470 MIDLAND SAVINGS & LOAN CO. V. BROOKS. [177 'MIDLAND SAVINGS & LOAN COMPANY V. BROOKS. Opinion delivered June 4, 1928. 1. MORTGAGES-POSSESSION AS NOTICE OF EQurrms.—Possession by a purchaser 'of a lot from • its equitable owner at the time when a mortgage was executed by a party holding the legal title 'for the equitable owner was equivalent to actual notice to the mortgagee of the purchaser's equitable title and rights. 2. MORTGAGES-POSSESSION AS NOTICE OF EQUITIEs.—One purchasing a lot; signing a purchase-money note and making payments in good faith,,in.reliarice on the vendor's Assertion that the title waa in himself, though the legal • title was in another for the mit-- , chaser's benefit, had an equitable interest of which his possession was notice to a subsequent mortgagee. Appeal from Miller Chancery Court; C. E. Johnson, Chancellor; affirmed. - STATEMENT OF FACTS. Paul- R. BroOks and Christine Brooks, his wife, brought this suit in equity.against the Midland Savings & Loan Company to .have a ContraCt of sale, executed to rplaintiffs to lot 3,. block 8,1 Strange's Addition .to the OtY,of Texarkana, Arkansas, declared to be a: prior lien to a mortgage: given to the defendant, arid that a mortgage executed: to the defendant by B. V.. Long te declared a cloud upon the title of the plaintiffs. The defendant- .filed an answer, denying the allegations of the comPlaint, and sought to foreclose a mOrtgage exe: cuted by:B. V. Long and wife to said defendant. B. V. Long and Lela Long, his wife, and Agnes McCall. are all made parties defendant to the cross-complaint.
ARK.] MIDLAND SAVINGS & LOAN CO.-V. BROOKS. 471 The facts necessary to determine the , issues raised by the plaintiffs may be stated in brief form is .folloWs: On April 29, 1926, Dan Dewberry purchased from -Mrs. Agnes McCall the lot involved in this controversy, and took the title thereto in the name of B. V. Long. On May 1, 1926, Dan Dewberry, as agent of the Midland Savings & Loan Company, filed an application with that company in the name of B.• V. Long for a loan of $2,000 upon said property. On May 18, 1926, the Midland Savings & Loan Company granted the loan, and a mortgage was executed to it on that date 'on 'said property by B. V. Long and wife, which was duly filed for record. On May 29, 1926, the deed to said property from Agnes McCall to B. V. Long was duly filed for record; and on the same day the mortgage from B. V. Long and wife to the Midland Savings -& Loan 'Company was 'alSo filed for record. No part of the mortgage indebtedness to the Midland Savings & Loan Company has been paid. Dan Dewberry and B. V. Long are ,both•insolVent. :On May 5, 1926, Dan Dewberry and his wife entered into a written contract with Paul R. Brooks and Christine Brooks, his wife, whereby they 'agreed to sell them said lot for $2,750. Thirty-five dollars of this amount Was cash in hand paid, and the balance of $2,715 was evidenced by'a promissory note, bearing interest from date until paid at the rate of len.per cent. per annum, and was payable in monthly installments of $35. each. The note for $2,715 for the balance of the purchase money was payable to the order of Dan Dewberry, and was signed bY Paul R. Brooks. On the 5th day of May, 1926, as ' soon as the contract was executed, Paul- R. Brooks and wife entered into possession of said lot,, and have resided in the dwelling-house thereon continuously since that time. Brooks continued to make the monthly payments of $35 as specified in said contract and note until the 5th day of April, 1927. The total amount' so paid is $420. At the time Brooks made the contract with Dewberry for the purchase of the property, he did not know that there was any-mortgage on the property.
