79 Ky. 598 | Ky. Ct. App. | 1881
deliveeed the opinion of the court.
In May, 1874, George P. Doern gave to appellant his promissory note for $2,500, bearing interest at the rate of nine per cent, p'er annum from date, and at the same time to secure its payment he and his wife executed a mortgage on certain real property on Green street, in the city of Louisville, which was in June, 1874, duly recorded.
July 24, 1876, Doern and one Stein gave their two joint promissory notes to appellee for $17,000 each, due three years after date, and bearing interest at the rate of nine per cent, per annum from date; and to secure the payment thereof they and their wives, on the same day, executed a mortgage to appellee upon several lots of land belonging to
May i, 1878, Doern gave to appellant a new note for #1,000, which was the balance of the first note after deducting payments made, and on the same day, to secure its payment, he and his wife executed a mortgage upon the Green street property previously mortgaged. The last mortgage was acknowledged June 19, 1878, and on the next day appellant, by its president, made an entry upon the margin of the record book releasing the lien retained in the first mortgage.
This action was brought by appellee to recover judgment for the balance due of the two notes given by Doern and Stein, and to enforce its lien upon the mortgaged property, including the lot mortgaged to appellant. The executor, widow, and heirs-at-law of George P. Doern, who died November 12, 1878, and appellant, were made parties defendants to the action, and appellant was called on to set up any claim he might have to the property.
Appellant filed its answer, made a counter-claim against appellee, and cross-petition against the executor, widow, and heirs-at-law of George P. Doern, -deceased, and in it alleged, in addition to the facts already mentioned, substantially, that after the first note given to appellant fell due Doern, though repeatedly requested to pay or renew it, evaded doing either until about the first of May, 1878, when the note for $1,000, which bore six per cent interest, and the second mortgage, were executed; that appellant, confiding in the integrity and good faith of Doern, made no examination of the record for mortgages upon the property, but released the first mortgage and accepted the second under a mistake of fact, and by reason of the fraudulent
The court below having sustained the demurrer to the counter-claim filed by appellant and dismissed it, this appeal is prosecuted, and for the purposes of the demurrer the allegations of appellant must be taken as true. Appellant seeks relief upon the grounds of both mistake and fraud.
The first question to be considered is, whether appellee, not having either participated in the alleged fraud, or been connected with the transaction in which the mistake on the part of appellant occurred, ought to be deprived of the .advantage thus acquired by it, in order to afford relief to .appellant. The determination of that question depends ■upon how appellee obtained the advantage it now seeks to .avail itself of, and whether its attitude in this case is such as to invoke the aid or protection of a court of equity.
The maxim, ** the laws assist those who are vigilant — not those who sleep upon their rights,” dóes not, as urged by ■counsel, apply to this case; for the. apparent advantage appellee may have is the result not of its vigilance, but mistake ■of appellant and fraud alleged to have been committed .against it.
It is needless to refer to all the cases cited by counsel, for if appellant is entitled to relief as against Doern, upon the ground of fraud or mistake, particularly the former, it is difficult to conceive upon what principle of reason, justice, or policy appellee may interpose to prevent it. In the case of Barnes v. Cammack, 1 Barbour, 398, which is similar to this, the court used the. following language: ‘ ‘ Brown not having parted with any property or right, nor placed himself in any worse condition in consequence of plaintiff having canceled her first mortgage, but having acquired a superior-title by reason of her mistake, this court cannot permit him to retain it to the injury of the plaintiff, but must give preference to the equity of the latter. . . . The principle upon, which this case is decided, and which runs through all cases; of this description, is, that when the legal rights of the parties have been changed by mistake, equity restores them to. their former condition, when it can be done without interfering with any new rights acquired on the- faith and strength-of' the altered condition of the legal rights,, and without doing injustice to other persons.”
In this case the legal rights of appellant have beeni changed not merely by mistake, but also by fraud. Re^ lief therefore is sought; and as it can be afforded to. appel
The allegations relevant to this issue are, that at the time of the release of the first mortgage appellant and its officers, were ignorant of the existence of appellee’s mortgage, of which Doern was aware, and did not examine the records, because of the confidence reposed in him, of which fact he was also aware, and that the release was made by a mistake, and because Doern fraudulently concealed what it was his. duty to disclose.
Though mortgagees are bound to examine the record itn regard to titles to real property, and in the absence of representations made in respect thereto by the mortgagor, must be presumed to have done so, yet they may rely upon such* representations, and if so relying, act under a mistake of fact, they will be relieved of the consequences of such mistake, and if the representations are fraudulently made, the consequences should fall upon him who makes them.
In this case, though no representations are alleged to have been made by Doern, it is alleged that appellant and its officers acted upon the belief that the property was at the time of the release unencumbered by other mortgages, and that such belief was induced by the conduct of Doern, and knowing such to be the case, he fraudulently concealed the exist
In an opinion, therefore, as the record stands, appellant is entitled to the relief sought.'
Wherefore, the judgment of the court below is reversed, and the cause remanded, with directions to overrule the demurrer to the counter-claim, and for other proceedings consistent with this opinion.