Where a mortgage is given to secure the separate debts of several persons as mortgagees, it is a several security, and may be enforced by each creditor, as in case of a separate mortgage. But where other parties are interested in the property, the Court will require them to he brought in before ordering a sale or foreclosure.
Where, in such case, bill avers the other mortgagees are no longer interested, and they are not parties, demurrer for defect of parties does not lie.
Baldwin, J. delivered the opinion of the Court—Cope, J. concurring.
[214]There was a demurrer to the bill of the plaintiff in this case, for, among other canses, a defect of proper parties, and the Court sustained it on this ground.
To determine the correctness of this judgment, which involves the subject of appeal here, it will be necessary to examine the frame of the bill. The bill charges that the defendant, the Yreka Water Company—a corporation under the general Act—in May, 1855, executed a certain mortgage, which is fully set out. The mortgage is executed to a large number of persons—Livingston & Co. among them—-as parties of the second part, and one S. S. Brooks, of the third part. It provides, that the parties of the first and third part, in consideration of sixty-four thousand dollars, paid by the parties of the second part, sell, etc. to the latter, all their right, title, etc. to a certain ditch—defeasible, on the payment by the parties of the first and third parts, of this sum, with three per cent, per month interest; the parties of the first part expressly covenant to pajr this sum. The mortgagees covenant next, that they will make no claim or demand “ for any amount greater than what may be actually due and owing on these presents;’ and that they will make no personal claim for any amount whatever on the party of the third part, Brooks. The deed then proceeds: “ and it is expressly understood and agreed by all the partios to those presents, that those presents are made, executed, and delivered, and are to bo held by the party of the second part, for themselves and others, who may or shall join with them, in furnishing and advancing, selling and delivering, to the party of the third part, goods, chattels, or cash, for or on account of the party of the first part, and who join with the party of the second part, in an agreement of this date between the same parties identically as the parties to these presents.”
The bill goes on to aver, that Livingston & Co. in accordance with the terms of the mortgage, furnished two thousand dollars’ worth of goods to the party of the first part, for and at the request of the party of the third part, and received two vouchers from the Treasurer of the company showing this fact—of which claims the plaintiff alleges he is the assignee, and that Templeton & Co. (successors to Templeton & Fox, also named as mortgagees,) furnished, in like manner, two thousand dollars’ worth [215]
of goods, evidenced in the same way, and in like manner assigned to the plaintiff.
The bill further states, that in April, 1857, an agreement was entered into between the corporation and the Shasta River Canal Company, another corporation—which agreement is also fully set out. By the terms of it, the Yreka Water Company sell, lease, and grant, to the Shasta Company, all the right, title and interest, of the first company to the ditch, from date to 11th of Sept. 1857. The instrument provides : “At which last mentioned time the aforesaid property, if not redeemed by the party of the first part, or by a redemption from the sale made thereof under a judgment against the said party of the first part, in favor of J. W. Russell & Co. on the 11th of March, a. d. 1857, by the Sheriff of Siskiyou County, shall be delivered to the purchaser at said sale ; and if the party of the first part shall be the assignee of said purchaser on the lltli day of September, a. d. 1857, then it is expressly agreed and understood, by and between the parties hereto, that the said party of the second part are to retain the possession and use of the above described property, with all the rights acquired by said assignment from said purchaser.
The said party'of the second part, as a consideration for this conveyance, hereby covenant and agree, to hold the party of the first part harmless from a claim that William Kelsíi has against the said party of the first part, for rents and profits arising from the above mentioned and described property, between the 11th day of March, a. d. 1857, and the 11th day of September, a. d. 1857. To pay off and discharge as fast as the cash proceeds arising from said property, after the payment of current expenses, will enable them to do so : first, a judgment against the said party of the first part, in favor of Jonas Hobert j secondly, the amount advanced (and unpaid) to pay the taxes on said property, and after the above named claims are paid off, to appropriate one-half of the net cash proceeds of said property, to pay six thousand dollars of a judgment in favor of Templeton & Fox, against E. J. Curtis and others; and the other half, to pay a claim not exceeding three thousand dollars, of certain laborers heretofore employed by the party of the first part, said laborers, and the amounts due them respectively, to be designated by [216]the party of the first part; and a judgment of Joseph Hawkins v. A. Y. Gillett. All, or any of the aforesaid payments, are to be made only as the party of the second part realizes the money, over and above current expenses of tho property, exclusive of water scrip issued by the party of the first part, and taken in payment of water by the party of the second part, out of the use and possession of said property.
And the party of the second part agree and undertake to use their best endeavors to procure an assignment of the claims of various persons against the party of the first part, which said claims are mentioned and set forth in the schedule hereto annexed, to the party of the second part, for shares of the capital stock of the party of the second part, in the amount and proportions of stock set forth in said schedule; and if said party of the second part shall succeed in procuring said assignment of said claims, and become the owners thereof, and of the property first described herein, absolutely, then they will release and enter satisfaction of said claims assigned to them as aforesaid, on or after the 12th day of September, A. d. 1857, or as soon thereafter as said claims shall be assigned to the said party of the second part.”
The bill proceeds to state that on the 12th September, 1857, in pursuance of this agreement, all the other mortgagees (except plaintiff and his assignors) entered into an agreement with the Shasta Co. and the other parties mentioned in the schedule before referred to, to assign to the company their several indebtedness against the Yreka Water Co. and to receive the stock of the Shasta Co. in lieu thereof; which contract was to take effect and become binding upon all the parties thereto, provided that persons holding or representing nine-tenths of the indebtedness mentioned in said schedule should agree to sign the said agreement; and that persons holding nine-tenths of said indebtedness did so sign said agreement; that the Shasta Co. now claim to be the owner of the property, rights, etc. of said Yreka Water Co.
