Summary
refusing to apply the merger doctrine even after finding that the mortgagee unquestionably intended to accept the real estate in satisfaction of its senior mortgage
Summary of this case from Thorp Consumer Discount Co. v. HartiganOpinion
Decided December 29, 1930.
Mortgages — Constructive notice of judgment lien obtained before foreclosure commenced — Mortgagor conveyed to mortgagee to satisfy mortgage — Restoration of lien status before conveyance.
1. Mortgagee held to have constructive notice of lien of judgment obtained against mortgagor before foreclosure was commenced.
2. Where, after mortgagor conveyed to mortgagee to satisfy mortgage, prior judgment creditor sued to have property sold to satisfy his alleged prior lien resulting from merger of legal and equitable title in mortgagee, parties were entitled to restoration of status existing before conveyance.
3. Equity does not require doing of vain thing.
APPEAL: Court of Appeals for Wood county.
Messrs. Bloom Rowland and Mr. W.H. Jones, for plaintiff.
Mr. Frank T. Bow, Mr. J.E. Kelly, Mr. Ray D. Avery and Mr. N.R. Harrington, for defendants.
On January 18, 1927, the plaintiff, Adolph J. Eythe, recovered a judgment against the defendant A.E. Hughes in the sum of $1,109.83. On the same day, execution was issued and levy made thereunder on certain real estate situated in Bowling Green. Theretofore, on December 19, 1920, the defendant A.E. Hughes and his wife, Lola M. Hughes, had executed and delivered to the defendant Commercial Bank Savings Company a mortgage thereon to secure the payment of certain promissory notes, aggregating in amount the sum of $9,500. At the time of the execution of this mortgage the real estate in question was owned jointly by Mr. and Mrs. Hughes. On June 21, 1924, a partial release of the mortgage was executed by the bank and duly recorded. On June 10, 1927, the bank filed a petition in the court of common pleas against Mr. and Mrs. Hughes, setting up the notes to secure which the mortgage was given, and praying for judgment thereon and foreclosure of the mortgage on that part of the real estate not theretofore released therefrom. The plaintiff herein, Eythe, was not made a party to the action so commenced. Thereafter, on June 7, 1928, Mr. and Mrs. Hughes, by a deed of general warranty, conveyed the premises in question to the mortgagee, the Commercial Bank Savings Company, and the deed so executed and delivered was duly recorded. On June 9, 1928, the mortgage was duly released of record and on September 11, 1928, the action to foreclose same was dismissed by agreement of the parties thereto. In addition to the Commercial Bank Savings Company and A.E. Hughes, the superintendent of banks of the state of Ohio is a party defendant to this action, and he and the bank have filed separate answers to the amended petition of the plaintiff, Eythe. After alleging the facts as they claim them to have been, each of them prays "that the cancellation and release of said mortgage of record shall be set aside and held for naught and that said mortgage may be fully re-instated and decreed to be a first lien upon said premises and to the end that the parties may be placed in statu quo, herewith proffers and tenders a deed back to the said Arthur E. Hughes and Lola M. Hughes."
The plaintiff now claims that the equitable and legal title to the premises in question having been merged in the bank by the deed of conveyance to it from Mr. and Mrs. Hughes, his judgment lien is prior to any claims of the bank, and that the real estate in question should be sold to satisfy same. The court of common pleas decreed otherwise, and from that decree an appeal has been taken by plaintiff to this court.
The evidence discloses that at the time of the execution of the above-mentioned deed of conveyance the bank delivered to Mr. and Mrs. Hughes the notes secured by the mortgage, and the intent unquestionably was to accept the conveyance of the real estate in satisfaction thereof and of the mortgage. The bank did not make the plaintiff a party to the action of foreclosure, and did not have actual knowledge of his judgment lien, but nevertheless must be held to have had constructive notice thereof. The uncontradicted testimony of witnesses is that the value of the real estate is very much less than the amount of the mortgage indebtedness, and, if this be true, then, after the payment of the mortgage claim to the bank, none of the proceeds of a sale thereof will remain to apply on the judgment lien of the plaintiff.
Our conclusion is that the relief prayed for by the defendants the Commercial Bank Savings Company and the superintendent of banks should be granted and each of the parties hereto be restored to the status existing prior to the conveyance of the real estate to the bank and the releases of the mortgage executed by the bank. The decree of this court is that, upon compliance by plaintiff with the conditions hereinafter imposed, the parties hereto be restored to the status existing heretofore, and that the liens on the real estate be then foreclosed and the property sold according to law for the satisfaction thereof, and that from the proceeds of sale there shall be paid:
First. Legal taxes and assessments which were a lien on the real estate at the time of the conveyance thereof to the Commercial Bank Savings Company, together with any taxes or assessments thereon thereafter paid by said bank.
Second. Court costs.
Third. The mortgage indebtedness found due the bank, less the net amount, if any, received by the bank by way of rentals or otherwise from said property.
Fourth. The judgment lien of plaintiff.
Fifth. The proceeds remaining, if any, to Mr. and Mrs. Hughes in the proportion to which they may be found entitled.
It is ordered that Lola M. Hughes and any others who have any interest in the real estate by way of lien or otherwise be made parties defendant to this action, and that the priorities of such liens, if any there be, be determined, the foregoing order of application of the proceeds of sale to conform to the finding of the court as to the priority of any liens against said real estate other than those above enumerated.
Since it is probable, as has been indicated, that the proceeds of any sale of the real estate will be insufficient to satisfy the mortgage indebtedness, and equity does not require the doing of a vain thing, it is ordered that before any further proceedings are taken herein the plaintiff shall deposit as security for costs such sum of money as the court may deem adequate to pay all costs occasioned by the prosecution of such proceedings. If plaintiff elects to proceed as herein provided, and the proceeds of the sale of said real estate are insufficient to pay the amounts found to have priority over the judgment lien of the plaintiff, then plaintiff shall pay all of the costs occasioned thereby. The security for costs herein ordered shall be deposited by plaintiff, who is a nonresident of Wood county, with the clerk of courts within fifteen days after the entry of this decree, and if not so deposited within said time, a decree may be then entered quieting the title of the defendant bank, obtained by said deed of conveyance from Mr. and Mrs. Hughes, against the plaintiff and all other persons and parties claiming any interest in said real estate acquired subsequent to the execution and recordation of the mortgage given to said defendant bank by A.E. and Lola M. Hughes.
The court further orders that this cause be remanded to the court of common pleas to carry this decree into effect.
Decree accordingly.
WILLIAMS and RICHARDS, JJ., concur.