham v. Ins. Co., (Minn.) 64 N.W. 906, and cases cited. The ruling of the court below is inequitable and unjust, and should be reversed.

R. N. Ogden Jr., Hagens & Murane, and Laura B. Harris, for defendants in error.

Plaintiff's judgment was for $ 8031.38; it paid $ 11,185.61, which, after payment of costs and expenses of sale, leaves a balance of surplus of $ 3,007.28; it seeks to retain this balance to cover taxes paid after judgment and prior to the sale; this it cannot do because the decree is a final judgment and binding upon the parties, 3 Jones Mtgs. (7th Ed.) 1600; Homan v. Hellman, (Nebr.) 53 N.W. 369; Blake v. McMurtry, (Nebr.) 31 N.W. 172; 42 C. J. 1777-1778; Blakistone v. State, (Md.) 83 A. 151; Ins. Co. v. Allis, 23 Minn. 337; Johnson v. Payne, (Nebr.) 9 N.W. 81; McCrossen v. Harris, (Kans.) 10 P. 583; Loan Inst. v. Richards, (Ind.) 68 N.E. 1039; 19 R. C. L. 558; Day v. Brenton, (Iowa) 71 N.W. 538; Vincent v. Moore, (Mich.) 17 N.W. 81; DeLeuw v. Neeley, 71 Ill. 473; a decree of foreclosure merges the mortgage and the debt and determines the amount of defendant's debt, Wallace v. Field, (Mich.) 22 N.W. 91; Trust Co. v. Company, (Mich.) 135 N.W. 115. The cases cited by plaintiff in error are not in point on the facts and are distinguishable from the cases explaining the rule of res judicata Wyatt v. Quimby, (Minn.) 68 N.W. 109. The doctrine of caveat emptor applies, David Co. v. Hellman, (Nebr.) 95 N.W. 467; Norton v. Taylor, (Nebr.) 53 N.W. 481. It was not the duty of plaintiff in error to pay the taxes, 41 C. J. 615; Pearmain v. Ins. Co., (Mass.) 92 N.E. 497; Ins. Co. v. Bulte, 7 N.W. 707. The doctrine of merger applies as to the mortgage debt, and the taxes paid; Young v. Brand, (Nebr.) 19 N.W. 494; Dickinson v. White, (Iowa) 21 N.W. 153; Carter v. Phillips, 49 Mo.App. 324; 19 R. C. L. 181; Stone v. Tilley, (Tex.) 101 S.W. 201.

BLUME, Chief Justice. KIMBALL and RINER, JJ., concur.

OPINION

BLUME, Chief Justice.

Plaintiff in error, the Wyoming Building and Loan Association, brought an action against the Mills Construction Company to foreclose a mortgage on certain real property in Natrona County, Wyoming, making D. E. Davidson and Pat Royce, junior mortgagees, parties defendants. Judgment was entered on February 21, 1927, foreclosing the respective mortgages of the parties, finding the amount due under each and directing the sale of the premises, the proceeds to be applied first to satisfy the claim of the plaintiff in error in the sum of $ 8031.38 and costs and interest, second, the joint claim of Davidson and Royce in the sum of $ 6059.88, and third, the individual claim of Royce in the sum of $ 5418.61. A sale of the premises was accordingly had. Plaintiff in error purchased the premises at the sum of $ 11,185.61. This amount was just sufficient to pay the claim of plaintiff in error and the sum of $ 3007.28 paid for taxes. On April 18, 1927, the court entered an order confirming the sale and giving plaintiff in error credit for the taxes paid as above mentioned. On August 24, 1927, D. E. Davidson and Pat Royce, defendants in error herein filed a motion to modify the order of confirmation claiming that plaintiff in error should not be allowed credit for the taxes paid, but that this amount should be paid over and applied on their claim. This motion was sustained by the court on August 24, 1927, and this appeal is taken from the order of the court to that effect. The bill of exceptions herein shows that the taxes above mentioned were paid by plaintiff in error subsequent to the entry of the judgment of February 21, 1927, and prior to the sale of the premises. According to the sheriff's return of sale the sum of $ 3007.88 was applied on the taxes. The mortgage of plaintiff in error provides that the mortgagor shall pay all taxes on the premises and that in case of failure to make such payment the plaintiff in error is authorized to do so, the amount thereof to be added to the mortgage indebtedness. These taxes appear to have been the taxes for 1926, or for that year and previous years, the amount of which was in dispute and was not finally settled until the entry of the final judgment of February 21, 1927. They were due and delinquent at the time of payment thereof.

