Hume v. Indiana National Life Insurance Co.

• Decision Date: 06 November 1922
• Docket Number: 243
• Citation: 245 S.W. 19,155 Ark. 466
• Parties: HUME v. INDIANA NATIONAL LIFE INSURANCE COMPANY
• Court: Arkansas Supreme Court

245 S.W. 19

155 Ark. 466

HUME v. INDIANA NATIONAL LIFE INSURANCE COMPANY

No. 243

Supreme Court of Arkansas

November 6, 1922

Appeal from Arkansas Chancery Court, Northern District; John M Elliott, Chancellor; affirmed.

Decree affirmed.

Frank L. Hume, and Buzbee, Pugh & Harrison, for appellant.

The mortgage was invalid in that the trustee had no authority to execute the mortgage. 39 Cyc. 381; 14A Corpus Juris, p. 658 sec. 2653; 17 Ark. 438; 68 F. 1006; 81 Tex. 16; 16 S.W. 639; 66 Wis. 160; 57 Am. Rep. 256; 28 N.W. 369; 114 Ga. 719; 40 A 791; 122 Iowa 402; 98 N.W. 135; 80 F. 236; 25 C. C. A. 389.

The foreclosure of the mortgage was premature, 27 Cyc. 1595. There was no default of payment alleged in the complaint. 19 Standard Enc. of Proc. 949.

The allegations in the complaint must set out the breach of the conditions of the mortgage to give the court jurisdiction to foreclose. Wiltsie on Foreclosing Mortgages, 3rd. ed., sec 360.

John L. Ingram, for appellee.

A mortgage of trust property is valid regardless of whether it was authorized or not, where it is clearly assented to or ratified by the cestui que trust. 39 Cyc. 183.

The writ was never levied. C. & M. Dig., sec. 507. The return of the sheriff was defective, in that it did not describe any land. C. & M. Dig., sec. 6982.

MCCULLOCH C. J. HART and HUMPHREYS, JJ., dissent.

OPINION

MCCULLOCH, C. J.

Appellee instituted this action in the chancery court of Arkansas County to foreclose a mortgage, dated December 29, 1916, executed to it by H. M. Evans, trustee, on certain lands in that county, to secure the payment of a note in the sum of $ 22,000, with interest notes payable semi-annually. Certain other parties, in addition to Evans, were joined as defendants upon the allegation that they claimed interests in the mortgaged property, among others the appellant Hume, who had obtained a judgment in an Indiana court against the Liberal Life Assurance Company, of Anderson, Indiana, for the sum of $ 821, and had, prior to the institution of appellee's foreclosure suit, commenced an action upon the Indiana judgment in the circuit court of Arkansas County and caused an order of general attachment to be issued against the property of said Liberal Life Assurance Company. All of the defendants in the action were nonresidents of this State and were brought in by publication of a warning order. An attorney ad litem was appointed for the nonresident defendants, in accordance with the statutes, but none of the defendants appeared prior to the rendition of the decree.

The mortgage and note and interest coupons were introduced in evidence, and the court rendered a decree in favor of appellee, foreclosing the mortgage and finding the debt to be $ 24,954.56, and directing court's commissioner to sell the mortgaged property. The property was sold by the commissioner, and brought at the sale the aggregate sum of $ 10,125, appellee being the purchaser of one of the tracts for the sum of $ 4,000, and the remainder of the land being sold to C. E. Shearman, who was not a party to the action. The sales by the commissioner were duly reported by the commissioner and confirmed by the court, and deeds were executed pursuant to the terms of the sale, under orders of the court.

Within two years after the rendition of the decree, appellant Hume appeared and filed his application under the statute (Crawford & Moses' Digest, § 6266) to have the cause retried as to him, and upon giving bond for costs, as required by the statute, the court ordered a retrial of the cause as to the rights of appellant. Appellant then filed an answer presenting the following defenses: first, that there had never been an indebtedness to appellee by the mortgagor in the sum claimed; second, that the indebtedness secured by the mortgage had been fully paid; third, that the mortgage debt was not due at the time of the commencement of the action; and fourth, that the mortgage was invalid because the mortgagor conveyed only as trustee and without authority from the cestui que trust.

