Patterson v. Miller
| Decision Date | 04 December 1929 |
| Docket Number | No. 51.,51. |
| Citation | 227 N.W. 674,249 Mich. 89 |
| Parties | PATTERSON v. MILLER et al. |
| Court | Michigan Supreme Court |
OPINION TEXT STARTS HERE
Appeal from Circuit Court, Wayne County, in Chancery; Arthur Webster, Judge.
Suit by Peter Patterson against Peter A. Miller and others. Decree for plaintiff, and defendants appeal. Affirmed and case remanded.
Argued before the Entire Bench.
C. W. Videan, of Detroit, for appellants.
Lloyd L. Axford, William E. Tarsney, and Arthur Axford, all of Detroit, for appellee.
Defendant Miller sold defendant Martin forty unimproved lots in the city of Detroit, Mich., for the sum of $60,000, and received upon delivery of the deed $9,000 in cash and a purchase-money mortgage for $51,000. Nothing was said in the deed to the effect that it was given subject to a purchasemoney mortgage. Martin, before closing with Miller, had taken the abstracts showing title in his grantor to the office of the Investment Mortgage Company, Inc., of which plaintiff, Patterson, is secretary and treasurer, and with whom he had negotiated a loan of $20,000 to be secured by six mortgages on the various lots; no lots being included in more than one mortgage. Upon receiving Martin's deed and the execution of the mortgages, which ran to Patterson as mortgagee, the loan was made by Patterson. He recorded the deed and the mortgages at the same time. He did not examine the records in the register of deeds' office to ascertain whether there had been any change in the title after the time to which the abstracts had been certified. Had he done so, he would have discovered that the deed and the mortgages he received from Martin were recorded just twenty minutes after the time Miller had recorded his purchase-money mortgage for $51,000 on the same property. Miller knew nothing whatsoever about the Patterson mortgage, and Patterson was likewise in complete ignorance of the Miller mortgage. They both acted fully within their rights, in the best of faith, and in total ignorance of the fact that Martin had mortgaged the same property twice.
Martin in his testimony claims that it was understood by Miller that he had a right to give a mortgage which would be prior to the Miller mortgage in order to enable him to raise money to build on the lots and thus improve the entire subdivision. He did build on some of the lots, which were released from the mortgages, and thus materially reduced the amount that was owing both on the Miller and Patterson mortgages. It is obvious that Miller would not have been willing to consent to Martin's raising the sum of $20,000 on property for which a deed had been given upon payment of only $9,000, and for which there was still $51,000 due. We are satisfied that Miller's good faith should not be impugned, and that he was an innocent party in the transaction.
The Miller mortgage, having been the first to be given and recorded, would be entitled to priority unless a clause in said mortgage would give the Patterson mortgage a prior lien on the property. Miller subsequently assigned his mortgage to defendant McAlpine, who in turn assigned it to defendants Niles and Peters. Miller was the loaning agent for Niles and Peters. Miller at a much later time took deeds to some of the lots on which houses had been built and which had been released from both mortgages, but this need not into the questions of the case.
Both Patterson and Miller remained ignorant of the existence of the other's mortgage until approximately a year had elapsed, when Patterson found out about the Miller mortgage. Subsequently, Miller's assignees, defendants Niles and Peters, began foreclosure proceedings by advertisement. Thereupon Patterson brought this suit to restrain the foreclosure of the Miller mortgage. As plaintiff, he claims that two of the mortgages he received, which were partly unpaid, one for $6,500 covering thirteen lots, and one for $3,500 covering seven lots, had priority over the Miller mortgage because the Miller mortgage contained the following secondary or junior provision:
‘It is further mutually understood and agreed that this mortgage is and shall be subsequent, secondary and junior to any mortgage or mortgages hereafter placed upon said premises, provided, however, that such mortgage or mortgages shall be only such as may be approved by and executed to any person, banking corporation, insurance company or trust company, of the city of Detroit, such mortgage or mortgages not to exceed in amount fifty per centum of the total cost price of the lot or lots therein conveyed and of the building or buildings thereon situated, provided further that not more than one such prior mortgage shall be executed on any of the lots described in this indenture.’
Plaintiff in his bill of complaint sought a decree establishing the priority of his mortgages over the Miller mortgages. He further prayed for an injunction to restrain the foreclosure sale so that purchasers at such foreclosure sale might not be misled into believing that they were receiving a good title to the property when, as a matter of fact, they were only receiving a deed subject to the Patterson mortgage. Plaintiff further asked that the amount due on the Miller mortgage be reduced to the extent of the value of the equities in certain lots and the houses erected thereon, which had been deeded to Miller for the benefit of defendants Niles and Peters. These improved lots had been released from the Patterson and Miller mortgages after buildings had been erected and new mortgages placed on said lots.
The lower court held that plaintiff had constructive notice of the Miller mortgage, with the above-quoted secondary or junior clause in it. It, however, further held:
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