Farm Land Mortgage & Debenture Co. v. Elsbree

The opinion of the court was delivered by Joi-instoN, J. : [566] l' note — action burden 0SfGe [567] 2' niorVsage-title — evidence. [565] When the trial was begun the court ruled that, as there was no verified denial of the execution of the notes upon which the Elsbrees were seeking to recover nor of the indorsements thereon, the burden of proof rested upon the Farm Land Mortgage and Debenture Company. In this we think there [566] was error. While it was alleged in the petition that the note upon which Manson Elsbree sought to recover was duly indorsed by Joseph M. Young, a copy of the same was set out in the petition, and upon it there was no indorsement. Under the code a copy was required to be attached to and filed with the pleading, and the one which was attached to the petition in this instance purports to be true and complete. It plainly contradicted and overcame the allegation of indorsement. In such a case, the statement that the note was duly indorsed cannot be regarded as a fact nor any more than a conclusion of law, and hence the unverified denial of the company put in issue the title and ownership of the note. The mortgage securing the Elsbree notes was given to Joseph M. Young in May, 1886, and nearly three years later Wahl, the owner of the land, desired to obtain a $6,000 loan to be used in discharging maturing liens upon the same land that was mortgaged to Young, and through the aid of Young the loan was obtained from the Farm Land Mortgage and Debenture Company, the company being unwilling to place the loan, unless it could have a first mortgage upon the land. Young agreed, for a consideration of $848.10, to postpone the $1,900 mortgage to the one securing the $6,000 loan. He was in possession of the notes and claimed full control of the same. For the purpose of subordinating the mortgage for the one about to be given, a writing was executed, which was probably sufficient for the purpose, if Young had been the owner of the notes or had had sufficient authority from the owners to make the agreement and release that were made. The Elsbrees claimed that there had been a bona fide transfer of the note and mortgage to them, and that Young was without the authority to [567] make the agreement which he had attempted to make. On the other hand, the company contended that the alleged transfer from Young was a sham and subterfuge, and that it had dealt with Young as the owner of the mortgage, without notice of any adverse right in the Elsbrees. In the trial it was an important question whether the company had actual or constructive notice that there had been a transfer of the note and mortgage, and as to what transfers of title or interest in the land were shown by the public record at the time the last mortgage was executed. The burden of proof having been placed upon the company, it offered proof of -what the records showed as to the $1,900 mortgage at the time the $6,000 loan was made by the company. This was excluded upon the ground that the original mortgage was in court, and was available to the company for purposes of evidence. The production of the original, however, was not competent evidence of what the pub-lie records disclosed respecting the title or ownership of the mortgage at the timé Young attempted to postpone' that mortgage to the later one. This testimony should have been admitted, but whether its exclusion constitutes a sufficient ground for a reversal we need not now determine. There is considerable dispute in the evidence as to the authority of Young to represent and bind the Els-brees, and much is made of the fact that their money was invested, and when collected was reinvested by him as he thought best to do, and also of the fact that he had possession of the notes. There is some contention as to the authority of one Cammon, a local agent, who acted for the company, but these conflicts must be determined by the trier of the facts. If it should finally be held that Young was not authorized to sub [568] ordinate the $1,900 mortgage to the later one, and that the attempt was ineffectual, then we would think that the company should be subrogated to the rights of the holders of the incumbrances and liens which were discharged with the money obtained from the company. The $6,000 loan was obtained for the purpose of discharging accrued and accruing incum-brances upon the land, and the proceeds appear to have been devoted to that purpose. It seems that there was a prior mortgage of $4,000, which with accrued interest amounted to $4,952.50 that was paid from that fund. ■ There was a claim of $186.70 for unpaid taxes, which was paid out of the money received from the company; and then there was $848.10 paid to Young to secure the release and postponement of the $1,900 mortgage to that of the company, which was actually paid to Elsbree, and the amount so paid was credited upon his note. 8. Subrogation. Prom the facts developed in the present trial of the case it appears to be highly equitable that subrogation should be made if the agree-meat of Young proves to be abortive. The money was advanced by the company upon the understanding and belief that it had obtained a first lien upon the premises, and -was used as it was intended for the payment of prior incumbrances. If the company succeeds to the rights of the prior incumbrancers, it will not change the position of the $1,900 mortgage nor depreciate the security of the same. The Elsbrees, if they own the notes and mortgage, could lose nothing by the substitution. Their mortgage security is just as good after payment and substitution as it would have been if the $6,000 mortgage had not been executed and payment of the prior incumbrances had not been made. In fact they occupy a more favorable [569] position, because $848.10 was paid upon their mortgage from the proceeds of the $6,000 loan. After deciding that the Elsbrees had a first lien, the court did not allow the Farm Land Mortgage and Debenture Company to take the places of the incumbrancers whose debts and securities had been paid and discharged from the money advanced by the company. No personal judgment was awarded to the company, nor was it decreed to have a lien of any rank upon the mortgaged premises. We are satisfied from an examination of the record that the case should be retried, and for that purpose the judgment will be reversed, and the case remanded. All the Justices concurring.