Wiscomb v. Cubberly

The opinion of the court was delivered by Johnston, J.: S. D. Cubberly brought this action to recover upon two promissory notes, executed by Henry S. Caylor and wife in favor of I. B. Vancil on February 1, 1881, one of which was for $200, payable on February 1, 1882, and the other for $200, payable on February 1, 1886, both bearing interest at the rate of 10 per cent, per annum from date, and also to foreclose a mortgage executed by Caylor and wife to Vancil upon 80 acres of land in Osage county. On each of the notes was indorsed a credit of $12.50, purporting to have been paid on August 27, 1884. It was alleged that the notes and mortgage had been transferred through several hands, for a valuable consideration, to S. D. Cubberly. Among others, William H. Wiscomb, L. J. — 586 — Wiscoinb and the Monadnock Savings Bank were made parties defendant, it being stated that they claimed an interest in the property sought to be foreclosed, which was alleged to be inferior to that of Cubberly. By the answer of the Wiscombs, it appears that prior to February 1, 1886, they acquired the mortgaged property, and after an attempt to obtain a release of the prior mortgage executed to Vaccil, made, executed aud delivered to the Topeka Loan and Investment Company a mortgage for $550, due five years after date, and from the answer of the savings bank it appears that it purchased the Wiseomb note and mortgage, believing that the prior mortgage to Vancil had been released and discharged, and the bank claimed the protection of an innocent purchaser for value. When the cause was called for trial, the Wiscombs and the savings bank each for themselves demanded a jury to try the issues of fact, which demand was overruled. The court sustained the validity of the Cubberly mortgage, and found there was due him thereon the sum of $701.73, and, further, that there was due to the savings bank the sum of $761.21, and the amount found due to Cubberly was adjudged to be a first lien upon the real estate mortgaged, while that found due to the savings bank was decreed to be a second lien. The savings bank and the Wiscombs complain of this ruling and ask a reversal. It is contended that the court erroneously denied the demand of the defendants Wiscombs and the savings bank for a jury to try the questions of fact put in issue between the parties. The pleadings, as framed, did present the issue of the payment of the notes which were secured by the Cubberly mortgage, and also that the first of these notes was barred by the statute of limitations. There was indorsed on the note a payment of $12.50, which, if paid at the time stated in the indorsement, and as a part payment of that note, enlarged the time so as to take it out of the statute of limitations. Upon the issues so framed, the defendants would ordinarily be entitled to a jury trial, and a refusal of a demand seasonably made would be error. In connection with this demand, — 587 — there is a statement in the record which is inconsistent with the demand, and leaves nothing for consideration- in the case except the priorities of the respective liens of Cubberly and the savings bank. The court recites that it “ was stated in open court that the only matters in issue were the priorities of different alleged liens.” This statement, if liberally interpreted, so as to sustain the ruling of the court, brushes away the defense of payment and the statute of limitations. If the defendants publicly announced that they claimed nothing under those defenses, and relied alone on the priority of the savings-bank lien over that of the Cubberly lien, a jury trial was unnecessary and could not be compelled. Neither could the court, after such an announcement, be required to enter upon an examination of the merits of these questions. fused — liens— It further appears that judgment for the full amount of the notes, less the amounts indorsed upon them, was rendered against the Caylors, Vancil and Hutchinson, by default, on May 3, 1888, and the trial of the issues between the remaining parties upon the priorities of the liens was not had until July 1, 1889. Under these circumstances, and considering the above-mentioned statement made by the court, there was no error in refusing the jury, nor was there anything left for the consideration of the court but the question of priorities. Can it be said that the court erred in holding the savings-bank mortgage to be .inferior and second to the Cubberly mortgage? The Cubberly mortgage was executed February 1, 1881, in favor of Izri B. Vancil, who transferred it to John Hutchinson on July 18, 1881, by a written assignment; but this assignment, although recorded, was not acknowledged as the statute requires. Hutchinson assigned and transferred the mortgage to C. J. Cartwright on January 31, 1882, but the assignment was not recorded until December 19, 1887. According to the testimony of Cubberly, he acquired the note.and mortgage by assignment and purchase on August 25, 1885. It appears that the Caylors conveyed the fee of the mortgaged land to Vancil on January 28, 1882, who in turn conveyed it to one — 588 — Lorenzo Cartwright, on January 31,1882. The last transfer was made subject to the Cubberly mortgage, and it was so stated in the deed of conveyance. In November, 1883, Lorenzo Cartwright conveyed the fee of the property to William H. Wiscomb by general warranty deed. On February 1, 1886,-Wiscomb obtained a loan of $550 from the Topeka Investment and Loan Company, and executed a mortgage upon the land in question to secure the same, and on February 20, 1886, this mortgage was assigned and transferred to the Monadock Savings Bank. Prior