Heller v. Gate City Bldg. & Loan Ass'n

Decision Date13 December 1965
Docket NumberNo. 7655,7655
Citation75 N.M. 596,408 P.2d 753,1965 NMSC 152
PartiesJohn R. HELLER and Josephine Heller, Plaintiffs-Appellees, v. GATE CITY BUILDING AND LOAN ASSOCIATION, a corporation, Defendant-Appellant.
CourtNew Mexico Supreme Court

William H. Darden, Raton, for appellant.

Robert S. Skinner, Raton, for appellees.

CHAVEZ, Justice.

Gate City Building and Loan Association, a corporation, appeals from a judgment which settled the priority of appellant's and appellees' respective mortgages.

On February 22, 1962, appellees, John R. Heller and Josephine Heller, filed their complaint against defendants, Thomas Stiveson, Jr. and Arvilla J. Stiveson, his wife, and Gate City Building and Loan Association, a corporation, in the district court of Colfax County, New Mexico.

The complaint sought to foreclose a mortgage deed executed by the individual defendants on August 3, 1956, upon certain real estate in Raton, New Mexico. All defendants answered, putting in issue most of the allegations of the complaint. The cause was tried by the court without a jury and judgment was entered settling the priorities between appellant and appellees of their respective mortgages. The trial court held that appellant's first mortgage was entitled to priority over the second mortgage of appellees, and that the second mortgage was entitled to priority over the advances made by appellant under the first mortgage. Appellant gave due notice of appeal. No appeal was taken by Thomas Stiveson, Jr. and his wife and they are not involved in the relative position of the parties on appeal.

On August 3, 1956, Thomas Stiveson, Jr. and his wife, purchased from appellees a home located upon certain real estate in Raton, New Mexico. The purchase price of said real estate and improvements was $8,000. To pay for said property, defendants Stivesons borrowed from appellant $5,000 which appellees received. Stivesons then gave appellant a mortgage deed on the property purchased to secure the $5,000 loan.

In payment of the balance of $3,000, Stivesons gave appellees their promissory note for $3,000 and secured the payment by giving their mortgage deed to said real estate.

The mortgage deeds were given to appellees and appellant on August 3, 1956, and the mortgage to appellees contained a provision subordinating it to the mortgage given to appellant. Both mortgages were duly recorded, appellant's mortgage first, and appellant had actual and constructive notice of the second mortgage given to appellees.

Stivesons made payments totaling $325 on the indebtedness to appellees, then ceased making payments about July, 1957. Stivesons made payments to appellant until the time this suit was brought.

From time to time during the continuance of the transactions between Stivesons and appellant, at the request of Stivesons and under the terms of the mortgage so providing, appellant paid insurance premiums and taxes assessed against the mortgaged premises, which costs were duly charged to Stivesons. In addition, from time to time during this period, appellant made monetary advances to Stivesons, at their request, for interior remodeling of the house, remodeling and installation of a new heating unit, repair of the roof, and plumbing work. The trial court found that it was agreed between Stivesons and appellant that all advances made would be charged to their loan and would be repaid on the same terms as the promissory note, thereby extending the maturity date thereof, and would be secured by the mortgage deed from Stivesons to appellant. The total indebtedness, including the original loan and subsequent advances, was carried by appellant on one ledger sheet.

Appellant at no time advised appellees of the advances made to or on behalf of Stivesons, subsequent to the original promissory note, and appellees never agreed with appellant to subordinate their indebtedness to any of such advances.

In making payments' on their indebtedness to appellant, Stivesons gave no directions as to how the payments should be appropriated on the indebtedness, and appellant credited them first to the interest due on the original indebtedness and all advances, and credited the balance of said payments to the general balance due as shown by their ledger sheet.

In view of the above facts, the problem before us is a question of the priority between appellant's first mortgage, appellees' purchase-money-second mortgage, and the subsequent advances made by appellant with knowledge of appellees' second mortgage. The question is one of first impression in New Mexico.

The main question presented is under point III, wherein appellant contends that all advances made have priority over appellees' purchase-money-second mortgage. Appellant says that the advances made were authorized by paragraph Third of appellant's mortgage deed, wherein mortgagors (Stivesons) covenant and agree with appellant as follows:

'Third: To keep said premises in good condition and repair and permit no waste or deterioration, and in case of the neglect or refusal of the parties of the first part, to repair buildings or premises or to keep the same in good condition, the party of the second, part, being hereby made the sole judge of the necessity therefor, then the said party of the second part, without notice to the parties of the first part, may enter or cause entry to be made, upon said property, and expend such sums as it may deem necessary for the repair of buildings, and such sums when so expended shall bear interest at the rate of eight per cent per annum and shall be immediately due and payable from the parties of the first part to the party of the second part and shall be secured by this mortgage. * * *'

The language of the above provision grants appellant an option to make repairs. Appellant is made the sole judge as to the necessity of the repairs and, in case the mortgagors (Stivesons) neglect or refuse to make repairs, appellant may enter said property and expend such sums as it deems necessary for the repairs of the buildings.

The rule is clear that a mortgage for a specific sum cannot be enlarged or extended to cover other debts or future advances, as againt others who have acquired rights in the property. 1 Jones on Mortgages, 8th Ed., Sec. 440, p. 563. See also, 59 C.J.S. Mortgages Sec. 230a(1), p. 297; 36 Am.Jur., Mortgages, Secs. 67, 68, pp. 722-723.

As to open end mortgages, or mortgages to secure future advances as they are sometimes called, in 1 Jones on Mortgages, 8th Ed., Sec. 452, p. 583, we find the following statement:

'The early English decisions,...

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9 cases
  • Franklin Financial v. New Empire Development Co.
    • United States
    • Utah Supreme Court
    • February 14, 1983
    ...160, 162 (2nd Cir.1931), or possibly even subject Franklin to a loss of its priority. See generally, Heller v. Gate City Building and Loan Association, 75 N.M. 596, 408 P.2d 753 (1965); 100 Eighth Avenue Corp. v. Morgenstern, 4 A.D.2d 754, 164 N.Y.S.2d 812 (1957) (concurring opinion). Again......
  • Farmers and Stockmens Bank of Clayton v. Morrow
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    ...apply the proceeds in such a way as to satisfy the Bank's loan, which was the basis of the mortgage. Heller v. Gate City Building and Loan Association, 75 N.M. 596, 408 P.2d 735 (1965); Conly v. Industrial Trust Co., 27 Del.Ch. 28, 29 A.2d 601 (1943); 59 C.J.S. Mortgages § 396c at p. 559; A......
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  • Shane v. Winter Hill Federal Sav. and Loan Ass'n
    • United States
    • United States State Supreme Judicial Court of Massachusetts Supreme Court
    • May 7, 1986
    ...6 (1924); Bunker v. Barron, 93 Me. 87, 93, 44 A. 372 (1899); Brown v. Hardcastle, 63 Md. 484, 493 (1885); Heller v. Gate City Bldg. & Loan Ass'n., 75 N.M. 596, 599, 408 P.2d 753 (1965). Cf. Guleserian v. Fields, 351 Mass. 238, 242, 218 N.E.2d 397 (1966). Such prejudice is compounded to the ......
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