a tax sale, their prior relations cease, and the junior mortgagee may then purchase and assert the tax title, unless he is in possession under the foreclosure of his mortgage or has, in some manner, obligated himself to pay the taxes. If the title acquired by a second mortgagee at a tax sale is allowed to become absolute, it may be set up as a defense in an action of ejectment by the mortgagee unless tender is made of the amount paid at the sale. XV. PROTECTION In General· 176. Protection against Prior Liens.-It is settled beyond reasonable question that a mortgagee may protect his interest in the mortgaged property by paying off prior liens and incumbrances thereon, thereby substituting himself to the interests so discharged under the general doctrine of subrogation. Likewise, where a mortgagee, induced by the fraudulent representations of the mortgagor that his mortgage would thereby become the senior lien, pays money to remove prior liens on the property, he is entitled to be subrogated to the rights of the holders of such prior liens, as against a person whose lien is prior to the lien of the mortgage, but junior to the liens satisfied.10 Furthermore, it has been held that the holder of a third mortgage on real estate, who purchases the property under the mortgage, and secures a conveyance in fee of the equity of redemption, may procure the notes secured by the first mortgage, direct sale in accordance with its terms, and purchase thereat, without giving actual notice to the second mortgagee, and thereby perfect his title as against the latter.11 The circumstances so presented do not, of course, raise the question of tacking, though the result might have been the same had the court applied that doctrine.12 177. Tacking.-It has long been an established rule of the court of chancery in England that where property is subject to successive mortgages, and the third mortgagee had advanced his money without notice of the second mortgage, he may take an assignment of the first mortgage and require the second mortgagee to redeem from both of the other mortgages before the property can be subjected to the second mortgage. This is known as the doctrine of tacking, and rests on the maxim that where the equities are equal the law shall prevail. Of course, the rule is the same where the third mortgagee 7. Safe Deposit, etc., Co. v. Wickhem, 9 S. D. 341, 69 N. W. 14, 62 A. S. R. 873. 10. Backer v. Pyne, 130 Ind. 288, 30 N. E. 21, 30 A. S. R. 231. 11. Searles v. Kelley, 88 Miss. 228, 40 So. 484, 8 L.R.A. (N.S.) 491 and 8. Note: 11 Ann. Cas. 760. 9. See generally, SUBROGATION. And note. see infra, par. 267 et seq. 12. See infra, par. 177. was the holder of the first mortgage at the time when the third mortgage was given.18 Indeed the court is not scrupulous by what means a bona fide mortgagee without notice at the time of advancing his money obtains a legal protection for his security, even though it be by getting in a judgment or a satisfied term.14 In this country the doctrine of tacking is regarded as wholly abrogated by the registry laws. 15 178. Attacking Validity of Prior Mortgage. It is the general rule that a mortgagee, in the absence of any matter of estoppel, may assert the invalidity of a prior mortgage for the purpose of subjecting the mortgaged property to the payment of his claim. In so doing he may show that the prior mortgage is founded on no consideration, or is fraudulent, or is invalid for some other reason.16 It has been said, however, that a junior mortgagee cannot question the consideration given by the senior mortgagee when the latter has made a prima facie showing of consideration, and no fraud or unfair preference has been shown.17 And if the junior mortgagee takes his mortgage expressly stipulating that it is subject to a prior mortgage he cannot subsequently attack the prior mortgage for fraud, unless he abandons his rights under his mortgage.18 However, it has been held that the exception of a mortgage from the covenants of a subsequent mortgage does not estop the second mortgagee from contesting the validity of the prior mortgage.19 A question analogous to that above discussed is whether a junior mortgagee may set up usury as against a prior incumbrance. In some jurisdictions the courts hold that he cannot do so, as the defense is personal and can be used only by the mortgagor. In other jurisdictions a contrary rule prevails, and the junior mortgagee is permitted to use the defense of usury as against a prior incumbrance.20 179. Injunction to Restrain Sale under Judicial Process.