
    Marietta A. Older, Respondent, v. John Russell, Appellant, Impleaded with John B. Russell and Others, Defendants.
    
      Foreclosure — where one alleged to have a subsequent lien anstoevs and sets up a prior equitable lien, his answer should not be stricken out as frivolous.
    
    In an action brought to foreclose a mortgage a party defendant interposed an answer specifically denying the allegation of the complaint, that his interest in' the mortgaged premises was subsequent to that of the plaintiff, and further alleging that he had an equitable lien which was superior and prior to that of the plaintiff’s mortgage, which lien had been improperly and fraudulently released, of which the plaintiff had knowledge at the time of the commission of such fraudulent act, which took place just previous to the execution of the mortgage to the plaintiff.
    The answer was stricken out as frivolous.
    
      Held, that the answer was improperly stricken out;
    That a defense should never be stricken out as frivolous and judgment be given thereon unless the defense is plainly frivolous;
    That the rule, that, in such an action, the rights of the person, having a title superior to that of the mortgagor, and made a defendant upon an allegation that he had-some claim to or interest in the mortgaged premises which accrued subsequently to the execution of the mortgage, would not be affected by the judgment, did not apply where such a defendant sets up by answer his prior right or claim and asks the court to determine as to his title to the premises; That, within the provisions of section 463 of the Code of Civil Procedure, in the interest of a complete determination of the controversy, the answering defendant was a proper party defendant and his answer should have been allowed to stand, and the issue raised thereby should have been determined in the action.
    Appeal by the defendant John Russell from an order of the Supreme Court, made at the Wyoming Special Term, directing judgment in favor of the plaintiff, upon the answer of the defendant John Russell adjudged to be frivolous, and also appointing a referee to compute the amount due upon the bond and mortgage in suit.
    This action was brought to foreclose a mortgage executed the 30th day of December, 1885, by the defendant John B. Russell to the plaintiff; and the defendant John Russell was made a party upon the allegation in the complaint that he had, or claimed to have, some interest in the mortgaged premises, which interest, if any, had accrued subsequently to that of the mortgage.
    The defendant John Russell interposed an answer to the plaintiff’s complaint, which contains a.specific denial of the allegation in the complaint, that the interest which he claims in the mortgaged premises is subsequent to the lien of the plaintiff’s mortgage ; the defendant further alleges in his answer that he has and claims an interest in and lien upon the mortgaged premises, which is in the nature of an equitable lien of $500, which he avers was superior and prior to that of the plaintiff’s mortgage, and which was improperly discharged or released by his father, the defendant John B. Russell; and lie further alleges in his answer that such discharge and release were fraudulent, and that the plaintiff knew the same to be so at the time of the commission of such fraudulent acts, which time was just previous to the execution of plaintiff’s mortgage.
    The answer was stricken out as frivolous by order of the court, and from that order this appeal is brought.
    Bartlett, Bartlett & Tozier, for the appellant.
    
      Brown & Coleman, for the respondent.
   Green, J.:

It appears from the allegations in the answer, which for the purposes of this motion must be taken as true, that the answering defendant had an equitable lien upon the premises described in the complaint, which is prior to the lien of the mortgage sought to be foreclosed. This the plaintiff knew when she brought the foreclosure action; she, however, alleges in the complaint that the lien or interest of the defendant is subsequent and inferior to the lien of her mortgage.

She has invited this defendant into court and has alleged that any lien, claim or interest which he has is subordinate to the mortgage sought to be foreclosed. The defendant promptly answered denying that allegation, and setting out his claim, and alleging that it is prior to complainant’s mortgage, and praying ■—■ as he has a right to, if it is prior — to have such relief as shall be just and'proper under the circumstances.

The plaintiff asks for judgment debarring and foreclosing this defendant from any and all claim and interest in the mortgaged premises. Unless this defendant had some claim or interest, he should not have been made a party. If he had an interest and was made a party, and desired to protect that interest, it was incumbent upon him to answer and set out that interest in his own way.

If, under the allegations of this complaint, he had remained silent and suffered judgment by default, would not that judgment preclude him from asserting his interest and lien in a collateral action i

“ It is true that, ordinarily, where, in an action for the foreclosure of a mortgage, a person whose title to the premises is superior and prior to that of the mortgagor, is made a defendant, and it is alleged in the complaint that he has some claim to or interest in the mortgaged premises, which, if any, accrued subsequently to the execution of the mortgage, such person’s rights will not be affected by the foreclosure judgment, nor will he be estopped thereby from after-wards asserting ■ his title to the premises in question. (Payn v. Grant, 23 Hun, 134; Lee v. Parker, 43 Barb. 611.)

“ But it is otherwise if the defendant in a foreclosure action so made a party sets up by answer his prior right or claim to the premises, and, stating the facts in regard to his interest therein, asks the court to determine as to his title thereto.” (Fletcher v. Barber, 82 Hun, 408.)

In Goebel v. Iffla (111 N. Y. 170-177) it was said: “And, moreover, if the facts upon which the plaintiff relies to defeat that prior title are stated, the defendant whose title is thus assailed may demur to the complaint upon the ground that the plaintiff has no right to bring him into court upon the foreclosure to try the validity of his title; yet, if the party so made a defendant should, instead of demurring, answer and litigate the question and then judgment should go against him, no case decides that the judgment would not conclude him in a collateral action.”'