On the final hearing the court decided the issues against appellant and rendered a decree reaffirming the terms of the original decree and denying appellant's right to assert a lien against the appellee. The cause was heard upon the pleadings and exhibits, including the mortgage and notes, and upon the deposition of one Rudd, the treasurer of appellee corporation, who exhibited with his deposition a certain contract between appellee and Evans, the mortgagor.

Appellee is an Indiana corporation, engaged in the life insurance business at the city of Indianapolis, and the Liberal Life Assurance Company of Indiana is likewise a corporation engaged in the insurance business at Anderson, Indiana, and the latter entered into a contract with the former for reinsurance of the latter's business, but the record does not embrace that contract. It appears, however, from the testimony of witness Rudd, that this was a speculative contract, as it was uncertain whether it would finally result in profit or in loss to the Liberal Life Assurance Company. This depended upon whether the reinsurance resulted in profit or in loss.

Business relations had also existed between the Liberal Life Assurance Company and the Pittsburg Bank for Savings, of Pittsburg, Pennsylvania, and the Liberal Life Assurance Company had become largely indebted to said banking institution, and had assigned to the bank its reinsurance contract with appellee as collateral security for a debt of $ 27,318.74. The Liberal Life Assurance Company had also assigned, as collateral, to said bank two notes executed by Sidney G. Brain and Francis E. Brain for $ 10,000, which were secured by a mortgage on land.

On the date of the execution of the mortgage in controversy by Evans as trustee to appellee, these two parties, appellee, and Evans acting as such trustee, entered into a written contract setting forth in extenso the contract between the Liberal Life Assurance Company and the Pittsburg Bank for Savings, which recited that the company was indebted to the bank "in the sum of $ 27,318.74, evidenced by a note and secured by collateral in the form of reinsurance contract entered into between the two said named life insurance companies and two certain mortgage indebtednesses executed by Sidney G. Brain and Francis E. Brain, each for $ 10,000, as well as a lot of other mortgage indebtedness, some of which have been foreclosed upon by the receiver for the said bank."

The contract between the parties then contains the following clause relative to the purchase by appellee of the debt and collateral securities from the Pittsburg bank:

"Now, it is mutually agreed by the parties hereto that the said first party has taken an assignment of said reinsurance contract and has purchased said two Brain mortgage indebtednesses from G. H. Getty, as receiver of said Pittsburg Bank for Savings, at and for the price of $ 27,318.74, the same to be divided as follows:

"For said two Brain mortgages indebtednesses

$ 15,318.74

"Advance on reinsurance contract

12,000.00

"And said two Brain mortgage indebtednesses and said reinsurance contract shall be the absolute property of the said first party hereto, subject to the terms and conditions hereinafter stipulated."

There are numerous other recitals in this contract, which are unnecessary to set forth, but there are certain other clauses which throw light upon the character and extent of the indebtedness secured by the mortgage in controversy.

The contract provided that appellee should keep an account of the proceeds derived under the reinsurance contract and charge the Liberal Assurance Company with any deficit, and credit it with any profits derived therefrom.

The contract contains the following stipulations concerning the execution of the mortgage in controversy:

"The second party has this day executed his note for $ 22,000, payable to the first party hereto, secured by a mortgage on certain real estate in Arkansas County, in the State of Arkansas, owned by him as trustee, and acquired by said conveyance from said receiver, which said note and mortgage are made a part hereof as fully and completely as though set out herein in full."

The following stipulations in the contract are also deemed to be material to the present controversy:

"It is understood and agreed that, should there be any deficit in any of the assets turned over by said Liberal Life Assurance Company of Indiana for reserve, as aforesaid, to the said first party, the same shall be a charge against the second party hereto, and he agrees to repay the same, with interest thereon at the rate of six per cent. per annum, to the first party, and it shall be a part of said mortgage indebtedness this day executed. Likewise, should there be in the future coming to the second party hereto on said reinsurance contract any amount less than $ 12,000, such sum, together with interest thereon, shall be a charge against the second party hereto, and he agrees to repay the same, but, should there be an excess of $ 12,000 on said reinsurance contract the same shall be credited to the second party's indebtedness this day created. * * * *

"It is agreed that whenever said contract between said Pittsburg Bank for Savings and said Liberal Life Assurance Company of Indiana shall have been fully carried out and any and all sums to be paid by the second party to the first party, as herein stated, shall have been paid, and first party shall have received from said two Brain mortgage indebtednesses,...