Du Bois v. First National Bank

Mr. Justice Campbell delivered the opinion of the court.: On the 5th of February, 1895, Louis B. Du Bois was indebted to the First National Bank of Denver in the sum of about seven thousand dollars. As collateral security therefor and for all advances thereafter to be made to him by the bank, he executed on that day and delivered to George E. Ross-Lewin his promissory note in the sum of twenty-five thousand dollars, secured by a trust deed to Thomas Keely upon real estate. From time to time thereafter, Du Bois obtained further loans from the bank and gave notes and renewal notes for them and the earlier indebtedness. During the continuance of this indebtedness, Du Bois made a payment upon the same in November, 1897, which was credited upon the principal debt and indorsed upon the collateral note. In June, 1899, his wife, Eliza M. Du Bois, brought her action against him in the district court for divorce, alimony, and a division of the property, — 403 — and, in the following October, obtained a decree dissolving tbe marriage relation and an award of an undivided one-tbird interest in tbe property covered by tbe deed of trust bere in controversy; and, on tbe 25tb of tbe same month, by virtue of tbe provisions of tbe decree, a deed of conveyance was . executed and delivered to ber for tbis one-tbird interest, and tbe deed was tben placed on record. In June, 1903, tbe indebtedness, interest and taxes, which Louis B. Du Bois was obligated to pay, were tben past due and unpaid, and tbe bank and Boss-Lewin, bolder of tbe collateral note, and Keely as trustee, filed their complaint in tbe pending action to foreclose tbe deed of trust and apply tbe proceeds obtained therefrom to tbe indebtedness of Du Bois to tbe bank. Mrs. Du Bóis was made a defendant in tbe action as a claimant of an interest in tbe property covered by tbe trust deed as tbe result of tbe award to ber in tbe divorce proceeding, and tbe deed made in pursuance thereof. Plaintiffs got judgment against Mr. Du Bois for the amount of indebtedness, and a decree went for foreclosure of the trust deed. To review tbis judgment, Mrs. Du Bois sued out this writ of error. Of tbe alleged errors, tbe following assignments only are deemed worthy of consideration: Tbe court was right in overruling ber motion to make tbe complaint more specific. Tbe complaint was not so general as to be misleading. It could readily be understood by defendant. Her demurrer upon tbe ground that tbe complaint on its face showed that tbe action was barred by tbe six years’ statute of limitation was properly overruled. The complaint contained an allegation of a payment upon tbe indebtedness in question made less than six years before tbe action was instituted. Plaintiff’s motion to strike certain parts of tbe answer was properly granted. These contained ref — 404 — erences to allegations of the complaint in the divorce proceedings brought more than five years after the trust deed was given, whose pertinency to anything involved in the present action is not apparent. They are not matters that can be taken against the bank or which affected the validity of its security. Even though the bank knew that Du Bois and his wife were not living together harmoniously, it did not prevent the bank, in good faith and in the ordinary course of business, from making loans of money to him and taking security for the payment of the same. If the bank had knowledge of their domestic infelicity, it could not reasonably be "held, at its peril, to anticipate that she would bring an action for divorce and obtain a decree therein for an interest in her husband’s mortgaged property. But if the bank could foresee such an end to their unhappiness, its lien on the property, taken in good faith, would not be subordinate to the purchaser’s title which she subsequently secured. The attempt of defendant, by separate defenses of the answer, to assail the transactions between her husband and the bank upon the ground of fraud, is ineffectual. She would have to allege facts, not conclusions, constituting fraud; but her pleading is wholly insufficient in such particulars. The objections to the insufficiency of the evidence and errors of the court in admitting evidence in behalf of the plaintiffs are not good. A careful examination of the record shows that both by legitimate record evidence and oral testimony the material allegations of the complaint were established. It appears with equal clearness that none of the defendant’s defenses were proven. Passing now to- the more important questions, we observe that, in one of the defenses of her answer, the defendant pleads the six years ’ statute of limita — 405 — tion. Had no payment been made by Louis Dn Bois to tbe bank upon this indebtedness, tbe bar of tbe statute would have been complete in February, 1901; but before that time, in November, 1897, the debtor made a payment upon tbe debt, wbicb, as to him, suspended tbe running of tbe statute, and this suit was begun before- tbe expiration of six years from tbe date of such payment. Tbe defendant, however, says that, although tbe effect of this payment.was to elongate the statute as to her husband, tbe mortgagor, both as to- tbe debt and tbe mortgage, it did not have that effect as to her interest in tbe mortgaged property, since she was a