Case Name: Yerger v. Barz et al.
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1881-04-23
Citations: 56 Iowa 77
Docket Number: 
Parties: Yerger v. Barz et al.
Judges: 
Reporter: Iowa Reports
Volume: 56
Pages: 77–84

Head Matter:
Yerger v. Barz et al.
1. Mortgage: priority of liens: recording law. Section 1944 of the Code, providing that the indexing of a deed or mortgage by the recorder, after it is filed for record, shall constitute constructive notice of the rights of the grantee therein, contemplates the remaining of the instrument in the recorder’s office until recorded, which is required to he as soon as practicable thereafter. Where a mortgage was withdrawn from the recorder’s office after being indexed, and was not recorded for two years, it was held that third parties acquiring rights in the property in the meantime, in good faith, and without knowledge of the existence of the mortgage, were not charged with notice thereof by the records.
2. Principal and Agent: notice to agent: when binding on principal." The rule that notice to an agent is notice to his principal applies only to knowledge acquired by the agent in the particular transaction, or which, if previously acquired, is still present in his mind at the time of his agency.
3. Mortgage: priority of liens: assignment. As to priority between the holders of different mortgages, an assignee occupies no better posi- ' tion than his assignor.
Appeal from JTeoJmJe District Court-.
Saturday, April 23.
This action is instituted for a judgment upon notes, and the foreclosure of a mortgage against the defendants, Herman and Maria Barz, and for a decree declaring the lien of plain tiffs to be superior to that of the other defendants. The defendants Covill and The Iowa Loan and Trust Co., by way of cross-bill, ask the foreclosure of mortgages against their co-defendants, and pray that the lien in favor of each respectively be declared superior to the lien claimed by plaintiff. The court granted the plaintiff the relief asked. The defendants Covill and The Iowa Loan and Trust Co. appeal. The facts are stated in the opinion.
Drown & Dudley and Sampson c6 Drown, for appellants.
O. U. Maclcey and Woodvn & McJunlivn, for appellees.

Opinion:
Day, J.
I. On January 18, 1877, Herman Barz and wife executed a mortgage on the lands in controversy to F. -G- Gaylord to secure him or his order in thepaymerit of $1,000, evidenced by five promissory notes, dated December 25,1876, and due, respect-' ively, in one, two, three, four, and five years from date. The mortgage was acknowledged, and, on January 27, 1877, was filed for record in the office of the recorder of Keokuk county, and all the statutory entries were made in the index books, except the page of the book where the record of the mortgage was made. The recorder also made the required indorsements upon the mortgage, stating. that it was recorded in book 10, on page 291, of mortgage land records. The mortgage was subsequently withdrawn from the recorder's office by the mortgagee, and on March 18, 1878, the first three' notes of the series, together with the mortgage, were transferred, for value, to plaintiff by Gaylord. On August 18, 1878, defendant Covill loaned Barz $800, and to secure the payment of the loan Barz and wife made their mortgage to Covill on the land in controversy. This mortgage was acknowledged and filed for record in the office of the . recorder of Keokuk county, August 30, 1878, and recorded in book 12, page 597, of the mortgage records of said county.
On the same day, Barz and wife, for the purpose of securing The Iowa Loan and Trust Company in the payment of ten notes of §8.00 each, one due each six months after August 1, 1878, made a mortgage on the same land, which was also recorded in the same book, on page 600, as the Covill mortgage. By its terms this mortgage was junior to the Covill mortgage. Both mortgages were duly indorsed as required.
On the 8th or 9th of January, 1879, it was discovered that the mortgage to Gaylord, then in the possession of the plaintiff, had not, in fact, been recorded. On the morning of January 9, 1879, the mortgage was procured from the plaintiff by Jones, recorder of Keokuk county for 1877 and 1878, but whose term of office expired January 1, 1879, and recorded in mortgage records, book 10, page 264, and the page on the indorsement on the back of the mortgage was changed accordingly, and the index was completed by entering in the proper column the page of the book where the mortgage was recorded. The loan by Covill to Barz was negotiated through The Iowa Loan and Trust Company upon an abstract of title prepared by Johnston & Hawkins, and forwarded to the Iowa Loan and Trust Company by James & Son. This abstract of. title contained no reference to the indexing of the mortgage to Gaylord.
