Flower v. Elwood

• Decision Date: 30 September 1872
• Citation: 1872 WL 8601,66 Ill. 438
• Parties: ISABELLA FLOWER et al.v.JAMES G. ELWOOD et al.
• Court: Illinois Supreme Court

66 Ill. 438

1872 WL 8601 (Ill.)

ISABELLA FLOWER et al.

v.JAMES G. ELWOOD et al.

Supreme Court of Illinois.

September Term, 1872.

OPINION TEXT STARTS HERE

APPEAL from the Circuit Court of Will county; the Hon. JOSIAH MCROBERTS, Judge, presiding.

Messrs. BRECKENRIDGE & GARNSEY, for the appellants.

Mr. G. D. A. PARKS, and Messrs. HILL & DIBELL, for the appellees.

Mr. JUSTICE WALKER delivered the opinion of the Court:

In the month of July, 1869, Alexander F. Askin purchased from Mary Adams a part of block 39, canal trustees' subdivision of the west half of section 15, township 35 north, range 9 east, in Joliet, in this State, for distillery purposes. The price of the property was $3013.31, for which he gave four notes for different sums, falling due at different dates, all bearing interest, and payable to the vendor; and at the same time executed a mortgage on the premises to secure the payment of the notes, containing a power of sale. It also contained this provision:

“It is also stipulated and agreed by and between the parties hereto, that, when the distillery is ready to start to run, that then this mortgage is to be released by the party of the second part to the government of the United States, upon the party of the first part giving to the party of the second part an indemnifying bond signed by J. G. Elwood, or other satisfactory security.”

These notes were also signed by William L. Price, he being a partner of Askin. Soon after the execution of the notes, Mrs. Adams, by her husband, assigned the note first falling due, in six months, and for $513.31, to Ludington & Co., of Chicago, and assigned the note falling due in twelve months, and for $500, and the note for $1000, and falling due in eighteen months, to Thomas S. Burger, and delivered to him the original mortgage with an assignment of $1500 of the notes and mortgage indorsed thereon, dated July 3d, 1869; but the fourth note, for $1000, and due in twenty-four months, was retained. The mortgage covered two acres of ground, and Askin purchased another acre adjoining it. In October, 1869, Askin and his partners, being ready to commence distilling spirits, tendered Mrs. Adams a bond in pursuance of the terms of the mortgage, but she and Burger refused to receive it, and to give their consent to the government that the property might be used as a distillery. Thereupon, Askin & Co. executed three new notes, corresponding with the last three, except the first two were payable to Burger, and procured them to be indorsed--those to Burger by Elwood and Bush, and that to Mrs. Adams by Elwood alone, and they were delivered respectively to Burger and Mrs. Adams, and the three old notes were surrendered; and some days afterwards, the government agent, who drew the consent that the property might be used as a distillery, delivered the mortgage to Pierce.

After the exchange of notes had taken place, Mrs. Adams executed the consent, which, as well as the mortgage, was recorded. Askin & Co. becoming embarrassed, they applied to one Gore, who advanced them money and took a trust deed on the three acres of ground to secure its payment. This trust deed was recorded. Askin, to secure the bondsmen of the company, gave them a mortgage on the whole property, which was recorded. There were also several mechanic's liens on the property which were afterwards enforced.

Askin & Co. failed, and Gore sold under his trust deed and became the purchaser, and subsequently sold the premises to Mrs. Flower, appellant. In the course of the negotiations Gore purchased the note assigned to Ludington, and assigned it to William H. Flower, who transferred it to Kinney, who sold to Mrs. Flower.

Elwood, subsequently, and after it fell due, purchased of Burger one of the new notes, which was indorsed to him, it being the $500 note, and he, with Burger and Adams, filed this bill to foreclose the mortgage and to set aside Kinney's sale and deed. On a hearing, the court below decreed that the mortgage was subsisting, and a lien to secure the new notes; decreed that Askin pay the amount due thereon; set aside the sale, and decreed the sale of the premises; and to reverse the decree, Mrs. Flower appeals to this court.

Did the execution of the new notes and the surrender of those for which they were given, operate to release or discharge the mortgage to Mrs. Adams? As a general rule, payment, or something done and accepted as payment or satisfaction, can only be held to discharge an obligation. Where anything else than payment is accepted as satisfaction, it must appear that such was the intention of the parties. Ralston v. Wood, 15 Ill. 171. And although the surrender of the notes by the mortgagee, to the maker, is prima facie evidence of their payment, still such presumption may be rebutted. So the cancellation of a mortgage of record is prima facie a satisfaction and discharge, but it may be proved to have been made by accident, mistake or fraud, and the mortgage will remain in force against the mortgagor, if not against innocent purchasers and incumbrancers.

It is urged that the surrender of the old notes and taking the new ones, and the mortgage being delivered to the makers, waived the lien of the mortgaged premises, and that Gore thereby, under his purchase, acquired title to the land free from incumbrance or lien of the mortgage. Upon turning to the record, we find that the release given by Mrs. Adams to the government only waives the lien to the government, and retains it as to all others. It stipulates “that the lien of the United States for taxes and penalties shall have priority of said above mentioned mortgage, and in case of the forfeiture of the distillery premises, or any part thereof, the title shall vest in the United States, discharged from said mortgage, and for that purpose the said party of the first part does hereby remise, release,” etc. This release to the government was duly recorded in the proper office and became notice to all persons.

This all occurred before Gore received his mortgage, and he is chargeable with notice of all that release contained. It does not purport to be a release of the mortgage to any person, but simply giving the government priority of lien to the mortgage. If Gore saw the record of this instrument, he could not have been misled to believe that the mortgage was discharged; he, then, loaned the money and took his junior mortgage, with notice, and subject to the lien of the mortgage to Mrs. Adams. Nor did his purchase under his mortgage relieve the premises from the prior lien; and his sale to Mrs. Flower did not change the relation of the parties to this property.

It is urged that Gore and Mrs. Flower were protected by the fact that the old notes were surrendered and new ones taken, even if Mrs. Adams did not release her mortgage so as to give Gore's mortgage priority; that, finding the notes and mortgage in the hands of Askin, he had the right to suppose that the debt was paid and the mortgage was discharged, and he should therefore be protected.

Whether this exchange of notes operated to discharge the mortgage, as between the parties, at least, depended upon their intention; and when we turn to the evidence, the preponderance is overwhelming that it was not intended as a satisfaction, but, on the contrary, the holders of the notes intended to rely upon it and hold it as a valid lien against every one except the...