Sidebilder
PDF
ePub

work to which the state applies so large a part of its revenues. None of these reasons, however, will apply in favor of a property owner who simply rents or leases his property, to be used for one of the purposes mentioned in the constitution. He holds such property for his own use and benefit,-for his individual profit,-and not for the public good. Accordingly, it has been held that although the property of a benevolent institution, used for its own benevolent purposes, is exempt from taxation, yet property owned by such institution, and rented or leased for gain, is subject to taxation. Such was the case in City of Indianapolis v. Grand Master of Grand Lodge of Indiana, 25 Ind. 518, where it was held that the use of a building by lessees for concerts or for mercantile purposes is not a use by a charitable institution, within the meaning of the statute, even though the rents derived therefrom are devoted to charitable uses. And in Trustees v. Ellis, 38 Ind. 3, also cited by appellant, it was held that property owned by a church, but devoted to a purpose not then regarded by the legislature as a religious use, was not exempt from taxation. It is the use of its property for the purposes named in the constitution that entitles an educational, religious, or charitable institution to exemption from taxation; but an owner who has not set apart his property for such use cannot get the benefit of such exemption merely because he rents or suffers the property to be used for such purposes. That would be an exemption for private gain, and a perversion of the enlightened purposes had in view by the framers of the constitution. "Statutes," as said in Potter's Dwarris (page 144), "must be interpreted according to the intent and meaning, and not always according to the letter." Other authorities are to the same effect. In 25 Am. & Eng. Enc. Law, 165, it is said, "The mere use or occupancy for school or educational purposes of the property of a private owner, sustaining merely the relation of lessor to a school or seminary, does not create an exemption in his favor;" citing People v. Board of Assessors, 32 Hun, 457; Id., 97 N. Y. 648; Hennepin Co. v. Bell, 43 Minn. 344, 45 N. W. 615; Montgomery v. Wyman, 130 Ill. 17, 22 N. E. 845; Armand v. Dumas, 28 La. Ann. 403. Compare Nazareth Literary & Benevolent Institution v. Com., 14 B. Mon. 266. In Laurent v. City of Muscatine, 59 Iowa, 404, 13 N. W. 409, the property in question was owned by a private person, but used by a church and school; and it was held that there was no exemption. The court said it would be different if the title to the property were in the school or in the church, and might also be different if it were shown that the owner held the naked legal title in trust for the church or school. In the case at bar it is idle to talk of any school interests in the property. The title of the Brookston Academy was taken on foreclosure, and passed in full to Cormican Hays,

with the sheriff's deed received by him. No one but Hays had any right or interest in the land at the time he made his mortgage to appellant; and, when that mortgage was foreclosed in the United States court, all of Hays' right, title, and interest passed to appellant, with the United States commissioner's deed. The bond for a deed given by Hays after he had mortgaged the property to appellant could give nothing more than Hays then had, which was an interest subject to such mortgage. And, even if any such interest could remain after the foreclosure of appellant's mortgage, it passed to appellant by the assignment of Hays' interest in the contract and bond. The interest left in Prairie township, or in the town of Brookston, could be only of the most shadowy nature. It was never more than a right to purchase, and was lost years ago by laches, and by failure to comply with the conditions of the contract. But, even if such shadowy interest should ever develop into anything substantial. it could be only something subject to the fee-simple title of appellant. The case of City of Indianapolis v. Sturdevant, 24 Ind. 391, is not in conflict with anything said in the case at bar. In that case a private individual had established and conducted a literary institution of a permanent character, and it was held that the property so owned and conducted by him was not taxable. It was much as if, in the case before us, Cormican Hays, on coming into possession of the property here in controversy, had continued it as an academy of learning. He would then have taken the place of the corporation that had established and theretofore conducted the school, and, under the decision cited, might have claimed for his school exemption from taxation. But, as already said, the Travelers' Insurance Company is not pretending to carry on an institution of learning. Judgment affirmed.

