Drexler v. Commercial Savings Bank

• Decision Date: 27 March 1925
• Docket Number: No. 6825.,6825.
• Parties: DREXLER v. COMMERCIAL SAVINGS BANK.
• Court: U.S. Court of Appeals — Eighth Circuit

5 F.2d 13 (1925)

DREXLER v. COMMERCIAL SAVINGS BANK.

No. 6825.

Circuit Court of Appeals, Eighth Circuit.

March 27, 1925.

J. G. Bradford, of Sioux Falls, S. D. (James A. Lyons, of Howard, S. D., and Davis, Lyon & Bradford, of Sioux Falls, S. D., on the brief), for appellant.

John Brown McCrary, of Carroll, Iowa (John E. Haltigan, of Carroll, Iowa, and Kirby, Kirby & Kirby, of Sioux Falls, S. D., on the brief), for appellee.

Before LEWIS, Circuit Judge, and VAN VALKENBURGH and FARIS, District Judges.

FARIS, District Judge.

This action was begun below by appellee, to foreclose a mortgage upon certain land situate in Miner county, S. D. Defendant Drexler, sole defendant below and appellant here, set up by his answer that he was an innocent, subsequent purchaser for value of the lands in dispute, without actual notice of the mortgage herein sought to be foreclosed, and that no constructive notice was comported by the recording of this mortgage; because such mortgage did not contain therein the post office address of the mortgagee, as required by a local statute.

Defendant further set up by his answer that the mortgage included, in addition to the lands in controversy, certain other lands of the mortgagor situate, respectively, in Carroll county, Iowa, and in Mellette county, S. D.; that these latter lands were in value more than sufficient to pay the mortgage debt due to the bank; and thereupon prayed, by way of alternative and affirmative relief, that the court order that the sale of these lands be made on foreclosure, if foreclosure should be decreed, in the inverse order of alienation, under the equitable doctrine cognate to that of the marshalling of assets. The court found for the bank, and decreed a foreclosure and ordered a sale; but made no express ruling on the matter of marshalling securities, thus, by inference, denying this relief. Defendant Drexler thereupon appealed in conventional manner and form.

Drexler, so called hereinafter, sets up 46 assignments of error. These may be reduced to three: (a) Did the evidence under the law show that Drexler had either actual or constructive notice of the mortgage to the bank?

(b) Did the court err in failing to order the bank to sell the three several tracts of land in the inverse order of alienation? And (c) did the court err in the admission of incompetent evidence? The mortgagor, since executing the mortgage, has sold and conveyed all lands embraced in the mortgage; first the tract here in dispute to appellant, and subsequently, the two remaining tracts to his father, who reconveyed them to the wife of the mortgagor.

The mortgage sought to be foreclosed was executed by one Lemker to appellee, Commercial Savings Bank, of Carroll County, Iowa, on the 14th day of June, 1921, to secure the payment of a note for $14,000 bearing even date. This mortgage, as correctly pleaded by Drexler, conveyed to the bank, in addition to the land here in controversy, a parcel of land in Carroll county, Iowa, and another parcel in Mellette county, S. D. It was filed for record in the office of the register of deeds for Miner county, S. D., on the 1st day of October, 1921, and copied in full, on such records, some eight months before the date of the conveyance from Lemker to Drexler. But since a local statute of South Dakota provides that "the mortgagee of every real estate mortgage shall state therein his post office address before recording the same" (section 1570, Rev. Code S. D. 1919), and since another statute of South Dakota provides that "no mortgage shall be received for record by any register of deeds which does not contain the post office address of the mortgagee" (section 5916, Rev. Code S. D. 1919), it is contended by Drexler that, although this mortgage was spread upon the proper records of Miner county, eight months before he bought the land, such record, in view of the above statutes, did not comport constructive notice to him.

