Citizens Nat. Bank in Zanesville v. Denison

• Decision Date: 21 March 1956
• Docket Number: No. 34401,34401
• Citation: 165 Ohio St. 89,59 A.L.R.2d 1293,59 O.O. 96,133 N.E.2d 329
• Parties: , 59 A.L.R.2d 1293, 59 O.O. 96 The CITIZENS NATIONAL BANK IN ZANESVILLE, Appellant, v. DENISON et al., Appellees; Graham, Appellant.
• Court: Ohio Supreme Court

Page 89

165 Ohio St. 89

133 N.E.2d 329, 59 A.L.R.2d 1293, 59 O.O. 96

The CITIZENS NATIONAL BANK IN ZANESVILLE, Appellant, v. DENISON et al., Appellees; Graham, Appellant.

No. 34401.

Supreme Court of Ohio.

March 21, 1956.

Syllabus by the Court.

1. Under the provisions of Section 5301.25, Revised Code, a defectively executed mortgage, although recorded, does not establish a lien with priority over a properly executed mortgage which is recorded subsequently; and the defective execution may be provided by evidence of defects which are not apparent on the face of the instrument. 2. A mortgage by two persons is not properly executed in accordance with the provisions of Section 5301.01, Revised Code, and is not entitled to record under Section 5301.25, Revised Code, and the recording thereof does not constitute constructive notice to subsequent mortgagees, where there is a failure to follow the statutory requirements in that the mortgage is not signed and acknowledged by either mortgagor in the presence of two witnesses, and the signing by one mortgagor is not in fact acknowledged before a notary public.

This cause originated in the Court of Common Pleas of Muskingum County when the plaintiff, the Citizens National Bank in Zanesville, a corporation, filed its petition to marshal liens on certain real estate located in South Zanesville, Ohio. The defendants are Bertha G. Denison and Ralph E. Denison, the grantors of a mortgage to the bank of record in said county, and the Citizens Budget Company of Zanesville, Ohio, Inc., and Ernest B. Graham, who claim liens by reason of mortgages on the same premises.

The cause is before this court on the pleadings in the lower court and a stipulation filed in this court that 'the facts as found by the trial court in its journal entry rendering judgment in this cause are the facts of the case and are the facts upon which the appeal herein is predicated.'

The petition of the bank is in the usual form where foreclosure of a mortgage is sought and alleges that the budget company and Graham 'have or claim to have some lien or interest in said real property, but that the same is subsequent and subordinate to plaintiff's claim herein.'

The petition alleges that the mortgage on which the action is predicated was executed by the Denisons on August 16, 1952, and filed on the same day for record in said county; and that this mortgage and note were given to refinance a certain mortgage and note given by the Denisons to the bank in the sum of $3,600, dated October 28, 1948, which mortgage was released on the records of the recorder's office of Muskingum County, Ohio, on August 16, 1952, the date of filing of the mortgage on which this action is predicated. The prayer of the petition is for judgment against the Denisons in the sum of $3,267.52, with interest; that the mortgage be foreclosed, the liens marshalled and the property sold; and that the budget company and Graham be required to set up their liens upon or interests in said property or be barred.

An answer and cross-petition was filed by the budget company, setting up its mortgage which was dated March 22, 1950, filed March 23, 1950, and recorded April 5, 1950. This mortgage was given to secure four promissory notes totalling $1,402.96, and included among the properties therein described are the premises owned by the Denisons in South Zanesville, Ohio, on which the bank claims its lien, and other real estate.

The prayer of the cross-petition is for judgment against Ralph G. Denison, for foreclosure of the mortgage, for a declaration that it is the first and best lien on the premises, that the liens be marshalled, and that the property be sold and the proceeds applied according to law.

An answer and cross-petition was filed by Graham, setting up a claim on a note executed by the Denisons and secured by mortgage on the same real estate, which was recorded in Muskingum County December 31, 1952.

The Graham cross-petition alleges that 'the mortgage executed by Ralph and Bertha Denison in favor of the cross-petitioner The Citizens Budget Company, was never witnessed or acknowledged, but the notary [who] had placed his signature upon said mortgage, never took the acknowledgment of Ralph or Bertha Denison, and did not see their signatures placed upon said instrument, and that said purported mortgage instrument is not a valid mortgage as far as this cross-petitioner is concerned.' He prays that his mortgage be held the second best lien on the premises, subject only to the bank's lien.

An answer was filed by the Denisons to the bank's petition, budget company's crosspetition and Graham's cross-petition. The answer admits the allegations in the bank's petition; admits the allegations set forth in Graham's cross-petition; admits the execution of the notes and mortgage as set forth in the cross-petition of the budget company; and denies that the mortgage instrument set forth in the cross-petition of the budget company was ever witnessed by two witnesses or acknowledged by them.

The cross-petition of Graham and the answer of the Denisons were put in issue by replies by the budget company.

The matter was submitted to the trial court on the question of law as to whether the effect of the purported mortgage of the Denisons to the budget company is any different than appears of record, as disclosed by the pleadings and the mortgage itself which constitutes an exhibit in the cause.

The trial court found that the bank's existing mortgage from the Denisons is entitled to priority as the first lien by subrogation to its mortgage of October 28, 1948, in the amount of $2,556.02, being the amount secured by said prior mortgage at the time of refinancing by the bank's current note and mortgage; that the budget company has the second best lien; that the bank has the next lien for the balance of its existing mortgage debt; and finally that Graham is entitled to be paid from the remaining funds.

An appeal on questions of law was perfected to the Court of Appeals, and that court affirmed the judgment of the Court of Common Pleas for the reasons stated in the opinion.

The cause is before this court upon the allowance of a motion to certify the record filed by the bank and Graham.

Graham, Graham, Gottlieb & Johnston, Zanesville, for appellants.

D. H. Crossland, Zanesville, for appellee Citizens Budget Co. of Zanesville, Ohio, Inc.

MATTHIAS, Judge.

The bank and Graham assign as error the judgment of the Court of Appeals affirming the judgment of the Court of Common Pleas which decided that the improperly executed mortgage of the budget company is a valid lien on the real estate of Mrs. Denison as against the mortgage held by Graham and as against that portion of the bank's subsequent mortgage which exceeds the unpaid balance on its original...