56 N.E. 161 | Ill. | 1899
The sole contention between the present parties is which shall have the prior lien. They do not disagree as to the material facts, but each insists that, under the law applicable to those facts, his is the prior security.
As early as September 30, 1886, Mrs. Thomas and her husband conveyed the property described to Schintz, as trustee, to secure their own principal note for $4,000, payable five years after date, to their order, with 6½ per cent. per annum interest, payable semiannually, for which they made 10 coupon notes, also payable to *527 their order. Both principal and interest notes were payable at the office of Schintz, the trustee. The deed provided: "When said notes and all expenses shall be fully paid, said grantee, or his successor in trust, shall reconvey all of said premises remaining unsold to the said grantors, or their heirs or assigns, upon receiving his reasonable charges therefor." By their indorsement they transferred all these notes to one John Lobstein. On the maturity of the principal note, September 30, 1891, it was extended, in writing, to September 30, 1896, upon the payment of 10 new interest notes, due semiannually, each for $130. At the date of the extension Schintz took up the principal note, and on October 12th, thereafter, sold it and the new interest notes to appellant, Mann. The trust deed had been filed for record October 5, 1886, and duly recorded, but no change or addition was ever made to that record showing the assignment to Lobstein, Schintz, or Mann, or the extension of the payment of the notes.
About a month before the maturity of the $4,000 note as extended, Mrs. Thomas applied to Schintz for a further extension, and was informed by him that the holder wanted the money, but another party would take the loan, upon her and her husband executing new papers, and that he (Schintz) would use the proceeds of the new loan to pay off the old one. Pursuant to that arrangement, she and her husband made new notes, and a trust deed to Schintz, in all respects like the first; indorsing the notes in blank, and delivering them, with the deed, to Schintz. This trust deed was acknowledged September 14, 1896, and recorded the following day. It is shown by their own testimony that, at the time of the delivery of the new notes and deed to Schintz, he told them he would get the old deed released, and they paid him $3.10 for the release and the recording.
As already stated, the $4,000 note held by Mann, as extended, fell due September 30, 1896. A few days before that date Schintz told Mann that the Thomases *528 wanted the loan extended for a year, and asked him if he was satisfied with that arrangement; and he said he was, and left, supposing such an extension would be made. A few days later he called again at the office of Schintz, and received from him a check for $130 in payment of the last interest note held by him, but did not receive any extension agreement or new interest notes, and retained the principal note without any change, relying only on the statement that the Thomases wanted the time extended. He gave no further attention to the matter until about April 1, 1897, when he called on Schintz, and again received his check for $130, which would have been six months' interest due if the loan had been extended.
On October 6, 1896, Schintz executed and acknowledged a release deed, by which he conveyed, remised, released, and quitclaimed to Amelia and James S. Thomas all right, title, or interest acquired by him under the trust deed dated September, 1886. This release was filed for record on the day of the date, indorsed "Box 519," which was a box in the recorder's office rented by Schintz, in which papers were placed to be returned to Schintz. It never came to the hands of the Thomases. After recording this release, on October 14, 1896, Schintz sold the new notes and security to appellee, Jummel, for $4,025.25, the amount of the $4,000 principal note and accrued interest. When the first interest of the notes fell due, March 9 1897, Schintz falsely stated it had not come in yet, but the day following sent Jummel his check for the amount. He failed to apply the proceeds of the sale of the second notes and security upon the first, as he had agreed to do, but appropriated the same to his own use. In July, 1897, his financial worthlessness and rascality became known, and the question then arose between these parties who should become his victim. Both had trusted him implicitly in their purchases, and relied upon his statements as to the security bought being a first *529 lien upon the mortgaged property; neither requiring or obtaining an abstract of title, nor an examination of the records. The Thomases were equally confiding, with the result that a double incumbrance exists on their property for a single debt. Their interest, however, in the matter, is not here involved, they having abided by the decree below. The property is inadequate security for both debts described in the trust deeds, and hence it is all-important to these parties as to which shall have priority of lien.
The real issue in the case is whether the release of the first trust deed is binding on appellant, as between himself and appellee. It is first insisted that it is invalid for want of delivery by Schintz to the Thomases. That there was no manual delivery of the instrument is conceded, but there can be no doubt that it was made and recorded in pursuance of an agreement that Schintz should execute and record it. Mrs. Thomas testified: "Schintz told me he would get the old trust deed released; that I had nothing to do; if I just paid the money, he would get it released himself. That is what he told me, and I paid the money for the release. He charged me for the recording. The new mortgage and release deed were to be recorded." To say, in the face of this evidence (and there is none to the contrary), that it was not the intention of the parties that the release should take effect from and after its execution and recording, would be idle. Speaking of the effect of acknowledgment and recording of deeds as the equivalent of delivery, we said in Weber v. Christen,
The substantial question in the case is whether Schintz, holding the legal title in trust for the benefit of the owner of the notes secured by it, had the power, without the consent of the holder of those notes, as against the owner of the second indebtedness, to make the release of the first trust deed. From the foregoing statement the following state of the record at the time the release was executed is shown: The first trust deed was recorded October 5, 1886, showing no one interested in it, or the indebtedness secured by it, except Schintz and the Thomases, and the debt past due more than five years. The release was unquestionably good against the Thomases, and we are unable to see why Jummel, the purchaser for value of the second notes and security, without any notice whatever, should not be protected. Mann's lien was a secret one. On principle, the case is like that of Williams v. Jackson,
Not only did the record fail to show that any third party claimed any lien upon the property when the second mortgage was purchased by Jummel, but, from the recitals in the deed, the indebtedness was past due more than five years when the release was executed and recorded. A trustee in deeds of trust of this kind has the power to release the lien so as to revest the legal title in *532
the grantor, even though he does so without the consent of the cestui que trust, and in violation of the obligations of his trust. Walton v. Follansbee,
It must, we think, be also conceded in this case, if appellee had examined the record, or procured an abstract of it, and acted upon what it showed, he would have been fully justified in acting upon the validity of the release, as against any holder of the old indebtedness, upon the presumption of payment, arising from the fact that it was long past due. Appellant is therefore driven to the position that appellee is not entitled to the protection which the record would have afforded him, because, he says: "He relied wholly on the legal opinion of his vendor. The statement of Schintz to Jummel that the second security was a good first mortgage was not merely the statement of a legal opinion, but of a fact. Jummel's inquiry was whether it was a first mortgage, and Schintz answered it was. In other words, he answered just what, *533 as a matter of fact, the record showed." Suppose this conversation had not taken place at all, but Jummel had made his purchase upon the assumption that he was getting a first lien; would it have been pretended, in the face of the recording act, that he would not have been protected, because, forsooth, he did not examine and rely upon the record? It is said he did not rely upon the release. But he did rely upon the mortgage he was about to buy as a first lien, and he therefore relied upon, and had a right to rely upon, everything of record which would protect him in that right. We cannot regard these parties as equally innocent, as a matter of law. True, both acted honestly, and confided in Schintz. Neither had a bad motive in anything he did or attempted to do. But Mann, by failing to record the assignment to himself, and by allowing the indebtedness due him to remain of record as being long past due, and failing to record the first extension agreement, was negligent of his own rights, and must suffer the consequences. The judgment of the appellate court is affirmed. Judgment affirmed.
*76