The first and principal question presented by the record is the following: Were Covill and The Iowa Loan and Trust Company, at the time of accepting their respective mortgages, affected with constructive notice of the mortgage to Gaylord? The provisions of the statute upon the subject are found in the following sections of the Code óf 1873.
"Section 1941. No instrument affecting real estate is of any validity against subsequent purchasers for a valuable consideration, without notice, unless recorded in the office of the. recorder of the county in which the land lies, as hereinafter' provided.
" Section 1943. The recorder must keep an entry book or index, the pages of which are so divided as to show in paral- , lei columns: 1, the grantors; 2, the grantees; 3, the time when the instrument was filed; 4, the date of the instrument; 5, the nature of the instrument; 6, the book and page where the record thereof may be found; 7, the description of the land conveyed.
" Section 1944. The recorder must indorse upon every instrument properly filed in his office for record the time when it was so filed, and shall forthwith make the entries provided for in the next preceding section, except that of the book and page where the record may be found, and from that time such entries shall furnish constructive notice to all persons of the rights of the grantee conferred by such instrument.
" Section 1946. Every such instrument shall be recorded as soon as practicable in a suitable book, to be kept by the recorder for that purpose; after which he shall complete the entries aforesaid, so as to show the book and page where the record .is to be found."
It is to be observed that under section 1941 no instrument possesses validity ás to subsequent purchasers unless recorded in the manner provided in the following sections.
These sections provide for the making of an index, the indorsement upon the back of the instrument of the time when filed, and the recording of the instrument itself as soon as practicable. These requirements are all made essential by the statute, and it is not competent fos the court, by construction, to dispense with one or more of them. It is true section 1944 provides that the entries upon the index book and upon the instrument filed shall furnish constructive notice to all persons of the rights of the grantees. But this provision clearly comtemplates that the instrument itself shall be recorded as soon as practicable. Otherwise it would be in direct conflict with section 1941, which declares that the instrument shall possess no validity as to bona fide purchasers unless recorded as subsequently provided. Ths statute clearly contemplates that an instrument once filed shall remain with the recorder.until actually recorded, and that, intermediate the date of filing and the date of the actual record, the entries upon the index shall furnish constructive notice. As the mortgage was withdrawn from the files of the recorder, and had not been recorded at the time the mortgages to the defendants, Covill and The Iowa Loan and Trust Company, were executed, we are of opinion that these defendants cannot be affected with constructive notice of the mortgage under which the plaintiff claims. The case of Barney v. McCarty, 15 Iowa, 510, although arising .under the Eevised Statutes of 1843, is, in its reasoning, entirely applicable to this case. •
II. The application for the loan was made to J ames & Son, who 'procured an abstract of title and forwarded it, with application, to The Iowa Loan and Trust Company. When the company procured the money from Covill, they sent it, together with a C011p0I1 note and mortgage ready for execution by Barz and wife, to James & Son. James & Son paid over the money to Barz, secured the proper execution of the notes and mortgage, procured the.mortgage to be recorded, and -returned it, with the notes, to The Iowa Loan and Trust Company. It is. claimed that James & Son were the agents of Covill, that, they had knowledge of the Gaylord mortgage'' held by plaintiff, and that the knowledge of the agent affects the principal. If James & Son were informed at all of the Gaylord mortgage, it was through a conversation which the plaintiff had with James on the 18th day of March, 1878, more than four months before the mortgages to the defendants were executed. James did not acquire the information when engaged in the transaction of any business for Covill, but long before his agency for Covill had any existence, if he is to be regarded, under the evidence, as the agent of Covill. It does not appear that J ames retained this information in mind at the time the mortgages to the defendants, were executed. Upon the contrary, James testifies that he has no recollection of any conversation with tbe plaintiff about tbe Gaylord mortgage. We are clearly of the opinion-that Covill, under tbe circumstances disclosed, cannot be affected by any information imparted to James. 'See Story on Agency, § § 140 and 140a; The Distilled Spirits, 11 Wallace, 356; Day v. Wamsly, 33 Ind., 145.
