Shattuck v. Bank

• Decision Date: 06 July 1901
• Docket Number: 12,500
• Citation: 63 Kan. 443,65 P. 643
• Parties: SARAH G. SHATTUCK v. THE BELKNAP SAVINGS BANK et al
• Court: Kansas Supreme Court

65 P. 643

63 Kan. 443

SARAH G. SHATTUCK v. THE BELKNAP SAVINGS BANK et al

No. 12,500

Supreme Court of Kansas

July 6, 1901

Decided July, 1901.

Error from Harvey district court; M. P. SIMPSON, judge.

STATEMENT.

THIS was an action in foreclosure by the Belknap Savings Bank against Elliott E. Pollard, Sarah E. Pollard, Sarah G Shattuck, and others. The facts, in substance, are as follows: On the 1st day of February, 1887, defendants Elliott E. and Sarah E. Pollard made to one E. M. Sheldon their promissory note in the sum of $ 1600, due five years after date, with interest at seven per cent., payable semiannually and a trust deed to the Kansas Loan and Trust Company, of even date, on certain real estate in the city of Newton, to secure payment of the note. Before maturity, the Belknap Savings Bank became, and ever since has been, the owner and holder of this note. On the 23d day of February, 1887, the Pollards made to plaintiff in error their promissory note in the sum of $ 1200, due three years after date, interest at the rate of twelve per cent., payable semiannually, and a second mortgage upon the same real estate to secure its payment. This mortgage contained the following recital "Said premises are subject to a mortgage for $ 1600, at twelve per cent." On the 15th day of February, 1892, the bank entered into an agreement with the Pollards, extending the time of the payment of the first mortgage for a period of five years.

Default having been made in the payment of interest, this action was commenced on the 17th day of June, 1895, to foreclose the first mortgage. During the pendency of the action an agent of the plaintiff took from the makers of the note and trust deed a quitclaim deed to the mortgaged premises, agreeing, in consideration thereof, that the makers should not be held personally liable for any deficiency judgment thereon after exhausting the mortgaged premises, it being agreed and understood, however, that the foreclosure action should proceed to final decree and sale of the property.

The taking of this deed was set forth by plaintiff in error in a supplemental answer filed on the 24th day of June, 1896, and the claim made therein that, in consideration of this conveyance, the bank released and discharged the Pollards from any and all personal liability for the payment of the debt owed by them to the bank; that the bank agreed, in consideration of the execution and delivery of the deed, that it would not take or obtain a personal judgment against the Pollards upon said indebtedness, and that, by reason of such conveyance and agreement, the mortgage of plaintiff in error had become a first and superior lien on the property.

At the trial, upon request, the court made special findings of fact and conclusions of law, upon which findings a decree was entered foreclosing both mortgages and establishing the mortgage of the bank a first lien upon the property, and that of plaintiff in error a second lien. Sarah G. Shattuck defendant below, brings this proceeding in error to obtain a reversal of the judgment.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. TITLE AND OWNERSHIP -- Merger. Where the holder of a lien on real estate acquires the legal title to the property, with the intention that such lien shall not merge in the legal title taken, such intention will prevail as against junior encumbrancers.

2. TITLE AND OWNERSHIP -- Right of Subrogation Waived. A junior lien holder has the right to make payment of a paramount lien, and upon payment to be subrogated to all the rights of the superior lien-holder; but if such payment is neither made nor tendered, and the junior lien-holder assumes and maintains the attitude of denying both the validity and superiority of such lien, the right to make payment and of subrogation will be deemed to have been waived.

S. W. Shattuck, jr., for plaintiff in error.

Fuller & Whitcomb, for defendants in error.

POLLOCK J. DOSTER, C. J., SMITH, J., concurring.

OPINION

POLLOCK, J.:

Two contentions are made by counsel for plaintiff in error to work a reversal of the judgment below: (1) That the taking of the quitclaim deed by the bank operated to merge the mortgage held by it in the legal title so taken, and thus gave priority to the mortgage of plaintiff in error; (2) that the agreement made by the bank to receive the conveyance of the mortgaged premises and release mortgagors from any deficiency judgment that might remain after exhausting the mortgaged premises operated in equity to create the mortgage of plaintiff in error a paramount lien on the premises.

As to the first of these contentions, the doctrine is firmly held by this court that where the holder of a lien acquires the legal title to the property upon which the lien rests, with the intention that such lien shall not be merged in the legal title, such intention will prevail as against junior encumbrancers. (Bowling v. Garrett, 49 Kan. 504, 31 P. 135; Rand v. Ft. S.W. & W. Rly. Co., 50 id. 114, 31 P. 683.) This is also the settled law in other jurisdictions. (The Delaware Railroad Construction Co. v. The Davenport & St. Paul R. Co., 46 Iowa 406; Richardson v. Hockenhull et al., 85 Ill. 124; Brooks v. Rice, 56 Cal. 428; Hanlon v. Doherty et al., 109 Ind. 37, 9 N.E. 782; Belknap v. Dennison, 61 Vt. 520, 17 A. 738; Coburn v. Stephens, 137 Ind. 683, 36 N.E. 132.) The trial court found that it was not the intention of the bank that its mortgage should merge in the legal title taken, as follows:

"But that the taking of said deed by said plaintiff...