73 N.W. 527 | N.D. | 1897
In this action, instituted to foreclose a mortgage, a contest for priority of lien has arisen between the plaintiff and' the defendant the Milburn & Stoddard Company. The mortgage was executed by James Morrison, the owner of the land. It was delivered November 26, 1887. Morrison was at that time indebted to the plaintiff on several notes, and was also liable to it as indorser upon the notes of others. Simultaneously with the execution of this mortgage, he borrowed from the plaintiff $4,000. The mortgage was given to secure his indebtedness to the plaintiff, and his contingent liability on the notes referred to, and also as security for future advances. At the same time Morrison executed and delivered to plaintiff as further security a chattel mortgage on a large amount of personal property situated at that time in this state, the property being located on the farm covered by the real estate mortgage, and being stock and farming implements and machinery used by Morrison in the operation of such farm. A few days after the delivery of these two mortgages, the defendant Milburn & Stoddard Company attached the land and chattels in an action against Morrison as guarantor on a bond signed by him guarantying the fidelity of Hughes & McDonold as agents of the defendant Milburn & Stoddard Company. On the 27th of February, 1891, judgment was rendered in that action in favor of Milburn & Stoddard Company and against Morrison for $17,-6$8.i8. While the sheriff was holding the chattel property under the attachm’ent, it was taken from him by the coroner in claim and delivery proceedings in an action of replevin instituted by plaintiff, the mortgagee in the chattel mortgage thereon, plaintiff claiming priority of lien over the attachment. The defendant in that action, the sheriff, having failed to rebond, the coroner
The mortgage on the real estate, given by Morrison to the plaintiff, was a mortgage to secure future advances. On its face it secured $20,000, according to a bond executed at the same time. And the bond discloses the fact that one of the objects of the transaction was to protect the plaintiff by this lien not only as to present indebtedness, but also with respect to the future liability of Morrison to it. At the time the defendant’s attachment became a lien on the real estate, there was due on the plaintiff’s mortgage a certain sum. Subsequently a portion of this was paid. The amount of that indebtedness still unpaid is $7,000, with interest thereon from December 31, 1890. Taking up our position at this period of time to ascei'tain the relative rights of the parties, we find that plaintiff then held a first lien on the real estate for $7,000 and interest, and the defendant a second lien thereon, which would be defeated by its failure to x-ecover judgment on its claim against Morrison, but which would become a fixed second lien as of the date of such attachment if it succeeded in establishing in coux't the justice of its claim. Were it not the fact that plaintiff’s mortgage secux'ed future advances as well as px'esent indebtedness, we would have no fux-ther trouble with this branch of the case. But it appears that the plaintiff, x-elying on its lien for future advances, loaned Morrison the further sums of $1,000 on November 17, 1891, and $1,600 on January 5, 1891. A portion of the $1,000 note has been paid, but there is still due on these two notes a large amount of principal and interest, and the question is whether, as to this amount also, the plaintiff’s mortgage is a first lien on the real estate. That a mortgage to secure future advances is lawful as between the parties, and also with respect to third pex'sons who deal with the land or secure liens thereon, has become an elementary principle. 3 Pom. Eq. Jur. § §
Plaintiff’s cashier, who was a witness on the -trial of this case, testified as follows: “I remember hearing about the claim of a lien on tbe real estate and personal property described in the two mortgages taken November 26, 1887, by the Moline, Milburn & Stoddard Company, but I have no remembrance about the date. I have known for a long time such a claim was made. At the time of the taking of my deposition in June or July, 1888,' taken before Harshaw, I understood that the Moline, Milburn & Stoddard Company claimed a lien.” That his knowledge was the knowledge of the bank does not admit of doubt. We therefore find that plaintiff, before making these later advances, knew of the lien on the land which the defendant had obtained by attachment. As the plaintiff, when it made the subsequent advances to Morrison, know that there was another lien on the property, it cannot, as to those advances, claim priority.
