Lawson v. Warren

• Decision Date: 19 March 1912
• Citation: 124 P. 46,34 Okla. 94
• Parties: LAWSON v. WARREN.
• Court: Oklahoma Supreme Court

124 P. 46

34 Okla. 94

LAWSON v. WARREN.

Supreme Court of Oklahoma

March 19, 1912

Rehearing Denied June 4, 1912.

Syllabus by the Court.

Where a person holding all of a series of notes secured by mortgage assigns one of them, the assignee is entitled to be preferred to the assignor and the receiver of the assignor in the distribution of the proceeds of the mortgaged property.

A receiver holds the property coming into his hands by the same right and title as the person for whose property he is receiver, subject to liens, priorities, and equities existing at the time of his appointment.

Error from District Court, Logan County; A. H. Huston, Judge.

Action by Frank L. Warren against Lewis C. Lawson and others. Judgment for plaintiff, and Lawson brings error. Affirmed.

C. Dale Wolfe, of Wewoka for plaintiff in error.

Warren & Miller, of Wewoka, for defendant in error.

ROSSER C.

This suit was brought by Frank L. Warren against Robt. M. Lee, Guy Gamble, E. E. Nolen, and Lewis C. Lawson, as receiver of certain assets of the Arnold Mercantile Company, to recover on a certain note for the sum of $1,500 secured by vendor's lien on certain property in the town of Coyle Okl. The petition alleges that Robt. M. Lee bought the property in Coyle from Gamble and Nolen, paying therefor $2,000 in cash, and giving two notes for the sum of $1,500 each, due, respectively, October 1, 1908, and October 1 1909; that the notes were assigned to the Arnold Mercantile Company of Yeager, Okl., before maturity; and that the Arnold Mercantile Company indorsed the note due October 1, 1908, to Frank L. Warren, the plaintiff. It is further alleged that Lewis C. Lawson, as receiver of certain assets of the Arnold Mercantile Company, holds the other note. A foreclosure of the vendor's lien is prayed for, and also judgment against Robt. M. Lee, the maker of the note for $1,500, and that the proceeds of the property upon which the vendor's lien was obtained be applied, first, to the note held by plaintiff, and, second, to the second note held by Lewis C Lawson.

The evidence shows that the note sued upon was the first of the two notes coming due, and was assigned by the Arnold Mercantile Company to Frank L. Warren, before maturity, as collateral security for claims which he had for collection against that company. Within a few days after the assignment of the note to Warren, Lewis C. Lawson was appointed receiver to collect the second of the two notes. Judgment was rendered for plaintiff against Lee for the amount of the note with interest and attorney fee, and also foreclosing the vendor's lien on the property in Coyle, and ordering it sold, and ordering that the proceeds be applied, first, to the payment of the note held by Warren, upon which judgment had been entered, and the balance upon the note held by the defendant, Lawson.

The sole question presented in this case is as to whether or not the first of the two notes, which was assigned to Warren, upon which suit was brought, is entitled to priority, or to be first paid out of the proceeds of the property for the price for which it was given.