III. Tbe Iowa Loan and Trust Company, it is conceded, acted as tbe. agent of Covill in effecting tbe loan. It is claimed that'C. E. Fuller, tbe treasurer of this.company at ' tbe time tbe loan was made, bad knowledge of tbe mortgage under which plaintiff claims, and 'that this knowledge affects Covill. Fuller, amongst other things, testifies as follows: "In tbe Summer of 1878 tbe company received an application from Herman Barz for a loan of $800, offering as security certain real estate.. Tbe money to fill tbe application was received from Stephen H. Covill, of Yermont. Tbe application was sent to said company by S. A. James & Son, of Sigourney, Iowa, as tbe agents of said Barz. Tbe application was signed by Barz, but sent by S. A. James & Son, and was accompanied by an abstract of title of tbe premises described in tbe application. Tbe Iowa Loan and Trust Company bad no other knowledge of tbe title except such as was revealed in tbe abstract. At the time of negotiating said loan for Barz, neither tbe Iowa Loan and Trust Company, nor myself, bad any knowledge that plaintiff, Yerger, had or claimed to have a mortgage on said premises outstanding prior to tbe loan from Covill. We bad nothing, either personally or officially, to do with.tbe making of tbe abstract. S. A. James & Son furnished us all tbe information we bad as to tbe property, except such as was furnished by Mr. Barz and by tbe abstract. Tbe Company guaranteed tbe collection of tbe loan to Covill, and it would not have been recommended by us to Mr. Covill, or guaranteed, bad we bad any information whatever that Yerger bad, or claimed to have, any interest in tbe property. Said Barz owes said company, on a second mortgage, for eighty dollars, in installments of ten dollars each, secured by a mortgage junior to that given' to Covill. We liad no knowledge of there being any other claim prior to that of Covill; supposed that Covill's mortgage was the first lien upon the premises and ours the second one. I do not think of anything material, other than that in the application Barz made affidavit that the property was unincumbered, except the mortgage to Gaylord,. which was paid off with the money obtained from Covill: This was not the mortgage claimed to be owned by Yerger." It is this last part of Fuller's testimony upon which the plaintiff relies to affect Fuller with notice of the Gaylord mortgage. The evidence shows that Barz executed two. mortgages - to Gaylord. The first was satisfied January 27, 1877, when the second was issued. The plaintiff claims that Barz must have referred, in his application, to the mortgage assigned to plaintiff', as the other had been satisfied before that time, and Fuller is mistaken-in saying that the mortgage referred to was not the one claimed to be owned by Yerger. The probability is that the witness intended to refer to the mortgage to the German Savings Bank, a release of which, dated August 20, 1878, was filed for record August 30, 1878, the same day that the defendants' mortgages were acknowledged and filed for record. But whatever Barz referred to, or was understood to refer to, it is clear from the. evidence that he was not understood by Fuller to refer to the mortgage now claimed by plaintiff. To so hold would be directly in the face of his positive testimony; and would be inconsistent, not only with all the preceding portion of his testimony, but with the act of the company in guaranteeing the loan and accepting security to themselves upon the property in question.
IV. It is claimed that the burden of proof is upon the defendants, The Iowa Loan and Trust Company and Covill) to establish that they are purchasers, for a valuable consideration, without notice, and that they have not sufficiently established that fact. "Without determining on which party rests the burden of proof, we think the defendants have es tablished their want of notice. We have already set out the testimony of Puller. C'ovill testifies as follows:
" I had no knowledge when the loan was made that J. P. Yerger had any, or claimed to have a mortgage on the said premises prior to the mortgage taken by me." It is said that, as the mortgage was originally executed to Gaylord, Covill may not have known that Yerger claimed to have any mortgage upon the property, and yet may have known of the mortgage to Gaylord, assigned to Yerger. But this position is clearly negatived by the testimony of this witness as follows : The premises were represented to me by the Iowa Loan and Trust Company to be free and clear of incumbrances of any kind, and I supposed that I was getting the first lien upon the premises, and, relying upon said representations, advanced my money in good faith."
Y. It is claimed that as the plaintiff is the assignee of the mortgage for value, he stands in a better position than kis assignor, and must be protected, whatever might be the rule if Gaylord were the party seeking the foreclosure of the mortgage. In support of the position the plaintiff cites Preston, Kean & Co. v. Morris, Case & Co., 42 Iowa, 549; Farmers' National Bank v. Fletcher, 44 Id., 252; Vandercook v. Baker, 48 Id., 199. The principle invoked is not applicable to the present case. The question involved here is one of priority under the registry statutes. As to priority between the mortgagee and parties holding under other mortgages, the assignee can occupy no better position than the assignor. The court below erred in allowing the plaintiff the priority of lien.
Beyeesed.