MAGEL et ux. v. MILLIGAN et al. (Supreme Court of Indiana. May 24, 1898.) APPEAL-ASSIGNMENT OF ERRORS-ESTATE BY ENTIRETIES-ESTOPPEL OF WIFE.

1. Where a husband and wife unite in an assignment of error, the assignment will be good as to both if it is good as to the wife.

2. Possession of a note and mortgage is prima facie evidence of title.

3. Where a husband and wife made affidavit that they were owners in fee simple by entireties of lands which they desired to mortgage, and that the money to be borrowed was to be used to pay off an incumbrance on such land, and to purchase other land to be held by entireties, which was relied on by the person who loaned the money and took the mortgage, and part of the money so obtained was used to pay off an incumbrance for which the wife was jointly liable, and the remainder was by check made payable to and indorsed by both husband and wife, the wife is estopped from claiming that the mortgage was to secure money to pay her husband's debts, and therefore void as to her as a contract of suretyship; nor is the wife benefited by the alleged

fact that she and her husband had a secret understanding that the money to be borrowed was not to be used as agreed to in the affidavit which they had sworn to, and that such money was actually used in violation of such affidavit.

4. Where property held by a husband and wife by entireties is jointly mortgaged, there is a presumption that they are joint principals, which can only be overcome by satisfactory proof that the wife is only a surety.

Appeal from superior court, Marion county; Vinson Carter, Judge.

Action by Harriet N. F. Milligan and others against Henry Magel and wife. From a judgment for plaintiffs, defendants appeal. Affirmed.

Gavin, Coffin & Davis, for appellants. Wm. F. Brown, for appellees.

HOWARD, J. This was an action on promissory notes, and to foreclose mortgages securing the same. The notes and mortgages were executed by appellants, husband and wife, in favor of Joseph Milligan, deceased; and the action was brought by appellees, as the only heirs at law of the said Joseph Milligan. The appellant Louisa Magel filed her separate answer to the complaint, in which she averred that at the time of the execution of the notes and mortgages she was, and ever since has continued to be, the wife of Henry Magel, her co-appellant; that the money received for said notes and mortgages was received by her said husband; that none of it was ever received by her or used in the improvement of her separate estate; and that she signed the notes and mortgages simply and solely to enable her husband to procure a loan for his own use and benefit. To this answer the appellees replied, admitting that appellants were at the date of the notes and mortgages, and still are, husband and wife, and that the land mortgaged was then, and still is, held by them as tenants by entireties. But it is further said in the reply that the notes and mortgages were executed by appellants for a loan then made to them by Joseph Milligan; and the reply continues that, before said loan was made or said notes and mortgages executed, the appellants, "for the purpose of showing and convincing said Joseph Milligan, and those acting for him in the matter, for what purpose said debt was made and said notes and mortgages given, and the use that was to be made of the money to be obtained upon said loan," signed and made oath to a written statement, set out in the reply. In this affidavit it was stated that the appellants were the owners in fee simple by entireties of the lands on which the mortgages were to be given; that the money to be borrowed was to be used in part to pay off an incumbrance then upon the land, and the balance to purchase other land, also to be held by entireties; that Louisa Magel presented said affidavit to Joseph Milligan, and to those acting for him in the matter, "intending that they should rely upon said statement, and should act thereon in making

said loan; and said Joseph Milligan and those acting for him did believe the said statement to be true, and did in good faith rely upon the same, and did make said loan, so believing said statement, and so relying upon the truth of the same. If said Joseph Milligan or those acting for him had known that said 'statements were false, and that said loan was, as alleged in the said answer, made for the sole use of the defendant Henry Magel, said loan would not have been made, nor would said loan have been made if said representations had not been made; and plaintiffs say that the proceeds of said loan were applied first to the payment of the mortgage debt set out and mentioned in said affidavit, which was a valid and subsisting lien upon the real estate described in the complaint, and the residue was paid and given to both of the defendants by a check upon a bank payable to the order of both defendants." Upon the issues so formed, the court found for the appellees; that the mortgages securing the notes given for the loans were valid liens upon the lands of appellants, and should be foreclosed. Over a motion for a new trial, made by Louisa Magel, judgment was rendered in favor of appellees.

