Case Name: Nancy J. Jenks, Appellant, v. D. L. Shaw, Anna B. Hartley and W. H. Woodruff
Court: Iowa Supreme Court
Jurisdiction: Iowa
Decision Date: 1896-10-27
Citations: 99 Iowa 604
Docket Number: 
Parties: Nancy J. Jenks, Appellant, v. D. L. Shaw, Anna B. Hartley and W. H. Woodruff.
Judges: 
Reporter: Iowa Reports
Volume: 99
Pages: 604–617

Head Matter:
Nancy J. Jenks, Appellant, v. D. L. Shaw, Anna B. Hartley and W. H. Woodruff.
1 2 limitation of Action; mortgage. A mortgage may be foreclosed as against a vendee of the mortgagor, even though she is not made a' party to the foreclosure proceedings till after the statutory period of limitation has run against the debt secured by it, where the proceedings for its foreclosure were commenced against the mortgagor before the expiration of such period.. The mortgage is but an incident of the debt, and may be foreclosed so long as the debt is not barred.
2 8 4 Innocent Purchaser from Mortgagee: unrecorded assignment. An innocent purchaser for a valuable consideration and without notice, who takes a warranty deed of property in which the mortgagee "under an existing mortgage thereon joins as a grantor, takes the property free from the lien of the mortgage, even though the debt secured by it had previously been assigned to a third party, who had failed to make the fact of its transfer appear of record;
Appeal from Allamakee District Court — Hon. W.. A. Hoyt, Judge.
Tuesday, October 27, 1896.
Action in equity, commenced September 2, 1891, to recover judgment against tbe defendant Shaw, upon a promissory note for five hundred dollars, executed by him, payable to Laura M. Shaw, or order, “September 2, 1881, after date,” with ten per cent, interest per annum from date, payable annually. Also for decree foreclosing a mortgage on certain real estate, given to secure the payment of said note. The note set out is indorsed: “Without recourse. Mrs. Laura M. Shaw,” and plaintiff alleges that for a valuable consideration she purchased said note and mortgage, and is now the owner and holder thereof. A. H. Woodruff was made a. defendant, as having some interest in the land, but he failed to appear or answer. Plaintiff, by an amendment to her petition, filed January 1,1892, made Anna E. Hartley a party defendant, as claimiug some interest in the land, which plaintiff alleged to be junior to her mortgage.. An original notice was served on Mrs. Hartley, December 81, 1891. On May 6, 1892, the defendants Shaw and Hartley filed separate answers. The defendant Shaw admitted the execution of the nóte and mortgage in suit, and denied that plaintiff had any interest therein, and alleged as defense, in substance, as follows: That about July 10, 1879, he was owing Mr. H. P. Lane two thousand two hundred and forty-four dollars, for which he executed his notes and a mortgage covering the land in question and other lands; that on September 2,1878, he had executed the note and mortgage in suit, to his wife, and that, to further secure Mr. Lane, she assigned to him, as collateral to his notes and mortgage, her said mortgage and the two notes secured thereby, one of which is the note in suit, under an express agreement, that when one thousand dollors was paid on Lane’s note and mortgage he would return said notes and mortgage to Mrs. Shaw; that said sum of one thousand dollars was fully paid to Lane; that the real estate in question was sold by defendant Shaw and wife to Francis Hartley, for the sum of nine hundred dollars, all of which was paid to Lane, whereupon he executed a release of his mortgage as to the land bought by Hartley; that Lane consented to the sale, and verbally agreed with Mr. Hartley that he had no further claim on the land bought by Hartley. Defendant Shaw alleges that, whatever interest the plaintiff had in said note and mortgage was acquired after the same became due, and with full knowledge that Lane assigned the same to her in fraud of the rights of the defendant Anna E. Hartley and her grantor, and of the fact, that said Lane held said note and mortgage only as collateral security, as above stated. The defendant, Anna E. Hartley, answered, denying generally the allegations of the petition, and alleging, in substance, as follows: That the note and mortgage sued upon were fully paid; that this action is barred; that her grantor, Francis Hartley, purchased said land from Shaw and his wife with full covenants of warranty in which both joined-; that Mrs. Shaw was the owner of the mortgage sued on, and the same appeared of record in her name; that Francis Hartley paid D. L. and L. M. Shaw nine hundred dollars cash for said land, and took possession thereof under claim of right and color of title; and that neither this defendant nor her grantor ever had any notice that plaintiff owned said note or mortgage, or any interest therein. She also alleges that Mr. Lane held the note and mortgage in suit as collateral security upon the conditions as stated in the answer of defendant Shaw, and that the one thousand dollars had been paid on the mortgage to Lane, and the nine hundred dollars paid by Francis Hartley for said land was paid directly to H. P. Lane, and applied on the mortgage to him. Judgment was entered as follows: “Wherefore, it is adjudged and ordered by the court that the plaintiff have and recover from the defendant, D. L. Shaw, judgment for $1,584.61, interest 10 per cent, on $500, and 6 per cent, on balance; to which he excepts. Decree of foreclosure refused as to Anna E. Hartley, to which plaintiff excepts. Judgment against D. L. Shaw for $55.85 attorney fee, to which he excepts. Judgment in favor of Anna E. Hartley for costs, to which plaintiff excepts.” Plaintiff alone appeals.—
Affirmed.