In Jacobie v. Mickle (144 N. Y. 240) it was held that “ where the complaint in the foreclosure action alleges the prior incumbrance and prays for relief that the amount due thereon he ascertained, and that such amount he first paid out of the proceeds of the sale in foreclosure, and the judgment follows the prayer of the complaint, it has never been doubted in any case that the prior incumbrancer suffering default in such an action is concluded by the judgment therein. In such an action the court has jurisdiction of the subject of the action and the parties, and it cannot be doubted that it can render judgment against a defaulting defendant in precise accordance with the prayer for relief. If Mrs. Jacobie did not desire to have her rights as prior mortgagee adjudicated in the action brought by Guilford, she should have appeared and demurred or answered in that action, and thus have raised the question that she was not a proper party thereto, and had it adjudicated therein. But .having, by her default, consented that judgment comprehended within the prayer for relief might be rendered against her, she cannot attack that judgment collaterally, or successfully object that it does ■ not conclude her as to everything therein contained and adjudicated.”

The opinion in the case of Kay v. Whittalier (44 N. Y. 565) furnishes a negative authority in favor of this appellant. It appears that in one portion of the complaint in that case there w'as an allegation that the appellant was in possession of the mortgaged premises as tenant, and that he claimed some interest therein by virtue of a lease from one of the other defendants. In another portion of the complaint was the general allegation that he “and other defendants have, or claim to have, some interest in or lien upon the mortgaged premises, which interest or lien, if any, has accrued subsequently to the lien of the mortgage. In his answer the appellant admitted that he was in possession, but denied that he was in as tenant or by virtue of any lease from one of the defendants, and alleged that he was the true and lawful owner of the premises; but in other parts of his answer he alleges facts showing clearly that his interest in the premises, if any, was subsequent to the lien of the mortgage, and that he was in possession under an agreement between him and the other defendant, or that he was tenant only of such defendant, and that, in consequence thereof, the allegallons in the answer as to the manner of the answering defendant’s occupancy and the nature of his title tendered no material issue. It appears from the opinion that if the answer had not clearly shown that all the interest of the defendant was subsequent to the lien of the mortgage the answer could not have been stricken out as frivolous.

In the case at bar this issue, as to whether or not the interest or claim of the defendant is subsequent and inferior to the mortgage, was clearly presented by the answer herein, and whether the defendant’s equities are prior and superior to the rights of the plaintiff under her mortgage, or junior and subordinate thereto, must necessarily be determined in a judgment for the foreclosure of the plaintiff’s mortgage. (Brown v. Volkening, 64 N. Y. 76; Lanier v. Smith, 37 Hun, 529.)

If the proceedings ripen into judgment of foreclosure and sale, and the premises are sold thereunder, what protection would a purchaser have, if it can be said that this appealing defendant may have a lien or claim upon the property, superior to the mortgage under which the purchaser makes title, and if he, although made a defendant in the action cannot assert his claim, but may retain it and must enforce it, if at all, by a subsequent independent action ?

The purchaser, knowing that the appealing defendant was a party to the action, and knowing that it was alleged in the complaint that any lien or claim he might have was subsequent and inferior to the lien of the mortgage sought to be foreclosed, would have a right to rely upon the proceedings had to preclude this defendant from asserting that he still had a lien prior and superior to the lien of the mortgage foreclosed. “ The plaintiff was not bound to make a conceded prior incumbrancer a party, but he was bound to sell subject to the prior lien. To permit him to do otherwise would be a fraud upon the purchaser.” (Moller v. Muller, 12 Hun, 675.)

In the case at bar a defendant claims a lien upon the premises prior to the mortgage in suit. There is no record of this lien, but the defendant claiming the lien asserts it in his answer, and thus notifies the plaintiff of his lien. Under the doctrine of the Moller case the plaintiff must sell under her foreclosure subject to such prior lien; and if she does not she will commit a fraud upon the purchaser. If she does give notice that a prior lien is asserted against the premises, will not that preclude purchasers from bidding upon this property when they are notified that such claim is still outstanding and undetermined ?

The title to real property is affected by this claim of the defendant ; he is, therefore, a proper party to the action in order that the conflicting interests of the parties may be adjudicated. This is the policy of the law incorporated in the statute. It is provided by section 452 of 'the Code of Civil Procedure that the court may determine the controversy, as between the parties before it, where it can do so without prejudice to the rights of others, or by saving their rights, but where a complete determination of the controversy cannot be had without the presence of other parties, the.court must direct them to be brought in. And where a person, not a party to the action, has an interest in the subject thereof or in real property, the .title to which may, in any manner, be affected by the judgment, and makes application to the court to be made a party, it must direct him to he brought in by theproper amendment.”

The controversy in this action is between the plaintiff and this defendant, and can be determined without prejudice to the rights of others. The title to real property is affected, and it is necessary that a complete determination of this controversy be had in this action to which all who are interested have been made parties.

The answer of the defendant must be tested by the complaint. It puts in issue a material allegation and is sufficient for the purposes of this action. The subject-matter of the action-—the mortgage — is attacked, and the defendant alleges that it is a lien subsequent and subordinate to the lien of this defendant and not superior thereto as alleged in the complaint.

The answer, therefore, should have been allowed to stand.

A defense should not be stricken out and a judgment given upon an answer as frivolous unless it is palpably so. (Kay v. Whittaker, 44 N. Y. 573.)

A material allegation of the complaint was denied by this defendant. A material issue was thus joined; and the rights of all concerned, as well as the rights of a purchaser under such foreclosure proceedings, demand that such issue should be disposed of by the trial court.

We conclude, therefore, that this answer should be allowed to. stand, and that the case should be sent to the trial court, where the whole matter may be disposed of upon the evidence and the law.

All concurred.

Order reversed, with ten dollars costs and disbursements, and motion denied, with ten dollars costs.  