1. The brief of counsel for defendants in error disputes some of the facts stated in the bill of exceptions, but according to that bill the only question before us is as to whether or not the plaintiff in error was entitled to be reimbursed for the taxes paid by it after its mortgage indebtedness was reduced to judgment and before the sale of the property thereunder. Defendants in error want that amount of money applied on their judgments. We may well say, as was said by the Supreme Court of Minnesota in a similar case (Gorham v. National Life Ins. Co., 62 Minn. 327, 64 N.W. 906), that "a claim so inequitable must be clearly shown to have the support of strict legal right, before it can be granted." In that case the mortgagor was held to be entitled to be reimbursed for taxes paid after advertising the mortgaged premises for sale under a power contained in the mortgage, but before the sale actually took place. And while that case is, perhaps, not in point, because there was no intervening judgment as in the case at bar, the injustice of the claim of the defendants in error is just as striking as the injustice of the claim made in that case. It is argued that the doctrine of caveat emptor is applicable; that the plaintiff in error bought subject to all the burdens resting on the premises at the time of the sale. That is stated to be the general rule in 35 C. J. 78, but we are not sure that it is applicable to payment of taxes. See Kenton v. Cormick, 11 Ky. L. 487; Crawford v. Wiedemann, 154 Ky. 666, 159 S.W. 555; Pedley, Receiver v. Williams, 181 Ky. 336, 205 S.W. 323, and cases cited; Turrill v. Turrill, 7 Ont. Pr. 142; Craig v. Smith, 84 N.J. Eq. 593; 95 A. 194; See also Maroney v. Tannehill, 90 Okla. 224, 215 P. 938, 943. And if it does not apply in such case, it would, perhaps, make no difference whether the taxes were paid before or at the time of the sale. Gormley v. Bunyan, 138 U.S. 623, 11 S.Ct. 453, 34 L.Ed. 1086. We shall not decide the point herein, for the reason, if no other, that the premises in this case were not in fact bought subject to any taxes. Nor is the doctrine of caveat emptor applicable where a judicial sale is involved, until after the sale has been finally ratified, for the reason that the sale is not complete until then. Byrd v. Day, 138 Md. 442, 114 A. 486. We may mention in this connection that it is apparent herein, that the plaintiff in error bought the premises for the amount bid with the understanding that it should be reimbursed for the taxes paid. To compel it now to pay over to defendants in error the amount already paid for taxes would in effect be to compel it to pay more than it actually bid. That cannot be done, if the point is raised before confirmation. The court at most, if it was not satisfied with the sale, could have set the sale aside. Hotchkiss v. Clifton Air Cure, 2 Abb. Dec. (N. Y.) 406, 43 N.Y. 170. See also Young and McWhorter v. Smith, 88 W.Va. 445, 107 S.E. 110; Buskirk v. Musick, 100 W.Va. 205, 130 S.E. 432; Ex parte Patterson, 121 S.C. 78, 113 S.E. 467; Kirk v. Oakey, 110 Va. 67, 65 S.E. 528, 135 A. S. R. 915; Craig v. Smith, 84 N.J. Eq. 593, 95 A. 194, showing that a purchaser at a judicial sale will be relieved from his bid by reason of the existence of prior liens, if he applies therefor before confirmation of the sale. That the plaintiff in error gave the court to understand before confirmation that it did not want to purchase the premises at the amount bid subject to taxes of about $ 3,000 is clear.

2. Counsel for defendants in error argue that the amount paid by plaintiff in error for taxes is but an integral part of the amount of indebtedness owing to it under the mortgage; that while it had the right to pay the taxes before judgment and have...