McGuigan v. Rix

HUMPHREYS, J. The appeal now before this court grows out of a controversy between Alice McGuigan, T. T. Marsh and Henry Shank, on the one side, appellants herein, and C. N. Rix et al. on the other side, appellees herein. All of said parties intervened in the original case of Taylor Rushing et al. v. Susie Horner et al., twice before this conrt on appeal. In the first appeal, on.May 28, 1907, this court reversed the decree of the chancery court and remanded the cause for a new trial, upon material issues which had not been fully developed on the first trial in the lower court. In the second appeal, the decree of the chancery court was affirmed July 8, 1918. The purpose of the intervention filed in the original case was to determine whether appellees, C. N. Rix et al., had a prior and paramount claim to that of appellants, Alice McGuigan, T. T. Marsh and Henry Shank in an undivided one-half interest in lot 15, block 54, in the second subdivision of the Hot Springs Land & Improvement Company in the city of Hot Springs, Arkansas,- except a portion of the lot which had theretofore been sold and conveyed to the Little Rock, Hot Springs & Western Railroad Company. Both appellants and appellees claim an undivided one-half interest in said lands acquired by James E. Hogue on account of legal services rendered the Rushings in the original suit, styled Rushing v. Horner, and reported in 130 Ark. 21, and 135 Ark. 201. In order to test the priority of their respective claims to Hogue’s interest, he was made a cross-defendant in the interventions. Appellants claim Hogue’s undivided interest in said lands by virtue of judgments obtained against him in the chancery and circuit courts of Garland County of date September 16, 1916, September 18, 1916, and January 8, 1917. Appellees claim Hogue’s undivided one-half interest in said lands by virtue of the following written instrument: “ASSIGNMENT AND POWER OK AT TORNE 7. “Know All Men by These Presents: “That, whereas, I, the undersigned, James E. Hogue, domiciled and residing in the city of Hot Springs, in the State of Arkansas, have,, as attorney for Taylor Rushing and James Rushing, filed a suit in the Garland Chancery Court to recover from Scott-Mayer Commission Company and Susie A. Horner and others a certain lot lying and being in the city of Hot Springs, in the State of Arkansas, and described as lot numbered 15 of the Hot Springs Land & Improvement Company’s subdivision in block 54, said block 54 being according to the plat of the Hot Springs Reservation as made by the Hot Springs commission, and said subdivision being according to the plat on file in the records of deeds and mortgages for Garland County, Arkansas, except that portion of said lot heretofore sold and conveyed to the Little Rock, Hot Springs & Western Railroad Company; and, “Whereas, The purpose of said suit is also to recover back rents on said property; and, “Whereas, I have a contract with the guardian of said minors which has been approved and confirmed by the probate court by the terms of which contract I am to have for my services and fees one-half of said property, and one-half of any and all sums that may be collected as back rent on same; and, “Whereas, I am indebted to the Arkansas National Bank as is evidenced by my various promissory notes which have in the past been renewed from, time to time and may in the future be renewed; and, “ Whereas, I am further indebted to the said Arkansas National Bank for office rent; “Now, for and in consideration of the sum of one dollar to me in hand paid by Chas. ,N. Rix, I, the said James E. Hogue, do hereby grant, bargain, sell, transfer and assign to the said Chas. N. Rix all my rights and interest in said contract and all my rights and interest in said property that may come to me by virtue of this contract or otherwise, and I hereby nominate, constitute and appoint Chas. N. Rix my true and lawful attorney in fact, for me and in my name, place and stead, to collect and receive all my interest in said property; to execute receipts and acquittances therefor, the same as I might or could do in person, and I hereby ratify and confirm all the acts of my said attorney done in this behalf, making them effectual and binding on me as if done by me in person. 44 Out of such proceeds as my attorney may receive or collect by virtue of this power of attorney, I hereby authorize and direct him to pay all my indebtedness to the Arkansas National Bank evidenced by promissory notes, or by account for rent and to turn the balance, if any, over to me, or as I may direct. “Witness my hand and seal on this 1st day of August, 1916. “James E. Hogue. “Witness: I. B. King. 4 4 Acknowledgment. “State of Arkansas, “County of Garland. 4 4 Be it remembered, That on this day, the first day of August, 1916, appeared before me, an acting notary public, within and for the county and State aforesaid, James E. Hogue, to me known as the person who signed and executed the above instrument in writing, for the purpose and consideration therein mentioned and set forth. “Bobert Neill, Notary Public. “My commission expires June 16, 1919. “Filed July 20, 1917.” The above instrument was executed and acknowledged on the first day of August, 1916, prior in point of time to the rendition of the judgments in favor of appellants against Hogue, but was not recorded until July 20, 1917, subsequent in point of time to the rendition of said judgments against him. The chancery court construed the instrument in question to be an equitable mortgage and a superior lien to the judgment liens of appellants. A decree was rendered in accordance with the construction and finding of the court and is before us on appeal for trial de novo. (1-2) The nature and character of this instrument is the first question to be determined. So far as the instrument relates to the real estate described therein, it purports to grant, bargain, sell, transfer and assign it to a trustee to be applied on a pre-existing .indebtedness of James E. Hogue to tbe Arkansas National Bank of Hot Springs, Arkansas. It invests,no power of sale of said lands in the trustee, nor does it contain a defeasance clause. It is therefore lacking in these necessary essentials to make it a technically legal mortgage. It is manifest, however, that it was intended by the parties thereto as a security for pre-existing indebtedness of Hogue to said bank. This court has held, in substance, as follows: “Every instrument intended to secure payment of money, whatever name and form it have,is in equity a mortgage.” Turner v. Watkins, 31 Ark. 429; Bell v. Pelt, 51 Ark. 433. The chancellor correctly interpreted the instrument as being an equitable mortgage. (3-5) The next and last point for determination is whether or not the lien created by the instrument in ques-. tion is paramount to the lien of the judgments of appellants. Judgment creditors are not innocent purchasers. Their liens are subject to existing equities of third parties in the land. The rule of caveat emptor applies to purchasers at execution sales. Equitable mortgages are not controlled by the recording statutes of this State. Martin v. Schichtl, 60 Ark. 595; Priddy & Chambers v. Smith, 106 Ark. 79. The instrument, being prior in point of time to the judgment liens, is therefore prior and paramount to them. No error appearing in the record, the decree is affirmed.