Cole v. Beale

Mb. Justice Higbee delivered the opinion of the court. On July 27, 1893, Orange R. Gorham and wife mortgaged certain premises in Boone county, Illinois, to Balph J. Sensor to secure, as stated in the mortgage, the sum of $5,600, according to the tenor and effect of five certain promissory notes of even date therewith, one for the sum of $1,600 and four for the sum of $1,000 each, and also certain notes attached to said principal notes representing the interest thereon. This mortgage has never been released of record. The mortgage was duly acknowledged on the day of its date and afterward recorded in the proper county, on August 1, 1893. On the day the notes and mortgage were executed the note for $1,600 and the interest notes attached were assigned and transferred to Isaac Toms, one of the appellees. On December 20, 1893, said Orange B. Oorham and his "wife conveyed said premises to Henry H. Baker and Balph J. Sensor by Avarranty deed subject to a certain mortgage for $5,600 to Balph J. Sensor, which said parties of the second part assumed and agreed to pay as part of the purchase price of said premises. This deed was. duly acknotvledged on the day of its date and afterward on December 23, 1893, recorded in the office of the recorder of Boone county. On August 23, 1895, two of said notes for $1,000 each, were duly assigned and transferred by Sensor to appellee Thomas Beale. On September 6, 1895, another one of said notes for $1,000 was assigned and transferred by Sensor to J. S.Wilmarth. Wilmarth afterward died testate; Alonzo B. Wilmarth was appointed his executor and is one of the appellees herein. On January 27, 1896, the last one of the $1,00.0 notes Avas assigned and transferred by Sensor to appellee, J. B. Moxiey. Sensor paid the interest upon these notes for several years. On September 10,1896, Henry JST. Baker and Balph J. Sensor made their note for $5,000, due five years after date, Avith interest payable annually at the rate of six per cent per annum from date, to appellant, Melvin J. Cole. Some time after the giving of the note Baker and Sensor made a mortgage to Cole on the premises in question to secure said note for $5,000. The mortgage was dated back to September 10, 1896, but was acknoAvledged December 31,1896, and recorded March 11,1897. After the description of the property in the mortgage, were inserted the words “ subject to prior incumbrance,” and after the covenants that the premises were clear from all liens, etc., occurred the words “ except one mortgage,” and these words appear in the mortgage as first recorded. In the mortgage as first recorded, Mrs. Baker and Mrs. Sensor did not join, but afterward at the request of Cole on the 28th day of December, 1897, their executed the same mortgage and all the parties acknowledged it. It was again recorded on January 4, 1898. In the second record of the mortgage, nothing appears to indicate a prior incumbrance on said premises, the words above referred to in reference to the same having been erased. At the January term, 1899, of the Circuit Court of Boone County, appellees, who are the holders of the Gorham notes to Sensor, as above set forth, filed their bill in chancery to foreclose the mortgage given by Gorham and wife to secure the same, making Baker, Sensor and their wives, appellant, M. J. Cole, and Albert J. McGee, defendants, the latter being a tenant holding the premises under Baker and Sensor. All of the defendants were defaulted except Cole, who answered and then filed his cross-bill, alleging that the conveyance above referred to, made by Gorham and his wife to Baker and Sensor, operated as a merger of the fee to said premises and extinguished any prior incumbrances on the same running to Sensor, and that by reason thereof the mortgage made to him by Baker and Sensor was a first lien upon said premises. The cross-bill also sought the foreclosure of the mortgage made to appellant by Sensor and Baker. The court below entered a decree in favor of appellees foreclosing the Gorham mortgage, but giving no relief to appellant Cole under his cross-bill. The principal question presented to' the court in this case is whether or not the conveyance from Gorham and wife to Baker and Sensor merged the prior mortgage from the same parties to Sensor in the fee, thereby extinguishing the lien. We are of opinion that there was no merger for the following reasons: (T) The deed is made expressly subject to the mortgage, which Baker and Sensor assumed and agreed to pay as part of the purchase price of the premises. The deed being recorded was ample notice to all persons who might thereafter become