Newman v. Fidelity Savings & Loan Ass'n

• Decision Date: 29 November 1912
• Docket Number: Civil 1246
• Citation: 14 Ariz. 354,128 P. 53
• Parties: J. B. NEWMAN, GEO. R. HILL, WILLIAM M. STALLARD and ANNIE D. STALLARD, His Wife, Appellants, v. FIDELITY SAVINGS AND LOAN ASSOCIATION, a Corporation of California, Appellee
• Court: Arizona Supreme Court

128 P. 53

14 Ariz. 354

J. B. NEWMAN, GEO. R. HILL, WILLIAM M. STALLARD and ANNIE D. STALLARD, His Wife, Appellants, v. FIDELITY SAVINGS AND LOAN ASSOCIATION, a Corporation of California, Appellee

Civil No. 1246

Supreme Court of Arizona

November 29, 1912

APPEAL from a judgment of the District Court of the Fifth Judicial District, in and for the County of Gila. E. W. Lewis, Judge. Affirmed.

STATEMENT OF FACTS BY THE COURT.

The record in this case consists of an agreed statement of the case permitted by paragraph 1522, Civil Code, as amended by section 11 of chapter 74 of the Session Laws of Arizona approved March 21, 1907. This action was commenced by the appellee as plaintiff against the appellants as defendants to foreclose a realty mortgage made to it by William M. and Annie D. Stallard. The appellants Newman and Hill were made defendants to the action because of some alleged adverse claim made by them to the property affected, viz., because they were alleged holders of a mortgage assigned to them their assignment having been recorded subsequent to the recording of the mortgage in suit. On and prior to October 21, 1909, appellants Newman and Hill were the owners of the property; and they contracted to sell the same to William M Stallard, and on November 11, 1909, made, and delivered a deed conveying the same to Stallard. Stallard immediately conveyed the property to one Sanford Jackson, and received as a part of the purchase price Jackson's negotiable promissory note in the sum of $500 secured by a mortgage on the premises. The deeds from Newman and Hill to Stallard, and from Stallard to Jackson, and the mortgage from Jackson to Stallard were duly recorded. The Jackson note and mortgage to Stallard before maturity on January 17, 1910, were assigned to Newman and Hill in payment of a balance of the purchase price due them from him. The note was indorsed and delivered. The mortgage was assigned in writing duly acknowledged and delivered. The assignment of the mortgage was not recorded until long after the subsequent mortgage, sought to be foreclosed herein, was made and recorded. On February 1 1910, Jackson reconveyed the property to Stallard. This deed was recorded. On the same date Stallard entered a release and satisfaction of the Jackson mortgage, on the margin of the record. On April 13, 1910, Stallard received a loan from the appellee, and as security mortgaged the property to it, which mortgage was promptly recorded. This is the mortgage sought to be foreclosed as a prior lien on the property, on account of default in payment of the note secured thereby. Stallard had no authority from Newman or Hill to release the mortgage, and Newman and Hill had no actual knowledge of such release nor of the mortgage to appellee, until about November 10, 1910, thereafter; and, when these facts became known to them on or about the said date, they recorded their assignment of the Jackson-Stallard mortgage. It does not appear when the Jackson note matured. The appellee had no actual or other knowledge of the assignment of the Jackson-Stallard mortgage to Newman and Hill, when the loan was made to and received by Stallard. It relied solely upon the state of the record showing a release and satisfaction of the Jackson mortgage. The priority of the mortgage lien of the appellee's mortgage, over the appellants' Newman and Hill mortgage, is the contested question. Upon the foregoing facts the trial court ruled the appellee's mortgage a prior lien, and gave judgment accordingly. The defendants Newman and Hill made a motion for a new trial, which was by the court denied, and thereupon they appealed to this court. They assign as error as follows: "The court erred in adjudging appellee's said mortgage to be prior and superior to appellants' said mortgage."

Mr. George R. Hill, for Appellants.

Mr. Neil M. Allred, for Appellee.

OPINION

CUNNINGHAM, J.

The appellants base their argument for a reversal, in part, upon the premise that the release of the Jackson mortgage was a forgery. We do not deem it necessary to consider whether or not a falsification of a public record made under the circumstances disclosed by the record in this case is a forgery. We concede that the act of Stallard releasing the Jackson mortgage, while it and the note secured by it were assigned by him and in the possession of his assignees, was fraudulent, and deprives any person having knowledge of the fraud from reaping any benefits therefrom. The appellee does not fall within such class, however, as it is agreed that appellee had "no knowledge of the assignment of the said mortgage at the time of making the loan, nor any knowledge whatsoever concerning the same, other than as disclosed by the records." Knowledge of the assignment would be essential to charge appellee with knowledge of the fraud in releasing the mortgage. Without the assignment in existence, no fraud could have been perpetrated by a release of a mortgage by the mortgagee.

The solution of the question does not depend upon the fraudulent act of Stallard releasing the assigned mortgage; but it depends upon notice of the existence of such assignment.

It is argued that the appellee had no actual notice of the assignment, and that the assignment was not of record when it acquired its lien on the property, and that the records disclosed, at the time the appellee made the loan and took its mortgage, that the Jackson mortgage had been regularly released by the mortgagee more than two months prior thereto.

Stallard, by his fraudulent release of the assigned mortgage, could not affect the rights of his assignees to enforce the mortgage lien, as between the parties to such contract of assignment. On the other hand, the appellee has the right to presume that public records speak the truth and to act thereon in all matters affected by instruments required by law to be recorded. If the law requires or provides for the recording of certain instruments, and they are not recorded, a party searching the records is justified in concluding that no such instrument exists, and the law bears him out in the presumption.

Is the assignment of a mortgage such an instrument as the laws require to be recorded to charge persons dealing with the mortgaged property with notice of such assignment, is the question presented for our solution.

Paragraph 735, Civil Code of Arizona, provides: "No instrument affecting real estate is of any validity against subsequent...