Montgomery v. Merrill

McKee, J.: This appeal is taken on the judgment roll, from a final judgment entered on the pleadings in the case. The judgment was entered in an action commenced December 8, 1881, to foreclose a mortgage given to secure payment of a promissory note and a counsel fee, at the rate of five per cent, upon the principal and interest due upon the note in case of foreclosure. In the complaint it was alleged that the wife of the mortgagor, who was named in the complaint as a party defendant, had or claimed to have some interest in or lien upon the mortgage premises, which she claimed to have acquired subsequent and subject to the mortgage lien; and that, since the execution of the mortgage the mortgagor had become insolvent, and, therefore, against him, no judgment was asked for any deficiency after a sale of the mortgage premises. By the answer of the defendants all the allegations of the complaint were admitted; but it was affirmatively averred that the mortgagor had been adjudicated insolvent on October 29, 1881, and that all proceedings against him, as an insolvent debtor, had been stayed. Also, “ that on the-day of -, A. D., 18—,” the defendant, as head of a family, had acquired a homestead interest in the mortgaged premises, by making, acknowledging, and filing, according to law, “ on that day,” a declaration of homestead upon the premises.

Upon these pleadings the Court, on motion, gave judgment in favor of the plaintiff, according to the prayer of his complaint, for the amount of the principal and interest of the mortgage debt, and $188.65, “ attorney’s fee provided in the mortgage,” and costs; and to this no exception was taken by the defendants. But it is contended that the judgment is erroneous, because the answer contained matter which operated as a bar to the maintenance of the action.

The adjudication of the defendant’s insolvency did not con[392]stitute a defense to the action, nor did the existence of a stay of all proceedings against the insolvent debtor have that effect. The action was not brought against the insolvent to recover a money judgment upon the debt; it was brought to obtain a decree of foreclosure and sale of the mortgaged premises for the satisfaction of the debt. As a creditor of the insolvent debtor, having a mortgage lien, the plaintiff had the right, when the mortgagor was adjudged insolvent, to look to the mortgage alone, or to prove the mortgage debt against the estate of the insolvent, pursuant to the provisions of Section 44 of the Insolvent Act. (Stats. 1880, p. 92.) According to those provisions, a mortgage creditor of an insolvent debtor is not permitted to prove his debt in whole, unless he releases or transfers his mortgage to the assignee in insolvency; nor in part, unless he agrees with the assignee upon the value of the mortgaged premises, and the value should be less than the mortgage debt; or unless he agrees that a sale of the mortgaged premises may be made, under an order of the Court, “in such manner as the Court may direct;” in such cases he will be admitted to prove any deficiency. Or, if he releases or transfers his mortgage to the assignee, he will be admitted to prove the entire debt and share in the administration of the assets. But unless the value of the mortgaged premises shall be ascertained by agreement, or the property itself shall be sold under the directions of the Court, or the mortgage shall have been released or transferred to the assignee in insolvency, it is not permissible for the mortgage creditor to prove his debt in whole or in part, nor to maintain any action against the insolvent debtor for the collection of his debt. Such an action would be against the policy of the insolvent law and in violation of the order of the Court, which stayed all proceedings against the insolvent debtor. Yet as the assignee in insolvency takes only such interest and rights as the insolvent debtor had in the mortgaged premises, subject to the mortgage, the insolvency proceedings do not affect the right of the mortgagee to foreclose his lien; and in this case the mortgagee relied wholly on his mortgage lien. By his complaint he waived personal judgment for any deficiency which might be remaining after execution of a foreclosure and sale; he, therefore, had no debt or claim proved or prov