Both appellants unite in assigning as error that the court overruled Louisa Magel's motion for a new trial. There is some discussion as to whether the assignment so made is joint or several as to the parties appellant. But in this case the question is not material. Henry Magel did not make any motion for a new trial, and took no exception to any ruling of the court in regard to such motion. Ordinarily, therefore, an assignment of error made by him that the court overruled a motion for a new trial would not be available; and, under the general rule that a joint assignment of error must be good as to all who unite in it, the assignment here, being bad as to Henry Magel, would be bad also as to his co-appellant, Louisa Magel. But there is an anomalous exception to the general rule here stated, a remnant of old procedure resulting from the former legal relations of husband and wife; and, according to this exception, it is held that, where husband and wife are parties, an assignment will be good as to both if it is good as to the wife. Elliott, App. Proc. § 319; Stewart v. Babbs, 120 Ind. 568, 22 N. E. 770; Sibert v. Copeland, 146 Ind. 387, 44 N. E. 305. The fact that Henry Magel joined in the assignment made by his wife did not, therefore, make the assignment bad.

Where, as in this case, an action is brought by heirs to recover a debt due an ancestor, it is necessary to allege and prove that the debts of the ancestor have been paid, and the estate settled, or that no letters of administration have been granted. Finnegan v. Finnegan, 125 Ind. 262, 25 N. E. 341. The reason for this rule is a very sound one. So long as there is an administrator, he is entitled to recover all debts due the estate. Besides, the heirs can have no right to sue for and recover

debts due the estate when such amounts may be needed to make payment to the creditors of the estate. The claims of creditors are paramount to the rights of heirs. It is admitted by appellants that the allegations of the complaint in this respect were sufficient; but they contend that there was not sufficient evidence to show that Joseph Milligan's estate had been settled. It was admitted on the trial that Joseph Milligan died intestate; that, prior to the commencement of the action, "all the debts of his estate had been paid and settled up"; and that the appellees are his only surviving heirs. This admission alone would not perhaps have been sufficient to show that the estate had been settled, and that there was no administrator. We think, however, that there was enough other evidence heard by the court to authorize the finding that the estate had been settled. The appellees were in possession of the notes and mortgages, and this was at least prima facie evidence of title in them. 2 Pars. Notes & B. 444; Casto v. Evinger, 17 Ind. App. 298, 46 N. E. 648. Sufficient inferences, as we think, could be drawn from the evidence in the record to support the allegation made in the complaint that the estate had been settled. There was nothing shown to the contrary.

The chief contention made by appellants is that the evidence does not support the finding of the court. A careful reading of the record has, however, satisfied us that, notwithstanding the conflict in the evidence, the court had ample support for the finding made. The affidavit filed by appellants when the loan was made was explicit as to the use to be made of the money, and would seem to have fully justified Joseph Milligan in relying upon the representations then made to him that the money was to be used, not for the husband, but for the benefit of the wife's estate. This affidavit was presented by the wife herself, and the evidence showed that she understood the contents of the affidavit at the time she swore to its truth. A part of the money was certainly used to pay a lien upon the land, for which the wife was jointly liable with her husband; and the remainder was paid, not to the husband, but to the husband and wife, by check to their joint order; and it was shown that she and her husband both indorsed these checks before the money was drawn from the bank. If money cannot be safely loaned to a husband and wife after the taking of such precautions, it would seem that it could not be loaned at all. The parties should be estopped from now denying the consequences of their own words and acts. Rogers v. Insurance Co., 111 Ind. 343, 12 N. E. 495; Wertz v. Jones, 134 Ind. 475, 34 N. E. 1; Trimble v. State, 145 Ind. 154, 44 N. E. 260. Even if it were true that the husband and wife had a secret understanding with one another that the money to be borrowed was not to be used as agreed to in the affidavit filed by them, and even if the money

