ARK.] SCHICHTL• V. HOME LIFE & ACCIDENT CO: 415 SCHICHTL V. .HOME LIFE & ACCIDENT COMPANY. °Pinion delivered OctOber 5, 1925. MORTGAGES1—RIGHT TO FOLLOW FUNDS DERIVED FROM, CONDEMNATION FROCEEDING.—Where a mortgagee, knowing of condemnation proceeding against the mOrtgaged 'property, though not a party thereto, permitted the mortgagor to receive the funds so received and to use them in improving'the mortgaged property and in the purchase of a hoine elsewhere, and thereafter proceeded to, foreclose his mortgages , on the property, ,it will nO be permittexl: thereafter to assert a lien on the homestead property acquired, with such funds. . . Appeal _from:Pulaski -Chancery Court ----johnfE...Mar-- timeau, Chancellor ; reversed. . Mann & McCulloch, for appellant. John M. Rose, for appellee. , • MCCULLOCH, C. J. This is an action instituted by appellee in the chancery court of Pulaski County agaiiist appellants, J. N. Schichtl and•lis wife, Annie Gertrude Schichtl, to enforce 'an asserted lfen against Certain , real. estate in the city of Little Rock, the legal title to .whi!ch is in Mrs. Schichtl and constitutes her homestead. There was a decree in favor of appellee declaring a lien ontlie.
416 SCHICHTL V. HOME LIFE & ACCIDENT CO. [169 property in question, and an appeal has been prosecuted.. to this court from that decree. • • The • facts as established by the• preponderance of the evidence, though in some instances, disputed, are as follows: Prior •to the acqui g ution, in the year 1922; •of . the property in controversy, the . Schichtls •resided in Lee County, Arkansas, and..J... N. Schichtl was, the owner of two large tracts of farm land, one containing about six hundred acres, known as :the Sullivan place, . and the other containing something over 1100 acres known as the. Highland place. Schichtl purchased -the. Sullivan place in August, 1919, from J. K. 'Sullivan; the then 'owner, for the price of .$40,000, and.paid $10,000 cash and :executed three equal notes, :payable .annually, for the• remainder of the purchase price and executed a mortgage on the land to secure 'the notes. These notes were sold and transferred by Sullivan to appellee. About the sarno time Schichtl purchased the Highland place, which adjoins the ' Sullivan place, the , purchase price being $28,- 500, and he paid all of it except $5,000, a mortgage being given to secure a note for that amount, and that note' was also seld 'and ' transferred qcry the holder to appellee. • Roth of the traots of land in question were operated as farms, a portion of each being in cultivation.. Roth of 'the farms fronted on the Mississippi River and .were in the route of the levee constructed and 'maintained by the St. Francis Levee bistrict. In the' year . 1920 the board of directors of the St. Francis Leiree DiStrict, in accordance with a'proposed plan to' extend and enlarge the levee along the Mississippi River in the southern part of Lee County,' instituted statutory proceedings against Schichtl to condemn a right-ofway through. the lands referred to, and Schichtl was made a party to, and notified of, the proceedings, but appellee as the holder of 'the mortgage notes referred to :above was not made a •party and was not given any legal notice of the''pro-. ceedings. There was involved in the condemnation proceedings forty-seven acres 'of the Highland place and twenty-six acres of the Sullivan place, and there was an
ARK.] SCHICHTL V. HOME LIFE & ACCIDENT CO. 417 award of damages in favor of Schichtl in the gross sum of $19,570:66, of which the sum of $5,665.76 was for the value of the lands taken from. the Sullivan place, and the remainder was for the value of lands' taken from. the 'Highland , place. A check-for the.gross amount was • delivered by- the Levee District to Schichtl . on March 8, 1922, and he deposited the check to his own checking account in a bank in Marianna with which:he had been a depositor 'for many years. - : Om : March 29, 1922; the . • property . in. Little Rock, which •corisisted of a lot and a residence btilding, was purchased and •title taken in the name of Mrs: Schichtl. The price of the property was $7,000, which was• a. check dmwa by J. N. Schichtl on the :funds • deposited to his O r WR credit in : the Marianna bank-i—the • deposit which consisted of the check from the St. Francis Levee District. Schichtl 'and his Wife moved to Little Rock immediately . and established their homeStead • on the property'in gnestion and haVe so occupied it continuouSly