Ferrell-Michael Abstract & Title Co. v. McCormac

• Decision Date: 27 November 1915
• Docket Number: (No. 8272.)
• Parties: FERRELL-MICHAEL ABSTRACT & TITLE CO. et al. v. McCORMAC et al.
• Court: Texas Court of Appeals

184 S.W. 1081

FERRELL-MICHAEL ABSTRACT & TITLE CO. et al. v. McCORMAC et al.

(No. 8272.)

Court of Civil Appeals of Texas. Ft. Worth.

November 27, 1915.

On Appellees' Motion for Rehearing, February 5, 1916.

Appellants' Motion for Rehearing Denied February 5, 1916.

Appeal from District Court, Eastland County.

Action by Mrs. C. B. McCormac and others against the Ferrell-Michael Abstract & Title Company and others, in which R. L. Davenport intervened, and to which George Vaught and another were made parties defendant. From a judgment for plaintiffs and intervener, the named defendant and the impleaded defendants appeal. Affirmed in part and reversed and rendered in part.

Earl Conner and M. J. Smith, both of Eastland, for appellants. J. R. Stubblefield, of Eastland, for appellees.

CONNER, C. J.

Mrs. C. B. McCormac, C. A. Gray, and J. W. Ward joined in the institution of this suit in the district court of Eastland county, seeking to recover a judgment upon certain promissory notes severally made to these parties. It was alleged that the note to Mrs. C. B. McCormac, which, principal, interest, and attorney's fees, amounted to $512.60, had been executed by J. M. Ferrell, as principal, and J. R. Stubblefield, as surety, that the note payable to C. A. Gray amounting at the date of the judgment, as found by the court, to $606.68, had been executed by J. M. Ferrell, J. R. Stubblefield, and W. B. Ferrell, and that the note payable to J. W. Ward, at the date of the judgment amounting in all to $583.15, had been executed by J. M. Ferrell, W. S. Michael, and J. R. Stubblefield. It was alleged that at the date of the execution of the McCormac note J. M. Ferrell was the owner of a certain abstract business in the town of Eastland, and that, as such owner, he had executed and delivered to the said J. R. Stubblefield a certain mortgage on certain property described in the petition to secure the payment, among others, of the said note to said C. B. McCormac, and that said mortgage had been duly recorded in the proper records of Eastland county; that at a later date not named the Ferrell-Michael Abstract & Title Company was incorporated for the purpose of doing an abstract business in Eastland county, and that all the books, papers, records, and office fixtures and appurtenances theretofore belonging to J. M. Ferrell, and which had been mortgaged as alleged by J. M. Ferrell to secure the McCormac indebtedness, "became the property of the Ferrell-Michael Abstract & Title Company, subject to the mortgage above described," and that the abstract company was in possession of all of the property and asserting some right or title to the same. It was further alleged that 33 shares of the capital stock of said corporation owned by W. S. Michael had been duly mortgaged to J. W. Ward, C. A. Gray, and C. B. McCormac, for the purpose of securing the respective plaintiffs in the several notes owned by them.

Later, by an amended petition, the plaintiffs made George and Nora Vaught parties defendant, alleging, in substance, among other things, that subsequent to the happenings hereinbefore recited, and prior to the institution of the suit, a judgment had been rendered in the justice's court of precinct No. 1 of Eastland county, in the case of M. J. Smith v. the Ferrell-Michael Abstract Company, for the sum of $117.50, with interest and costs, purporting to foreclose a "laborer's lien on the books, papers, records, a Remington typewriter, an Underwood typewriter, and all other fixtures and appurtenances belonging to the Ferrell-Michael Abstract & Title Company, including the record pertaining to the titles to land in Eastland and Stephens counties, Tex.," which said judgment had been transferred to Nora Vaught, and under and by virtue of which she was asserting some right, title, or interest to the judgment. It was alleged:

"That the said judgment was void because it attempted to foreclose a laborer's lien on personal property in excess of the sum of $200; that it attempted to foreclose a laborer's lien on property of the value of more than $1,000."

The plaintiffs sought to foreclose the mortgage made to J. R. Stubblefield upon the property therein described as against all parties to the suit. They also sought to foreclose the mortgage upon the 32 shares of capital stock that had been issued to W. S. Michael.

