Boraks v. Siegel

*310 Adams, J. This case involves a bill to foreclose a so-called equitable mortgage on a vendee’s interest in a land contract. On December 20,1949, George Eatmon became the vendee under a land contract. Twenty-two days later, plaintiff acquired the vendor’s interest; Forty-one days after that, on February 21, 1950, the Eatmons gave a promissory note to plaintiff’s brother, Paul Boraks, in the sum of $2,164 as evidence of indebtedness for improvements to the property. Eatmons also assigned their vendee’s interest “to secure payment” of the note. The assignment to Paul Boraks was recorded on August 9,. 1950. On August 14, 1950, Paul Boraks assigned the vendee’s interest obtained from the Eatmons and their promissory note to the plaintiff. On November 24, 1950, plaintiff instituted summary proceedings against the Eatmons to forfeit the land contract. The proceedings were never completed. On March 15, 1951, defendants acquired the' interest of the Eatmons in the land contract. Shortly thereafter, plaintiff made demand upon defendants for payment of the $2,164 promissory note. Payment was refused. On January 10, 1955, plaintiff secured a justice' court judgment against the Eatmons. Plaintiff then proceeded in circuit court by a certified transcript of the judgment. In spite of the circuit court proceedings, the judgment remained unsatisfied. On June 27, 1960, defendants, having performed under the land contract, received a warranty deed, from Arthur A. Dunn and wife, who were the then-holders of the vendor’s interest. The warranty deed conveyed the premises “subject to * * * such encumbrances as have accrued or attached since December 20,1949 through the acts or omissions of parties other than the. grantors herein;” *311 This suit was instituted December 11, 1959, plaintiff alleging that the promissory note is still unsatisfied and that he is entitled to obtain satisfaction by foreclosure. Defenses are: (1) merger of the vendor’s interest .and the assigned vendee’s interest in the plaintiff; (2) failure of consideration; (3) that there was an (election of remedies and the matter is res judicata because of ancillary receivership proceedings brought .after judgment was entered for plaintiff in the case >of Ludwig Borahs v. George W. Eatmon and wife; ¡(4) that the plaintiff is estopped to pursue his remedy since he has accepted payments on the land contract for years after the defendants denied he had any rights under the notes and assignment. At the close of plaintiff’s proofs, a motion was made to dismiss. It was granted. The court held that plaintiff was estopped to pursue his remedy because defendants were placed in a position by his conduct, or lack of it, to conclude that no valid mortgage existed. From the decision of the trial court, plaintiff appeals. When the assignment of land contract from the Eatmons to Paul Borahs was recorded on August 9, 1950, defendants had no interest in the property. The assignment became a valid, separate and distinct interest in the property for security. Paul Borahs testified that he was in the home-furnishing business; that he dealt with the Eatmons in connection with the improvements; that he made a profit on the transaction. The contract was between the Eatmons and Paul Borahs for improvements to the house, even though plaintiff assisted in financing Paul Boraks to carry out the contract. Defendants obtained the Eatmon interest in the property on March 15, 1951. It was already encumbered by the previous assignment, on record, to Paul Borahs. Defendants took with constructive notice *312 of the outstanding claim in the name of Paul Boraks, CL 1948, § 565.25 (Stat Ann 1953 Rev § 26.543). See0, also, Lowrie & Webb Lumber Co. v. Ferguson, 312 Mich 331; McMurtry v. Smith, 320 Mich 304; Piech v. Beaty, 298 Mich 535. They also took with notice that the vendor interest was in Ludwig Boraks. The proceedings by the plaintiff against George W. Eatmon and wife were not an election of remedies nor a determination of the interest of the parties to this lawsuit in the property. Plaintiff first secured a justice court judgment against the Eat-mons. This eliminated any defense of failure of consideration since the judgment on the note in that case' is not subject to collateral attack in these proceedings to obtain payment of the note from the security for it. Plaintiff then certified the transcript of judgment to circuit court and attempted to collect by a receivership. The circuit judge held that the Eat-mons had lost their rights in the property by assigning their interest to the defendants. The court did not attempt to, nor was it possible for the court toy adjudicate the rights of defendants in the property. The issue was simply whether or not there was any interest of the Eatmons which could be reached by plaintiff. Is there an estoppel? On the basis of the record none appears. Plaintiff at no time misled defendants, nor in any way permitted defendants to understand that he did not claim a lien against the property for the $2,164 note. Quite the contrary, in addition to the claim having been a matter of record when the defendants acquired their interest in the property, plaintiff promptly asserted the claim to the defendants. When plaintiff conveyed the vendor’s interest in the property to Arthur A. Dunn and wife, he was careful specifically to retain “the debt owed to him and secured by an assignment of the vendees’ interest.” In the absence of any showing *313 that defendants were led to believe by plaintiff that plaintiff’s interest in the property as vendor and his Interest as security for a debt had merged, ther^e is no basis to assume either a merger or an estoppel. The fact that the plaintiff first attempted to collect the note- by proceeding against the principal debtors in no way estops him from attempting to foreclose his mortgage, his efforts to collect from the principal debtors having failed. Stegeman v. Fraser, 161 Mich 35; CL 1948, § 619.28 (Stat Ann § 27.1138); .37 ALR2d 959, 960. Inasmuch as this case must be remanded, we do not pass upon the question- as to whether or not the trial ■court erred in refusing to admit the promissory note into evidence on motion of plaintiff after the plaintiff had rested. Reversed and remanded for further proceedings in accordance with this opinion. Costs to appellant. Carr, C. J., and Dethmeks, Kelly, Black, Kava-nagh, Souris, and Otis M. Smith, JJ., concurred.