since • that time. Nothing had been paid on either of' the principal notes 'held by appellee, but Schichtl had. paid interest amounting to $4,100,- having borrowed that sum froni-the bank at Marianna where this . deposit was • made, and 'the funds thus borrowed were' repaid to the 'bank-Out of the deposit' referred to. above. It is alse undisputed : that SChichtl expended about $9,000 in permanent improvements on the twO farms Mentioned,' sorne -of on one place and some of it on , the, other. At. the time of- the deposit- of -these -funds in the bank .lat Marianna the Schichtl notes owned by appellee were in the hands of the bank for 'collection, and the , bank officials had, at the direction of the appellee, been importuning Schichtl for payment. The 'officials of the bank, as well as the agent of -appellee iii Little' Rock who had charge of.these collections,' were 'apprised of the pendency 'of the condemnation proceedings instituted by the -.St:. Francis Levee 'District against Schichtl, 'but ne steps were taken by appellee to assert its lien on the lands songht to be taken or to 'arrest payment Of the funds
418 SCHICHTL V. HOME LIFE & ACCIDENT CO. [169 to Schichtl. The testimony shows; however, that Schichtt promised to make a substantial. payment to. appellee out of the funds to be paid by the St. Francis Levee District on the award. This was . not done, however, and the money was used by Schichtl for other purposes, namely, for the making of improvements on the places, the repayment of the . amount borrowed from the bank to use in paying interest to appellee, and in. the purchase of the Little Rock property:now in conttoversy., In June, 1922, appellee commenced an action in the 'chancery court of Lee County against Schichtl to ;foreclose the liens on the Sullivan place and the Highland place according to the descriptions in the:. mortgage,' which included the lands taken under condemnation. . A. decree in favor of appellee was rendered for the amount of the debt and accrued interest on the Sullivan place, amounting "to $31,450, and , on the Highland place ,for the sum of about $5000. . Mrs. Schichtl was made party defendant to that action for the purpose of barring.her right of dower, and there was a personal decree against J. N. .Schichtl for the respective -amounts mentioned above, and a mortgage lien was declared on the lands, and the same were ordered sold to pay,the debts. At the sale by the commissioner appellee purchased the Sullivan place for the price of $15,000, leaving a deficiency judgment against Schichtl in the sum of $16,450, Ad purchased the Highland place at the price of $5,000, the full amount,of the decree against that place.. According to the undisputed evidence in the case, the Sullivan place at the time of the sale and at the time of the trial of this cause below was of' the value of thirty to thirty-five thousand dollars, and the Highland plaCe was of the' Value of twenty to twenty-five thousand dollars. The merchantable timber . on the Highland place at that time was shown to be of the value of $2,000, and was sold by appellee to a timber dealer for that sum. Subsequent to the *confirmation of the sale and the conveyance of the land by the commissioner to appellee. appellee instituted the present action, asserting a lien
ARK.] SCHICHTL V. HOME LIFE & ACCIDENT Co. 419 on the Little Rock property in controversy on the ground that its mortgage lien extended to the funds used in the purchase of the property which were a portion of the award of damage's to Schichtl for the taking of his propertY in the condeinnation proceedings. The contention of aPpellee is that, notwithstanding the fact that appel-lee was not made a party to the condemnation proceedings, •he funds paid by the St. Francis Levee District in satisfaction of the award became subject to a lien in lieu of the lien on the land, and that appellee was entitled to trace and follow the funds into the property purchased in Mrs. Schichtl's name and to enforce it against that property. On the other hand, appellants plead, among • other things, that appellee waiVed its right to claim the funds awarded inthe condemnation proceedings by know-• ingly permitting the consummation of the 'proceedings 'and an award and payment thereof to Schichtl and by proCeeding to foreclose the mortgage on all of the lands, including the parts condennied, and that appellee is thereby estopPed to assert a lien on the property pnr-chased with a' portion of the funds. Our conclusion