172 FOSTER V. TAYLOR. [187 • FOSTER V. TAYLOR. .4-2928 Opinion delivered April 3, 1933. . MORTGAGF.S ASSIGNMENT.—The assignee of a second mortgage acquired no better title than the assignor had.. 2. MORTGAGES—PRIORITY.—A mortgage which correctly describes the land and recites that it is a second mortgage is not entitled to .priority over the first mortgage, which misdescribes the land. 3. MORTGAGES—RIGHTS OF SECOND MORTGAGEE.—A second mortgagee, — riot 'Made a party to foreclosure of the first mortgage, is entitled to a 'reasonable tiMe . to redeem. App • eal from Howard Chancery Court; C. E. John-son, Chancellor; affirmed. •U. A. Gentry and Carrigan & Monroe, for appellant. •Geo. R. Steel and W.P. Feazel, for appellee. MCHANEY, J. On January 21, 1930, A. M. 0 'Quinn - and wife executed and delivered to one Peppers their notes for $15,000 secured by deed of trust on 115.6 acres of land, Which Was to beconde due and payable October 15, 1930. The land described in. the deed of trust was erro-ifeousiaS to one 40 adres, it being described as the northeast -quarter of -the northwest quarter of section 34, Whereas it should . have been described as the northeast quarter of the • northeast quarter, and it is undisputed that• O'Quirm and wife intended . to correctly describe the land known as the 0 'Quinn peach orchard, and that they did not own the northeast quarter of the northwest quarter, and that the description was inserted by inadvertence, oversight or honest mistake in drawing the mortgage. Said notes and mortgage were transferred on January 21.; 1930, for value and before maturity to the Planters' Bank & Trust Company. Thereafter, 0 'Quinn defaulted in the payment of said indebtedness, the Planters' Bank & Trust Company became insolvent, and was taken over by the Bank Commissioner for liquidation, and on August 4, 1931, suit was brought by the Bank Commissioner against 0 'Quinn and wife and Peppers to foreclose said deed of trust, and a decree was granted in accordance with the prayer on September 10, 1931. Appellant was not made a party to this action, although on January 21,
ARK.] FOSTER V. TAYLOR. 173 1931, 0 'Quinn and wife executed and delivered a second mortgage to the Hope Fertilizer,Company to ,secure-their note to it in the sum of $2,381.91, given for a pre-existing debt, due October 1, 1931, with interest at 8 per cent, to maturity and 10 Tier cent. thereafter. The mortgage cOyered the 0 'Quinn 13each orchard, the Saine 116.6 acres, bnt Correctly described the 46 acres Of lanct in controveray as the northeast quarter of the northeast quarter of sec.- tion 34. '.This mortgage to the Hope Fertilizer 'COMpanY, after Correctly'describing the land, contained this 'olanSe "It IS understood that , this is a 'second mortgage en the above-deseribed ` land." This mortgage was before ma-tnrity and"for value 'assigned tO apellant, *he is the Wife, of the president bf the Hope Fertilizer COmpany. Pursuant to the decree of the court in favor of the Bank Commissioner . of September 10, 1931, all, the land described in the mortgage to the Planters' Bank & Trust - Company was sold, and the Bank Commissioner became the purchaser, which sale was approved by the court and deed executed to the Bank Commissioner. , After the sale the Commissioner _received information of the,. error. in the description of said 40 acres and obtained a:quitclaiin deed from 0 'Quinn and wife tO the northeast quarter of the northeast quarter and executed and delivered ,to the owner of the northeast i quarter of the ,northwest , quarter hiS quitclaim deed thereto tO : Clear up hiS title Thereafter, on March 13, 1932, appellaht, • aS aSSignee of ihe Rope Fertilizer Comany, brought this . aCtinn tO foreclose the second mortgage, making the ‘ Planters' Bank & Trust Company, the Bank Comini s • siciner and the liqui • dating agent defendants in this actibn. , Appollhiit there claimed,. and is now claiming, that her Second mortgage became a f * irst mortgage_ 'on the 40 acreS of land mis-described - in the Peppers' deed of truSt: The xhanceiy court found that the mortgage given to . Peppers, as corrected by the quitclaim deed executed by 0 'Quinn and wife to the Bank Commissioner . since the foreclosnre of the mortgage, constituted a superior and parathount lien to the lien of appellant under the mortgage executed ,to the Hope Fertilizer Company. A decree was accordingly entered, but, inasmuch as neither appellant nor the Hope
174 Fosrim v: TAYLOR: -[187 Fertilizer Conipany was-made a party tO the first fore-Closare hit, that, appellhnt . Wa g entitled to the .privilege Of iedeeming the , lands'', frOM. the Bank . Corandssioner 'by Paying the. fall'anionnt'd his debt 'within 90.da • ys: — 'As ahoVe stated, appellant's mortgage.'edntained the coi l dition . :that : "It 'i.SuilderStoOd , that . this is a . secOnd mortgage On the above-described lands." ThiS clauSe wa g insetted purSuant to agreement between' O'Qn.ilin go-139 • rotil , ,_44 . . 011313.arq, il ess jp,i t was . past dae, it,,Was trying ' .f,O debt' or obtain seCurrty for -it, In response td a lettei. b'Quinn wtote the conipany as folloWS: , `,`YOur letter to. hand relatiVe tO,•giying iurther securitY , on the fertilizer note dile you frOm me. I told yOur Mr:1161ms after• his . questiOning me that the only furthet 'Security that I could give On the note would'be a SeCond.Mortgage on the -real eState. PetsOnally, do not see that yOil will be dily farther secnred, but, if it will assist you in yOur financing; I . am entirely willing to 'give such a mottgage. I ara giving You a desCriPtion of this Orchard Property, and Yon can haVe . a Second mortgage formffilled Ont and mail thiS nie'for thy' Signature; nhd, if Yon wish, I 'will have' 'th'e f : sanie.