Frerking v. Thomas

• Decision Date: 19 March 1902
• Citation: 89 N.W. 1005,64 Neb. 193
• Parties: FRERKING v. THOMAS ET AL.
• Court: Nebraska Supreme Court

64 Neb. 193

89 N.W. 1005

FRERKING

v.THOMAS ET AL.

Supreme Court of Nebraska.

March 19, 1902.

Syllabus by the Court.

1. Where land is sold subject to a mortgage existing thereon, as between the parties to the transaction the land is the primary debtor, and a sale thereof may be resorted to for the satisfaction of the incumbrance.

2. A mortgage on real estate is an incident to the debt evidenced by the notes it secures, and passes with an assignment of the debt, and an unauthorized release of the mortgage would not prevent the enforcement of the rights of the holder of the notes to a sale of the property in satisfaction of the debt as to any save those who in good faith and without notice have obtained title to such property, relying on the record, which disclosed the apparent satisfaction of the incumbrance.

3. A grantee of land subject to a mortgage thereon fraudulently obtained an assignment of the mortgage and released the same, the notes secured thereby being unsatisfied. Held, as against an indorser of the notes, who was compelled to take up the same because of his liability as such, that the release was unavailing to deprive him of his lien thereon, and a sale of the property could be had to satisfy the debt.

4. In a suit to reinstate a mortgage on real estate fraudulently released and enforce the lien created thereby, it was alleged that after the fraudulent release of the mortgage the notes secured by the same were transferred to a third party, and suit caused to be instituted against the payee on his liability as indorser, and that he was compelled, because of such liability, to pay for and take up such notes, which he did, giving the amount thereof. The answer alleged that, if any money was paid thereon, it was paid to some other and different person, without the knowledge or procurement in any manner of the defendants. Held, in the face of such an allegation, the defendants could not be heard to say and prove that the payment so made was in compromise of the plaintiff's liability as indorser, and for their benefit, in that it was agreed that no action should thereafter be maintained against the maker of the notes, or to enforce the security pledged to the payment of the debt.

5. While a third party may maintain an action or a defense under an agreement between others made for his benefit, it must appear that there was an intent by the promisee or person with whom the agreement was made to secure some benefit to such third party, and also that there existed some privity between the promisee and the party to be benefited.

6. Where a person purchases real estate with knowledge of a third party's equitable lien thereon, or with notice of such facts as would put an ordinarily prudent man on inquiry, which, if pursued, would lead to such knowledge, such person cannot be said to be a good-faith purchaser without notice, and entitled to protection as such.

7. In reviewing a cause on appeal, where the findings and decree of the trial court cannot be reconciled with any reasonable construction of the testimony, the same will be set aside as unsupported by sufficient evidence.

Appeal from district court, Saline county; Stubbs, Judge.

Action by Christopher Frerking against Albert Thomas and others. On the death of plaintiff, the action was revived in the name of Frank W. Bartos, administrator. Judgment for defendants, and plaintiff appeals. Reversed.Neal & Quackenbush and J. A. Wild, for appellant.

A. S. Sands, for appellees.

HOLCOMB, J.

