Interstate Bldg. & Loan Ass'n of Bloomington v. Ayers

• Decision Date: 21 December 1898
• Citation: 177 Ill. 9,52 N.E. 342
• Court: Illinois Supreme Court
• Parties: INTERSTATE BUILDING & LOAN ASS'N OF BLOOMINGTON v. AYERS et al.

177 Ill. 9

52 N.E. 342

INTERSTATE BUILDING & LOAN ASS'N OF BLOOMINGTON

v.AYERS et al.

Supreme Court of Illinois.

Dec. 21, 1898.

Appeal from appellate court, Second district.

Action by the Interstate Building & Loan Association of Bloomington against Emma I. Ayers and others. From a decree giving plaintiff a third lien on certain property covered by its mortgage, it appealed to the appellate court (71 Ill. App. 529), where the decree was affirmed, and plaintiff appeals. Affirmed.

Alschuler & Murphy (J. J. Morrissey, of counsel), for appellant.

A. M. Beaupre and M. O. Southworth, for appellee Henry F. Hafenrichter.

Aldrich, Winslow & Worcester, for appellee Laurens Hull.

PER CURIAM.

The opinion of the appellate court in this case was delivered by Mr. Justice DIBELL, and is, in part, as follows:

‘This cause originated in a bill for a mechanic's lien upon lot 3 of Burdsall & Bruce's addition to Aurora, filed by C. Solfisburg, against Emma I. Ayers, the owner thereof, and others, for materials used in erecting a building for ‘flats' on said lot. Many mechanics and material men filed answers claiming liens. Plaintiff in error answered, claiming a mortgage lien for the principal sum of $6,000, with interest and other charges superior to all other liens, and filed a cross bill for the foreclosure of said mortgage. Henry Hafenrichter answered, claiming a mortgage lien for the principal sum of $1,850, with interest, prior to all other liens, and filed a cross bill for the foreclosure of said mortgage. Issues were joined, and there was reference to the master to take proofs and state an account between the parties. The master heard proofs, and prepared a report, to which numerous objections were filed, and by the master overruled. Exceptions were filed to the master's rulings, and there was a hearing thereon in the circuit court, where two exceptions were sustained, and all others were overruled, and there was a decree accordingly. By said decree, Hafenrichter was given a first lien under his mortgage; Laurens Hull, trading as the Aurora Lumber Company, was given a second lien for materials furnished; plaintiff in error was given a third lien under its mortgage; numerous other mechanics and material men were given a fourth lien pro rata; and certain others, who had asserted liens, including C. Solfisburg, were denied a lien. The association brings the cause here by writ of error, and has assigned errors upon the record. No cross errors have been assigned. The rights of those who received a lien fourth in order, and of those who were denied a lien, are not involved. Mrs Ayers does not question the order of the liens established by the decree. There is also no controversy between Hafenrichter and Hull. The questions are whether Hafenrichter was entitled to priority over plaintiff in error, and whether Hull was entitled to any lien, and, if so, whether he was entitled to priority over plaintiff in error.

