Swope v. Jordan

• Decision Date: 24 May 1901
• Citation: 64 S.W. 52,107 Tenn. 166
• Parties: SWOPE v. JORDAN et al. SAME v. THOMPSON et al.
• Court: Tennessee Supreme Court

64 S.W. 52

107 Tenn. 166

SWOPE v. JORDAN et al.

SAME v. THOMPSON et al.

Supreme Court of Tennessee.

May 24, 1901

Appeal from chancery court, Shelby county; F. H. Heiskell Chancellor.

Suit to foreclose a mortgage by W. C. Swope against R. A. Jordan and others. From a decree in favor of defendants, complainant appeals. Modified and affirmed.

St John Waddell, W. W. Goodwin, and J. M. Steen, for appellant.

Myers & Banks and Prescott & Farmer, for appellees.

WILKES J.

October 1, 1889, M. M. Gilchrist subscribed for 12 shares of stock in the Interstate Building & Loan Association of Bloomington Ill., each share being for $100. June 1, 1889, he borrowed from the association $1,200, and secured the same by mortgage on real estate; the amount to be paid; under the rules and by-laws of the association, in monthly installments. The association paid over the entire sum of $1,200, and the premium bid was to be paid in monthly installments. May 25, 1892, Gilchrist and wife conveyed the property to Robert Thompson by deed, for the consideration of $2,500. Twenty dollars of the amount was paid in cash, and for the remainder 111 notes were executed, payable monthly. A mortgage back to Butler Jack, trustee, was executed by Thompson and wife, with power of sale in default of payment of the purchase money. The deed or instrument contains this clause: "That the same [premises] are free from all incumbrances, except a trust deed to the Interstate Building & Loan Association of Bloomington, Illinois, which M. M. Gilchrist assumes to pay." This is signed by Gilchrist and wife and Thompson and wife. On the 11th of July, 1894, Gilchrist assigned to W. C. Swope, before their maturity, the purchase-money notes for the lots, in satisfaction of a debt he had been compelled to pay for him as indorser. Gilchrist having defaulted on payment of his dues to the association, his stock was declared forfeited; and Jordan, its trustee, advertised to sell the lots under the trust deed. Complainant enjoined the sale, which injunction continued in force until final decree in this cause. There was a demurrer to the bill, which was overruled, with leave to rely on the same in the answer, which was done. January 28, 1897, a decree was entered appointing a receiver. June 1, 1898, the association, having become insolvent, was placed in the hands of a receiver by a court in Illinois. On June 21, 1898, a general creditors' bill was filed in the chancery court at Memphis against the association and was sustained. The association was adjudged insolvent, and Edward Barry was appointed receiver; being the same person theretofore appointed in the suit in Illinois. He filed an answer and cross bill in this cause, and prayed for a foreclosure of the mortgage to the association, claiming as due under the rules and by-laws up to January 1, 1897, the sum of $1,440.50. Pending the suit and injunction which Swope had sued out on September 24, 1896, he (Swope) purchased the lots at tax sale from a back-tax attorney, and claims under this tax sale a title paramount. The trustee of Shelby county sold the property presumably for the taxes of 1895, also, and reported the same to the clerk of the circuit court. On September 13, 1899, the receiver redeemed the property from this sale, and took deed and certificate therefor, and set up these facts by cross bill. The cause was heard on the entire record March 29, 1891, and the chancellor decreed that the trust deed of Gilchrist and wife to the trustee of the association was prior in date and equity to the trust deed of Robert Thompson and wife to Butler Jack, trustee, of date May 25, 1892, and decreed the foreclosure of said deed of June 1, 1891, subordinating to it any lien in the said deed of May 25, 1892, and decreeing a sale of the property, and subjecting the funds in the hands of the receiver, and the proceeds of the Gilchrist stock in the said association, to the payment of any indebtedness found due thereon, and referred the cause to the clerk and master to take an account of said indebtedness,--to be taken according to the rule laid down by this court in Rogers v. Hargo, 92 Tenn. 35, 20 S.W. 430, and other cases; from which decree the complainant has appealed to this court and assigned errors.

