Ely v. Pingry

The opinion of the court was delivered by Johnston, J. : The controversy in this case is as to the relative priority of two mortgages upon a single tract of land situated in three counties. One of them [26] belongs to Pingry, who conveyed the land to Rowlen, and, simultaneously with the delivery of the deed, Rowlen delivered to Pingry a mortgage upon the same land for a part of the purchase-money. The other is the Ely mortgage, which was executed and delivered by Rowlen before Pingry conveyed the land to him, and before he had any title thereto. The land was conveyed from Pingry to Rowlen on March 30, 1889, and the mortgage to Pingry was delivered at the same time. The Ely mortgage was recorded in Anderson county, where a portion of the land was situated, on March 29, 1889, which was one day before any title had vested "in Rowlen. Ely claims priority by virtue of the prior recording of his mortgage in the several counties in which the land was situated, while Pingry claims -that he was not bound to search- the records for conveyances made by his grantee before the execution of his deed, and while the grantee was a stranger to the‘title. He also insists that The Investment Banking Company, whose officers negotiated the loan with Rowlen, had knowledge of the record title, and that such knowledge as they possessed must be imputed to Ely, for whom they acted. After the land was actually conveyed to Rowlen, the first mortgage to be recorded was that given to Pingry for the purchase-money, which was filed for record in Anderson county on April 2. The Ely mortgage was filed for record in Miami county on April 3, when the records of that county showed the title to be in Pingry. It was filed for record in Franklin county on April 6, when the records of that county indicated that the title was in Pingry. The Pingry mortgage, however, was not recorded in Franklin county until April 17, nor in Miami county until April 19. Rowlen had neither a legal nor equitable title to the land [27] at the time the Ely mortgage was executed and delivered, and he had not even possession upon which to base a right to mortgage. The possession remained in Pingry until the deed was delivered, and as Rowlen had no possession nor any vestige of title, the mortgage which he made could not attach before the conveyance by Pingry to him. It would seem that the priority of the record of the Ely mortgage could not avail as notice to Pingry of its existence. In such a case it has been held that “A vendor of real estate has no occasion to examine the records for incumbrances created prior to his conveyance. He has the power to protect himself by a qualified or conditional transfer, or by any legal mode of creating a lien to secure himself for unpaid purchase-money. When he conveys, and instantly takes a reconveyance as such security, no authority is needed to demonstrate the gross injustice of permitting, a prior mortgage from intervening to his prejudice.” (Dusenbury v. Hulbert, 59 N. Y. 541.) 2- mortgage; execution?118 In Schoch v. Birdsall, 48 Minn. 441, a somewhat similar case, it was said that the grantor “was not bound to search for conveyances made by his grantee while the latter was a stranger to the title, and before the execution of his deed, and the defendant whose mortgage ’ was recorded before plaintiff’s conveyance was not a subsequent bona fide mortgagee within the meaning of the recording act.” See, also, Turk v. Funk, 68 Mo. 18; Ford v. Unity Church, 120 id. 498 ; Boyd v. Mundorf, 30 N. J. Eq. 545 ; Heffron v. Flanigan, 37 Mich. 274 ; Loan Co. v. Maltby, 8 Paige, 361; Gould v. Wise, 32 Pac. Rep. 576 ; 1 Jones, Mortg. § 568 ; 1 Devl. Deeds, § 724. [29] L bmmd’by o™gent.ffe [27] Apart from this consideration, the facts of the case and findings of the trial court in respect to the rela [28] tions existing between Ely and The Investment Banking Company and its managing members require an affirmance of the judgment. It is, in effect, found that the members of the company, in making the loan, were the agents of Ely, and that he is chargeable with the notice which they had, and is bound by what they knew or should have known. Pounds, the vice-president of the company, had been acquainted with Ely for many years, and had made him a visit shortly before the making of the loan with a view of inducing Ely to allow the company to invest his money in Kansas securities. In accordance with arrangements then made, Ely forwarded money to them for investment, and it was this money which was loaned by the company to Rowlen. It is true that the mortgage first considered was not the one which was finally accepted, but it was made by the same man and covered much of the same land; and it further appears that in making the investment in both instances Ely relied upon the discretion and judgment of the members of the company, and especially Pounds, its vice-president and active official. Ely resided in Ohio, and had no knowledge in regard to the Pingry land or the title thereto, except what was obtained through the company. The money was forwarded by Ely on March 18, 1889, and was received by the company two days later. Although the loan first considered was not made, the money was allowed to remain with the company until it was invested in the Rowlen mortgage, on March 28. When the money was received it was credited to Ely on the books of the company, and when the Rowlen note and mortgage were taken, on March 28, they were at once transferred to Ely, and he was charged upon the books of the company with the note and mortgage. [29] The note and other papers were forwarded to Ely on March 29, and the acknowledgment of the receipt of the same on April 2 indicates the relations which existed between him and the members of the company. He said: “I thank you and your Mr. Pounds for the care you have taken in placing this loan, which appears to me to be in all respects first-class, and hope it will prove so.” It therefore appears that Ely furnished the money to the company for in: vestment; that he depended on the members of the company for the safety of his investment, and trusted to them to place the loan which was made. By their action Ely became the owner of the Rowlen note and mortgage on March 28, 1889, and instead of repudiating their action, his subsequent conduct has been rather to ratify and adopt it as his own. As they were agents of his in the transaction, he is held *° know what they knew, and what they, would have learned by a reasonable inquiry and investigation. Although Rowlen told them that he owned the land, no abstract of title was furnished, nor did they make an examination of the public records to ascertain the condition of the title. One of the managing members of the company visited the land, and discovered that it was occupied by and in possession of another. At the time the loan was negotiated, Rowlen notified them that there was an incumbrance upon the land, but they left it to him to discharge that incumbrance. They therefore knew that the mortgage taken was not a first mortgage, and, having actual knowledge that the land was incumbered, prudence required that they should follow up the clue and ascertain from those in possession and the records what was the true state of the title. If they had done so, they would have found that Pingry [30] was the absolute owner of the land, and in possession of the same, and that Rowlen had no title which he could incumber or convey. Ely, therefore, did not part with his money on the faith of the record, and so far as the recording goes he does not occupy the position, nor is he entitled to the protection, of an innocent and bona fide purchaser or holder. (Mitchell v. Aten, 37 Kan. 33.) See, also, School District v. Taylor, 19 Kan. 287 ; Greer v. Higgins, 20 id. 420 ; Dusenbury v. Hulbert, supra. As Ely cannot be regarded as the bona fide purchaser of a mortgage executed by one holding the record title or mortgage interest, the principles which he invokes and the cases which he cites are not applicable. If the company had taken and held the mortgage, the managing members thereof could not have claimed to have been without notice in regard to the title, nor have claimed any benefit on account of the prior recording of the Rowlen mortgage, and Ely, for whom they were acting, occupies no better position. When he acquired the mortgage, Pingry was the actual and apparent owner of the land, and Ely could not and did not therefore part with his money on the faith of a title in Rowlen. We think the testimony is sufficient to sustain the findings of the court, and that they support the judgment which the court rendered. The questions raised upon the pleadings and upon the admission of testimony are not such as to require special comment. Judgment affirmed. All the Justices concurring.