were actually used by the husband in violation of such sworn affidavit, yet, unless the wife were shown to be totally ignorant of the nature of the proceedings, no benefit ought to accrue to her from such deception; nor ought such fraud on the part of husband and wife avail to make it unlawful for one to loan them his money, relying, as the decedent here did, upon their false representations. Husband and wife should not be suffered to take advantage of their own wrong in so concealing their real design, unless, indeed, the money lender himself had knowledge of the true state of the facts, and so participated in the violation of the law, which we do not think is here shown. Cummings v. Martin, 128 Ind. 20, 27 N. E. 173. It may be added that a difference has been recognized between a case such as this, where husband and wife own their lands by entireties, and a case where one or both are the owners of separate interests. Security Co. v. Arbuckle, 119 Ind. 69, 21 N. E. 469. If the property is held by entire ties, there may be some presumption indulged that the owners are, as they seem to be, equally interested and equally responsible, and that, when they give their joint note and mortgage, they are joint principals; and, in the face of such presumption, there should be some satisfactory proof to show that the wife is only surety, if such should be the fact. Miller v. Shields, 124 Ind. 166, 24 N. E. 670. Here the only such evidence offered amounts to little more than a claim that husband and wife joined in a scheme to deceive the money lender. It has often been held that the beneficent statute framed to protect the wife and family and home ought not to be perverted into a cloak for fraud. McCoy v. Barns, 136 Ind. 378, 36 N. E. 134. Judgment affirmed.

BANK OF COMMERCE OF EVANSVILLE v. FIRST NAT. BANK OF EVANSVILLE et al.

(Supreme Court of Indiana. May 24, 1898.) MORTGAGES-MARSHALING ASSETS-INVERSE ORDER

OF ALIENATION.

1. Where a mortgage is given on part of land subject to judgment liens which could be fully satisfied from the remainder of the land, which was afterwards conveyed by trust deed for the benefit of one who thereafter bought up the judgment liens, the right of the mortgagee to require the judgment liens to be satisfied from the remainder will continue and be protected as against the beneficiary of the trust deed.

2. Where pieces of land subject to a common incumbrance are successively mortgaged, and the second mortgagee, who afterwards purchases the common incumbrance, which could be fully satisfied from the second piece, sells the second piece, and applies the proceeds on his mortgage, the lien of the common incumbrance on the first piece is destroyed.

Appeal from superior court, Vanderburgh county; John W. Foster, Judge.

Action by the First National Bank of Evansville, Ind., and others, against the Bank of Commerce of Evansville, Ind., for

foreclosure of a mortgage. From a judgment for plaintiffs, defendant appeals. Affirmed.

Gilchrist & De Bruler, for appellant. Gavin & Cunningham, for appellees.

HACKNEY, C. J. David J. Mackey owned several parcels of real estate, estimated to be of the value of $200,000, upon which were certain judgment liens of about $13,000, in favor of parties not here interested. Mackey gave to the First National Bank, appellee, a mortgage on parts of said real estate (referred to, for convenience, as No. 1), for about $100,000. Thereafter he executed to one Cook, as trustee, a conveyance of the remaining parts of said real estate (which we will refer to as No. 2), the purpose of the trust being the sale of parcels included in No. 2, and the application of the proceeds to certain claims for a large sum owing to the Bank of Commerce, appellant. Still later, the Bank of Commerce purchased the judgments mentioned. The trustee sold a large part of No. 2, and applied the proceeds to the claims of the appellant, other than said judgments. In a foreclosure proceeding instituted by the appellee First National Bank, the question was made as to the rights of said appellee to require said judgments, so held by said appellant, to be made first from the property No. 2. The lower court held that they should be so enforced, and this appeal is from that holding.