Appellant, plaintiff below, brings this case here by appeal from a finding and decree adverse to him in the trial court. The action is one in equity, brought to reinstate a real estate mortgage alleged to have been fraudulently released, and to enforce a lien on the property described therein in favor of the plaintiff. The petition is grounded on alleged fraudulent acts and practices of the defendants committed to defraud the plaintiff out of his lawful rights. In substance it alleges that in 1892 the plaintiff, being the owner of a certain town lot in De Witt, Saline county, which is the real estate in controversy, conveyed the same by warranty deed to defendant Carrie Chesney, now Carrie Crane, and that she, to secure the purchase consideration, executed back to the plaintiff a mortgage thereon, securing 13 promissory notes, for the sum of $40 each, the first payable April 14, 1893, and one maturing every four months thereafter, and drawing interest at 10 per cent. per annum from maturity; that thereafter, on September 27, 1894, plaintiff sold and assigned the said notes and mortgage securing the same to one Mary Cobel, the notes being indorsed in blank, and the assignment of the mortgage being duly recorded; that April 23, 1894, Carrie Chesney, the mortgagor, conveyed the premises to Lelia Chesney, subject to the mortgage, and with the intent to defraud the plaintiff; that on June 26, 1895, Mary Cobel sold the notes and mortgage to defendant James Chesney, said notes being delivered with a blank assignment of the mortgage, and that this transaction on the part of Chesney was had with the intent to defraud plaintiff; that on July 10, 1895, Lelia Chesney, in collusion with James Chesney and Carrie Chesney to defraud plaintiff, made a release of the mortgage, which release was withheld from the records until after the commission of the acts thereafter complained of; that plaintiff was 78 years old, a German, ignorant of English, and incapacitated on account of ill health to do business, and that the Chesneys, by falsely and fraudulently representing that his indorsement of the notes was in full force and effect, and the mortgage unreleased, induced him to pay their agents, attorneys, or assignees $396 on said notes, and that suit was caused to be instituted to accomplish such wrongful purpose. It is alleged that the notes have been destroyed; that defendant Thomas, conspiring with the other defendants, and with full knowledge of plaintiff's rights, took a warranty deed of said premises dated December 24, 1897; and that all of the defendants except Thomas are insolvent, and that plaintiff is without remedy except by the enforcement of his rights under said mortgage, and prays for the ascertainment of the amount due him on said notes, and a foreclosure of the mortgage lien, and general equitable relief. The defendants Chesney in their answer deny the fraud charged, or the receipt of any money paid by plaintiff on the notes, and allege that, if any money was paid thereon, it was paid to some other and different person, and without their knowledge or procurement in any manner. It is also alleged that if any money was paid to obtain his release as indorser it was long after the release of the mortgage, and with knowledge that it had been released, and for the purpose of releasing plaintiff as indorser on the notes, and not in payment of the notes or any part thereof. Defendant Thomas answered, separately denying the alleged fraud, and alleges that he received a warranty deed for the premises, paying $360 therefor, and denies that he had any notice or knowledge of plaintiff's claim; says that he bought the premises in good faith, and without any intention to defraud the plaintiff, and asks to have the title to said premises quieted in him, free of any incumbrance in favor of the plaintiff. The reply denies the allegation of new matter contained in both answers.

The badges and earmarks of fraud and overreaching are discernible throughout the entire record, so far as the defendants Chesney are concerned; not that any fraudulent act may be directly imputed to the two defendants Carrie and Lelia Chesney, sisters of the defendant James Chesney, for, by the transactions in which their names appear, they are seemingly nominal parties only, the moving spirit and actor in all instances being the brother, who, it appears, being insolvent, carried on and did his business in the name of one or the other of the two sisters made defendants in the action. Whether he was the principal in the several transactions complained of or acted as the agent of his sisters is for the purposes of this case immaterial. In either instance, the legal consequences would be the same, and the plaintiff's rights in no wise changed thereby. It was he that negotiated the purchase of the property, although the deed was taken in the name of his sister, who, in turn, executed the notes and mortgage mentioned in the pleadings to secure the purchase price thereof. He purchased the notes from the transferee, Cobel, and obtained an assignment of the mortgage in blank. He negotiated the sale of the premises to the defendant Thomas, and we may assume, in the absence of any evidence to the contrary, that he was the principal in all the transactions had, his sisters being only the intermediary for the conveyance of the property, and nominally holding title thereto, while he was in fact the beneficial owner, although it is unnecessary to determine this question. It is disclosed by the evidence that, after the procurement of the notes given for the purchase of the lot from the indorsee, Mrs. Cobel, an assignment of the mortgage was obtained, the name of the assignee being left blank and afterwards filled in by inserting the name of his sister Lelia Chesney, who was then the holder of the legal title to said property. The deed from Carrie to Lelia Chesney bears date April 23, 1894, and was not recorded until February 19, 1897. The assignment of the mortgage in blank from Mrs. Cobel was obtained June 26, 1895. Lelia Chesney, it appears, as assignee of the mortgage, and whose name was afterwards inserted therein, executed a formal release thereof July 10, 1895, the consideration, as given, being the payment of the debt, the release, however, not being recorded until December 31, 1897. Soon after obtaining the notes and mortgage from Mrs. Cobel, June 26, 1895, several of the notes were transferred, evidently by de...