Sec. Trust Co. v. Tuller

• Decision Date: 24 July 1928
• Docket Number: No. 144.,144.
• Citation: 243 Mich. 570,220 N.W. 795
• Parties: SECURITY TRUST CO. v. TULLER et al.
• Court: Michigan Supreme Court

243 Mich. 570

220 N.W. 795

SECURITY TRUST CO.

v.TULLER et al.

No. 144.

Supreme Court of Michigan.

July 24, 1928.

Appeal from Circuit Court, Wayne County, in Chancery; Vincent M. Brennan, Judge.

Suit to foreclose trust mortgage by the Security Trust Company against Lew W. Tuller and others. From the decree, plaintiff appeals. Reversed in part, and in part affirmed.

Argued before the Entire Bench.Stevenson, Butzel, Eaman & Long, of Detroit (Leo W. Kuhn and William L. Carpenter, both of Detroit, of counsel), for appellant.

Bryant, Lincoln & Miller, of Detroit (Patrick S. Nertney, of counsel), for cross-appellant Otis Elevator Co.

Friedman, Meyers & Keys, of Detriot, for appellees Dickinson Island Land Co. and Berman.

Yerkes, Simons & Goddard, of Detroit, for appellees Properties Co. and Tuller.

McDONALD, J.

This is a suit to foreclose a trust mortgage given by Lew W. Tuller and wife to the Security Trust Company of Detroit, Mich., to secure a bond issue of $1,500,000. The mortgage pledged real estate and buildings comprising two hotel properties in the city of Detroit. The hotels were not furnished when the mortgage was executed, but by its terms it covered after-acquired furniture, furnishings, and equipment used in the buildings. On June 10, 1925, the furniture and furnishings had been put in. The trust instrument was then filed with the city clerk as a chattel mortgage. It had been previously recorded in the office of the register of deeds in Wayne county. No affidavit of renewal was filed with the city clerk until March, 8, 1928. During the period that the Security Trust Company was in default for failure to file the renewal affidavit, the Tullers sold the premises and personal property to the Properties Company, a Delaware corporation, and this corporation sold to the defendant the Dickinson Island Land Company. Mr. Tuller was the principal stockholder of the Properties Company, and the defendant Berman is a stockholder and director of the Dickinson Island Land Company. In the latter purchase, Mr. Berman carried on the negotiations for himself and his company. As a result of the transaction, he became the owner of one-third, and the Dickinson Island Land Company of two-thirds, of the premises and personal property covered by the trust mortgage.

There was default in the payment of principal, interest, and taxes under the terms of the mortgage. The trustee declared all the bonds immediately due and payable, and filed this bill to foreclose the mortgage. On the hearing there was no contest, except as to the furniture and furnishings contained in the hotel buildings. It was the contention of Mr. Berman and the Dickinson Island Land Company that they purchased the property without any notice or knowledge that the furniture and furnishings were covered by the mortgage. The trial judge accepted their view of the case, and denied the right of the trustee to include the furniture and fixtures in its foreclosure. The plaintiff has appealed.

The only question involved is whether the defendants purchased the furniture and furnishings with knowledge or notice that they were subject to the lien of the trust mortgage. The claims of the parties, as stated in their briefs, are as follows:

‘The plaintiff does not claim that the defendants had constructive notice that the trust mortgage covered the personal property; i. e., that the mortgage was filed as provided for by statute. The plaintiff believes it is not necessary to go into the question whether the defendants had actual knowledge-were actually conscious of the fact that the mortgage covered the personalty before they closed the deal. But the plaintiff does claim that these defendants had actual notice that the mortgage covered the personalty; i. e., that there are certain facts that are conceded and admitted by the defendants to be true, from which, as a matter of law, the defendants are charged with notice that the mortgage covered the personalty.’

The defendants say:

‘We will concede that the defendants' knowledge of the existence of the trust mortgage bound them to all the terms, conditions, and covenants contained in said mortgage, whether or not the defendants actually knew of the various terms, conditions and covenants. We claim, however, that a chattel mortgage on furniture and furnishings is not a necessary part of a trust mortgage on real estate, and that defendants' knowledge of the existence of the real estate mortgage did not fix upon them notice of the chattel mortgage clause contained therein.’

It will be noted there is no disagreement between the parties as to the effect of recording with the register of deeds this mortgage covering both realty and personalty. Whether or not the defendants knew of the mortgage, the fact that it was recorded was constructive notice to them that real estate was mortgaged, but was no notice that it covered personal property. And, no renewal affidavit having been filed with the city clerk as required by statute, the filing of the mortgage there did not charge the defendants with notice that the furniture and furnishings were pledged. It will also be noted that there is no claim that defendants had any express notice or actual knowledge of the existence of the chattel mortgage. So that, if they are to be charged with notice, it must be because of their knowledge of some facts or circumstances sufficient in law to put them on inquiry, or which in themselves amount to actual notice that the furniture and furnishings were covered by the trust mortgage. We find such facts in the preliminary agreement between defendant Berman and the Properties Company and in the abstracts which were examined by Berman's counsel.

The preliminary agreement for the purchase of the property by the Dickinson Island Land Company was signed by Mr. Berman. He was acting for himself and the company. The agreement recites the sale to Berman of the two hotel properties, ‘together with all the personal property, fixtures, and equipment therein,’ after which is the following statement:

‘The foregoing properties and personal property therein are free and clear of all liens and incumbrances, excepting a mortgage to the Security Trust Company in amount of one million one hundred fifty thousand ($1,150,000) dollars.’

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