The prayer of the bill is as follows:
“ Wherefore plaintiff prays that said defendants, and all persons claiming under them or any of them, subsequent to the mortgage aforesaid, may be foreclosed of their estate and interest in or lien upon the said mortgaged premises, that a decree [217]may be made in due form for the sale of said premises in said mortgage mentioned by the Sheriff of said county, according to law and the practice of this Court, and the proceeds of said sale applied to the amount due the plaintiff, together with his costs and disbursements, and that ho have execution for the balance, if any remaining unsatisfied thereafter; or that this honorable Court will, by its decree, sequestrate the franchise of the said defendants, and appoint a sequestrator to take charge of the said mortgaged premises and collect the tolls of the same, and after paying the current expenses, to retain enough money in his hands to satisfy plaintiff’s demand, together with interest and costs, and then to deliver said mortgaged premises to the defendants and pay said money to the plaintiff, and for such other and further relief as the nature of the case may require, and to this honorable Court may seom just and proper, the premises being fully considered, and he, as in duty bound, will ever pray, etc.”
From this analysis of the hill, it would seom that the plaintiff’s assignors were mortgagees for the sums they subsequently advanced under the terms of the mortagage, to the same extent as if they were then present creditors. The transfer by the Trcka Co. of the property first mortgaged, to the Shasta Co. was subsequent in time, and, of course, subordinate, to the first mortgage. That company took the interest subject to this para-, mount charge. The Shasta Co. is made a party defendant—the-other mortgagees, now stockholders in the latter company, are-not. According to the bill, they have no longer any beneficial, interest as mortgagees. They have changed their indebtedness from credits against the old.company into stock in the new. corporation; and have released, or agreed to release, their debts against the Yreka Co. on this consideration. It is.not necessary to consider the question, whether, by force of this. agreement nd release, these stockholders could claim their lien on the property as against the plaintiff, or whether that lien has become extinguished in equity. The only question is, whether it was necessary to make these mortageos parties to this bill, in order to enable the plaintiff to enforce his lien.
We do not see in this instrument anything to distinguish it from an ordinary mortgage, securing several separate debts, nor anything requiring of these mortgagees the execution of any trusts, so far as the plaintiff is concerned. It is the simple case, as wo consider, of a separate mortgage for the benefit of the plaintiff, and may be enforced as if he were the only party interested, subject only to this: that, if others are interested in the property mortgaged, a Court of Equity, for a full adjustment of the equities and rights of the parties, will require them to be brought before the Court before ordering a sale or foreclosure. It is true, some authorities seem to hold that where several persons are interested as mortgagees one may foreclose without joining the rest. This was held—or, rather, permitted, for no opposition was made—in Montgomerie v. The Marquis of Bath, (3 Vesey, Jr. 560.) The same doctrine seems to be held in 17 Serg. & R. 400; Darley v. Hayes, and affirmed to be correct in Mohler’s appeal, (5 Barr. 118.) But the weight of authority seems to be otherwise. Story's Eq. PI. (See. 201,) thus states the rule:
“And it may be generally stated, that all persons who have the legal interest in the mortgage, as well as those who have the equitable interest therein, are necessary parties to the bill to foreclose. There can be no redemption or foreclosure unless all the persons entitled to the whole mortgage are before the Court. Thus, for example, a person entitled to a part only of the mortgage money cannot file a bill to foreclose the mortgage as to his own part of the money; but all the other persons in interest must be made parties. So, if the mortgage has been made to a Trustee in trust, all the cestuis que trust, (or beneficiaries,) should be made parties, as well as the Trustee to the bill to foreclose;" and many authorities are cited. (See, also, See. 207.)
But we think this case is not within the rule, for here the bill avers that these other creditors are no longer interested. They [219]have become stockholders of this new corporation, and the corporation is made a defendant, and charged to be in possession of the mortgaged property, subject to the incumbrance of the plaintiff. It is true, it may appear that they, if they choose to assert it, have some claim, possibly, upon the ground that they were originally creditors of the Yreka Co. coupled with other equitable circumstances. But, as yet, they do not set up or insist upon that claim; and upon the demurrer it is too éarly to consider the effect or validity of this claim. Prima <facie, it would seem from the averment, that they have no interest- in the mortgage property as cestuis que trust or mortgagees under the first deed—that their claim is extinguished—as by payment on this new contract or arrangement.
The Court below, on the return of the cause, will be put in possession of the merits of the case by the answer of the defendant, and the rights of all parties concerned can be fully protected by its action.
Judgment reversed and cause remanded for further proceedings, in pursuance of this opinion.
AI Brief
AI-generated · verify before citing
Holding. The court held that a mortgagee of a separate debt secured by a mortgage held by multiple parties may maintain a foreclosure action without joining the other mortgagees if the bill sufficiently avers that those other parties have no remaining interest in the mortgage.
Issues
Whether other mortgagees are necessary parties to a foreclosure suit when the mortgage secures separate debts.
Whether the plaintiff's bill sufficiently alleged that other mortgagees lacked a remaining interest in the mortgaged property to excuse their non-joinder.
Disposition. reversed and remanded
Quotations verified verbatim against the opinion
“Though several parties are provided for and secured by the mortgage, yet they were not jointly interested in the mortgage debts; but the debts were separate, and the mortgage may be regarded as a several security for the different creditors.”