220 N.W. 80 | Iowa | 1928
On November 25, 1921, Enos Stanley was the owner of certain real estate in the city of Des Moines, known as the Glen Bailey Apartments. The Security Loan Investment Company was at that time engaged in the general loan and mortgage 1. MORTGAGES: business, but has since failed, and is now in lien and the hands of a receiver. On the aforesaid date, priority: Stanley and his wife, for moneys advanced by the second aforesaid company, executed unto it 23 mortgage to promissory notes, in the amount of $1,000 each, secure items and another note in the amount of $22,000, and secured by as security for said loan, executed unto said first company a mortgage upon the aforesaid real mortgage: estate. The first of the notes, in the amount of effect. $1,000, became due July 1, 1925, and the remaining $1,000 notes became due every six months thereafter until July 1, 1937, when the $22,000 note, according to its terms, would become due. The mortgage was recorded in the recorder's office of Polk County on November 29, 1921. The Security Loan Investment Company was indebted to the plaintiff bank in the sum of $24,000, and on January 12, 1922, as collateral security for said indebtedness, assigned the $22,000 note and two of the $1,000 notes, *136 and executed unto said bank an assignment of the aforesaid mortgage. In like manner, the Investment Company transferred the remainder of the $1,000 notes as collateral security for indebtedness owed to other parties to this suit.
In some manner not clearly shown by the record, the Glen Bailey Company became the owner of the mortgaged real estate, but said company did not assume and agree to pay the aforesaid mortgage indebtedness.
The taxes upon said real estate became delinquent, and the Investment Company paid the same. The amount so paid was secured by the terms and provisions of the aforesaid mortgage. Stanley neglected to pay the interest upon his indebtedness. The amount required to pay the delinquent taxes and interest up to January 1, 1925, was $8,414.25. The Glen Bailey Company paid the Investment Company $
The remaining holders of the Stanley notes, by cross-petition, asked judgment on their notes, and joined the plaintiff in the relief demanded. The aforesaid owners of the Glen Bailey notes, by cross-petition, prayed for the foreclosure of the mortgage referred to in plaintiff's petition, and that their notes be held to be secured under said mortgage. They did not ask for the foreclosure of the mortgage executed by the Glen Bailey Company. The remaining defendants defaulted. The court rendered judgment in favor of the holders of the Stanley notes, and established the same as the first lien upon the real estate. Judgment was rendered in favor of the cross-petitioners against the Glen Bailey Company, and their claims were established against the receiver of the Security Loan Investment Company, and their rights held to be inferior to those of the holders of the Stanley notes, and they are given the right of redemption. From the decision of the court refusing them a share in the proceeds of the sale of the real estate on special execution, the holders of the $7,000 notes aforesaid have appealed.
It is the contention of the appellants that the execution of the Glen Bailey notes and the acceptance of same by the Investment Company did not amount to payment of the delinquent taxes and the interest due at that time on the Stanley notes; that a mortgage secures the debt; and that no change of form or evidence of the debt originally secured by the mortgage, in the absence of an agreement or intention to release it, will release it as security, so long as the identity of the debt can be traced. They rely upon Gribben v. Clement,
We find it unnecessary to determine whether the execution of the Glen Bailey notes amounted to payment of the interest and taxes secured by the Stanley mortgage. However, the fact that the word "first," preceding the word "mortgage" in the notes, was scratched out with red ink, prior to the time of their execution, and the fact that a second mortgage was taken as security therefor, which was made expressly subject to the *138 Stanley mortgage, and other facts and circumstances shown by the record, are strongly indicative that it was the intention of the Glen Bailey Company to execute, and of the Investment Company to accept, the latter notes in payment of the taxes and unpaid interest on the Stanley notes.
The Stanley notes were negotiable instruments. The appellee holders thereof were holders in due course. One taking a negotiable promissory note as collateral 2. BILLS AND security for a pre-existing indebtedness is a NOTES: hol- holder in due course for value. State Bank of
der in due Halstad v. Bilstad,
The appellants contend that the outstanding notes are nonnegotiable, relying upon Hubbard v. Wallace
3. BILLS AND Co.,
"This note is secured by a first mortgage on real estate in Polk County, Iowa."
This provision of the notes did not make the stipulation in the mortgage a part of the notes and render them nonnegotiable. DesMoines Sav. Bank v. Arthur, 163 Iowa 205.
Therefore, the appellees were the holders in due course of negotiable instruments, at the time of the execution of the Glen Bailey notes. They were the assignees of the mortgage securing the same. The appellees were entitled to the full amount due on the collateral notes, including interest, regardless of any contractual arrangement relative thereto, made between the Investment Company and the Glen Bailey Company. The Investment Company could not, without the consent of appellees, by any contractual arrangement with the Glen Bailey Company change the rights of the appellees; and all that the Investment Company procured by reason of the execution of the Glen Bailey notes which had not been previously assigned by it to the appellees was a right of action against the latter company. The rights of the appellant cross-petitioners can rise no higher than the rights of their assignor. *139
The appellants, by reason of the notes which they received, with the word "first" scratched out with red ink, and by reason of the notice which they and the record of the two mortgages afford, had both actual and constructive notice of the rights of the appellees.
It is apparent that the decree of the trial court is correct, and the same is hereby affirmed. — Affirmed.
STEVENS, C.J., and De GRAFF, ALBERT, and MORLING, JJ., concur.