• i: e0Orded . at the einirthdn'se in' Howatd Cdnnty'and 'Mail it fq you ' • Itaccepted . 0 's prdposition, prePared a Mort-gnke , whiCh cOrrecW , deSpabed the lands 'in 'the Orchard, and enaliodied -theagreerderit therein that it was a second MOrtgage on the lands deseribed. APpellarit, • as . aSsignee of -11-16-1Iope Fertilizer donipany, _ a . cquired no better title than it had, which was by agreethent a•second mortgage only. Trae, it did not state that it was seCond or subject to. anY Particular Mortgage, ' but' We think that is unimPOrtant; eveh- s.against an unreCorded niortgage, f6r all that aPPellant'S assignor took was a seCond mortgage, which made it subject to a valid Prior first mortgage, whether recorded:or net. , We so held in HOney v. Holt, 179 Ark. 403, 16 S. AIT . (2d) 463, written by the late Chief JustiCe HART. - In that case - the first mortgage was not filed or recorded, not being subject thereto for lack of acknowledgment. The- second mortgage cdntained this clanse: "This mortgage is second to a previously re-
ARK. VOSTER V. TAYLOR. 175 , corded . ,mortgage. It, was, there said, quoting rom -Young, v. Evans,i 5wider-Eush-Com. ' Co.; 158 Mo. -395; 59 S..M. 113 : This . agreement. of plaintiffs; -substantially recited; in their mortgage, to take their .security, Subject to .the defendant's prior,mortgages; which, were ian- equit, able lien upon:the , cattle, valid . between the. parties: thereH to, ; obviously takes the defendant's case,.upon• this • issue, out of; the principle ,of, the Arkansas case aforesaid, upon which 'plaintiffs ,r ely, and brings it within the wellsettled doctrine :recognized and enforced in:that State; as; well as in:the other States . of the Iinion, that 'one who:takes a , conveyance„absolute or conditional, which recites that it is • Second Or ;subordinate. to some other lien . •or ,incum:• brance, can in no. proper : sense,.claiM ;that he• chag er. • of: the .entire thing. He..purchases - only the :surplus . or residuum : after satisfying the, otherAncumbrance' ; and :`.a. mortgage :expressly 'proyiding.that it shall.be subject to a,priormortgage is subject,to it, : independently 'of the fact that the prior. mortgage is not _of record ;. nor will it , alter matters to record the ,subsequent •mortgage ..Jones,..Chat. ,Mortg.,, § .494; .5 Am. :86'.'•tn.g. ,Eno. Law (2d ed.) .1915 2 . Cohl?ey, Chat..Mortg., §,.1W9.; Clapp Ir. Halliday, 48 Ark. •258, 2 S. W • . • Th • e pl • aintiff „ s . ,. by accepting . their .. subsequent Mortgage:Under . .the pireum-Stances afOreSaik ceaSed to be strangers to 'the , 4efeliC17 ant's prior mortgages, and were thereby brought' into eonz tractual relations-With Said mortgageS; :a"ridthey'imposed • the- 'interest acquired . thein 'in tbe ‘ptofiettY r , fd 'the • 'ektetit ' of defendant's equitable under said prior mortgages, subject to which theyagiced to take. .There is nothing in the statutes mf Arkansas, or in the rulings of the Supreme' Court of that StateJhere7 upon, prohibiting the . making or impugning , the validity of such a contract." • . . , : • See also Wells v. Farmers' .Bank (0 Trust C6., - 181 Ark. 950, 28 S. W. (2d) 1059, and Gunnels v. Farmers' Bank of Emerson, 184 Ark. 149, 40 S. W. (2d) 989. In the latter case the second mortgage to Gunnels, as here, recited tbat it was a "second mortgage on" the lands described in the mortgage to the bank. We there held that the case was ruled by Haney v. Holt, and said: "In
_.176 FOSTEli-V.-T-AYLOR. -- --[187 the instant case, -as in the case of Haxey v. Holt,. .supra, the second mortgage was taken while the first mortgage was a subsisting lien, and there was a contractual agreement in the second mortgage, which became a condition upon which the conveyance was made, that is, that it was second to a prior mortgage." So here the mortgage to the fertilizer company was taken on the condition that it was a second mortgage on the land therein correctly described. That was all 0 'Quinn was willing to give, and but for that condition he would have given no mortgage at all. The fact that 40 acres was misdescribed in the first mortgage did not work any prejudice to its rights, and, because of such condition, neither it nor its assignee is in any position to complain because 0 'Quinn gave appellee a quitclaim deed thereto. Undoubtedly Peppers, the bank, or the Bank Commissioner after insolvency of the bank, could have had a decree of reformation of the instrument at any time so as to show the correct description, as it is undisputed in this record that O'Quinn intended to give and Peppers to receive a mortgage correctly describing the orchard, and not land be-lon -ging to a stranger to the whole transaction, and this would work no injury to appellant or her assignor, as all they ever • had was a second mortgage on said property. • „Since appellant was not made a party defendant-in the foreclosure of the first mortgage, she would have the right to redeem in a reasonable time, which the court crave her. We find no error, and the decree is accordingly affirmed. JOHNSON, C. J., disqualified and not participating: KIRBY, 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.