-The rule may be deduced from the adjudged cases that a mortgagee may not enjoin a sale of the mortgaged property under an execution or other judicial proceedings on a claim subordinate to his mortgage, where the sale cannot prejudice his rights; but if he is himself without fault and the intended sale is in violation and disregard of his 13. Marsh v. Lee, 2 Vent. 337, 18 Eng. Rul. Cas. 523 and note; Bailey v. Barnes, [1894] 1 Ch. 25, 63 L. J. Ch. 73, 69 L. T. N. S. 542, 42 W. R. 66, 18 Eng. Rul. Cas. 510 and note. Notes: 97 Am. Dec. 435; 7 L.R.A. 273. 14. Note: 18 Eng. Rul. Cas. 522. 15. Notes: 97 Am. Dec. 435; L.R.A. (N.S.) 492. 8 16. Evans v. Faircloth-Byrd Mercantile Co., 165 Ala. 176, 51 So. 785, 21 Ann. Cas. 1164 and note. 17. Opelousas Nat. Bank v. Fahey, 129 La. 225, 55 So. 772, Ann. Cas. 1913B 687. 18. Jerome v. McCarter, 94 U. S. 734, 24 U. S. (L. ed.) 136. Note: 21 Ann. Cas. 1166. 19. Livingstone v. v. Murphy, 187 Mass. 315, 72 N. E. 1012, 105 A. S, R. 400. 20. Note: 21 Ann. Cas. 1166. And see supra, par. 72 et seq. legal rights, he may procure an injunction. So, it is well settled, certainly in a jurisdiction wherein a mortgage is regarded as a mere lien and not as a conveyance, that a court of equity has no jurisdiction at the instance of a mortgagee to enjoin a sale of the mortgaged premises under an execution issued upon a junior judgment against the mortgagor, simply because the mortgage is a prior lien on the property, and the mortgagee is in possession. The mortgagee is not the owner, even if in possession of the mortgaged property, and has no title to be clouded by a sale of the property under execution. His mortgage, being of record prior to the rendition of the judgment, cannot be prejudiced; while if the real estate is sold, it cannot be removed, and is not rendered less valuable by the sale. A like rule obtains where the proceedings relative to the proposed execution sale show that the sale is to be made subject to the mortgage: or where the rights of the mortgagee after the sale will stand on the same footing as before. If a purchase money mortgage has a priority over a judgment lien, which can be established only by matters outside of the record, a sale under the judgment will be enjoined. It has been said that a mortgagee whose debt exceedthe value of the mortgaged property is entitled to an injunction. restraining an execution creditor of the mortgagor from levying on the mortgaged property, when the mortgagor is insolvent. And a party advancing money to a corporation to acquire title to land, and taking the title in himself for security of the money advanced, anc levying upon that land for his debt, is entitled to an injunction against the payment of the proceeds to the holder of a senior execution: against the company. Taxes 180. Payment of Taxes on Mortgaged Premises.-A mortgagee. to protect his interest, may pay taxes and assessments on the mortgaged land, whether payment is made directly or by way of redemption from tax sale or extinguishment of a tax title; and he may add sums so paid to the mortgage debt. In some instances provision to that effect is made by statute. In some jurisdictions the mortgagee is regarded as entitled to subrogation to the tax lien for the amount paid by him and may thereby acquire a lien which in respect to priority occupies the same position as the tax lien. So, a junior mortgagee who pays taxes on the mortgaged premises to protect his lien, and without notice of the prior mortgage, is entitled to have the sum thus paid declared a lien superior to such mortgage.10 And a statute permitting the holder of a mortgage to pay taxes assessed against the mortgaged land, and making the receipt of the county treasurer an additional lien on the land to be collected as part of the mortgage debt, does not prevent a recovery on common law principles by a mortgagee who has paid such taxes, but whose mortgage has lost its lien.11 A mortgagee is authorized to act on the assumption that a tax against the mortgaged premises is valid, where no actual notice is had that the assessment was defective; and equity will not allow the mortgagors, to whose benefit the payment made by the mortgagee inured, to assert the invalidity of the taxes so paid.12 Accordingly upon the foreclosure of a deed of trust which provided for the payment out of the proceeds of all moneys advanced for taxes, the mortgagee is entitled to be paid the sums paid by him to extinguish tax titles and is not obliged to contest them.13 But there is some dissent from the proposition that the mortgagee may assume the taxes valid.14 181. Independent Action by Mortgagee to Recover Taxes; Discharge of Lien by Lapse of Time.