The case before us is not a case where the mortgagee who holds the security for future advances has obligated himself to make such advances. It does not appear from the record that the bank bound itself to advance Morrison a dollar in the future. If it had so agreed, and the moneys subsequently loaned him had been loaned in pursuance of such agreement, it is possible that
Heretofore we have been discussing this case on the theory that the plaintiff held only this real-estate mortgage. But it appeal's that it was otherwise secured. It held the chattel mortgage already mentioned, and, in addition, it had a mortgage on real property in Algoma, in the State of Wisconsin. For the sake of brevity,*we will hereafter speak of this mortgage as the “Algoma mortgage,” and will refer to the mortgage on the North Dakota land as the “Dakota mortgage.” The Algoma mortgage also was given to secure future advances, and it was the only incumbrance on the land it covered. In view of the fact that both of these mortgages embraced all indebtedness of Morrison to the plaintiff, past, present, and future, it is evident that they secure the same claims. Therefore, at the time the defendant attached the Dakota land, the plaintiff held double security for the sum
But in the case at bar the plaintiff did not, by its mode of dealing with the Algoma land, invade the defendant’s equitable rights. It did, in fact, exhaust that security before attempting to foreclose its mortgage on the Dakota real estate. It is only by its attitude on the question of the application of the proceeds of the sale of the Algoma land on foreclosure that it has taken a position prejudicial to the equities of the defendant. The net amount realized on such sale was $4,790.17. The qustion arises, how must this sum be applied? At the time it was received by plaintiff (April 6, 1894,) there was due on the $7,000 note the sum of $8,890, being the principal sum and interest thereon from December 29, 1890, to that date. This principal sum of $7,000 wás, as we have already seen, due on plaintiff’s mortgage at the time it learned of defendant’s inferior lien. It follows that plaintiff has an undisputed right to apply the net proceeds of the Algoma foreclosure on the amount of this note, principal and interest. After making this application, we find that there was still due from Morrison on this note, on the 6th of April, 1894, the sum of $4,099.83. But it is contended by counsel for plaintiff that plaintiff was not bound to make such an application of the funds of that foreclosure. At the time thereof there was a much larger sum due on these two mortgages because of advances made by plaintiff to Morrison after it knew of defendant’s lien; and it is urged that plaintiff could apply all of the moneys received from the sale of the Algoma land on such of the indebtedness as was not in existence when plaintiff learned of defendant’s equitable rights as the holder of a second lien on the Dakota real estate; or, at least, that it had a right to apply a
We have already referred to the chattel mortgage held by plaintiff upon a large amount of property owned by Morrison, and situated on this Dakota farm, and to the fact that the property was taken by the plaintiff in an action of replevin against the sheriff, who was holding under defendant’s attachment. Plaintiff was finally successful in that action. It established its right to priority of lien on these chattels as against defendant. When plaintiff seized this property, its'attitude was that its lien was superior. But it did not dispute the fact that defendant held a lien thereon subordinate to its lien. It knew of such lien. In no event could it defeat defendant’s rights thereunder. Moreover, the plaintiff knew that defendant had secured by attachment a second lien on the Dakota land, and it was therefore bound to do nothing with this chattel security inconsistent with defendant’s right to insist that it should not suffer any property on which it had a lien to escape therefrom to the prejudice of the defendant, even on the assumption that defendant had obtained no lien on the chattels whatsoever. Three facts stand out in bold relief in this case: First, that plaintiff took the property from the possessios of the sheriff, who was holding it for defendant under the attachment, for the express purpose of foreclosing its lien under the chattel mortgage; second, that it never made any attempt to
Did the defendant, through its attorney, Judge Emery, who appears to have had full charge of the whole matter, agree that the plaintiff need not foreclose its mortgage until the happening of two events in the future, — the decision of defendant’s case against Morrison in its favor, and the trial of the question of priority of lien in the replevin suit? We have very carefully studied the evidence on this branch of the case, and have reached the conclusion that there is practically no dispute about the facts Col. Ball, one of the attorneys for the plaintiff through all the various stages of this long contest between plaintiff and defendant, admits that he never had any express agreement with Judge Emery, who represented the defendant, to the effect that the plaintiff need not foreclose its mortgage until all these mooted questions had been finally settled. The utmost scope of his evidence is that it was talked over between him and Judge Emery that plaintiff could not foreclose during the pendency of these two law suits. Judge Emery distinctly testifies that there was no agreement that plaintiff should not foreclose’ until after these cases had been disposed of. He says: “There never was any talk at any time between Mr. Ball and myself, or anybody else, with regard to what should or should not be done, or could or could not be done, as to foreclosing that mortgage, and to my knowledge there was no understanding whatever in regard to the the further disposition of that' property; at least none that I participated in, or ever talked about with Mr. Ball, or any one else. I never had any arrangement with Mr. Ball, and never agreed with him, that they should delay the foreclosure of the mortgage until the result of the litigation between the Moline, Milburn & Stoddard Company, and Hughes, et al, should be determined, and emphatically never had made any arrangement or understanding or had any agreement that the foreclosure of the mortgage should be delayed until the result of litigation should be decided in the replevin suit. I never had any under
The District Court will vacate the judgment heretofore rendered in this case, and enter judgment in favor of the plaintiff against the defendant James Morrison for $10,700.22, with interest thereon from February 23, 1897, at 7 per cent., and the usual foreclosure judgment for the sale of the land described in the complaint to satisfy such judgment. The rights of all the defendants except Moline, Milburn & Stoddard Company will be adjudged to be subordinate to the lien of the plaintiff’s mortgage, and to be barred by the foreclosure and sale of the premises under such judgment. But the defendant Moline, Milburn &- Stoddard Company will be decreed to have a lien on said premises superior to that of the plaintiff’s mortgage for the full amount due upon such judgment, to-wit, $17,658.18, with interest thereon from February 27, 1891.
Defendant Moline, Milburn & Stoddard Company will recover costs and disbursements in this court.