Parks v. Frahm

The opinion of the court was delivered by Johnston, J.: From the record, it appears that Jasper Parks and wife entered into negotiations to procure a loan of $1,000, which was to run five years, at 9 per cent, interest, payable semiannually, and was to be secured' by a mortgage upon their homestead. Separate notes were to be given for .2 per cent, of the interest which was to accrue, and what is presumably a commission mortgage upon the same property was to be executed as security for the last-named notes. The preparation of the papers was begun on July 7, 1886, and upon that day the notes and mortgages were first signed by Parks and his wife. After the papers had been signed and the mortgages filed for record, but before the money was paid, some unsatisfied incumbrances were discovered upon the record which prevented the immediate completion of the transaction. It was found to be necessary to defer further action for several days, until the record title of the land could be cleared, and by mutual arrangement the $1,000 note which [682] had been signed was destroyed, but the mortgage, which had been filed for record, was left uncanceled. About 20 days afterward, when the incumbrances which have been mentioned were released and discharged, another note, identical in every particular, was signed, and substituted for the one destroyed, and the loan having been perfected, the money was paid to the mortgagors. The note for $1,000 and the above-mentioned mortgage were made to correspond in date — that is, they were dated back to July 1,1886 — and in each reference was made to the other, thus showing that they were part of a single transaction. The contention is, that when the first note was destroyed the mortgage was extinguished, and that the execution of the second note did not operate to revive the extinguished lien. The court correctly held that the motgage was an existing obligation, and that it created a valid lien upon the property described therein. The validity of a mortgage does not require that it and the note should have been contemporaneously signed. The making of the note, the execution of the mortgage, and the delivery of both in exchange for the money borrowed, all together constituted a single transaction. Each is a step taken in effecting a loan, and none of them is effective, at least as between these parties, until the transaction has been completed. While the note and mortgage were signed and the mortgage filed for record, they were not delivered in exchange for money, and until that time there was no liability against Parks and wife nor any lien against their property. The note is said to be an evidence of debt, and the mortgage given in security an incident of the same, but there was no debt until the money was obtained, and the mortgage had no legal inception between mortgagors and the mortgagee until it had been delivered as security for money actually loaned by the mortgagee. The lapse of a few hours or a few days between the execution of the note and mortgage is immaterial, providing that their execution was with reference to each other and as a part of a single negotiation or transaction. If within a few minutes after the note and mortgage were executed, but [683] before the loan was completed, it had been ascertained that a word used in the note was incorrectly spelled, and the note was therefore torn up and another substituted, which, except for the correction, was identical in every particular with the first, would it be contended that, because of the substitution, another mortgage must be executed? It cannot be said that the lien was extinguished by the destruction of the first note, or revived by the execution of the second. The mortgage, as we have seen, did not amount to a lien until the loan was completed by the payment of the money and the delivery of both note and mortgage. The mortgage was given to secure a loan of $1,000. It was the same loan which was in the minds of all the parties throughout the negotiations. The substitution of one note for another did not change the character of the proposed loan, nor affect the relations of the parties. In the second note that was negotiated, there was an express declaration that it was secured by the mortgage, duly recorded, so that there was no misapprehension, nor was there any prejudice by reason of the delay of 20 days in completing the loan and in closing the transaction. The judgment of the district court will be affirmed. All the Justices concurring.