-According to some authorities an action. cannot be maintained against a mortgagor by the mortgagee before the foreclosure of his mortgage, to recover for taxes paid by him, as his remedy is limited to a satisfaction thereof in a proceeding to foreclose the mortgage.15 And by the weight of authority, a mortgagee who pays taxes on the mortgaged property, either before or after the discharge of the mortgage by foreclosure or release, is not entitled to recover the amount of taxes so paid, or to enforce the lien of the state, Faure v. Winans, Hopkins Ch. (N. 8. Union Mut. L. Ins. Co. v. Union Mills Plaster Co., 37 Fed. 286, 3 L.R.A. 90. 9. Equitable Trust Co. v. Kelsey, 209 Mass. 416, 95 N. E. 850, Ann. Cas. 1912B 750 and note. Note: 17 Ann. Cas. 1135. 10. Fischer v. Woodruff, 25 Wash. 67, 64 Pac. 923, 87 A. S. R. 742. on rehearing, 58 Wash. 148, 107 Pac. 1053. Notes: Ann. Cas. 1912B 751; 17 Ann. Cas. 1135. 12. Farmers' Security Bank of Park River v. Martin, 29 N. D. 269, 150 N. W. 572, L.R.A.1915D 432 and note. 13. Windett v. Union Mut. L. Ins. Co., 144 U. S. 581, 12 S. Ct. 751, 36 U. S. (L. ed.) 551. 14. Note: L.R.A.1915D 434. As to assertion of tax title by mortgagee or mortgagor against the other, see supra, par. 178; infra, 181. 15. Notes: 10 L.R.A. (N.S.) 680, 15 11. Childs v. Smith, 51 Wash. 457, 99 Pac. 304, 130 A. S. R. 1107, aff'd Ann. Cas. 525. county, or city therefor, in an independent suit against the mortgagor instituted after the discharge of the mortgage. This rule results from the consideration that the amount paid for taxes, together with the amount due on the mortgage, constitutes but a single and indivisible demand, existing only by virtue of the mortgage, and being collateral and subordinate thereto.16 But the position has been adopted that a mortgagee who, as purchaser, has paid taxes on the mortgaged premises after a foreclosure sale thereof can maintain an action of assumpsit against a purchaser of the encumbered premises from the mortgagor for the taxes thus paid.17 A mortgagee is sometimes empowered by statute to enforce his lien for taxes paid by an action independent of foreclosure; and it has been held that where the mortgage is barred by the statute of limitations, a claim for taxes, being merely incidental thereto, will fall with it,18 though there are decisions. to the contrary.1 19 182. Taxes against Mortgagee's Interest as Such.-While the duty rests on the mortgagor to pay taxes assessed generally against the mortgaged premises, he is chargeable with no obligation to discharge taxes on the mortgagee's interest as such. Therefore, a provision in a mortgage that the mortgagor shall pay all lawful taxes and assessments levied against the mortgaged premises does not make him liable for taxes which, by virtue of a subsequent change in the law, are levied against the mortgagee's interest in the premises.20 And if the mortgagor, in the absence of an agreement to pay taxes assessed against the mortgagee's interest, discharges taxes so assessed, he is entitled to credit therefor.1 An agreement in a mortgage whereby the mortgagor assumes taxes on the mortgagee's interest as well as his own is not objectionable, however, on the ground of usury. Though such agreements are sometimes prohibited by statute, the prohibition does not extend to a contract of that character separate and distinct from the mortgage; and certainly the mortgagor cannot complain after having performed the contract despite the fact that it is prohibited. 16. Stone v. Tilley, 100 Tex. 487, 101 S. W. 201, 123 A. S. R. 819 and note, 15 Ann. Cas. 524 and note, 10 L.R.A. (N.S.) 678 and note. 68 N. W. 267, 64 A. S. R. 362, 34 L.R.A. 308. 1. San Gabriel Val. Land, etc., Co. v. Witmer Bros. Co., 96 Cal. 623, 29 17. Notes: 10 L.R.A. (N.S.) 680; 15 Pac. 500, 31 Pac. 588, 18 L.R.A. Ann. Cas. 526. 18. Note: 15 Ann. Cas. 526. 19. Childs v. Smith, 51 Wash. 457, 99 Pac. 304, 130 A. S. R. 1107, aff'd on rehearing 58 Wash. 148, 107 Pac. 1053. 465. 2. Banks v. McClellan, 24 Md. 62, 87 Am. Dec. 594; Detroit v. Detroit Board of Assessors, 91 Mich. 78, 51 N. W. 787, 16 L.R.A. 59. 3. London, etc., Bank v. Bandmann, 120 Cal. 220, 52 Pac. 583, 65 Note: 15 Ann. Cas. 526. |