207 Wis. 272 | Wis. | 1932
The following opinion was filed January 12, 1932:
The defendants Stephen Cherf and Anna Cherf, husband and wife, resided in Langlade county for some time prior to 1922, and had executed a mortgage on their farm to one Henry Borgman. This mortgage was later assigned to Anna Borgman, wife of the mortgagee. In the fall of 1922 the defendants Cherf defaulted in the payment of interest and taxes. The mortgagee retained Henry Hay, an attorney of the city of Antigo, to collect the mortgage and to foreclose, if necessary. Upon receiving the demand sent out by Mr. Hay, the defendant Stephen Cherf consulted John T. Brown, of the Langlade County Abstract Company, for the purpose of re-financing his in
In October, 1923, John T. Brown came to Hay’s office and asked Hay to extend the time under the Borgman judgment for one year, upon payment of the unpaid taxes, costs of foreclosure, and guaranty of payment of future interest. Hay’s client agreed to this upon the further condition that $1,500 would be paid upon the indebtedness. In December, 1923, $1,500 was paid by the Langlade Abstract Company, and the Abstract Company executed its guaranty to Mrs. Borgman to the effect that the premises would bring the amount of her mortgage on a foreclosure sale. No further conversations were held between Hay, Mrs. Borgman, the Cherfs, or the Browns until December, 1924, when Brown asked for a further extension of time, which was refused, and the premises advertised for sale, fixing February 7, 1925, as the date of sale. Thereafter John T. Brown applied to Hay for assistance in obtaining a loan for the purpose of taking up the balance due on the mortgage. . Hay suggested that he go to the plaintiff bank and see if they would re-finance the loan. Hay promised to present the matter to the loaning board and see whether they would
In July, 1928, the .plaintiff learned for the first time of the claim of the Savings Loan & Trust Company, and immediately wrote the latter company claiming priority for its mortgage, and stating that the bank was about to foreclose. This letter was the first indication to the Savings Loan <& Trust Company that there was any difficulty with respect to the loan. The plaintiff bank had made no ex-, amination of the title to the premises at the time of the loan, and did not receive an abstract until December, 1925, nearly a year after the loan. At the time the abstract was received it was not examined, although an examination of the abstract at that time would have disclosed the existence of the mortgage to the Savings Loan & Trust Company. During all this time the Cherfs remained in possession and made some payments to Brown. Cherf was under the impression that the only outstanding mortgage was that of the Savings Loan & Trust Company, and that the proceeds of their loan had retired the Borgman mortgage.
In substance, the court found that at the time of its loan to John W. Brown the bank relied upon the fact that the foreclosure judgment was a first lien upon the property, and
The defendant contends that the court erred in its findings that the plaintiff bank did not have sufficient notice to put it upon inquiry in respect to the defendant Trust Company’s mortgage. This contention is based upon (1) alleged facts which it is claimed should have put the bank upon inquiry, which inquiry, if followed, would have advised the bank of the true state of the title; and (2) upon the legal proposition that one dealing with real estate is bound to know the rights of one in possession, and is chargeable with the actual notice he would have received had inquiry been made of the person in possession.
Dealing with the first of the contentions, it is contended that since Cherf had previously obtained the abstract to the premises with the express purpose of getting the loan, and since following the payment of $1,500 upon the principal by Brown, professedly on behalf of Cherf, a loan of $5,000 could easily be obtained, according to Hay’s own admission, Hay should have anticipated the possibility of Cherf having made a loan on his own behalf and should have inquired of Cherf concerning the facts. It is further contended that once the arrangements for re-financing by the bank were made, instead of making a new loan to Cherf, the deal Was so arranged that John W.. Brown would take title and that he gave to the bank a warranty deed sufficient in amount to protect the $1,500 which Brown claimed to have paid out of his own pocket on account of the mortgage.
It is suggested that the fact that Brown claimed the $1,500 had been paid by him or by the Abstract Company was enough in itself to put the bank upon inquiry. It is
It seems to us that the court could find that the bank was justified in relying upon Brown’s representations, and that it could further find that there was nothing in the situation which would have or should have put the bank upon inquiry. It is not at all clear that this court could have disturbed a contrary finding, although it seems upon the record that the finding accords with the preponderance of the evidence.
With respect to the plaintiff’s failure to examine the abstract, the same comment may be made. Hay knew, and the fact was, that the foreclosure proceedings were perfectly regular, and that no mortgage made or recorded after the commencement of that action-could have any rights superior to the Borgman mortgage. Hence the only thing that would suggest an inquiry to Hay would be a suspicion of Brown’s .honesty — a suspicion that Brown had secured the loan as agent for Cherf and had thereafter dissipated the proceeds. What has heretofore been said on this subject disposes of this contention. There were no grounds to suspect Brown, or at least the court could find that there were none.
The contention of the defendant that the possession of Cherf was sufficient to charge the bank with such notice as an inquiry of the person in possession would have disclosed, is considered to be without merit. Defendant contends that the law is well settled that one who takes title to premises takes them charged with the duty of making inquiry as to the rights of the person in possession, and that if no inquiry is made the purchaser is chargeable with the actual notice he would have received had he made inquiry.
The defendant relies principally upon the case of Pippin v. Richards, 146 Wis. 69, 130 N. W. 872. In that case, which was an action to cancel a deed from plaintiff to the defendant Boyer for fraud, and also to cancel a deed from
“Possession, to operate as notice, should be inconsistent with the title upon which the purchaser relies. If the possession is consistent with the record title, the purchaser is not bound to make any inquiry concerning the title as indicated by the possession. No inquiry is suggested by the possession. If a person in possession holds under a deed upon record, apparently sufficient to explain his possession, a subsequent purchaser is not affected with notice of any other undisclosed title or interest which the occupant may have.”
See, also, Schumacher v. Truman, 134 Cal. 430, 66 Pac. 591; Brown v. Volkening, 64 N. Y. 76; Pope v. Allen, 90 N. Y. 298; Staples v. Fenton, 5 Hun (N. Y.) 172; Smith v. Yule, 31 Cal. 180.
Applied to this situation, it is our conclusion that the fact that Cherf was in possession would not put the bank upon inquiry. His possession was not inconsistent with his record
The final argument of the defendant is that the court erred in its conclusion of law that the deed of the plaintiff was a first mortgage and that of the defendant Trust Company a second mortgage. It is argued that upon Brown’s purchase at the foreclosure sale he became a constructive trustee for Cherf and the defendant Trust Company. This might be conceded without changing the result in this case. If plaintiff occupies the position of a bona fide purchaser for value, it is entitled to take free from the equities of Cherf and the Trust Company. Whether or not the bank occupies such a position as to be free from this contention depends upon the bona fides of its incumbrance. Since we find that the trial court’s conclusions in this respect are correct, it follows that the judgment of the lower court must be affirmed.
The defendant Cherf not having appealed, no question is raised as to the validity of the court’s determination as to him.
By the Court. — Judgment affirmed.
A motion for a rehearing was denied, with $25 costs, on March 8, 1932.