Cumberland Building & Loan Ass'n v. Sparks

ROGERS, District Judge. Section 5091 of Sandels & Hill’s Digest of the Statutes of Arkansas, regulating mortgages, provides: “Every mortgage, whether for real or personal property, shall be a lien on the mortgaged property from the time the same is filed in the recorder’s [102] office, and not before; which filing shall be notice to all persons of the existence .of such mortgage.” The supreme court of Arkansas, in Main v.' Alexander, 9 Ark. 112, in construing this statute decided: ' “(1) That a mortgage is good between the parties, though not acknowledged and recorded; but under our registry act it constitutes no lien upon the ■mortgaged property, as against strangers, unless it is acknowledged' and recorded as required by the act, even though they may have actual notice of its existence. (2) The registry of a mortgage without acknowledgment does not constitute such constructive notice to the world as contemplated by the act.” This decision was rendered at the July term of 1848, and it has been, followed by an unbroken line of decisions from that time down to the present day. Hannah v. Carrington, 18 Ark., at page 105; Jacoway v. Gault, 20 Ark., at page 193; Carnall v. Duval, 22 Ark., at page 136; Jarratt v. McDaniel, 32 Ark., at page 598; Neal v. Speigle, 33 Ark., at page 68; Martin v. O’Bannon, 35 Ark., at page 68; Ford v. Burks, 37 Ark., at page 94; Mitchell v. Wade, 39 Ark., at page 385; Dodd v. Parker, 40 Ark., at page 536; Martin v. Ogden, 41 Ark. 186; Wright v. Graham, 42 Ark. 148; Watson v. Lumber Co., 49 Ark. 83, 4 S. W. 62; Cross v. Fombey, 54 Ark. 179, 15 S. W. 461; Milling Co. v. Mikles, 61 Ark. 123, 32 S. W. 493. These decisions, and some others which might be cited to the same point, establish a rule of property in Arkansas. In Ford v. Burks, supra, the court said: “This ruling has been on the language of the statute, and has now become a rule of property, which cannot be safely disputed, save by the prospective operation of a statute.” There is no rule better established than that the settled decisions of a state in relation to a state statute, local in its character, establishing rules of property, will be followed by the federal courts. There is a collation of cases upon this subject, embracing almost every variety of case, to be found in volume 1 of the Digest of the United States Supreme Court Beports, published by the Lawyers’ Co-operative Publishing Company in 1894, beginning at page 529. They áre too numerous to cite. They begin with Polk v. Wendell, 9 Cranch, 87, 3 L. Ed. 665, and end at Amoskeag Bank v. Ottawa, 105 U. S. 667, 26 L. Ed. 1204. It is needless to say that the mortgage now sought to be foreclosed by the plaintiff corporation, although recorded, constituted no lien on the property in controversy, as to the defendants J. W. Killough and N. O. Killough. It is urged, however, that they are not bona fide purchasers for value. The contention is not sustained by the proof. The court finds that they occupied the attitude of bona fide purchasers for a valuable consideration, and are entitled to hold the property as against the plaintiff corporation. It is contended, also, that inasmuch as the money loaned by the Southern Saving Funds & Loan Company was used by Sparks to pay off the prior mortgage to Bray, as trustee for the Oliver heirs, .which latter mortgage was a valid incumbrance, the plaintiff corporation should be subrogated to the rights of Bray unde'r his mort [103] gage. The proof shows that the money was in pari so used. The proof wholly fails lo show that there was any privity between the Soul hern Saving Funds & Loan Company and either Sparks or Bray, or that the latter’s mortgage should be held by the Southern Saving Fuuds & Loan Company to secure the loan, or that such was the intention of any of the parties. On the contrary, it shows that Bray’s mortgage was canceled on the record, and presumably surrendered. In short, the Southern ¡Saving Funds & Loan Company occupies the attitude of having loaned Sparks the money, not upon the security of the Bray mortgage, but upon the security of.the land, and that Sparks had used the money to pay off the Bray mortgage, and the same had been canceled. Under such circumstances, can the plaintiff corporation, who holds by assignment the mortgage and note of the Southern Saving Funds & Loan Company, be subrogated to the rights of Bray under his mortgage? This question must be answered in the negative. Campbell v. Ass’n (Pa. Sup.) 1 Am. & Eng. Dec. Eq. 472, and note (s. c. 30 Atl. 222); Cohn v. Hoffman, 50 Ark. 108, 6 S. W. 511. In the former case the principles governing the doctrine of subrogation are aptly and tersely stated, and no further citations are necessary. The remaining question arises as to whether or not the court, there being no equity in the bill, should render a personal judgment against Sparks for the money loaned. At common law, on the foreclosure of a mortgage the plaintiff was compelled to bring suit at law for any residue of the mortgage debt which the mortgaged property, when sold, did not satisfy. That rule of the common law has been modified by equity rule 92 of the supreme court of the United States, so that in suits in equity for the foreclosure of mortgages a decree may be rendered for any balance that may be found due to the complainant over and above the proceeds of the sale or sales, and execution may issue for the collection of the same; but no prb-\ision is made for the rendition of a personal judgment where the equities upon which the bill is based have wholly failed, as in this case. The court is of opinion, therefore, that the bill must be dismissed, with costs. Dakin v. Railway Co. (C. C.) 5 Fed. 666. The bill is therefore dismissed for want: of equity.