Elgin City Banking Co. v. Center

Mr. Presiding Justice Windes, after making the foregoing statement, delivered the opinion of the court. Counsel for appelleei say : “ The sole question in this case is whether the execution by Eoland L. Morgan of the mortgage of appellee, Minnie Center, containing full covenants of warranty, operated as a release of appellant’s mortgage and precluded the said Boland L. Morgan, and consequently his secret assignee (the appellant), from afterward setting up such mortgage as a lien superior to that acquired by appellee’s mortgage:” It is the law, and is conceded by appellee’s counsel, that the assignment of a note secured by a mortgage before maturity passes the mortgage also as an incident of the debt. The assignee takes all the rights of the assignor, the mortgagee. Union Mut. Life Ins. Co. v. Slee, 123 Ill. 57-93; Sargent v. Morgan, 21 Ill. 148. From this principle it follows that appellant, by the indorsement, assignment and delivery to it of the Bothers note on June 23, 1892, became the equitable owner of the mortgage securing the same, and is entitled to a superior lien to that of the Rogers mortgage, which is its junior in date and date of record, unless it is debarred because of its failure to secure and place upon record an assignment of its mortgage before appellee acquired her mortgage and placed an assignment thereof on record. Appellee contends that as the assignment of the note (and consequent equitable assignment of the mortgage) was unaccompanied by a transfer of record of the mortgage, it is good only between the parties themselves or persons having actual notice thereof. It is not claimed, and, as we have seen, there is no evidence, that appellee had actual notice of the Bothers mortgage, and therefore it is only necessary to consider whether, under the facts of this case, appellee is in law chargeable with notice of its record. In Keohane v. Smith, 97 Ill. 156-9, the Supreme Court, in speaking of the rights of a second mortgagee who knew of the existence of the first mortgage, as against those of the holder of the first mortgage, which was released of record by the mortgagee after he had assigned the note secured by it, said, referring to the first mortgage: “ It described the note, and from the description contained in the mortgage, he must be held to have had notice that the note secured was not due. Being negotiable paper, be must have known it might have been assigned in the usual course of business, and might then be in the hands of an innocent holder for value. Under the circumstances it was his duty to have informed himself whether the outstanding note the mortgage secured had in fact been paid. Hot to do so made it possible for the mortgagee to practice a fraud on the assignee of the note. Knowing the note was not due, and would not be due for years to come, he ought to have inquired whether Runyan (the first mortgagee) was still the holder and could rightfully receive payment, and not to do so was gross carelessness.” Our Statute (Hurd’s R. S., 1897), Ch. 30, Sec. 31, provides, viz.: “ Deeds, mortgages and other instruments of writing relating to real estate, shall be deemed, from time of being filed for record, notice to subsequent purchasers and creditors, though not acknowledged or proven, according to law.” This statute, in our opinion, takes the place of actual notice to appellee, and makes applicable to the case at bar the language of the court in the Keohane case, supra, and it was the duty of appellee—as she must take notice of the record of appellant’s mortgage and its recitals that it secured a negotiable note which was not due for almost one year after her purchase of the Rogers mortgage, and that it was liable to be outstanding in the hands of an innocent holder for value—to ascertain whether those matters were true or not. She should have informed herself of all facts disclosed by the record of appellant’s mortgage, and as to whether the note secured by the mortgage had in fact been paid, or whether it was held by some innocent third person for value. Ho diligence on her part is shown. She did not, nor did any one for her, make an examination of the records. She was not justified- in relying on the statement of the Morgans’ agent, who was also the agent of the building association, and on its behalf interested in getting her money on its second mortgage to the Commercial Loan & Trust Company, that the Rogers mortgage was a first mortgage, any more than the second mortgagee was entitled to rely on Runyan’s release in the Keohane case, supra. Appellee seems to rely especially on the case of Ogle v. Turpin, 102 Ill. 148,. and claim's that because appellant did not take an assignment of its mortgage and record it, before her assignment of the Rogers mortgage was recorded, it is nots entitled to protection. We think this case is clearly distinguishable from the case at bar, in that the first mortgage was released by the mortgagee, who had acquired