Kendrick State Bank v. Barnum

• Decision Date: 03 July 1918
• Parties: KENDRICK STATE BANK, a Corporation, Respondent, v. GEORGE P. BARNUM and FARMERS BANK AND TRUST COMPANY, a Corporation, Appellants
• Court: Idaho Supreme Court

173 P. 1144

31 Idaho 562

KENDRICK STATE BANK, a Corporation, Respondent, v. GEORGE P. BARNUM and FARMERS BANK AND TRUST COMPANY, a Corporation, Appellants

Supreme Court of Idaho

July 3, 1918

MORTGAGE LIEN - PRESENTATION OF CLAIM FOR MORTGAGE INDEBTEDNESS AS UNSECURED CLAIM-ERRONEOUS DISTRIBUTION OF ASSETS BY ADMINISTRATOR-ERROR IN COMPUTATION.

1. The fact that a mortgagee files his claim against a decedent's estate in probate as an unsecured claim does not, ipso facto, operate as a waiver of his mortgage lien.

2. Where a mortgagee presents his claim as an unsecured claim and the administrator inadvertently includes such mortgagee in a pro rata distribution of assets among creditors, and the trial court directs that the amount so paid to the mortgagee be refunded to the administrator, which was done, the mortgagee cannot be deemed to have participated in the general assets of the estate, and his measure of relief in action for foreclosure is limited to the security, all right to a deficiency judgment having been waived.

[As to statement of claims against a decedent's estate, see note in 130 Am.St. 311]

APPEAL from the District Court of the Second Judicial District, for Latah County. Hon. Edgar C. Steele, Judge.

Action to foreclose a mortgage. Judgment for plaintiff affirmed.

Judgment affirmed. Costs awarded to respondent.

Frank L. Moore and A. H. Oversmith, for Appellants.

After a sale of mortgaged property through the probate court, the security is exhausted and it cannot be pursued any further. ( First National Bank v. Glenn, 10 Idaho 224, 109 Am St. 204, 77 P. 623.)

Where the mortgagee allows the property to be sold by the administrator and has presented a secured claim as an unsecured claim, then the security is waived. (In re Turner's Estate, 128 Cal. 388, 60 P. 967.)

Eugene A. Cox and T. B. West, for Respondent.

The record shows that plaintiff intended to file its claim as a secured claim; that all of the parties in any way affected knew that plaintiff's claim was a secured claim. The question involved in the case at bar is not whether the mortgagee by failing to file his claim as a secured claim loses the right to have his claim treated in probate proceedings as a secured claim, but whether by failing to file it as a secured claim he loses the right to have it treated as a secured claim in all other courts. (Bank of Sonoma County v. Charles, 86 Cal. 322, 24 P. 1019; Mathew v. Mathew, 138 Cal. 334, 71 P. 344.)

BUDGE C. J. Morgan and Rice, JJ., concur.

OPINION

BUDGE, C. J.

On March 1st and 5th, 1910, Joseph M. Wild made, executed and delivered to the Kendrick State Bank, respondent herein, his two promissory notes aggregating $ 1,000, secured by a real estate mortgage on lots 2 and 3 of block 4 of the original town site of Kendrick, Latah county, which mortgage was duly filed of record. On May 18, 1911, Wild made, executed and delivered to George P. Barnum, an appellant herein, his promissory note in the sum of $ 1,534.40, secured by a mortgage on the same property, which was also duly filed of record.

On the 5th of August, 1911, Wild died testate, and thereafter Ruth W. Broman, county treasurer and ex-officio public administrator, was duly appointed as administratrix with the will annexed of Wild's estate.

On the 10th day of September, 1912, the Kendrick State Bank filed with the administratrix its claims against the estate, which were duly allowed. However, it failed in presenting and filing its claims, to refer to the fact that its notes were secured by the mortgage.

On the 27th day of May, 1912, the Farmers' Bank & Trust Company, which then held the Barnum note and mortgage as collateral, filed its claim as a secured claim.

In 1914 a foreclosure proceeding was commenced by both mortgagees. At that time, as appears from the record, it was conceded that both mortgages were valid liens and that the mortgage of the Kendrick State Bank was a prior lien. After the action was commenced, $ 700 rent was collected by the administratrix. Thereafter a conference was held between the representatives of the holders of the two mortgages herein referred to, at which meeting it was agreed that the $ 700 be distributed, pro rata, to the creditors, both secured and unsecured; that the foreclosure suit be dismissed and that a sale be had of the property covered by the mortgages in the probate court in order that costs and expenses might be avoided and the creditors of the estate be paid their respective claims in full. The $ 700 was distributed and the suit was dismissed. On the 2d day of September, 1914, in keeping with the understanding, the administratrix petitioned the probate court for an order of sale. On the 7th day of November, 1914, the sale was held. Barnum, prior to the dismissal of the foreclosure proceedings, had again become the owner of his note and mortgage and, with the representative of the Farmers' Bank & Trust Company, agreed with the representative of the Kendrick State Bank that if the $ 700 were distributed and the foreclosure proceeding dismissed they would pay off the Kendrick State Bank's mortgage, and in the event there were no better or higher bids, bid in the property for an amount sufficient to pay off the Barnum mortgage. At the administratrix's sale Barnum bid in the property. The sale was subsequently confirmed by the district court on an appeal from the probate court. Thereafter Barnum tendered to the administratrix a receipt and release of his mortgage and demanded a deed. The administratrix refused to deliver the deed without payment being made by Barnum of the amount bid for the property and insisted that the deed should contain a proviso that Barnum assume the mortgage of the Kendrick State Bank, which he refused to do.

On the 25th day of February, 1915, the respondent commenced this action to foreclose its mortgage. Barnum and the Farmers' Bank & Trust Company filed their separate answer; the administratrix filed her separate...