Opinion
10-22-1920
STRAUS v. LOUDENSLAGER et al.
Bourgeois & Coulomb, of Atlantic City, for complainant. Norman Grey, of Camden, for defendant Loudenslager. C. L. Cole, of Atlantic City, for defendant Ambassador Hotel Co.
Bill by Simon W. Straus, trustee, against William B. Loudenslager and another. On motion to strike out bill. Denied.
Bourgeois & Coulomb, of Atlantic City, for complainant.
Norman Grey, of Camden, for defendant Loudenslager.
C. L. Cole, of Atlantic City, for defendant Ambassador Hotel Co.
LEAMING, V. C. I think it entirely clear that, under the averments of complainant's bill, he is entitled to be relieved from the enforcement of the decree heretofore entered against his mortgagor, until he shall have had his day in court.
It is an established equitable doctrine that "a suit in chancery, duly prosecuted in good faith, and followed by a decree, is constructive notice to every person who acquires from a defendant pendente lite an interest in the subject-matter of the litigation, of the legal and equitable rights of the complainant, as charged in the bill and established by the decree." This rule has been modified by the lis pendens act to the extent that constructive notice is imputed only from the time a lis pendens shall have been filed. Haughwout & Pomeroy v. Murphy, 22 N. J. Eq. 531.
But one who has acquired from a defendant an interest in the subject-matter of the litigation prior to the litigation or prior to the time a lis pendens is filed is not charged with constructive notice, and cannot be bound by the decree on any theory of constructive notice. Slack v. John, 63 N. J. Eq. 126, 51 A. 151.
Nor is one who has acquired an interest from a defendant prior to the time referred to regarded as a privy, in the sense that privies are bound. In order that such privity shall exist, the succession must have occurred after that time. 24 Am. & Eng. Enc. of Law (2d Ed.) 747. "While a mortgagee is privy in estate with a mortgagor as to actions begun before the mortgage was given [in this state as to actions begun and lis pendens filed before the mortgage was given], he is not bound by judgments or decrees against the mortgagor in suits begun by third parties subsequent to the execution of the mortgage, unless he or some one authorized to represent him, like the trustee of a mortgage bondholder, is made a party to the litigation, although it would be otherwise if the mortgage were executed pending the suit or after the decree." Keokuk & Western R. Co. v. Missouri, 152 U. S. 301, 314, 14 S. Ct. 592, 597 (38 L. Ed. 450).
There can be no doubt that a mortgagee whose mortgage has been executed prior to litigation touching the mortgaged premises enjoys such an interest in the property covered by his mortgage as entitled him to be heard, touching any matter that may adversely affect the value of his security. 24 Am. & Eng. Enc. of Law (2d Ed.) 750. A decree for the enforcement of a restrictive building covenant is obviously of that nature, since it prevents the use of the land for purposes entirely lawful, but for the existence of the restrictive covenant, and thus establishes rights in others in the nature of easements affecting the land.
It necessarily follows that the respective covenants here in question cannot be now enforced to the detriment of complainant herein until complainant shall have been heard touching their validity and binding force, unless complainant has in some way denied to himself the right to be heard. If complainant is in no way bound by the decree, because not made a party to the litigation, obviously the decree is a nullity as to him.
It has been broadly held in some jurisdictions that any person who is directly interested in a suit and has knowledge of its pendency, and who refuses or neglects to appear and avail himself of his rights, is concluded by the judgment rendered therein. In Nathan v. Fen, 6 N. J. Law, 478, a mortgagee applied and was admitted to defend in an action of ejectment against his mortgagor, unless plaintiff should discharge the mortgage. Whether failure of a mortgagee to intervene and defend, after actual notice, would be operative as a bar to a bill of this nature, need not be here considered, since the bill does not disclose such notice. It has also been held in equity that one may be bound by a judgment who has in fact or effect defended, though not a party to the record. Lyon v. Stanford, 42 N. J. Eq. 411, 7 A. 869. It would also seem that, under general equitable doctrines, a mortgagee who has stood by with notice of the suit, and in effect speculated on its result before asserting rights, or who has controlled or even contributed to the defense, would properly and justly be denied protection against the decree. But, since these facts are not disclosed by the bill, further consideration of their effect need not be here indulged.
I will deny the motion of defendant to strike out the bill.