and held the equity of redemption. This release was of record when the second mortgage was taken, and the second mortgagee had a right to rely on the record of this release under these circumstances. • Rot so in the case at bar, in which there was no merger of title and no release of record. • The claim that because the Rogers mortgage contained full covenants of warranty on the part of Roland L. Morgan, the mortgagee in appellant’s mortgage, it operated as a release and precluded Morgan and consequently appellant, his assignee, from setting up a lien superior to that of appellee, is not, in our opinion, tenable. If it were conr ceded that under this mortgage Morgan warranted the title of the lot to be free and clear of all incumbrances, we are not prepared to hold that it could have any other or greater effect than his formal release of the mortgage could have had, which, as we have seen in the Iveohane case, sivpra, the Supreme Court held had no effect on the first mortgage. We do not, however, think that.the covenants in the Rogers mortgage were the covenants of Roland L. Morgan. He merely joined in the mortgage, as we think is apparent from an examination of it, as husband, for the purpose of releasing his inchoate dower and right of homestead. The mortgage says “ the mortgagor, Emma L. Morgan, and Roland L.' Morgan (her husband),” mortgage and warrant-, etc. The fact that the verbs are plural can not overcome the statement that the mortgagor is Emma L. Morgan. She owned the fee; her husband only had an inchoate dower, right and homestead. In equity he had no mortgage title. In construing the deed the court will look not only to the words of the deed, but also to the circumstances and condition of the .parties as they existed at the time the deed was made, and when they are considered we think it apparent that the covenants are those of Emma L. Morgan alone. Hadden v. Shoutz, 15 Ill. 581; Piper v. Connelly, 108 Ill. 651, and cases cited. In Sanford v. Kane, 133 Ill. 199-206, it was held that where a wife joined with her husband in a conveyance of his land she was not barred by the covenants of ■warranty contained in the deed, and the court said that in determining the question equity “ will look beyond the mere form and into the substance of the transaction, and give effect to the contracts of parties according to the true intent and meaning which the parties themselves understood and attached to them at the time they were made.” To a like effect in principle are Strawn v. Strawn, 50 Ill. 33, and R. R. Co. v. Whitham, 155 Ill. 520, in the latter of which cases the deed was by Hutchinson and Harriet M. Huchinson. his wife. The title was in the wife, and it was contended that she only joined to waive her dower and she did not convey her estate, but the court held that she conveyed her estate. The deed was construed according to the intention of the parties and the circumstances at the time it was made. Under our statute the rights of the husband as to dower and hom'estead in bis wife’s lands are the same as those of the wife in the husband’s lands. But aside'from the matter of its covenants, we can not think, from the evidence in this case, it was intended that the Eogers mortgage should operate as a release of appellant’s mortgage. The appellee and her agent had no actual knowledge of appellant’s mortgage, so far as the evidence shows. If they had actual notice they were bound to see that appellant’s note was paid. (Keohane case, supra.) A release, however formal, would not avail them. If they thought a release was necessary, it was an easy matter to have had one prepared and executed at the same time the mortgage was made. Also the fact that several months after the purchase appellee procured a release of appellant’s mortgage, is strong evidence that the Eogers mortgage was not intended by the parties to be a release. The claim of appellee that appellant is estopped by the recitals contained in the assignment of its mortgage taken after the assignment of the Rogers mortgage to appellee, to the effect that the note was then assigned and. that appellant can not now claim that the note was assigned to it June 23, 1892, at the time of the purchase, is not, in our opinion, tenable. The rights of appellant were. in equity-acquired June 23, 1892, and appellee did no act which was based on the faith of this recital. Moreover the words of the assignment are, “havegranted, bargained, sold, assigned, transferred and set over, and by these presents do grant, bargain,” etc., and are not inconsistent with the proof that the note was in fact assigned on June 23, 1892. We are of opinion that appellant is entitled to a first lien and appellee to a second lien on the lot in question. The decree is reversed and the cause remanded, with directions to the Circuit Court of Cook County to enter a decree in accordance with the recommendations of the master and with the views herein expressed. Reversed and remanded with directions.