to the execution of the latter mortgage, Wiscomb, believing that the first mortgage had been paid and discharged by Cartwright, applied to Hutchinson, a previous assignee, for a release of the mortgage. On December 24, 1885, in response to this request, Hutchinson executed a release acknowledging the same, which recited an assignment of the mortgage from J. B. Vancil to Plutchinson, and which was placed on record in December, 1885. The savings bank alleges that it purchased the second mortgage relying on the records showing a release of the first mortgage by Hutchinson, and without any notice that it was unsatisfied. The testimony is sufficient, however, to sustain the holding of the court, that the debt secured by the Cubberly mortgage was unpaid and that the lien was undischarged. It is strange that Cubberly delayed the collection of the debt and the foreclosure of the mortgage for more than two years after they were assigned to him, but his good faith and honesty in the transaction have been settled in his favor by the general finding of the district court. If Hutchinson had had any right to execute a release, or if Wiscombs or the savings bank had had any right to rely on the release executed by Hutchinson, they might reasonably claim that their mortgage was superior to Cubberly’s. When Hutchinson undertook to release the Cubberly mortgage, he was not an owner of the mortgage nor an assignee, with the right to release the same. Nearly four years before that time he had assigned and transferred the same to Cartwright. It is true that a mortgagee, and probably an assignee who had assigned — 589 — a note and mortgage, may sometimes release the same so that a bona fide purchaser would take them free from the mortgage lien, although the note and mortgage are in the hands of an innocent holder and wholly unpaid; but before this can be done it must affirmatively appear from the record that such mortgagee or assignee had authority to release. In this case, however, no one had any right to rely on the release by Hutchinson. The assignment from Vaneil to him was not acknowledged, and, although it was recorded, it does not impart constructive notice of such assignment. No such instrument is entitled to record unless it is acknowledged, and the placing on record of an unacknowledged instrument without authority of law imparts no notice whatever. (O’Neill v. Douthitt, 40 Kas. 689; Fisher v. Cowles, 41 id. 418; Meskimen v. Day, 35 id. 46; Kelley v. McBlain, 42 id. 764; Wickersham v. Zinc Co. 18 id. 481; Lewis v. Kirk, 28 id. 505; Devl. Deeds, §656; Warv. Abs. 344.) The assignment to Hutchinson was indorsed upon the mortgage, but this did not make it a part of that instrument, nor did it cure the defect in the matter of acknowledgment. (Fisher v. Cowles, supra.) It is said that the savings bank is an innocent purchaser for value, and as such is entitled to protection. Can it be so regarded in this instance? ft knew of the existence of Cubberly’s mortgage and that it secured negotiable notes liable to be transferred from hand to hand. It also knew of the defective transfer which had been attempted, and it must be held to know that au unacknowledged assignment could not legally be admitted to the record, and that, therefore, Hutchinson had no apparent right to discharge the mortgage of record. The release was made by a person who no longer had any interest in the note or mortgage, who in fact had no right to give a release, and, more than that, the records failed to affirmatively show that he ever had any right to discharge the mortgage of record. It is stated that Cubberly claims title to the security through the same assignment, and should not be permitted to treat the transfer as valid as to himself, but void as to the — 590 — plaintiffs in error. By the findings of the court, Cubberly obtained them from the actual owner, and is a bona fide holder of the same. The assignment may be valid for the purpose of transferring title, and yet be insufficient to impart constructive notice of its existence. The release that Hutchinson attempted to make recited a conveyance made to J. B. Vancil,. when the mortgagee’s name, as has been seen, is Izri B. Vancil. Nothing was paid to Hutchinson at the time the release was executed, and it was done upon the representation of Wis-comb that the mortgage had been paid and that it was his duty to discharge it from the record. assignment— unauthorized oxitySoñien Cubberly’s conduct in failing to have the Cartwright assignment recorded, and in failing to apply to the Wiscombs for payment or to take steps toward the enforcement of the collection of this mortgage for more than two years after he acquired the same, is criticised. Some testimony is also offered that there was actually a payment in discharge of the mortgage by Cartwright, and it is evident that this was Wis-comb’s understanding of the situation.. Some of these transactions are not easily understood, but, as has been stated, the bonafides of the transaction, so far as Cubberly is concerned, has been sustained by the court. It may be said, however,that Cubberly testifies that he did apply to Wiscomb for payment, but that he was relying chiefly upon Cartwright; and he further states, that he had no actual knowledge of the savings-bank mortgage until about the , ° 00 time began this foreclosure proceeding. But in view of the condition of the record at the time of the execution of the savings-bank mortgage, it must be held, under the authorities cited, that it was taken subject and second to the unsatisfied Cubberly mortgage. The judgment of the district court will therefore be affirmed. All the Justices concurring.