The question of priority of a series of notes secured by one mortgage or vendor's lien, when in the hands of different parties, is a question upon which there is great diversity of opinion among the courts, and it would not serve any good purpose to undertake to collect and weigh all the authorities bearing upon this question. The following extract from the case of Penzel v. Brookmire, 51 Ark. 105, 10 S.W. 15, 14 Am. St. Rep. 23, will show the extent of the divergency of views upon this subject, and also the reasons given for the various views maintained by the courts. "In the absence of such a stipulation or agreement, or special equities, the authorities are not agreed as to how the proceeds of the sale of property, mortgaged to secure the payment of several notes and sold under the mortgage, shall be appropriated, when the notes secured mature at different times, have been assigned to different persons, and the proceeds are not sufficient to pay all of them. One class holds that the notes shall be paid in the order of their assignment (McClintic v. Wise, 66 Va. 488 ; Cullum v. Erwin, 4 Ala. 452; Griggsby v. Hair, 25 Ala. 327; Waterman v. Hunt, 2 R. I. 298); another, that the notes should take precedence in the order of their maturity (Mitchell v. Ladlew, 36 Mo. 526, 530 ; Sargent v. Howe, 21 Ill. 148; Vansant v. Allmon, 23 Ill. 30; Koester v. Burke, 81 Ill. 436; State Bank v. Tweedy, 8 Blackf. [Ind.] 447 ; Doss v. Ditmars, 70 Ind. 451; Marine Bank v. International Bank, 9 Wis. 57, 64; McVay v. Bloodgood, 9 Port. [Ala.] 547; Richardson v. McKim, 20 Kan. 346, 450; Hinds v. Mooers, 11 Iowa, 211; Walker v. Schrieber, 47 Iowa, 529; Wilson v. Hayward, 6 Fla. 171, 190; Kyle v. Thompson, 11 Ohio St. 616; Winters v. Franklin Bank, 33 Ohio St. 250); and a third class that the proceeds should be applied pro rata in part payment of the several notes, irrespective of their dates of maturity or assignment (Donley v. Hays, 17 Serg. & R. [Pa.] 400, 404; Cowden's Estate Appeal, 1 Pa. 278; Mohler's Appeal, 5 Pa. 418, 420 ; Perry's Appeal, 22 Pa. 43 ; Grattan v. Wiggin, 23 Cal. 16; Dixon v. Clayville, 44 Md. 573, 578; English v. Carney, 25 Mich. 178, 181; McCurdy v. Clark, 27 Mich. 445, 448; Parker v. Mercer, 6 How. [Miss.] 320, 324 ; Cage v. Iler, 5 Smedes & M. [Miss.] 410 ; Pugh v. Holt, 27 Miss. 461; Andrews v. Hobgood, 1 Lea [Tenn.] 693; Exchange Bank v. Beard, 49 Tex. 363; Delespine v. Campbell, 52 Tex. 4; Wilson v. Eigenbrodt, 30 Minn. 4 ). The authorities which hold that the notes should be paid in the order in which they were assigned do so upon the ground that the debt secured was the principal and the mortgage an accessory, and that the transfer of a part of the debt carried with it the assignment of so much of the lien created by the mortgage as is necessary to pay the part assigned as effectually as it existed in the mortgage, and that no second assignment can divest the first assignee of his lien and preference. The courts adhering to the doctrine that the notes should be paid in the order of their maturity say that the debt is the principal thing and the mortgage to secure it is only an incident; that the assignment of the debt passes the mortgage without being referred to in the assignment; that 'the assignee of the debt takes the security by the assignment, in the same condition and to the same extent as it was held by the payee at the time of the assignment, as security for the debt assigned, and succeeds under it all the rights of the assignor'; that the assignor, the payee, in the absence of a stipulation to the contrary, had the right to foreclose the mortgage when default should be made in the payment of the notes first falling due, and as each one should fall due, and satisfy them out of the proceeds in the order of their maturity, so far as the proceeds would extend, although there should not be enough to pay all; and that, therefore, inasmuch as the assignee, by the assignment of any one of the notes, succeeded to the rights which his assignor had, he has the right, in the event there is not enough to pay all, to be paid out of the mortgaged property so far as it will extend, according to the order in which his note stands in the line of maturity with the others secured by the mortgage, and that 'the different installments in a mortgage, when secured by corresponding notes, may be regarded as so many successive mortgages, each having priority according to its time of becoming payable.' *** We do not think that either of the doctrines laid down by the two classes of decisions first mentioned is sustained by reason or equity. The notes are secured by one mortgage, executed for the equal benefit of all. It does not provide that one note shall be preferred to the others, but secures all equally or pro rata. The legal title to the property mortgaged is conveyed and held for the benefit of all. The rights and interests acquired in the property begin with the date of the mortgage, and not from the maturity or assignment of the notes, or the time when the cause of action arises. There can be no priority of rights in favor of one against the others, as the mortgage is one. The simple assignment of the notes does not change the mortgage and make it any less security for any of the notes than it was before the assignment. The mortgage security in following the transfer of the notes as an incident does not pass by the assignment any farther than it was an incident at the time the transfer was made. The holders of the notes, therefore, stand eaquile jure, and consequently are entitled to participate ratably in the fund derived from the security, if there be not enough to pay all." See, also, Nashville Trust Co. v. Smythe, 94 Tenn. 513, 29 S.W. 903, 27 L. R. A. 663, 45 Am. St. Rep. 748, in which a number of authorities are cited, and which contains a lengthy discussion of the questions involved.

But these authorities do not apply to the facts of this case. This is not a conflict between two assignees, but is a conflict between the assignee of the first note and the receiver holding the second note, and as such standing in the shoes of Arnold Mercantile Company. In this case the second note was retained by the Arnold Mercantile Company, and, as between it and Warren, its assignee, equity would require that its assignee be first paid out of the mortgage fund. "An assignee of the mortgage with part of the debt is generally entitled to payment in preference to the mortgagee who retains one of the notes; while, as between different assignees of mortgage bonds or notes, priority of assignment generally gives no preference, though the cases are not in harmony. ***...