subsequent purchaser in good faith of a third of tbe property covered by tbe trust deed; and that, while tbe running of tbe statute could be suspended as to her husband, it could not as to- her, by any act of bis to- wbicb she was not a party and to wbicb she bad mot consented by some affirmative act. To this she cites: Watt v. Wright, 66 Cal. 202; Tate v. Hawkins, 81 Ky. 577; Kendall v. Clarke, 90 Ky. 178; Cottrell v. Shepherd, 86 Wis. 649; Day v. Baldwin, 34 Iowa 380. Tbe California doctrine seems to go to tbe length contended for by defendant that a mortgagor has no power by stipulation to- prolong tbe time of payment of bis mortgage as against others who have acquired an interest in the- equity of redemption, either as subsequent incumbrancers or purchasers thereof. Watt v. Wright was based upon Wood v. Goodfellow, 43 Cal. 185. Tbe correctness of that decision has been controverted in Waterson v. Kirkwood, 17 Kan. 9; Schmucker v. Sibert, 18 Kan. 104; Clinton County v. Cox, 37 Iowa 570. Tbe other cases cited are clearly distinguishable from tbe one in band. There tbe mortgagor bad parted with all interest in tbe property at tbe time of bis payment upon tbe debt secured by tbe mortgage, and it was held, though the deei — 406 — sions upon that point are conflicting, that after the mortgagor has parted with all interest in the property as against subsequent incumbrancers or purchasers, he cannot prolong the time of the payment of his mortgage. But the decided weight of authority is that, when a purchaser with actual notice of the mortgage, or constructive notice by means of registry — which is the case here — acquires an interest in mortgaged property, he succeeds to the estate and occupies the position of his grantor. He takes subject -to the incumbrance, and, so long as the mortgagor retains the equity of redemption or any part of it, his acknowledgment of the existence of the debt binds the subsequent purchaser. — 2 Jones on Mortgages (6th ed.), §§1201-1202. This distinction is clearly brought out in the case of Cook v. Union Trust Co., 51 S. W. 600, 106 Ky. 803. Other authorities are cited in the notes to the foregoing sections of Jones. Another and sufficient answer to this point of defendant is, that the payment by Louis Du Bois, the' mortgagor, upon his debt to the bank, which suspended the running of the statute, was made nearly two years before the defendant acquired any interest in the property covered by the mortgage. At any time before she acquired her interest, her grantor, -the bank’s mortgagor, could arrest the running of the statute by an acknowledgment of the continued existence of his indebtedness to the mortgagee. No question is made concerning the validity of the mortgage to cover future advances, and it is now well settled that the mortgage need not state on its face that such was its purpose. It may be silent as to that feature, or it may specify a fixed sum-for -which the security is given, and advances within such limit are protected, the amount, as well as the purpose of the security, being established by oral evi — 407 — dence. — 1 Jones on Mortgages, §§364, 372, 374; Bank of Utica v. Finch, 3 Barb. Chanc. 293; Craig v. Tappin, 2 Sandf. Chanc. 85; Ackerman v. Hunsicker, 85 N. Y. 43. But defendant does contend that the mortgage or trust deed is not a security upon her portion of the property for advances made by the bank to her husband after the maturity of the collateral note, or after she acquired her interest therein under the divorce decree, and that the rendition of the decree and the recording of her deed, which was made in pursuance thereof, operated as constructive notice to the bank of her rights. The position of the bank is that, until she gave to it actual notice of the acquisition of her interest in the property, it might continue to make advances to the mortgagor even after the maturity of the mortgage notes, since the mortgage did not restrict the time within which the advances were to be made, which would be protected by the mortgage as to the entire property. The trial court apparently adopted the view of the law entertained by plaintiffs, and also found as a fact that all the advances which the bank made to Du Bois were made before defendant gave notice of her rights. If such is the fact, it would seem from the authorities that such advances are within the lien of the- mortgage. See authorities supra. But that question is not now a live one in this case. The foreclosure sale has been had under the decree of the district court, and it appears that the amount bid at the sale is less than Du Bois’s indebtedness to the bank which existed before defendant acquired her interest and without including any of the advances that were made by the bank after the date of the divorce decree.' Since then, as conceded by counsel for defendant on the oral argument, the amount bid does not equal the amount of the- conceded mortgage debt, defendant is — 408 — not in a position to have a decision of the question whether her’interest in. the property was released from the lien of the mortgage as to the advances that were made by the bank to the mortgagor subsequent to the acquisition of her rights. Perceiving no prejudicial error in the record, the judgment is affirmed. Affirmed. Chief Justice Steele and Mr. Justice G-abbert concur.