Hamburg Bank v. Zimmerman

• Decision Date: 10 October 1938
• Docket Number: 4-5187
• Citation: 120 S.W.2d 380,196 Ark. 849
• Parties: HAMBURG BANK v. ZIMMERMAN
• Court: Arkansas Supreme Court

120 S.W.2d 380

196 Ark. 849

HAMBURG BANK v. ZIMMERMAN

4-5187

Supreme Court of Arkansas

October 10, 1938

Appeal from Ashley Chancery Court; E. G. Hammock, Chancellor reversed.

Petition denied.

J. A Tellier, for appellant.

Y. W Etheridge and E. L. Carter, for appellees.

OPINION

BAKER, J.

B. and E. Zimmerman instituted a suit in the chancery court of Ashley county against James A. Murphy and wife, Hamburg Bank, Robert Wallace et al., for a judgment against the Murphys upon a promissory note for $ 800, dated April 15, 1919, and to foreclose a mortgage executed by the Murphys on the same date to the Conservative Loan Company, as security for the payment of the aforesaid note.

The mortgage covered an eighty-acre tract of land in Ashley county, and was by the Conservative Loan Company duly assigned to the Sheboygan Loan & Security Company, and on December 28, 1922, the Sheboygan Loan & Security Company assigned the note and mortgage to B. Zimmerman and E. Zimmerman. The said note, secured by the mortgage, matured on the first day of May, 1929. There was a default on that date, but later, on November 19, 1929, interest was paid to December 1st, and $ 100 was paid on the principal amount, and on May 21, 1931, $ 25 was paid on the principal, reducing the said note to the principal sum of $ 675, with accrued interest.

By agreement the balance was extended for the period of a year at 6 per cent. interest. Nothing further was paid on the note.

The Zimmermans filed suit on May 13, 1936. James A. Murphy and Mrs. Murphy, Blanks Company, Hamburg Bank and Robert Wallace were made defendants. The bank filed a motion to dismiss this suit on August 12, 1937. It alleged that it was the owner of the real property sought to be foreclosed, and that it was a third party in respect to plaintiffs' mortgage; that its title to the land in question was paramount and superior to that of plaintiffs because plaintiffs had not complied with the provisions of Crawford & Moses' Digest, § 7382 and 7408, which require payments to be indorsed on the margin of the record of the mortgage.

Later the Hamburg Bank amended its pleadings, setting out a deraignment of the title claimed by it, substantially as follows: That Murphy and wife conveyed the lands to J. A. Mathews in 1920 and J. A. Mathews and wife conveyed the same lands to W. L. Blanks on August 12, 1920, and that the heirs of W. L. Blanks conveyed the same lands to Blanks Company, a corporation, the Blanks Company conveyed the lands to the Hamburg Bank. Proof, however, disclosed the fact that the administratrix of the estate of W. L. Blanks, upon petition, and by order of the probate court, sold the property for payment of debts of W. L. Blanks' estate, and that the Hamburg Bank became purchaser of this same land, together with other lands. The Murphys had abandoned possession of the land after the sale, and the Zimmermans took possession thereof by their agent, Frank S. Green. Green, duly authorized to do so, placed Robert Wallace in possession, who went upon the property, under a contract of purchase for the sum of $ 600, at such time as title could be perfected by the Zimmermans. He made somewhat elaborate improvements upon the property while in possession, with full knowledge that title would not be conveyed to him until the Zimmermans had foreclosed and bought in the property.

The chancery court rendered a decree in favor of the Zimmermans, declaring that the Hamburg Bank was not a third party, within contemplation of the statute, and ordered sale of the property. From that decree the Hamburg Bank has appealed.

The principal question at issue upon this appeal, if not the sole one, is to determine whether the Hamburg Bank is a third party. Rather elaborate or extensive briefs have been filed, the most of which, we think, it is unnecessary to review. There are no disputed questions of fact. It is conceded by all parties that the note and mortgage were more than five years past due at the time of the filing of the suit; that there was no notation of any kind upon the margin of the record showing any payments and the dates thereof, certified as required by law, indicating that the lien of the mortgage was continued in force, nor is it disputed that the partial payments made upon the indebtedness were made at such times that the mortgage had been kept alive, except as to third parties, who had a right to rely upon the records as they appeared at the time of the institution of the suit.

It has been held that the effect of a failure to make the marginal notations as required by law, before the bar of limitations attached according to the record, is, as to third parties, to reduce such instrument to the status of an unrecorded mortgage. Morgan v. Kendrick, 91 Ark. 394, 121 S.W. 278, 134 Am. St. Rep. 78. See, also, cases there cited. Wells v. Farmers' Bank & Trust Co., 181 Ark. 950, 28 S.W.2d 1059.

This is true, of course, only as to such third parties protected by the statute.

Under the first statutes upon the subject, the expression "third parties" was not defined, but they came to be known as "strangers to the transaction." These are illustrated in the following cases: Clark v. Lesser, 106 Ark. 207, 153 S.W. 112; Beith v. McKenzie, 191 Ark. 353, 86 S.W.2d 176.

Appellees rely upon the case of Citizens Bank & Trust Co. v. Garrott, 192 Ark. 599, 93 S.W.2d 319. That opinion was rendered on April 20, 1936, and involved the question that has arisen here, under § 7382 and 7408, Crawford & Moses' Digest, now § 9436 and 9465, Pope's Digest.

The appellees argue that the above cited case is authority sustaining their present position and warranted the chancellor in his declaration of law in their favor. They call attention to the fact that in this case, under consideration, the lands of W. L. Blanks were sold under an order of the probate court upon petition by the administratrix for such sale, in order to...