The learned counsel for the appellant makes this concession: "Of course, the general doctrine that where a creditor has access to two funds for the payment of his debts, and another creditor is confined to one of those funds, the dominant creditor will be compelled in the first instance to exhaust the fund upon which the other creditor has no security before resorting to the latter, is conceded." It is practically conceded also that, in the hands of the original judgment creditors, equity might have enforced the lien of the judgments, for the appellee's protection, against No. 2 alone. In Bispham's Principles of Equity (section 27) it is said: "The doctrine of marshaling grows out of the principle that a party having two funds to satisfy his demand shall not, by his election, disappoint a party who only has one fund. Thus, a party who has a mortgage on two parcels of land ought not, in fairness, to resort in the first instance to one of them upon which there also happens to be a junior mortgage, which is not otherwise secured; for, in so doing, the junior mortgagee might be altogether cut out. Equity, however, is loath to interfere with the rights of a creditor to enforce payment out of any of his securities, and therefore the remedy usually afforded to the junior disappointed mortgagee is to substitute him to the rights of the paramount mortgagee as against the other property." The same proposition is announced and illustrated by the author in section

340 et seq. of the same work. In section 341 it is said that "the equity of marshaling would seem to be capable of being carried into effect in one of two ways, either-First, by restraining the other party; or, secondly, by giving the party entitled to the protection of this equity the benefit of another security in lieu of the one of which he has been disappointed. In other words, the right might be enforced either by injunction against the paramount creditor, or by subrogation in favor of the junior creditor." In the same section it is further said: "The rights of every one can be protected, and there is no harm in throwing the paramount creditor at once on the singly-charged fund. So, too, when the paramount creditor has been guilty of some negligence or default, as where he has put one of the funds beyond his own reach with the full knowledge that his debt cannot be satisfied out of the other fund without injury to the interests of third persons, he may be restrained from coming in upon the second fund." In Fetter on Equity (page 256) it is said "that a person having resort to two funds shall not by his choice disappoint another having only one. The practice in the early days was to summarily forbid the creditor with two funds to touch that which was the sole resource of the other. The remedy by injunction is, however, rarely applied in modern times. The usual course is to permit the double creditor to enforce his claim as he pleases; but, if he chooses to resort to the only fund on which the other has a claim, that other is subrogated to all his rights against the fund to which otherwise he could not have resorted." In Jones on Liens (section 1045) the same rules are stated, and, wherever stated, are fortified by abundant authority.

One contention on behalf of the appellant is that, while the right to require enforcement of the judgment against No. 2 alone existed at all times prior to the execution of the trust deed, after that time it did not exist; that the right was not fixed, but was inchoate, and to be enforced only with reference to conditions existing at the time of enforcement. If this were true, the rule that subrogation was the more modern and approved remedy would be defeated, since subrogation depends upon the previous conduct of the dominant creditor, either in disregarding his duty to seek the property not covered by the junior lien, and in enforcing it against that upon which the junior lien rests, or, as said by Bispham, where he "has been guilty of some negligence or default." The theory of subrogation would be incomplete without the supposition that the dominant creditor had either enforced his claim against the doubly burdened property, or had lost the right to pursue the property to which equity carries the junior lien in subrogation. The idea at the basis of the equity is that the dominant creditor, having otherwise ample security, shall not disap

point the junior creditor. Unless that which disappoints the junior creditor has been done, there is nothing for which subrogation is awarded. To give the disappointed creditor "the benefit of another security in lieu of the one of which he has been disappointed" necessarily implies that he has been placed in a position by the dominant creditor where his security is not available. Bispham says (section 342) that "the right of marshaling cannot be defeated by the intervention of creditors of a later date," citing authority. We are convinced, therefore, that where, as in this case, a creditor takes a mortgage on property, it then being apparent that all prior liens can be fully paid from other property covered by them, the right to require such payment will continue and be protected as against such prior liens.

It is insisted, however, that the enforceIment of the rule under the circumstances in this case is an injury to the appellant, now the dominant creditor, by the purchase of the judgments, and that equity will not enforce the rule to the injury of a third person.

