National Stockyards Nat. Bank v. Isaacs

Holden, J., delivered the opinion of the court This suit is a contest between the appellee, B. K. Isaacs, trustee in bankruptcy, and appellants, who are mortgagees, to determine whether the lien of the trustee upon property of the bankrupt is superior to the lien of the mortgagee in a- prior mortgage given upon the property by the bankrupt. The chancellor decided in favor of the lien of the trustee in bankruptcy as against the prior lien of the mortgagee; hence this appeal. The appellants present several grounds for reversal, but we shall notice only one of them, as the decision of this point will end the case. It is conceded by both sides, which makes it unnecessary for us to discuss the question, that the lien of the trustee, without notice, against the property of the bankrupt, is superior to all other liens; so the simple question to be determined in this case is whether the prior mortgage lien shall prevail over the lien of the trustee against the property, or the proceeds from the sale of it, under the facts of the case. George W. Armstrong went into bankruptcy and ap-pellee, Isaacs, was appointed, trustee. The trustee sold the property of the bankrupt, and holds the proceeds, about forty-four thousand dollars; and this suit in the chancery court of Adams county, where Armstrong owned certain lands and live stock, is to settle the question as to whether or not the trustee shall hold such proceeds for the creditors of the bankrupt, or whether he shall turn them over-to Wirt Wright, trustee in the mortgage in favor of the National Stockyards National Bank and the National Cattle Loan Company. A decision of the ques- *374 tiou involves section 2306, Hemingway’s Code (section 2805, Code of 1906), which., in part, provides as follows: ■ “But the clerk shall not record any mortgage or deed of trust in which the name of the beneficiary is not disclosed therein, and if such instrument is recorded, it shall not impart notice to any one.” In the lower court, the trustee in bankruptcy, Isaacs, contended that his lien against the property of the bankrupt was superior to the prior mortgage lien of appellants, because he acquired the property, as trustee, under the bankruptcy proceedings, without notice of the lien of appellant mortgagees. The prior mortgage held by appellants was duly recorded, as provided by the recordation of laws of this state, but it was contended by the trustee, Isaacs, that the recordation of the mortgage imparted no notice to him because the name of the beneficiary was not disclosed therein as required by the statute, supra. The chancellor accepted this view, and decreed accordingly. The recorded mortgage of appellants disclosed the beneficiary as being the National Stockyards National Bank, and it was urged by the trustee, Isaacs, that this bank was not, in fact, the beneficiary in the mortgage, and offered evidence to establish this fact. The proof relied on by appellee to sustain this contention was very scant, consisting chiefly of certain statements or admissions, in depositions and otherwise, made by Wirt Wright, president of the bank and also of the Cattle Loan Company. Tie stated that during a number of years these corporations had been making loans to the bankrupt, Armstrong & Sons; that the Cattle Loan Company had been making the loans, while the beneficiary named in the mortgages securing the loans was the National Stockyards National Bank. This is practically all of the proof in the case which tended to support the finding of fact by the chancellor that the National Stockyards National Bank was not the beneficiary in the mortgages involved in the case. The *375 ■chancellor held, however, that the evidence shows that the mortgage involved was properly acknowledged and recorded, as required by law, and the decree in this latter respect is correct. We have carefully considered the record bearing upon the phase of the case regarding the question as to who was the .real beneficiary in the mortgage, and we are convinced that the proof in the record does not sustain the finding of fact by the chancellor that the National Stockyards National Bank was not the beneficiary named in the mortgage, as contemplated by the statute. When the testimony of Wirt Wright, president of the bank, and also of the Cattle Loan Company, is carefully considered, together with the other indisputable proof, it conclusively appears that the National Stockyards National Bank, named as beneficiary in the deed of trust, was the beneficiary, in truth and in fact. The notes executed by Armstrong & Sons and secured by the mortgage were payable to the bank, and the bank paid out its money on these notes, and kept some of the notes, and disposed of others by indorsing them to the Cattle Loan Company, a subsidiary corporation of the bank, doing business in the same building; the stockholders and officers of the two corporations being the same. The bank had an interest in the loan to Armstrong & Sons, since part of the notes were given for its benefit, and were kept b3^ it, while others were turned over to the Cattle Loan Company, which was a subsidiary of the bank. Therefore the bank was interested in the notes, and was a beneficiary, under the law, and was named as such beneficiary in the mortgage, which was recorded as required by law, and such recordation imparted notice to the trustee, Isaacs, and his lien was therefore inferior to that of the mortgagees. We see no use in discussing the history of the recording statute here in question, and 'will make no comment thereon, except to say that the manifest purpose of the statute was to compel disclosure of the mortgagee or *376 beneficiary, so that he might be reached for taxation purposes. Up to the time this act was passed it was common for mortgages to be made payable to bearer, or some fictitious person, and such securities could not be taxed, for the reason that the owner thereof could not be found; but in the case at bar, the beneficiary was named, because the named bank had an interest in the notes secured by the mortgage, in that the bank retained some of the notes, and assigned others to the Cattle Loan Company, and the fact that the bank took and kept part of the notes was sufficient to constitute the bank the beneficiary within the meaning of the statute. The amount, about one hundred seven' thousand dollars, shown to be due by the bankrupt, Armstrong,' to appellant, greatly exceeds forty-four thousand dollars, the amount of the proceeds from the sale of the bankrupt’s property now held by the trustee, Isaacs, and therefore the many other questions presented by the record need not be discussed. In view of the conclusions reached, the decree of the lower court is reversed, and judgment entered here for appellant. Reversed and judgment here for appellant. Reversed.