All those against whom complaint was made as above stated were made parties defendant, after which R. L. Davenport filed a petition of intervention seeking to foreclose a laborer's lien set up by him upon the property described in the Stubblefield mortgage, and in the plaintiff's petition. A trial was had before the court without a jury, and resulted in a judgment in Mrs. C. B. McCormac's favor against J. M. Ferrell, as principal, and J. R. Stubblefield, as surety, on the note made to her, with a foreclosure of the mortgage lien evidenced by the Stubblefield mortgage upon the property of the abstract company. C. A. Gray and J. W. Ward also recovered judgment for the amounts by them as severally sought, with a foreclosure in their favor upon the 32 shares of the Michael capital stock of the abstract company. The court denied the prayer of these parties that the Stubblefield mortgage be foreclosed in their favor. The court further found and adjudged in favor of R. L. Davenport as against the abstract company for the sum of $130, to secure $60 of which a lien was declared and foreclosed upon the property in controversy as against all parties save the lien foreclosed in favor of Mrs. C. B. McCormac, which was made first in the judgment. It was further found and adjudged that the said judgment of the justice's court in favor of M. J. Smith against the Ferrell-Michael Abstract & Title Company, under which George and Nora Vaught claimed, was "void, because the plaintiff sought in said judgment to foreclose a laborer's lien on property of value in excess of $200." The Ferrell-Michael Abstract & Title Company and George and Nora Vaught severally filed motions for new trial, which were overruled, and they alone have prosecuted appeals.

By exceptions to the petition the judgment, and in other ways, it is contended that Mrs. C. B. McCormac was not entitled to the benefit of the mortgage made by J. M. Ferrell to his surety, J. R. Stubblefield. But in so adjudging we think the court was correct as against the original title of the abstract company. While made direct to J. R. Stubblefield, the surety, one of its specific purposes, as therein recited, was to secure the payment of the note declared upon by Mrs. C. B. McCormac. The note was unpaid the mortgage had been duly recorded prior to the abstract company's acquisition of the property, the mortgagee, Stubblefield, was consenting thereto, and no repudiation of the mortgage of which it is shown Mrs. McCormac had notice has been pointed out. Under such circumstances we think the mortgage inured to the benefit of Mrs. C. B. McCormac, that the statute of limitations did not run against her right, and that the title of the abstract company to the books and other property acquired from J. M. Ferrell was in all respects subordinate to the claim of C. B. McCormac. As said in a recent work on Chattel Mortgages (see Jones on Chattel Mortgages [5th Ed.] § 512):

"The mortgage given to a surety inures to the benefit of the creditor to whom the surety is bound; and upon the bankruptcy of the mortgagor a court of bankruptcy will enforce the trust. If the mortgage upon its face be conditioned to indemnify the mortgagee against a liability upon certain debts, it expresses a trust; and one who purchases the mortgage, or takes an assignment of it, takes it with notice of such trust and subject to it. The sale and assignment are then void in equity, and the assignee will be regarded as merely holding the legal title to the property as trustee in place of the original trustee."

See, also, Nat. Shoe & Leather Bank of Auburn et al. v. Small et al. (D. C.) 7 Fed. 837; Hanrion v. Hanrion, 73 Kan. 25, 84 Pac. 381, 117 Am. St. Rep. 453.

That the plaintiffs' action was not barred by limitation, as urged, is apparent in view of the fact that the action was not one for conversion of the property described in the petition, as suggested, but merely one for the foreclosure of a mortgage lien that had been duly recorded before the incorporation of the abstract company, and before, of course, its acquisition of the mortgaged property from J. M. Ferrell. Such record effected the abstract company with notice of the mortgage and of C. B. McCormac's equitable right therein, notwithstanding there may have been a want of actual notice thereof on the part of some of the stockholders of incorporators, as was testified. It is not pretended that the note of C. B. McCormac was barred by limitation, or that she at any time was given notice that the abstract company had or would repudiate the mortgage and hold the mortgaged property in hostility thereto. The mere possession and use of the property under a claim of ownership was not necessarily inconsistent with the terms and legal effect of the mortgage, and certainly not sufficient to establish that character of adverse possession which would be necessary to bar C. B. McCormac's action to foreclose the mortgage declared upon. All assignments of error involving these questions are accordingly overruled.

By other assignments the sufficiency of the description of the property as described in the mortgage, in the plea of intervener, and in the judgment is attacked. Substantially, the description in the mortgage is as follows:

"Two league books, four section books, two lot books, probate index, general index, maps, supplies and machine now on hand and in use, and that are hereafter acquired and used by me, the said J. M. Ferrell, in conducting and continuing in the abstract business, this day purchased by me from the firm of Ferrell & McCormac, said firm being composed of the J. M....