MORTGAGES.

[Butler Circuit Court,

April, 1896.]

Smith, Swing and Cox, JJ.

#### Second National Bank v. Augsperger.

Conveyance oe Encumbered Premises by Mortgagor to the Mortgagee.

Where a mother owns lands in fee and executes a mortgage on the same to her son and subsequently conveys the encumbered lands to him, this would, as between the parties operate as a cancellation of the mortgage without any express agreement that it should do so, because the son would then be the owner and holder of the mortgage on his own lands; but if the note and mortgage securing it has been assigned to a third person, the rights of such third person would not be affected by the conveyance from the mortgagor to the mortgagee and such third person would be entitled to his lien on the property.

Appeal from Court of Common Pleas of Butler county.

Smith, J.

This cause comes into this court by an appeal taken by Flanagan, and which has the effect to bring into this court only the questions arising on the pleadings in the original case in which he is interested— -none of the other parties having appealed. We suppose that the findings of the common pleas, as to the other parties, as to which Flanagan has no interest, stand unaffected by the appeal.

The facts in the case as disclosed by the evidence offered in this court, are substantially these: About August 31, 1891, Elizabeth Augsperger was the owner in fee of lots numbers 7 and 8 in Trenton, Ohio, and on that day she executed to her son, George Augsperger, a mortgage thereon, to secure a note for $1,389.96 of that date, owing by her to him. On the same day the mother and son executed to the Second National Bank a note for $650.00, and as collateral security therefor, theydelivered to the bank this note and mortgage for-$1,389.96, which mortgage was duly recorded by the bank, but afterwards it was withdrawn from the recorder’s office by George Augsperger without authority. On March 9, 1892, Mrs. Augsperger conveyed these lots to George in fee, she however retaining and reserving a life interest in the east halt of the two lots at a rental of $40.00 per annum. This we understand to have been in satisfaction of the note held by him against his mother, and did operate to cancel it, except so far as the rights of the bank were concerned; but no release of the mortgage or of any part thereof was ever entered of record. On March 19, 1892, George and his wife executed a mortgage on the lots to the Eaton Building Association. At that time the association officers knew of the record of the $1,389.96 mortgage, but George represented that it was paid, and judge Eisher, the attorney of the association, as a condition of his approval of the loan, required a release of the mortgage to be entered, but for some reason, which does not appear, the loan was made without a release having been entered. On September 14, 1893, Augsperger and wife, by general warranty deed, conveyed the premises' to defendant Flanagan, George Augsperger, as averred by Flanagan, then representing that'the said $1,389.96 mortgage was fully paid, and that he would cáncel it.

There was an issue raised upon the pleadings in the common pleas, as to which of the two parties, Elizabeth Augsperger or her son George, *543was primarily bound for tbe debt of the bank — each claiming the other was. The court of common pleas found on the theory that $864.45 was still due to the bank on their last renewal note; that of this sum Elizabeth was the principal debtor to tbe amount of $40.45, and George the principal debtor for $324. We understand there was no objection to this, and no evidence was offered to us on these points.

A question arises as to the amount for which the bank holds a lien on the mortgaged property. The original loan as for $650. It was renewed from time to time, the interest being paid, and sometimes a payment would be made upon the principal, and a new note be given for the balance and on--1892, the amount due on the note to the bank was bypayments thereon reduced to its minimum $ — , but between this time and June 20,1893, additional loans had been made by the bank to George and Elizabeth Augsperger, and these additional amounts as well as the balance due on the assigned note, were on June 20, 1893 included in one note and signed by both of them, and the old mortgage note again pledged as collateral for this last note. And the question which arose at the hearing was, whether the bank had any claim by reason of holding that collateral against the land for anything more than the minimum amount of their note of $650.00, after payments were made thereon with proper interest, and excluding any lien of the bank for advancement subsequently made.

It would seem clear that when Elizabeth Augsperger conveyed to George the real estate, which was encumbered by a mortgage given to her by him, and which he then owned, that this would, as between the parties, operate as a cancellation of the mortgage without any express agreement that it should do so, because he then would be holding a mortgage on his own land. But if the note and the mortgage securing it, had, as in this case, been assigned to another, of course the rights of such person would not be affected by such conveyance by the mortgagor to the mortgagee. So it would seem. that, the bank is entitled to a lien for the amount really due as a balance on its first loan, with, interest, and perhaps as between the bank and the two Augspergers it would be entitled to a lien for the further advances, though they were made after George became the owner, and this perhaps on the doctrine of estoppel. I do not see how it can hold any lien for such subsequent advancement as against a person who acquires title to the mortgaged property before such advancements were made, as did the Eaton Building Association. The lien of the bank at the time the building association took its mortgage, was only for the amount, actually due at that time on its note, for which the mortgage note was held as collateral, and as against it, it could not be increased without its consent. This we understand to be substantially-conceded, but it is claimed that the building association is not here to contest the additional lien, not having taken any appeal. But Flanagan who acquired title to the land after the advances were made, and who took the land subject to the building associations mortgage, did appeal, and he is interested in having the rights of the building association properly settled, and if the decision of the common pleas of the question of the right of the building association was wrong and affects him as it does, his appeal brings it up, and he is entitled to have the rights of the building association, in so far as it affects him, adjudicated.

We conclude then that the bank has a lien for this land, as against Flanagan, who took it subject to the building association, only for the sum of $ — , that being the amount to which the claim of the bank was *544reduced by the payment of *$--,*and it is entitled to *s*degree for the sale of the land, unless that sum, with interest at the rate, named in the note of the bank to 'this time, be paid. But the bank is also entitled to a finding against Augsperger and his mother for the residue of the claim against them. As neither of these two appealed from the finding of the common pleas as to the amounts for which each was severally liable, the •finding as to this stands, and will be adopted here/

*Judge*Hume, for Plaintiff.

*Morey, Andrews & Morey,*for Defendant, Mrs. Augsperger.

*M. Vaughn,*for Building Association.

*Slayack & Harr,*for Flanagan.