The point is an interesting one, especially in view of the fact that this mortgage bore upon the back thereof an indorsement which did give the post office address of the mortgagee. But in view of the fact that the construction of sections 1570 and 5916, Rev. Code of South Dakota, is initially for the Supreme Court of that state, and since that court has never construed these sections, we ought not to trespass upon the prerogative of that court if it can be avoided, as it can in this case. This is so, for the reason that another statute of South Dakota provides that "an unrecorded instrument is valid as between the parties thereto and those who have notice thereof." Section 990, p. 183, Comp. Laws S. D. 1913. Upon the question of whether Drexler had actual notice of this mortgage when he bought the land, the trial court found for the bank and against Drexler. Confessedly, the evidence upon the point was contradictory; but the finding of the trial court seems to be fully warranted by the weight of the evidence even, and so recourse, in any event, may be had to the rule that when a chancellor has considered contradictory evidence and has bottomed his findings thereon, such findings are to be deemed by this court presumptively correct, and they will not be disturbed or the case reversed, save in the presence of an obvious error of law, or a serious mistake of fact. Roswell Drainage Dist. v. Dickey (C. C. A.) 292 F. loc. cit. 31.

The second point reserved for discussion is a more involved and difficult one. Drexler contends, upon the facts and in view of his plea for affirmative relief, set up in the alternative in his answer, that the decree of the court should have provided that the bank, as a condition precedent to the granting of the equity it asked, ought to have been compelled by the terms of the decree to resort for payment of its mortgage debt to the three several tracts of lands embraced in the mortgage in the inverse order of alienation thereof by Lemker, the mortgagor.

Of course, it is almost, if not quite, a maxim of the law that courts will not do vain and futile things. Concretely, that if prior foreclosures and sales of the two other tracts will not afford some measure of relief to Drexler, he may not ask for foreclosures in the inverse order of alienation. But here Drexler's plea for affirmative relief avers that the two tracts last, in point of time, conveyed by Lemker by mesne conveyances to his wife, are in value more than sufficient to pay the mortgage debt to the bank in full. The cashier of the bank, than whom no one should be better informed, or be in better position to bind the bank by his statements, says upon this question: "The Carroll county land ought to bring enough to protect us, and then we would have the half section of land out in Mellette county that is clear." Germane to this point this witness also said: "We have commenced no foreclosure proceedings against the Carroll county, or Mellette county land; thought we would take one at a time." Obviously, if the Carroll county, Iowa, land should on forelcosure and sale prove sufficient to pay the bank's debt, and thus leave the other tract of South Dakota land clear, no occasion would ever arise to call on the Miner county land, here in controversy, to respond for any sum. But all this conceded, is Drexler entitled to have the relief prayed for?

The existence of the general equitable doctrine here invoked by Drexler is well-settled. 27 Cyc. 1367; 2 Jones on Mortgages (5th Ed.) 1630; Orvis v. Powell, 98 U. S. 176, 25 L. Ed. 238; Bank v. Creswell, 100 U. S. 630, 25 L. Ed. 713; 18 R. C. L. 468; Burpee v. Parker, 24 Vt. 567; Newby v. Fox, 90 Kan. 317, 133 P. 890, 47 L. R. A. (N. S.) 302; Gilliam v. McCormack, 85 Tenn. 597, 4 S. W. 521; Lewis v. United States, 92 U. S. 618, 23 L. Ed. 513; Neely v. Williams, 149 F. 60, 79 C. C. A. 82, and cases cited. Certainly, this is the case inter sese as regards subsequent purchasers with notice, of separate parcel of the lands embraced in the mortgage, and within limits and subject to exceptions, it is the case as to the first mortgagee. 18 R. C. L. 468. In such first mentioned case, since the mortgagor is liable for the whole debt secured by the mortgage, a sale by him of a part of the lands has the effect to shift the initial burden of liability from the part thus sold to that portion, or parcel still remaining in his hands; if, and in the event, that such remaining parcels shall be sufficient to pay the mortgage debt. Likewise, upon a sale of a second parcel of the mortgaged land, the primary burden to pay the mortgage debt shifts conditionally to...