1004 HOME B. & S. ASSOCIATION V. REDDING. [177
HOME BUILDING & SAVINGS ASSOCIATION V. REDDING. Opinion delivered July 9, 1928. 1. BUILDING AND LOAN ASSOCIATION-RATE OF INTEREST CHARGEABLE. —In determining the present value of anticipated payments in the ioreclosure of a mortgage given by a borrower from a building and loan association, the contract, and not the legal, rate of interest should govern in estimating the present value of the principal and unmatured installments. 2. LIENS EXCHANGE OF PROPERTY.-A mortgagee of land is not entitled to a .lien on land exchan g ed for the land covered by the alleged mortgage. . Appeal from Miller Chancery Court; C. E. Johinson, Chancellor; reversed on cross-appeal; affirmed on appeal. STATEMENT BY THE COURT. Appellant is attempting by this , appeal to reach certain property, lot 5, block 3, Webber Place 2d Addition to the city of Texarkana, Arkansas, and $9,000 of notes given by H. E. Redding and wife to Dan Dewberry, now in the hands of appellee Smith, Dewberry's receiver, in exchange Tor a tract of land in block 10, in Witherspoon's Addition to said city, upon- which appellant claims to have had a mortgage lien at the time of said exchange. Redding and wife, as plaintiffs, brought suit in equity on April 4, 1927, against Dan Dewberry and wife for rescission of a contract of exchange or sale of certain property, alleging: That the defendants sold to the plaintiffs the tract of land in Witherspoon's Addition to the city of Texarkana, and in payment and exchange thereTor took property of the plaintiffs, to-wit, the Webber Place lot and $9,000 of notes of the plaintiffs ; that said trade was upon the condition that Dewberry should satisfy a certain mortgage held by the Citizens' Building & Loan Association of Texarkana upon the Witherspoon Addition property for $7,000 ; that- Dewberry had failed to satisfy said mortgage, and that Dewberry had absconded. Prayed rescission of the transaction, and for restoration of the Webber Place lot and the $9,000 of notes.
ARK.] HOME B. & S. ASSOCIATION V. REDDING. 1005 D. E. Smith, as receiver of the estate of Dan Dewberry, answered the complaint, denying its allegations, and praying that rescission be denied. The receiver set up that the Citizens' Building & Loan Association of Texarkana and the Midland Savings &.Loan Association of Denver, Colorado, and the Home Building & Savings Association of Fort Smith, Arkansas, claimed liens upon the Witherspoon Addition property, and prayed that said companies be brought in and their claims adjudicated. The Citizens answered, setting up that it held a mortgage upon the Witherspoon Addition property to secure the 'payment of a loan of $7,000 obtained from the association by Dan Dewberry, and prayed fore-clogure. The Midland answered, setting up that it held a mortgage upon the Witherspoon a A ddition property to secure the payment of the sum $8,000 obtained as a loan from the company by W. T. McCauley and wife, and prayed foreclosure. • The appellant, Home Building & Savings Association, ,filed its answer and cross-complaint on July 12, 1927, setting up a mortgage upon the Witherspoon Addition property to secure the payment of the sum of $6,000 obtained as a loan from the association by W. T. McCauley and wife, and pray. ed foreclosure. In its answer appellant joined in the prayer of Redding for rescission. Appellant prays that, if rescission is not granted, then that appellant "be Subrogated to all rights and privileges of Dan Dewberry by virtue of its mortgage." On July 13, 1927, the cause was tried as between the plaintiffs and defendant receiver a nd continued as t6 the Citizens' Company, the Midland Company and appellant, who were not ready- for trial. The court found that plaintiffs' complaint for rescission was without equity, and dismissed it. The plaintiffs prayed an appeal, but did not perfect it, and it bad become conclu-
1006 • HOME B. & S. ASSOCIATION V. REDDING. [177 sive at the •time the appeal was granted herein on Feb-ruary 13, 1928. . The cause was submitted for trial as to the other parties on Septemiber 13, 1927, upon the question •of priority of plaintiffs' claim to the Witherspoon Addition •property by reason of their purchase, and also as to the question of the validity of the mortgages held by the three building and loan companies against that property., The :deed from Dewberry and_ wife to the plain- Liffs euuveyii Ulie 'X it-1-.6-1-s•p-Gri- retaining alien for the payment.of the $9,000 notes given for part of the purchase price was introduced in evidence, and also a lis pendens notice filed by them in the recorder's..office of the county on April 4, 1927. There was also introduced in evidence the mortgage of . Dan Dewberry and wife to the Citizens' Company, executed in July, 1926,. and recorded on July 31. The mortgage , to the . Midland Company, dated October 1, 1926,. signed by W. T..McCauley and wife, and recorded April 17, 1927. A prior certificate of record appe : ars on the mortgage, but it was declared to . .be a forgery by the recorder, and McCauley testified also that the mortgage Was a forgery. ,The appellant, Home Building & Savings Association, introduced in evidence its mortgage, dated Septem-ber 10, 1926, signed by W. T. McCauley and wife, and recorded .May 3, 1927. A certificate of record of prior date also appears on the mortgage, but it was declared a :forgery by •he recorder. It appears also • that Red-ding's deed tfrom , Dewberry was not put oil record, but Redding brought his suit and filed his notice of penclens on April 4, 1927; that the Citizens' mortgage was duly filed land recorded on hily 31, 1926; that the Midland Company's mortgage was filed April 17, 1927, and the . mortgage of appellant, May 3, 1927. The court held .that the trade between them for the exchange of lands was valid, and sustained it; that the mortgage of the Citizens'. Company was a paramount
