Sumerow v. Johnson

• Decision Date: 16 April 1892
• Citation: 19 S.W. 114,56 Ark. 85
• Parties: SUMEROW v. JOHNSON
• Court: Arkansas Supreme Court

19 S.W. 114

56 Ark. 85

SUMEROW v. JOHNSON

Supreme Court of Arkansas

April 16, 1892

APPEAL from Crittenden Circuit Court, J. E. RIDDICK, Judge.

Decree affirmed. Judgment reversed and cause remanded.

W. L Bailey, (of Kansas) and W. S. McCain for appellant.

1. The taking of a new note and mortgage is payment of the old note and releases the old mortgage, when such is the understanding of the parties. Jones, Ch. Mortg. sec. 645; Herman, Ch Mortg. sec. 168; 11 Ala. 775. When evidences of debt are surrendered and new security taken, this is prima facie evidence of the satisfaction of the old securities. 46 Mich 29; 11 Gray (Mass.), 190; 20 Minn. 411; 29; 145 Mass. 357; 73 Ind. 429.

2. The second mortgage was not acknowledged, and was void against creditors and purchasers, even though they had actual notice. 9 Ark. 117; 18 id. 105; 22 id. 141; 32 id. 453; 35 id. 68; 40 id: 540; 33 id. 206; 20 id. 193; 41 id. 192. An unacknowledged mortgage, or one defectively acknowledged, has no right to record. 9 Ark. 117; 35 id. 57; 40 id. 540; 25 id 158.

3. Appellee has not brought itself within the rule that "one who purchases subject to an outstanding mortgage is precluded from setting up its invalidity." Boone on Mortg., ch. 11; 1 Jones on Mortg., ch. 17. No such agreement, contract or understanding was shown, but the contrary appears. See upon this point 31 Ark. 601; 7 id. 253; 72 Mass. 572; 12 N. Y. (2 Kernan,) 79; 9 Paige, 432; Brandt on Suretyship, sec. 284; 2 Sand, Chy. 480; 99 U.S. 119; 27 N.J.Eq. 152; 56 Iowa 349; 94 N.Y. 370; 67 Wis. 154; Wiltsie on Mortg., sec. 396. The deed from Lamberson to Challis contains a general covenant against all persons claiming under him, and no exceptions are made in favor of this mortgage

4. One who purchases from a mortgagor can set up any valid defense against the mortgage unless he is estopped from doing so by express agreement with his vendor. 39 Ark. 182; 49 id. 83; 8 Paige, 440; 57 Wis. 594; 21 id. 241; 86 Ill. 513; 44 N.Y. 626; 4 Pet. 228.

Ratcliffe & Fletcher for appellee.

1. One who purchases subject an outstanding mortgage is precluded from setting up its invalidity in the hands of its owners on any ground than existing, 13 Barb. 561; 2 Seld. 348; 9 Paige, 137; 5 Barb. 130; 3 Metc. (Mass.) 147; 40 Barb. 362; 45 Ill. 468; 129 Mass. 398; 104 Mass. 249; 121 Ill. 130; 13 N.E. 547. The mortgage was good as against Lamberson. He could not question its validity, and Challis is estopped from asserting any greater right than he. 1 Jones on Mortg., secs. 736, 738, 744; 34 Ill.App. 460; 36 id. 161; 104 Mass. 249.

2. Appellee does not claim the land under its mortgage, but if it did, it would not be precluded from showing the facts by the waranty in the deed to Challis. 23 N. J. L. (2 Zab.) 680; 90 Pa.St. 78; 92 id. 495. The agreement to pay off the incumbrance or take subject to same need not be in writing. Boone on Mortg., sec. 125; 29 N.J.Eq. 520; 37 Iowa 239.

3. The taking of the second mortgage did not have the effect to satisfy the first, unless it is clear it was so intended. 2 Jones, Mortg., secs. 925-927; Jones, Ch. Mortg. secs. 643-4; 28 Ark. 195. The proof does not show such intent. But courts of equity, where the second security fails, will keep alive the first mortgage, to protect the parties. 38 Ark. 171.

4. The bank was not a party to the writing, and hence is not precluded from contradicting it by parol evidence. 16 Ark: 512; 31 id. 411; 45 id. 449; 48 id. 543; 4 Pet. (U. S.) 82; 56 Ala. 222; 2 Whart., Ev. secs. 1042 3 et seq.; 3 Fors. (N.H.) 555; 1 Greenl. Ev., sec. 279. The bill of sale contained no warranty, and all the circumstances show none was intended. 31 Ark. 423. See also 86 Ill. 573; 55 Vt. 205; 43 Ind. 213.

OPINION

BATTLE, J.

George Lamberson, being indebted to the German National Bank in the sum of $ 2500 for money loaned, executed a deed to a trustee, on the first day of February, 1889, whereby he mortgaged seventeen yoke of oxen and other personal property to secure the payment of the debt for $ 2500, and all other indebtedness which should be contracted by him with the bank on or before the first of January, 1890. This mortgage was duly acknowledged and recorded within sixteen days after its execution. His indebtedness to the bank having increased to the sum of $ 9554.48, he executed a second deed, on the 6th of December, 1889, and thereby mortgaged the property mentioned in the first deed and a saw mill plant, known as "Lamberson's mill." and all tram cars, tram tracks, and personal property used in connection with the mill, to secure the payment of this indebtedness, which included the indebtedness mentioned in the first mortgage. The second deed was filed for record on the day following its execution, and was recorded, but was never acknowledged, or proved by witnesses. To foreclose these mortgages this action was brought by the bank against Lamberson; W. L. Challis and others.

Plaintiff alleged that Lamberson, on the first day of February, 1890, sold and transferred to Challis the property which was mortgaged to secure the bank, subject to the mortgages, and with the understanding that they were valid liens on the property described therein and that the indebtedness secured thereby should be paid before Challis could acquire a good title to the property. But Challis, in his answer, denied this, and alleged that Lamberson sold the property to him unconditionally, on the 27th of December, 1890, for the consideration of $ 6000; and that the first mortgage was satisfied and cancelled by the execution of the second in lieu thereof.

Upon the hearing evidence was adduced in behalf of both parties, in consideration of which the court sustained the allegations of plaintiff's complaint, rendered judgment in its favor against Lamberson for the amount of his indebtedness to the bank, and decreed that the mortgages be foreclosed; and defendants appealed.

Under the laws of this State a mortgage is no lien on the property described in it as against any one, except the parties to it unless it be acknowledged or proved and filed with the recorder. The second mortgage was neither acknowledged nor proved. To avoid the effect of such failure it is alleged and insisted that Challis purchased subject to it. The burden of proving this allegation rested upon the bank. To do this it adduced the testimony of Lamberson, who testified that, in selling to Challis, he took into consideration the fact that the bank held the second mortgage; that it was not his intention in selling to defeat it or in any way to affect its collection; and that, in selling to Challis, he only transferred all the right and title he had in the property. But he explained this by saying that he believed that the second mortgage was a valid lien on the property therein described, and that Challis would pay it in order to protect his interest in the property, and that Challis took the property subject only to such claims as he should find were valid liens upon it as against him when it came into his hands as a purchaser. It does not appear was any understanding that he only purchased the equity of redemption, or that he would take any less interest than the law permitted him to acquire. If the mortgage was considered of any importance in the sale, it was because it was already a valid lien upon the property as against every one, and not because the parties to the sale intended to make it a lien as to Challis. The most reasonable conclusion is,...