Stillwell & Stewart for appellant.
J. H. Trewin for appellee.

Opinion:
Given, J.
I. The following statement of the facts, which are undisputed or fairly established by the evidence, will be sufficient for the purpose of the questions to be considered: On September 2, 1878, defendant Shaw executed the note and mortgage, together with another note for the same amount secured by the same mortgage, to his wife, Mrs. Laura M. Shaw; the note in suit to fall due September 2, 1891. Shaw and wife, being indebted to one H. P. Lane, in the sum of two thousand two hundred and forty-four dollars, executed to him a mortgage to secure said indebtedness on July 10,1879, upon certain real estate, including that covered by the mortgage to Mrs. Shaw. At the same time, and as a further security to Mr. Lane, Mrs. Shaw indorsed the note in suit, "Without recourse," and delivered the same to Mr. Lane, and also delivered to him the other note, secured by the same mortgage; Lane agreeing that when one thousand dollars was paid on the indebtedness of two thousand two hundred and forty-four dollars to him, he would return said notes and mortgage to Mrs. Shaw. It will be observed that this transaction was prior to the maturity of the note in suit. Some time in the fall of 1879, Lane, for a valuable consideration, transferred the note in suit by delivery to the plaintiff, who received it without knowledge or notice of the agreement by Lane to return the note and mortgage to Mrs. Shaw upon the payment of one thousand dollars. This transfer, it will also be noticed, was before maturity of the note in suit. About the sixteenth day of March, 1881, Francis Hartley purchased the real estate in question from Mr. and Mrs. Shaw for the consideration of nine hundred dollars in cash, paid to Mr. Lane, and received their warranty deed therefor. Mr. Hartley went into immediate possession of the land, and thereafter the title to the same was passed to the defendant Anna E. Hartley, who has ever since been in possession. There is some conflict in the evidence as to whether the one thousand dollars was paid to Mr. Lane upon the mortgage indebtedness to him. Shaw testifies that he had paid him one thousand three hundred dollars, but is unable to give dates or amounts. He admits that part of the money paid by Hartley to Lane was used in paying taxes on the mortgaged land. Lane . testifies that of the nine hundred dollars received by him from Hartley, but one hundred and sixty-seven dollars was applied on the mortgage indebtedness to him, that the balance was applied in payment of taxes amounting to five hundred and fifty or six hundred dollars, and that the only other credit given upon said mortgage indebtedness to him was fifty, dollars. It appears that the' other note secured by the mortgage sued upon, was surrendered by Lane, but it is not clear when, nor why. We are inclined to think that it was surrendered as a part of the transaction at the time the nine hundred dollars was received from Hartley. On November 26, 1884, judgment was rendered in favor of Lane against Shaw, for three thousand three hundred and sixty dollars and forty cents, and this, we think, corroborates Lane in his statement as to the amounts that had been paid to Him by Shaw, and leaves it quite clear to our minds that the amount of one thousand dollars had not been paid. Mrs. Shaw never made any assignment of the mortgage sued upon, and the record thereof showed it to be in her name. Neither Mr. nor Mrs. Hartley had any notice at the time they took title, of the transfer of the note in suit to the plaintiff, but took title believing that it was free from all incumbrances. The contention on this appeal is solely between the appellant, Mrs. Jenks, and appellee, Mrs. Hartley, and the question presented is whether appellant is entitled to a decree foreclosing the mortgage in suit as against appellee. Appellee states three reasons why appellant is not entitled to a foreclosure of said mortgage, namely: "As to this defendant the action is barred by the statute of limitations. Defendant and her grantor were innocent purchasers of the land for value from D. L. Shaw and L. M. Shaw, the only persons who, of record, had any interest in 'it. If Mrs. Jenks was the owner of the note and mortgage, she never placed any evidence of her ownership on record, and, as against the defendant, is estopped from setting up any claim to the property."