interested in these premises, of the existence of the mortgage. (2) The deed was made not to the mortgagee Sensor alone, but to Baker and Sensor. While it is true, as urged by appellant, that where the ownership of the mortgap;e debt and the title of the land becomes vested in the same person the mortgage is ordinarily thereby merged and extinguished, yet there are many exceptions to this'rule. There" is no merger where the conveyance is made to the mortgagee and one or more. other persons, he becoming the owner of only an undivided part of the fee. “ To effect a merger at law the right previously held and the rights subsequently acquired must coalesce in the same person and in the same right without any other right intervening.” 1 Jones on Mortgages, Sec. 848. “ There is no merger when a mortgagee of the entire premises becomes a devisee of an undivided part of the equity of redemption. He is entitled to be protected by holding his entire mortgage against the entire premises.” 1 .Jones on Mortgages, Sec. 849; Sahler v. Signer, 44 Barb. (N. Y.) 606. (3) The note for $1,600 and the interest notes therewith were assigned by Sensor and transferred to the appellee Toms before the conveyance was made by Gorham and wife to Baker and Sensor. The conveyance of a'mortgagor equity of redemption to the mortgagee, after the latter has parted with the mortgage and notes thereby secured to a l)ona ficle purchaser, can not in equity be treated as a merger of the mortgaged estate in the fee. International Bank of Chicago v. Wilshire, 108 Ill. 143. The transfer of a part of the mortgage debt would have the same effect in preventing a merger as the transfer of the whole, as there could not in that event be a merger of all the interests in one person at the same time. (4) All the actions of Sensor show there was no intention on his part that there should be a merger. “ Where a greater and a less estate meet in the same person a merger does not necessarily follow; that will depend upon the intent and the interest of the parties; and if a court perceives it is necessary to the ends of justice that the two estates should be kept alive, it will so treat them.” Edgerton v. Young, 43 Ill. 464. “ It is also a well settled rule that in equity it depends upon the intention of the parties and a variety of other circumstances whether or not a merger takes place. * * * If after the ownership and the charge have become united the party does any act which clearly shows that he regards the incumbrance as still subsisting, this is strong, even if not conclusive evidence, of an intent that there should be no merger.” Clark v. Glos, 180 Ill. 556. The act of Sensor in selling the Gorham notes to appellees shows that he regarded the mortgage debt as still subsisting, and even in the absence of other proof would therefore be strong evidence of an intent that there should be no merger. The mortgage to Cole as first recorded contained an express exception which gave him notice that the Gorham mortgage was in full force and outstanding, and deprived him of any equitable ground of complaint. We are therefore of opinion that the Circuit Court was fully warranted in finding that appellees were entitled to the relief prayed for and in decreeing a foreclosure of the Gorham mortgage in their favor. We are of opinion, however, that the court below erred in not giving appellant Cole some of the relief prayed for by his cross-bill. He offered in evidence his note, which showed on its face that there was interest past due and unpaid. By the terms of his mortgage he had a right to declare the whole debt due for failure to pay this interest, which he did by filing his cross-bill. That his mortgage contained an erasure, the making of which remains unexplained, was an objection only available to Baker and Sensor, who still own the equity of redemption, and they were defaulted and did not make any objection. Appellant was therefore entitled to have his mortgage foreclosed, and the decree should be so modified as to foreclose the same and direct the payment of the amount due for principal and interest upon the note it was given to secure, out of the proceeds of the sale of the premises, after the satisfaction of the notes secured, by the Gorham mortgage. As the decree must be reversed only for the error committed in regard to the foreclosure of the cross-bill, appellant should pay two-thirds of the costs of this court and appellees one-third. The decree is accordingly affirmed in part, reversed in part, and remanded, with directions to the court below to so modify the same as to provide for the foreclosure of appellant’s mortgage.