The first assignment of error by appellant, W. C. Swope, is that the court erred in refusing relief to him under his supplemental bill, because of his so-called tax purchase of the property in litigation from A. J. Harris, back-tax attorney. In regard to this the facts are as follows, in addition to what has already been stated: The back-tax attorney's deed to Swope was executed November 18, 1898. It is quite meager and informal. It does not show the year for which the taxes were delinquent and the property was sold. It does not show the amount of taxes, nor the penalty nor interest, nor whether the sale was public or private. Swope, the purchaser, was holding under Gilchrist's assignment of the notes to him for a pre-existing debt, and had full knowledge of the priority of the association's mortgage on the property, and of Gilchrist's stipulation to pay the dues to the association, and his implied and express duty and stipulation in the trust deed to the association to keep down the taxes. He procured the sale of the property to be enjoined for defaults in these payments, and during the pendency of that injunction bought the property at the tax sale. If it was not the direct duty of Swope, the assignee of the notes and mortgage, to keep down the taxes, he would not be allowed to invoke the injunctive power of the court to hold off defendants with the one hand, and on the other hand buy in property at tax sale, and claim the same by paramount title. It does not clearly appear whether the sale made by the county trustee was for the same taxes as those for which the back-tax attorney made sale, but the inference is that it was. Barry, the receiver, redeemed this sale, and set up the rights acquired thereunder by cross bill. We do not think complainant can take anything under this tax purchase.

The second error assigned is to the decree of the court in holding that the trust deed from M. M. Gilchrist and wife to B. M. Stratton, trustee, of date June 1, 1891, to secure the Interstate Building & Loan Association of Bloomington Illinois, in the payment of $1,200, borrowed money, was entitled to priority of satisfaction of payment over the deed of Robert Thompson and wife to Butler Jack, trustee, to secure M. M. Gilchrist in the payment of 111 notes secured by Exhibit B in bill. The third assignment of error by complainant is to a decree of the chancellor in declaring a charge upon the lots of land in favor of the Interstate Building & Loan Association under the trust deed executed by Gilchrist and wife to B. M. Stratton, trustee, over the title of Robert Thompson, and the notes executed by him to M. M. Gilchrist, and secured by trust deed of Thompson to Butler Jack, trustee, which last-named notes are now held by complainant, Swope. The above two assignments cover practically the same proposition, and, for convenience, we consider them together. The deed and mortgage between Gilchrist and Thompson contains the clause before recited: "That the same [premises] are free from all incumbrances, except a trust deed to the Interstate Building & Loan Association of Bloomington, Illinois, which M. M. Gilchrist assumes to pay." This must operate as an estoppel upon Thompson and Swope, the assignee, to question the legality and priority of the mortgage to the association. They are both affected with notice, and cannot claim except in subordination to that mortgage, as neither occupies the status of an innocent purchaser. 1 Jones, Mortg. (5th Ed.) §§ 735, 736, and notes; Id. p. 695, § 544; 2 Pom. Eq. Jur. p. 453, § 937; 3 Pom. Eq. Jur. § 1205, and notes; Johnson v. Thompson, 129 Mass. 398; Canfield v. Shear, 49 Mich. 313, 13 N.W. 605; 15 Am. & Eng. Enc. Law, p. 835; Mining Co. v. Heck, 15 Lea, 497-515; McRoberts v. Copeland, 85 Tenn. 211, 2 S.W. 33; Caraway v. Caraway, 7 Cold. 245; Rankin v. Warner, 2 Lea, 302-305; Kilpatrick v. Haley, 13 C. C. A. 480, 66 F. 133-136. In Jones, Mortg. (5th Ed.) § 736, the author says: "When one purchases land expressly subject to a mortgage, the land conveyed is as effectually charged with the incumbrance of the mortgage debt as if the purchaser had expressly assumed to secure it. The conveyance of land subject to a mortgage operates to give priority to the mortgage against the purchaser and those claiming liens under judgments subsequently rendered. The amount of the existing mortgage having been deducted from the purchase money of the incumbered property, the grantee, in effect, undertakes to pay the amount of the purchase money represented by the mortgage to the holder of it, and he is as effectually estopped to deny its validity as he would be had he in the premises agreed to pay such mortgage. The difference between the purchaser's assuming the payment of the mortgage and simply buying subject to the mortgage is simply that in the one case he makes himself personally liable for the payment of the debt, and in the other case he does not assume such liability. In both cases he takes the land charged with the payment of the debt, but he is not allowed to set up any defense to its validity,-- as, for instance, that the mortgage is void, wholly or in part, on account of usury." In 2 Pom. Eq. Jur. § 937, in regard to this proposition the author says: "For the same reason the subsequent mortgagee and incumbrancer cannot defeat the prior incumbrance, or procure it to be set aside, upon an allegation of its usurious character." In 3 Pom. Eq. Jur. § 1205, on the point under consideration the author says: "Where the mortgagor...