II. Defendant, Anna E. Hartley, alleges in her answer "that said notes and mortgage were due September 8, 1881, and that this action was not commenced as to this defendant, until January 1, 1892, and that plaintiff's cause of action is barred by the statute of limitations." She now insists that the action was not commenced, as to her, until she was made a party thereto, and that, as that was more than ten years after the maturity of the note sued upon, the action is barred as to her. Plaintiff does not dispute the claim that the action was not commenced as to Mrs. Hartley until she was made a party thereto, nor is it questioned that this was after the lapse of more than ten years from the maturity of the note. Plaintiff's contention is that the mortgage is merely an incident of the debt; that it follows the debt, and continues to exist so long as the debt is enforceable; and that, as this debt is not barred, the plaintiff is entitled to a foreclosure of the mortgage securing it. The action as against D. L. Shaw was commenced within the ten years, and there is no claim that it is barred as to him. Shaw states in his deposition that he has lived in South Dakota for thirteen years, but, the bar of the statute not being pleaded as to him, this statement is immaterial. In Crow v. Vance, 4 Iowa, 435, this court held that by the assignment of the debt, the assignee is entitled to use all the remedies the assignor might have used to enforce the lien of the mortgage against the debtor. In Hendershott v. Ping, 24 Iowa, 137, it is said: "While the lien acquired by virtue of the judgment, may have ceased at the end of ten years, yet the lien acquired by the mortgage continues until the mortgage debt is paid or discharged." In Clinton County v. Cox, 37 Iowa, 571, the court uses the following language: "Under the laws of this state a mortgage conveys no interest in or title to lands, but is simply a lien thereon for the purpose of securing the indebtedness which is its foundation. It is an incident — a security in the nature of a lien — of the debt. It survives until the debt be paid or discharged, or the mortgage released. It is' a convoy bearing a lien for the protection of the debt, and as long as that exists, it is not relieved of the duty of protection, or rendered ineffective for that purpose. When the debt is discharged, or by operation of law may no longer be enforced, its functions terminate, and not before. These principles determine the question before us, for, unless it appears that the debt is discharged, or is, under the law, no longer capable of being enforced, the deed of trust stands as security for its payment. The non-residence of the debtor, Cox, arrested the operation of the statute of limitations and the remedy upon the indebtedness still exists. The lien of thé" deed of trust may be enforced to satisfy the debt. These doctrines are so well supported by the authorities cited, and the conclusion we reach is so plainly deducible therefrom, as to forbid discussion. We have held, applying the same principles, that an admission of a debt ana a new promise to pay, which suspends the operation of the statute of limitations, keeps alive the lien of a mortgage given to secure the indebtedness." In Brown v. Rockhold, 49 Iowa, 285, it is said: "The general rule is that the mortgage is but a mere incident to the note which it is given to secure, and that nothing short of payment of the debt, or its extinguishment by operation of law, will discharge the mortgage lien." This doctrine is announced in Kerndt v. Porterfield, 56 Iowa, 412 (9 N. W. Rep. 322). See, also, Bank v. Woodman, 93 Iowa, 668 (62 N. W. Rep. 30); State v. Stuhtmiller, 94 Iowa, 750 (61 N. W. Rep. 986). The principle is well established by these and other cases that an action to foreclose the mortgage is not barred so long as the debt which it secures is enforceable. True, in most of the cases the debt was barred upon its face, but was taken out of the operation of the statute by new promise to pay, or by the non-residence of the debtor, or some other fact that-stopped the running of the statute. The principle is alike applicable, whatever may be the facts that rendered the debt enforceable. Appellee's counsel cite and rely upon Day v. Baldwin, 34 Iowa, 380, which was an action to foreclose a title bond treated as a mortgage, and for the sale of the premises to satisfy the amount due. The note was barred upon its face, but the maker, Baldwin, who had previously disposed of his interest in the property, was made a defendant, and answered, admitting the indebtedness, and consenting to the sale of the land for the payment of the note, "provided no personal claim be made against him." It was held that, as the petition made no personal claim against Baldwin, but simply against the land, and as Baldwin had no interest in the land, and as his admission of plaintiff's right to recover was made with the proviso that no personal claim be.made against him, his admission did not take the action out of the bar of the statute. We see nothing in that case in conflict with those cited, nor with the principle we have announced. Our conclusion is that, under the facts of this case, the plaintiff's right to a decree of foreclosure is not barred by the statute of limitations.