As

to the ownership of the judgments, we observe no stronger equity in the appellant than in the assignor, the original judgment creditor. Nor do we perceive that the trust deed added anything to the equities of the appellant under the judgments, as against the appellee. Equity forbade the assignor of the judgments to enforce them so as to disappoint the appellee. In other words, good faith demanded that the judgments should be enforced against No. 2, property incumbered only by their lien and ample to pay them. We know of no reason why this equity should be broken by the transfer of the judgments to another. The judgment creditor could perform no act affecting the equity in favor of the mortgagee. In the hands of the appellant, the judgments have been held, without enforcement, for the manifest purpose of pushing them over upon No. 1. The trust deed, the sales of property included in No. 2, and the application of the proceeds to credits in favor of the appellant, other than the judgments, have had the effect to remove much of No. 2 from the reach of the judgments, and to destroy, in the main, the possibility of subrogation. In other words, the judgments, as confessed by allegation, were purchased and employed by the appellant for its protection; that is, to secure the payment of its other claims from No. 2, hoping thereby to avoid the obligation to collect the judgments from that property, and to be enabled to collect them, or such part as might be necessary, from No. 1. The appellant, as to the judgments, does not occupy the position of a third party. It occupies the position of the original judgment creditor. Nor is it, as the dominant lienor, injured by the rule here in question. If injured, it is not by the rule, but in the violation thereof by the appellant, in securing the diversion of No. 2 to other sources than the payment of the judgments. If, in

stead of a trust deed for appellant's benefit, Mackey had conveyed No. 2 to a stranger, it would not have been released from the lien of the judgments. If he had sold out a part of it, the residue would have been first subject to sale upon the judgments, and then, for any balance, the part sold would have been subject to sale. This conclusion results from the universally established equitable rule that property subject to a lien, if sold by the debtor in parcels, is subject to resale, for the discharge of the lien, in the inverse order of its alienation. Authorities are unnecessary to a proposition so thoroughly understood as this. The appellee, in taking its mortgage, occupied the position of a purchaser of a part of the property covered by a lien, and was entitled to require the remaining portion to be sold first for the payment of the lien. Hahn v. Behrman, 73 Ind. 120; Merritt v. Richey, 97 Ind. 236; Denton v. Bank (Sup.) 28 N. Y. Supp. 293; Appeal of Robeson (Pa. Sup.) 12 Atl. 51; Kendig v. Landis (Pa. Sup.) 19 Atl 1058. The trust deed and sales under it, for the appellant's benefit, had the effect to release the property from the lien of the judgments, as to the appellant; and such release would operate as a relinquishment of the right to go upon No. 1 for the judgments. Alsop v. Hutchings, 25 Ind. 347; Turner v. Flenniken, 164 Pa. St. 469, 30 Atl. 486.

Cases in their essential features quite like the present are Appeal of Robeson, supra, and Kendig v. Landis, supra. In the first, Graham owned two tracts of land subject to two judgments in favor of Woods. Upon the Hale tract he gave two mortgages, and later gave one upon the Decatur tract. Both tracts were sold under the judgments, and the proceeds brought into court for marshaling. The appeal was on behalf of the mortgagees of the Hale tract, claiming precedence in distribution over the mortgage on the Decatur tract. The court said: "If the contest were one between the appellants and the debtor alone, can it be doubted that the appellants would in equity be entitled to have Woods resort to the proceeds of the Decatur tract, in order that they might avail themselves of the Hale tract? As the equity is against the debtor himself, certainly he would not be allowed to insist upon a pro rata payment of the Woods judgments from the two funds, respectively, in order that he might pocket part of the money. But, when the appellees subsequently recorded their mortgage upon the Decatur tract, it is contended that, as mortgagees, they acquired a lien, and that their equity was equal to that of appellants; that the equities were in equilibrio. We do not think so. The appellants acquired against Graham, the mortgagor, the right to have his other lands, not included in the mortgage, applied first to the payment of the earlier judgments which were liens against them. This right it was not in the power of the mortgagor to defeat by confessing judgments to other creditors, or by contracting subsequent debts.

« ForrigeFortsett »