Fifth Nat. Bank v. Pierce
| Decision Date | 28 June 1898 |
| Citation | 117 Mich. 376,75 N.W. 1058 |
| Court | Michigan Supreme Court |
| Parties | FIFTH NAT. BANK OF GRAND RAPIDS v. PIERCE ET AL. |
Appeal from circuit court, Kent county, in chancery; Allen C. Adsit Judge.
Suit by the Fifth National Bank of Grand Rapids against Edwin S Pierce and others to foreclose a mortgage. From a decree foreclosing the mortgage, defendants Emma Chamberlain and the Charles P. Kellogg Company appeal, and complainant appeals from an order refusing to appoint a receiver. Affirmed.
Uhl, Hyde & Earle and Carroll, Turner & Kerwin for complainant.
Butterfield & Keeney, for defendant Emma Chamberlain.
G. A. Wolf (W. D. Fuller, of counsel), for defendant Chas. P. Kellogg Co.
Complainants filed a bill to foreclose a mortgage made by Mr. and Mrs. Pierce, February 24, 1894, which mortgage was recorded March 14, 1895. A decree of foreclosure was rendered, in which there was found to be due $11,423.38. After the decree, complainants asked to have a receiver appointed. The application was denied. The defendant the Charles P. Kellogg Company is a judgment creditor of Mr. Pierce, having an execution levy upon the property covered by the mortgage. It defends against the mortgage upon the ground that, previous to extending credit to Mr. Pierce, it inquired of the complainant bank about his standing, and was wrongfully advised by it that Mr. Pierce was of good standing and credit, and claimed to be worth $35,000 or $40,000, and, relying upon such representation, it extended credit to Mr. Pierce. It is also the claim of this company that it was the duty of complainant to advise it of the mortgage it held, but, instead of doing so, it concealed the fact it had such a mortgage, and the mortgage was in fact, and in legal effect, put to a fraudulent use, and should, in equity, be postponed to the execution levy of the defendant company. The defendant Chamberlain is the sister of Mrs. Pierce. She was the possessor, by inheritance, of some property which was managed many years by Mr. Pierce. He was indebted to her for nearly $9,000 at the time the mortgage was made. At about the time of his failure, Mr. and Mrs. Pierce deeded the property covered by the mortgage to Miss Chamberlain, who defends against the mortgage; claiming that during the time the mortgage was not of record she was ignorant of its existence, and, if she had known of it, she would not have intrusted Mr. Pierce so implicitly as she did, but would have secured her indebtedness before the failure of Mr. Pierce made it too late to do so. She also claims that the inchoate dower interest of Mrs. Pierce is not conveyed by the mortgage, and that by virtue of the deed to her she succeeds to it, and it should not have been covered by the decree. The decree was dated July 27, 1897, and authorized a sale of the premises any time after August 28, 1897, if the amount due was not paid. It is the claim of Miss Chamberlain that the time in which to redeem was too short. It is also claimed by her that, because of the interest clause in the mortgage, it was usurious. The complainant and Miss Chamberlain and the Charles P. Kellogg Company have all appealed,-the complainant, from the order of the court refusing to appoint a receiver; and the others, from the decree.
It is urged that the bank was not authorized, under the national bank act, to extend credit based upon security upon real estate, and that the credit to Mr. Pierce was based upon the mortgage sought to be foreclosed, and for that reason the mortgage is void. The testimony in relation to the circumstances under which the mortgage was given and the time when it was to take effect is conflicting; but, conceding that the credit was extended because of the security offered by the mortgage, it does not follow that the mortgage is void. If the bank, in taking this security, has violated any of the provisions of the banking act,-a question about which we do not express any opinion,-it may be a reason why the governmental authorities should interfere and forfeit the charter of the bank, but it does not invalidate the mortgage. The authorities are very clear upon this proposition. Bank v. Mathews, 98 U.S. 621; Butterworth v. Milling Co. (Mich.) 72 N.W. 990.
In our view of the case, it does not become necessary to decide whether the mortgage became a present mortgage at the time of its execution, or whether it did not become a completed mortgage, by delivery, until the day when it was put upon record. It is very evident from the testimony that Miss Chamberlain was not influenced either one way or the other, in her dealings with her brother-in-law, by the withholding from the record of the mortgage. She had confidence in Mr. Pierce, and for more than 20 years she allowed him to manage and use her money, without questioning his ability and willingness to take care of her interests. The deed which she accepted, and through which she holds title, is a warranty deed, except as to two mortgages, one of which is the one involved in this litigation. We do not mean to intimate that this mention of the mortgages in the deed estops Miss Chamberlain from contesting their validity, but, taken in connection with the entire proceedings between her and Mr. Pierce, it shows that she relied wholly upon him to take care of her interests.
As to the effect of the withholding of this mortgage from the record upon the claim of the Charles P. Kellogg Company, they do not base their claim to relief, in their cross bill, upon the fact that the mortgage was void against them, as subsequent creditors. The ground for relief stated by them is that Mr. Pierce desired credit; that, before extending it to him, they inquired of the complainant about his financial condition, and "asked it to state fully all his circumstances, and complainant about March 2, 1894 wrongfully advised this defendant that said E. S. Pierce was of good standing and credit, and claimed to be worth $35,000 to $40,000; that defendants believed and relied upon said representations, as complainant intended it should, and sold and delivered said Pierce, on credit, goods to the amount and value of $799.50; that it was the duty of complainant to disclose said mortgage, but it concealed the same from the defendant, and defendant did not know of the same until after said credit was extended." It is important to ascertain from the record whether the allegation of the cross bill is sustained by the proof. The inquiry made of the bank was as follows: ...
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