Atkins v. Nordyke & Marmon Co. , 6 Kan. App. 145 ( 1897 )

Wells, J.

This.case was tried in the court below upon an agreed statement of facts, the substance of which, so far as is necessary to be stated in a review thereof, is as follows :

1. On December 3, 1884, R. J. Heale and Emma Heale, his wife, executed and delivered to Julia Curtis, now Julia Curtis Prall, their promissory note for $750, payable five years from date, with interest at the rate of eight per cent, until due, and interest after maturity at the rate of twelve per cent, per annum ; and secured said note by a mortgage upon lot 176 and the east half of lot 174, on Eighth Avenue, in the city of Topeka, Kan. This mortgage was filed in the office of the register of deeds of the county of Shawnee, on December 4, 1884, and duly recorded in book 102, at page 235.

2. On March 20, 1885, R. J. Heale and Emma Heale executed and delivered to W. H. Rossington, trustee, their trust deed upon the premises hereinbefore described, to secure an indebtedness of $4,000, payable in installments of $1,333.33 on the fifteenth days of August, September, and October, 1885, respectively. This trust deed was duly filed for record in the office of the register of deeds of the county of Shawnee, on April 14, 1885, and recorded in book 100 of deeds and mortgages, on page 379. Said trust deed recited that it was “subject to a mortgage of record, .to wit, $750, on lot 176 and the east half of lot 174, Topeka, Kan.,” which is the same mortgage mentioned in the first paragraph.

3. On or about January 20, 1887, R. J. Heale and Emma Heale obtained a.loan of fifteen hundred dollars of John D. Knox & Co., and executed their certain promissory note of that date therefor, securing the same by mortgage upon the lots hereinbefore described, the note being payable three years after the date thereof, with interest at seven per cent, per annum, payable semiannually, on the twentieth days of January and. July of each year, for which coupon notes were executed. The mortgage securing this note contained the usual covenants of warranty, and also a condition that, if the interest notes should not be paid when due, the whole of the first note should mature and be due at that time without demand, and said first note should thereafter -draw interest at the rate of twelve per cent, per annum. This mortgage was filed for record in the register of deeds’ office in said county on January 22, 1887, and recorded in book 112, on page 140. . Afterwards, and before maturity, John D. Knox & Co., for a valuable consideration, duly sold and indorsed .said first note and each of the said coupon notes to John Atkins, and also assigned in writing and transferred to him the mortgage securing the same, all of which were and are the property of the plaintiffs herein. At the time John D. Knox & Co. took said notes for fifteen hundred dollars ■ and interest, and the mortgage securing the same, they' had no actual knowledge of the trust deed in favor of W. H. Rossington, hereinbefore referred to, nor did the said. John Atkins, at the time he purchased the said note and mortgage, nor did the plaintiffs, have actual knowledge of said trust deed at the time said note and mortgage came into their possession. Out of the proceeds of said loan for fifteen hundred dollars, John H. Knox & Co., on January 29, 1887, paid to Julia Curtis, now Julia Curtis Prall, the amount then due upon the note and mortgage held by her. The original mortgage was released by the said Julia Curtis, and, together with the notes, was turned over to John D. Knox & Co., and by them afterwards turned over to the plaintiffs herein, before the beginning of this action; but the release was never entered of record. Afterwards, on January 1, 1892, Julia Curtis Prall executed an assignment of said mortgage and the note secured thereby to the plaintiffs herein, and received therefor at the time of the making of said assignment the sum of one dollar.

4. On October 20, 1885, the Nordyke & Marmon Company, being then the owners and holders of the indebtedness secured by the trust deed to W. H. Rossington, hereinbefore mentioned, brought suit in the Circuit Court of the United States for the District of Kansas to foreclose such trust deed. In this suit all parties having an interest in or lien upon said land, of record subsequent to the date of said trust deed, were made parties defendant, and were duly served with chancery subpoena. John D. Knox & Co. and Julia Curtis were not parties to said action and 'had no actual knowledge of the pendency thereof. A final decree was entered in said cause, in favor of the complainant and against the defendants, on February 14, 1888, and the court found that the Nordyke & Marmon Company had a first lien upon the premises in controversy herein, and ordered the sale thereof if said lien was not paid within six months from that date. The judgment not being paid, a sale was duly had according to law and the order of said court, on October 31, 1888, by the Master in Chancery, and the property was sold, to the Nordyke & Marmon Company for the sum of twenty-one hundred dollars. This sale was duly confirmed by the court, and a deed executed for the property, which was filed for l’ecord on January 22, 1889, and recorded in book 169, at page 20. This sale was in every respect legally made, and the purchasers thereat are still the owners of said premises and in possession of the same, and have been ever since the delivery of said deed.

This action was begun in the Circuit Court of Shawnee County on February 10, 1892, the plaintiff asking a foreclosure of the John D. Knox mortgage, and that the Rossington trust deed be declared void, or, if this could not be done, that the plaintiffs be subrogated to the rights of Julia Curtis under the first mortgage above described. The matter was presented to the court upon the agreed statement of facts and without any further evidence, and judgment was rendered by the court in favor of the defendants. After this a motion for a new trial was duly made, overruled, and excepted to, as well as a motion of the plaintiffs for judgment upon the agreed statement of facts, and the case was brought to this court for review.

The first question demanding our attention is-, Have the plaintiffs in error, by their laches, lost all right to the equitable relief sought ? ...We are clearly of the opinion that, if they had promptly and with reasonable diligence sought to correct their errors and to be subrogated to the amount paid out to release the first mortgage, such relief would have been granted ; and it is substantially admitted by the plaintiffs in error that, if by their acts or negligence the defendant in error has changed its condition so that it would, against equity, lose something if subrogation should be permitted, it should not be allowed. It seems to us that this raises about the only material question in the case. Will the defendant in error be in as good condition, if subrogation be allowed now, as it would have been had the plaintiffs in error and those under whom they claim promptly discovered their mistake and made their application for relief ?

On January 20,1887, Knox & Co. made the loan under which plaintiffs claim a right to be subrogated to the first mortgage. • At that time the Rossington trust deed liad been on record nearly two years, and proceedings liad been instituted to foreclose the same more than one year. This foreclosure suit was not tried for over a year after their loan was made. The sale was made eight months later, and then nearly another month elapsed before it was confirmed. Nearly two months more intervened before the defendant in error put its deed on record, and after that late date the plaintiffs in error waited over three years before taking any steps to remedy their own mistake. It seems to us that this was inexcusable negligence, and, if there is any doubt about the defendant in error being in as good condition after subrogation now, as it would have been had subrogation been promptly applied for, it will not be granted. That there is no such doubt we cannot say. There is no finding or statement as to when the holders of the Knox & Co. mortgage first learned that it was not a first mortgage, and we have, a right to assume that, as reasonably prudent business men, they learned it soon after taking it; and if they had then applied to be subrogated, we can imagine many things that the Nordyke & Marmon Company might have done to put itself in better position than it would be to-day. It is sure that it would have a larger personal judgment now unpaid against the Heales, and we cannot say as a matter of law that this would be valueless.

The judgment of the court below will be affirmed.

McElroy, J., concurring.