‘Mrs. Ayers is the daughter of Hafenrichter, and the wife of Francis E. Ayers. J. H. Jenks, at the time of the events here litigated, was the secretary of the advisory board of plaintiff in error at Aurora. Hafenrichter received a deed of the property September 2, 1892, and afterwards made some arrangement for selling it to his daughter; and she went into possession, and her husband made contracts with mechanics and material men for the erection of this building. After the work on the building had progressed some considerable time, Hafenrichter, on May 20, 1893, conveyed the lot to Mrs. Ayers for the consideration of $2,200; and she paid him $350 in cash, and executed, with her husband, a note of that date, for $1,850, due in six months after date, with interest at 6 per cent. per annum for the balance of the purchase money, and also a mortgage upon the lot securing said note. Hafenrichter handed the mortgage to Ayers that day, with directions to get it recorded, and supposed, till long after that, it had been so recorded. As the result of a conferencebetween Ayers and Jenks, Ayers kept the Hafenrichter mortgage off the record till Mrs. Ayers' application for a loan from plaintiff in error had been granted, the money paid, and the mortgage to the association recorded. Jenks placed the association's mortgage on record July 8, 1893, and Ayers placed the Hafenrichter mortgage on record July 11, 1893. Thus, the mortgage first executed was last recorded. * * * When Hafenrichter's mortgage was placed in the hands of Ayers to file it for record, he immediately consulted Jenks; and, by the suggestion and procurement of the latter, Ayers withheld it from record till after plaintiff in error's mortgage was, at a later date, executed, sent to Bloomington, accepted, returned from Bloomington with the money, and recorded. Plaintiff in error, in its opening brief, admits the acts of Jenks in this matter in the following language: ‘There can be no question that Francis E. Ayers and J. H. Jenks colluded together to withhold Hafenrichter's mortgage from record until after the loan was made and the mortgage to the building and loan association was filed for record.’ This admission was repeated in said beief, and makes a consideration of the details of the evidence on that subject unnecessary. ‘Subsequent purchasers, who have notice of a prior unrecorded mortgage, are affected by their knowledge of it in the same way that the prior record of mortgage would affect them.’ ‘Priority among mortgagees and grantees depends, not only upon the date of their deeds and the date of their record, but also upon the knowledge they have of the true state of facts as to the title, and of the rights and equities of those who have not fixed their priority by duly recording their deeds.’ 1 Jones, Mortg. § 572; Marshall v. Fisk, 6 Mass. 24; Dole v. Thurlow, 12 Metc. 157; Rev. St. 1874, c. 30, § 30. It is proved in this case that after Mrs. Ayers had made this application to plaintiff in error for a loan, and about a month and a half before the mortgage to plaintiff in error was executed and delivered, Ayers told Jenks that Mrs. Ayers owed Hafenrichter $1,850 for purchase money of this property, and that Hafenrichter held a mortgage on the property to secure said debt. If notice to Jenks was notice to plaintiff in error, then the rule above stated applies to this case, and Hafenrichter was entitled to the prior lien he received. If notice to Jenks was not notice to plaintiff in error, then the decree was erroneous in giving Hafenrichter priority.

‘Plaintiff in error was organized in 1889, under our statute relative to building associations. Section 9 of article 8 of its by-laws provides that its board of directors may appoint advisory boards to such an extent and at such times as it may deem best. ‘They shall advise with the board of directors on important topics whenever called upon to do so, and shall furnish said directors with such information relating to the matters of the association in their particular localities as they may, from time to time, require.’ Article 12 of said bylaws provides that each advisory board shall consist of not less than five members, who shall elect a president, vice president, secretary, and treasurer, and may elect them from members of the association who are not members of the advisory board. Bond is required from the secretary and treasurer. Section 4 of said article requires that all monthly dues to the association shall be paid to the treasurer of the advisory board, and by him remitted to the secretary of the association at Bloomington. Section 5 of said article provides that applications for shares shall be made by or through the secretary of the advisory board, and forwarded by him to the secretary of the association; and section 6 requires members wishing loans to fill blanks required by the association, and present them to the advisory board for action, and the advisory board will forward them to the association. Plaintiff in error organized an advisory board at Aurora. J. H. Jenks was secretary and apparently treasurerthereof during the time covered by the events here in controversy. Mrs. Ayers and her husband applied to the association, through Jenks, for stock and for the loan. He secured the issue of stock to Ayers, and its transfer to Mrs. Ayers when he discovered an error had been made as to the person in whose name the land was held. Jenks transmitted the application to the home office. Mrs. Ayers and her husband executed the bond and mortgage in his presence. The association sent the draft for nearly $6,000 to Jenks. He caused Mrs. Ayers to indorse it on the back, and return it to him, and he deposited it in the bank, and collected it, and held the money, took out of it dues, etc., owing to the association, and paid the rest of the money out on orders of Ayers and wife, as the building progressed. Although plaintiff in error put in evidence the by-laws, it also proved orally by Jenks, its witness, that his duties as secretary of the local board were to solicit stock, make loans, collect dues and interest, do the general work of the secretary and treasurer of the local board at Aurora, keep the accounts of the association at Aurora, and to collect dues, premiums, and fees of the stockholders of the association at Aurora. Jenks paid off the prior Butler mortgage previously resting on the property, recorded its release, and recorded plaintiff in error's mortgage. It was only by Jenks the association could prove what had actually been paid by Mrs. Ayers upon the dues, interest, and premium. No one else connected with the association knew, except by his books and reports. Counsel for the association, in interrogating Jenks as its witness, assumed he had been ‘acting as agent for the Interstate Building & Loan Association in Aurora,’ and he so assumed in his answers. Jenks was the officer of the association who retained possession of the stock upon which the loan was made, as the bond and mortgage...