Farmers & First Nat. Bank of New Castle v. Citizens State Bank of New Castle

• Decision Date: 13 January 1937
• Docket Number: 26582.
• Citation: 5 N.E.2d 506,211 Ind. 389
• Court: Indiana Supreme Court
• Parties: FARMERS & FIRST NAT. BANK OF NEW CASTLE v. CITIZENS STATE BANK OF NEW CASTLE et al.

5 N.E.2d 506

211 Ind. 389

FARMERS & FIRST NAT. BANK OF NEW CASTLE v. CITIZENS STATE BANK OF NEW CASTLE et al.

No. 26582.

Supreme Court of Indiana

January 13, 1937

Appeal from Superior Court, Madison County; James H. Edward judge.

Scotten & Hinshaw and C. M. DeWitt, all of New Castle, for appellant.

N Guy Jones and Paul Brown, both of New Castle, for appellees.

TREMAIN Chief Justice.

The parties in this appeal who are interested in the issue joined in this court are the appellant and the appellee Citizens State Bank of New Castle. The other named appellees are not interested in the appeal.

The appellee was plaintiff below and filed an action upon a promissory note owned by it, and to foreclose a mortgage on certain land, given to secure the note. The appellant was made a party defendant and filed a cross-complaint upon a promissory note owned by it, and to foreclose a mortgage upon the same land, given to secure its note. Both notes and mortgages were executed by Carithers and wife, owners of said real estate. Issues were closed. The cause was submitted to the court for trial. Upon request the court made special findings of fact and stated its conclusions of law thereon and rendered judgment as follows: First, that the appellee recover judgment upon its note sued on in the sum of $2,563.35, the foreclosure of its mortgage, sale of the property; that its lien was superior; and that its judgment be first paid from the proceeds of the sale. Second, that appellant recover upon its note sued on the sum of $7,349.55, the foreclosure and sale of the real estate, but the same to be subject to the payment of the superior lien of the appellee.

Each party, appellant and appellee, claimed that its mortgage lien was superior to the other. The issue presented for determination is the priority of said mortgage liens.

From the record in the case and special findings of fact, it appears that the history of the respective loans is as follows: The Carithers were, on the 22d of November, 1915, the owners of the real estate described in the mortgage, and on that day executed a purchase-money note to appellee in the sum of $2,200, secured by the mortgage on the real estate, which was duly recorded at that time; thereafter $200 was paid upon the principal, and on the 21st of August, 1919, Carithers and wife executed a new promissory note for the sum of $2,000, the amount of the principal remaining due, secured by mortgage upon the same real estate, which was duly recorded on that day, and contemporaneously therewith the mortgage of 1915 was released of record; the renewal note became due on October 8, 1921, and Carithers executed a second renewal note for $2,000 secured by mortgage, duly recorded on that date, and contemporaneously therewith released of record the mortgage given in August, 1919.

The appellant, at the time of the filing of the complaint and cross-complaint herein, was the owner of a promissory note in the sum of $6,000, evidencing pre-existing indebtedness, dated May 3, 1919, secured by a mortgage executed by Carithers and wife upon the same real estate, which mortgage was duly recorded at that time and was not thereafter released, although the note was renewed from time to time, as provided in the mortgage, until the filing of their cross-complaint, when the principal had been reduced to $5,800.

The appellant takes the position that appellee's mortgage, executed and recorded in 1915, released of record upon the giving of a renewal note and new mortgage on August 21, 1919, and the subsequent renewal in 1921, thereby became inferior to appellant's mortgage executed in May, 1919.

The appellee contends that the new notes and mortgages, evidencing the same debt upon the same land, constitute a continuation of the lien in each new mortgage; that the original lien was carried forward; and that the taking of the new notes did not constitute a payment of the original note, but only a renewal thereof.

As a general rule the acceptance of a second note and mortgage in renewal of a prior note and mortgage is not an extinguishment of the lien unless the parties so intend; that, where the release of the old mortgage and the execution of a new one appear to be part of one transaction, and the new mortgage is taken and recorded simultaneously with the release of the old mortgage, the recording of the new and the cancellation of the old mortgage constitute a contemporaneous act. A court of equity will look to the circumstances of such transaction and will not permit the release of the old mortgage and the execution and recording of the new to destroy the lien of the original mortgage, when not so intended, or rights of third parties have not intervened, or positions changed. Equity keeps the lien of the first mortgage alive for the benefit of the mortgagee under such circumstances. Pouder et al. v. Ritzinger et al. (1885) 102 Ind. 571, 575, 1 N.E. 44; Pouder et al. v. Ritzinger et al. (1889) 119 Ind. 597, 20 N.E. 654; Walters v. Walters (1881) 73 Ind. 425; Powell v. City of Madison et al. (1886) 107 Ind. 106, 8 N.E. 31; Thompson et al. v....