is that the contention of appellants is sound, and that the chancery court erred in declining to sustain it. The rights of a mortgagee 'who has been omitted 'from the proceedings to condemn a portiOn:'of the mortgaged proPerty are correctly stated in 19 R. C. L., p..344, as .follows : "And in the jurisdictions Where notice of the condemnation proceedings Must -be given : to a mortgagee, - as being considered an ' owner' or by reason of the language of the statute, in the absence of notice he is not bound by the proceedings, and his lien on the land iS not affected. Hence, when the condemner has, under such circumstances, made payment tO the mortgagor, the mortgagee e'an compel a second payment to himself, or foreclose on the land taken, though he must first resort to the land remaining after the condemnation. When a mortgagee resorts to such proPertY as' remains unaffe . eted by the condemnation proceedings, and thereby through fore-
420 SCHICHTL 1). HOME LIFE & ACCIDENT Co. [169 closure satisfies the debt secured,: with costs and Charges, his lien on the award terminates, though it may be *otherwise if there is a deficiency.:" The statutes of this State authoriing condemnation proceedings by levee and drainage..districts (Crawford &.Moses' Digest, § 3935) require that -all- known interested parties shall he notified by actual service of proCess, and unknown and non-resident . parties by publication of warning order, and this .court has . decided that all persons interested in the lands must be.notified in the manner provided by statute, and -that, if the condemner pays the award without giving such notice, • it . does go at its peril. Young v. Red .Fork 'Levee. 124 Ark. 61. The rule has been announced by this court in other cases-that-the mortgagee or other omitted .party cannot be deprived of his superior lien by condemnation and award made without notice. Organ v. Memphis & Little Rock R. Co., -51 Ark. 325; Hare v. Ft: -Smith. & Warren R. Co., 104 Ark. 187. The ruling in . Ruling -Case Law as stated above is in 'accordance. with our -statute and with the rule announced in the decisions::of this -court. It is a mooted question, however, , whether or nOt a mortgagee who has been ornitted from • the condemnation proceedings can pursue the funds . Paid . over to the mortgagor -on the -award,- or whether -a mOrtgagee is ; confined to its remedy against. the condemner.: We pretermit any discussion of that question, for, as before stated, we -are-of the opinion that appellee, under the facts of this ease, has by estoppel waived its right to -pursue the funds paid over to the mortgagor . and assert a lien thereon. . According to -the prepOnderance of the evidence in the case, appellee knew of the pendency of the condemnation proceedings, knew that it was omitted from- those p roceedings, and that the funds were to be paid over to E. Schichtl, and of his failure to pay any of it on the mortgage debt, and, after the funds had actually- been paid over to Schichtl and deposited in the bank, it -permitted Schichtl to use the funds, partly in improving the mort-.
gaged farms , and enhancing' the value thereof and in the Purchase of Little ROck pr . oPerty for 'use aS a home-, Stead, and then appellee proceeded to foreclose the mortgages, on all of the lands, including that part condemned, and to purchase the same. at less than half the• actual value. With lmowledge of all the facts, appellee elected to proceed against the condemned lands without asserting • any lien, "and, after 'securing all-the advantages of 'that propeeding, it is too late how fa assert a lien on the , property purchased by some of the funds awarded in the condemnation. Arppeee accepted all the benefits rby foreclosure on the lands, the . value . of . which had been enhanced by permanent . improvements made by funds from the ' award in exCe ` ss 'that portion which ,was derived from the condemnation of the SUllivan place, and it woUld not be in accordanCe 'with the prinCiples of,equity to permit appellee to take advantage of that faCt and -then , to turn and claim that the particular amount' of the funds derived from that sonrce, were used in purchasing , the Little Hock property. Stopp v. Wilt, 177 620. • We are of the . opinion therefore that the chahcellor erred in his conclusiOn, so. the 'decree is reversed; 'and the cause remanded with directions to dismiss the complaint ..for want of equity. • WOOD, J., dissents., •
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.