472 MIDLAND SAVINGS & LOAN CO. v. BROOKS. [177 • The chancellor was of . the opinion that the interest .of- the plaintiffs in said lot was paramount to the iiiorf-gage of the :defendant,. the Midland : Savings & .Loan Company, .and that the latter company. should.be subre, gated to the rights. of Dan Dewberry to receive 'the bah lance of the purchase money:for said lot from.the plaintiffs after the payment out of said purchase ..money..of tWo prior mortgage lienS . against said property., A decree was entered in accordance .with. the findings• of_ the chancellor, and to reVerse that. decree 'the defendant, . the Midland Savings. & Loan. Company, has duly .prosecuted an appeal to thiS court. . . .;.1no. D. Rogers' and P. P.' Bacon, for appellant-. Frank , S : ,QuinA, for appellee.. HART, C. J., (after stating •he* facts)..- A§ will be seen from our statement of factS, on: the 5th • day .of May, 1926, Dan Dewberry entered.into. a written contract with Paul R. Brooks 'for the sale of, the 'lot in controversy. After making a small . caSh. payment; Brooks executed a note to Dewberry for the . balance *of the purchase moneY, and -Was placed in possession of the property. He has aCtually resided on the property since the date of his purchase, 'and was residing there at the time a Mortgage was executed by B. V. Long and wife to -the Midland. Savings & Loan Company, on the 18th, day of May, 1926-. The possession of the property _by Brooks and wife at- the time : the:mortgage to the Midland Savings & Loan CoinpanY was eiecuted.was equivalent to actual notice to that coinpany, of the title, rights and equities of the occupants. Thalheimer v. lockert, 76 Ark. 25, 88 S. W. 591; Naill. v.-Kirby, 162 Ark. 140, 257 S. W. 735 ; First National Bank of Paris v. Gray, 168 Ark. 12, 268 S. W. 616; Reed v...Ziff Lodge 119 Order of Masons, 175 Ark. 980,-1 (2d.). 1000; Crawley v. Neal, 152 Ark. 232, 238 S. W. .1054; American Building & Loan Association v:'Warren, 101. Ark. 163,,141 S. W. 765. :In 'the case last cited .the law. applicable to cases of this sort-is clearly stated as follo*5:
ARK.] MIDLAND SAVINGS & LOAN CO. V. BROOKS. 473 . "Ordinarily; Possession by s a person under a cOn-. tract of purchase, although unrecorded, is notice of his equitable rights 'and interest§ in the property.' Ketual possession is evidence of some title in the possessor, and puts the subsequent purchaser or mortgagee on notice as to the title which the occupant holds or claims in the property. Generally, actual, visible and exclusive possession is notice to the world of the title and interest of the possession in the property, and it is incumbent upon the subsequent purehaser or mortgagee to make diligent inquiry to learn the nature of the interest and claim* of such possessor, and, if he does not do so, notice ther - eo , f will be imputed to him." In the case at bar Brooks went into possession of the lot as soon as he purchased it, and made Payments of the purchase money under the terms of his contract to the 'ainount of '$420. He testified that he did this in good' faith, and his testirneny is not contradicted. The other , evidence in- the case shows that Dan Dewberry purchased the property from Mrs. Agnes .McCall and had . :the title put in the name of' B. V. -Long for his benefit. Brooks did not have any notice of this, and, relying upon the assertions of Dan beWberry, believed that. - the title was in Dewberry at the time he purchased the lot, and entered into possession of it. There is nothing whatever in the record to impeach the good faith of Brooks in the Purchase of the property. Dewberry represented that the title was in him when he made the contract with Brooks, and Brooks signed the note for ; thefl purchase money and entered into possession of the property, believing that he was acquiring a good title thereto. B. V. Long 'admitted that the property was purchased by Dan:DeWberry from Mrs. Agnes McCall andlhat the title waS taken in the name of B. V-. Long for the benefit of Dan . Dewberry, and that he (Long) had no interest'whatever in the property. Under these circumstances Brooks had an equitable . interest in the property, and his possessiOn of it was notiee to tile
474 [177 defendant, ;the Midland Savings & Loan Company, of his rights. It . follows that the decree of the chancery court will be affirmed.
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