Beard v. Bank of Osceola

• Decision Date: 18 December 1916
• Docket Number: 45
• Citation: 190 S.W. 849,126 Ark. 420
• Parties: BEARD v. BANK OF OSCEOLA
• Court: Arkansas Supreme Court

190 S.W. 849

126 Ark. 420

BEARD v. BANK OF OSCEOLA

No. 45

Supreme Court of Arkansas

December 18, 1916

Appeal from Mississippi Chancery Court; Chas. D. Frierson Chancellor; affirmed.

Decree affirmed.

A. G Little and Churchill M. Buck, for appellant.

1. There was no vendor's lien retained in the deed; nothing to put appellants upon notice. But if a lien was retained the deed of release was sufficient to cancel and release same. Beard was an innocent purchaser for value without notice and had a right to rely upon the records showing satisfaction. Appellant has the greater equity. A vendor's lien does not pass unless expressly reserved in the deed, except where the note is transferred as collateral security; and then if the lien is not reserved or does not appear on the face of the deed it is not good against innocent purchasers, for value without actual notice. 37 Ark. 571; 41 Id 292. Beard had no notice of any lien and had a right to rely upon the records showing satisfaction. 18 Ark. 162; 23 Id. 257; 28 Id. 401.

2. The two notes of Barron and Lilly were assigned without recourse and by Lilly endorsed to the bank in blank. This did not transfer the lien. 23 Ark. 258. A quitclaim deed, if unexplained, is a circumstance to show notice. 23 Ark. 735; 50 Id. 322. The notes were endorsed in blank and in the absence of testimony as to the date of assignment they must be treated as having been assigned on that date most favorable to defendant. Kirby's Digest, § 520; 31 Ark. 20; 90 Id. 334; 31 Id. 128.

3. One who takes a note as collateral security for a pre-existing debt is not an innocent purchaser. 13 Ark. 163; 94 Id. 387.

4. Beard purchased, relying upon the records, and should be protected as against appellee who took an assignment as collateral security for a pre-existing debt after the record had been satisfied. 26 Law Ed. U.S. 245; 27 Id. 529; 199 U.S. 251; 73 N.E. 404; 106 N.W. 846; 54 S.E. 901; 56 Id. 163; 84 N.W. 353; 46 Am. St. 70; 15 L. R. A. (N S.) 1025; 131 Am. St. 996; 129 Id. 927; 110 Id. 924; 120 Id. 1030; 59 Am. Rep. 49; 51 Am. Dec. 147; 64 Id. 197; 63 Am. St. 460; 138 Wisc. 82; 131 Am. St. 997; 28 Kans. 497; 42 Am. St. 173.

5. In answer to the contention that Beard should have inquired as to the location of the notes at the time he purchased, see 107 U.S. 478-484; 4 S.W. 834. Appellant is an innocent purchaser and had a right to rely upon the records showing the title clear and unincumbered.

J. W. Rhodes, Jr., and W. J. Lamb, for appellee.

1. This case is almost identical with Driver v. Lacer, May 22, 1916. The law fixes a lien when the purchase money is not paid. 94 Ark. 301; 105 Id. 201; 93 Id. 371; 99 Id. 438. A lien appears upon the face of the deed. Kirby's Digest, § 510; 180 S.W. 216; 176 Id. 316. Beard was necessarily affected with notice of the lien. Kirby's Digest, § 5403; Ib. 511, 510-12; 27 Cyc. 1296, 1314 N. 2; Ib. 1315, Note B; 51 N.W. 520.

2. The law fixes the lien when the purchase money is not paid. It is not the recital of the lien. 94 Ark. 301; 105 Id. 201; 93 Id. 371; 99 Id. 438. It appears on the face of the deed that there is a note which is a lien. Kirby's Digest, § 510; 120 Ark. 616; 118 Ark. 316.

3. The appellee has the greater equity. Beard was not an innocent purchaser as the records were not satisfied. To protect himself he should have inquired at least. 115 Ark. 366; 105 Ark. Koen v. Miller; Driver v. Lacey, 124 Ark. 150; 186 S.W. 824; 27 Cyc. 1315, Note B; 68 A. S. R. 685; 46 Id. 70; 94 Ark. 387; 25 Kans. 625; 51 Id. 580; 63 N.W. 37; 66 Id. 57; 51 Id. 520; 129 Am. St. Rep. 927-931; 110 Id. 924; 106 Id. 472; 63 Am. St. R. 460.

OPINION

MCCULLOCH, C. J.