ARK.] HOME B. & S. ASSOCIAtION V. REDDIi rdr. 1007 lien upon the Witherspoon Addition property; and that the rights of Redding in that property Were superior:to all others, except the Citizens' Mortgage; that the mort r gages of the Midland Company and the appellarit, Hothe Building & Savings Company, were for'geries, and should be canceled, and that the $9,000 of notes of Red-ding arid wife in the hands of the receiver should be credited with the amount of the Citizens' . mortgage, leaving a balance. due from Redding upon the notes of $1,911.87, and retained the cause for further COnsiaerW-tion as to which of the particular notes should:be . Can; celed and delivered up ; and- decreed foreclosure and sale of the property in satisfaction of the Citiieng2 mortgage. The court dismissed the cros-complaint of apt;elL lant for want of • equity, and no judgment . Was rendered against D. E.' Smith, receiver,' in favor of appellant for the amount advanced upon its mortgage' eXecriterVY McCauley, it not being found by the court to' be the debt of Dewberry, and from this decree the lappeal is .prose;- cuted; and the Citizeris' Building & Loan AssOciation cross-appealed, complaining only of the method Of' Calen-lation employed by the court in deterinining the airiOnnt for which it decreed a judgment and -Tóreclosure' in .favOr of the said Citizens' Company. • John D. Arbuckle, for appellant. Frank S. Quinn and Elm,er . L. Lincoln, for appellee. KIRBY, J ., (after stating the facts).. The Citizens' Association on its cross-rappeal insists that the court erred in using the legal rate of 6 pet cent. interest instead of the contract rate of 10 per cent. inter.est.in determining the amount due it under its mortgage, and the con= - tention must be sustained. In Gate. City -B. 40 L.. Assn,. v. Frisby, ante, p. 252, the court laid . down the rule for determining the present value of anticipated payments in the foreclosure of a mortgage given, by borrowers of building and loan associations, holding that the contract • rate of interest should govern in estimating_the.,present
1008 HOME B..& S. ASSOCIATION V. REDDING. [177 value of the principal and unmatured installments, and this case is ruled by the decision therein. The decree on the eross-appeal must be reversed, and remanded with directions to determine the amount due by calculation of the present value of the principal notes and unmatured installments at the contract rate of 10 per cent, interest and for a foreclosure and sale of the property to satisfy the judgment. Appellant insists that the court erred in refusing to grant a rescission of the contract of sale or exchange of property to the plaintiffs and also in refusing to decree a lien in appellant's favor upon the Webber Place Addition property, which was conveyed to Dewberry in the sale or trade with Redding, and upon the balance of the notes given by Redding for the purchase money. In answer to the first contention, it will suffice to say that no appeal was taken by the Reddings from the decree refusing to grant them a rescission of the contract of exchange of the properties, and we cannot agree with appellant in its second contention that the court erred in not decreeing its claim a lien upon the Webber Place Addition property, which Dewberry received in the exchange from Mr. Redding, and upon the balance due on the purchase money notes given in such exchange. Appellant does not allege that it paid any debt or discharged any obligation of Dewberry's, and rests its . claim entirely upon the mortgage for relief, and insists upon a foreclosure thereof, and has no right to subroga-tion. 25 R. C. L., § 1, p. 1312. The proceeding upon appellant's part was for a foreclosure of its mortgage, and there was no allegation of any (fraud perpetrated by Dewberry in procuring the loan that entitled appellant to the relief it insists upon here. Alberson v. Klanike, ante, p. 288. There was no evidence whatever tending to show that the money procured from the appellant,association by Dewberry had been used in the purchase of either of the pieces of property included in , the ,trade or exchange, nor that any beneficial interest therein was
ARK. _I 1009 obtained by Dewberry through fraud practiced upon appellant company, nor, as already said, was there any allegation of any such fact, and the court did not err" in refusing to fix a lien under appellant's mortgage against the property conveyed by the Reddings to Dewberry in exchange Tor the Witherspoon Addition property. No constructive trust, that could be , enforced, arose by operation of law from this transaction in favor Of appellant entitling it to subject the exchanged property to the payment of its claim under the mortgage, and the decree dismissing appellant's complaint for want of equity must be affirmed. It is so ordered.
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