This is an action instituted by the plaintiff, Bank of Osceola, in the chancery court of Mississippi county, Chickasawba District, to foreclose certain liens on three 40-acre tracts of land in that county described as the west half of the northwest quarter, and the southeast quarter of the northwest quarter, of section 25, township 16 north, range 11 East.

There is no dispute about the material facts of the case, which are as follows: On September 2, 1909, J. W. Barron and O. R Lilly sold and, by warranty deed, conveyed to Ben Bunch one of said 40-acre tracts, the southeast quarter of the northwest quarter of section 25, for the sum and price of $ 1,300.00, evidenced by a negotiable promissory note of that date executed by said Bunch to Barron and Lilly, bearing 10 per cent. interest per annum, due and payable ten years after date; Barron assigned his interest in the note before maturity to Lilly, and Lilly assigned the note before maturity to plaintiff; on December 1, 1909, J. P Meador executed to Barron and Lilly two deeds of trust on the west half of the northwest quarter of section 25, one to secure a negotiable promissory note in the sum of a thousand dollars and the other to secure a negotiable promissory note in the sum of two thousand dollars, both of which notes were assigned before maturity to plaintiff by Barron and Lilly; on March 4, 1910, Meador sold and by warranty deed conveyed to Bunch the southwest quarter of the northwest quarter of section 25, for the price of one thousand dollars, as evidenced by a negotiable promissory note executed by Bunch to Meador, due and payable ten years after date, with interest at the rate of 10 per cent. per annum, and this note was by Meador assigned before maturity to Lilly, and by Lilly assigned before maturity to plaintiff. The assignments of the various notes set forth above to the plaintiff were for the purpose of securing the payment of certain indebtedness of Barron and Lilly to the plaintiff, which has not been paid.

On the 7th of May, 1910, Meador conveyed the northwest quarter of the northwest quarter of section 25 to M. A. Rudder and J. A. Hopkins, who subsequently conveyed to one Fisher, and on November 14, 1910, Bunch conveyed to Fisher the south half of the northwest quarter of section 25, which said conveyances put the legal title in Fisher subject to the lien for the purchase money and mortgage notes referred to above. On April 12, 1912, Barron and Lilly executed to Fisher a quitclaim deed conveying all their interest in the aforedescribed tracts, said deed reciting a consideration of $ 1.00, and also reciting that the deed was made for the purpose of releasing the deeds of trust and vendors' liens arising under the deeds already described. On April 15, 1912, Fisher conveyed all of said lands to W. A. Beard, one of the defendants herein, who subsequently mortgaged the land to John G. Powell, who is also made defendant. All of the deeds hereinbefore referred to were promptly placed of record in Mississippi county. It is not definitely shown whether said notes were assigned to the plaintiff before or after the execution of the release deed by Barron and Lilly to Fisher on April 12, 1912, and for the purposes of this decision we assume that they were assigned after the execution of that deed, but before the maturity of the notes and for an antecedent indebtedness.

The chancellor decreed in favor of the plaintiff for a foreclosure of the liens, and defendants Beard and Powell have prosecuted an appeal to this court.

Counsel for appellants have brought to our attention in the brief various authorities from other courts bearing on the points at issue, but we are of the opinion that every point raised in the case has been heretofore decided by this court against the contention of appellants' counsel. The principal contention is that as between the two innocent parties--that is, the appellants, as innocent purchasers of the property subsequent to the execution of the release deed from Barron and Lilly to Fisher, and the plaintiff bank as the holder of the lien notes--the former is entitled to the first consideration, and that the lien of the notes in the hands of the bank should not be held to be superior to the rights of appellants as subsequent purchasers of the land. This contention has been expressly decided against appellants in the recent case of Driver v. Lacer, 124 Ark. 150, 186 S.W. 824, and cases cited therein. The facts of the case just cited are very similar in all essential respects to the facts of the case at bar. The notes in that case were, as in the present case, assigned after the execution of the deed by the original grantor, which would otherwise have operated as a release, and we held that the release was ineffectual against the rights of an innocent holder of the negotiable promissory note. We said that the subsequent deed of the original purchaser was not in the line of the title of the purchaser of the notes, and he was not, therefore, bound to take constructive notice of that deed on the record, and that the subsequent purchaser of the land, in order to protect himself, must have demanded a surrender of the notes. "In no other way," we said, "could he protect himself against a bona fide holder of the notes before their maturity."

It is true that there is this difference between the two cases: In Driver v. Lacer the deed recited an express reservation of the vendor's lien, whilst in the present case the deeds, or at least one of them, merely recites the execution of the notes but do not in express terms reserve a lien. That, however, is an unimportant distinction between...