III. We next inquire whether appellant is entitled to a decree of foreclosure. We have seen that appellant is a good-faith purchaser of the negotiable note sued upon, for value, before due, and without notice of any infirmities therein. It is a familiar and undisputed rule of law that the transfer of the note carried with it the security without an assignment of the mortgage; therefore, if nothing further appeared, plaintiff would unquestionably be entitled to a foreclosure. We have also seen that appellee is possessed of whatever title Francis Hartley acquired in the property; that Mr. Hartley purchased the property from Mr. Shaw for value, and received a deed therefor from Shaw and wife, with the usual covenant of warranty of title, in which both joined; also that Mr. Hartley took the title believing that it was clear of incumbrance, and without knowledge that this note had been transferred, was unpaid, and that the mortgage was unsatisfied on the record. It is not disputed but that by this deed Shaw and wife transferred all of their interest in the property to Mr. Hartley, and that they would not be heard to claim any rights under the mortgage; neither is it disputed that by the transfer of the note appellant acquired an interest in the mortgaged property that Shaw and wife could not convey. Appellant contends that, the mortgage being unsatisfied of record, it was notice to Mr. Hartley that should have caused him to inquire whether any of the notes had been transferred, that he was negligent in not so inquiring, and that appellee must suffer the consequence of that negligence. Appellee contends that appellant was negligent in not taking an d recording an assignment of the mortgage, and therefore she is not entitled to claim under it as against appellee. Mr. Hartley did not examine the record, and did not inquire as to the notes. He seems to have relied upon the assumption that, as Mrs. Shaw, the mortgagee, joined in the deed and in the covenants of warranty therein, the deed was a satisfaction of the mortgage. Appellant did not take and record an assignment of the mortgage, but seems to have relied upon the rule that the security follows the debt secured. The question in this case is whether, without notice of record, the security follows the debt as against one purchasing the mortgaged property as Mr. Hartley did; in other words, whether, as to third persons acting without notice, the assignee of a debt secured by mortgage should be required to place evidence of the transfer on the record. This question is fairly answered in Bank v. Anderson, 14 Iowa, 545. After stating that the transfer of the note carried with it the security as between the immediate parties to the transaction, it is said: "But' a pertinent inquiry is whether this is equally true as to third persons who had no notice of it, to the extent that they were bound to know that the original mortgagee ceased to have the right to cancel or discharge the mortgage. The security passes to the assignee or holder of the notes as an incident, and upon the principle that the party holding the debt has a right to that which was given to secure it. But is the theory just or tenable which compels a third person to take notice of such transfer, and of the equitable consequences following? Now, as stated above, the mortgagee or payee may be barred by it. And, so, there is no hardship or injustice in requiring the mortgagor to take notice of it if he proposes to satisfy his debt, for he has a right, and the exercise of a proper diligence, demands, that he should exact the production- of the notes before paying the same. But by what process of reasoning can this principle, or this line of argument, be urged against a third party, who, in utter ignorance of the facts, and of facts too, which he could not ascertain by the use of even extraordinary diligence, takes an incumbrance upon property which is apparently freed from the prior lien? We confess our inability to see its applicability or pertinency." It is further said in that opinion: "But, on the other hand, how easy is it for the assignee of the notes or debt thus secured to protect himself. He can, by having the mortgage assigned on the margin of -the record, protect himself against all possible fraud on the part of the mortgagee, and leave the evidence of his rights in such a condition as that it must inevitably be seen by any one looking for incumbrances. Or, if not thus, he may take his assignment in the ordinary form, have it duly acknowledged and recorded, and thus give notice of his interest in the security, to third persons." In conclusion, it is said: "A secret or clandestine assignment, whether by parol or upon the instrument itself, or by the transfer of the debt, and however honest the purpose, is liable, as against third persons, to untold abuse. They ought, therefore, to be made a matter of record. The spirit, if not the very letter, of our recording law, requires -it. Such a requirement can work no possible hardship, while the contrary rule can only be attended with evil, and that continually. Parties should not be permitted to leave their rights and interests in liens and real estate in such a condition as to injure those who are deceived by appearances, without a record notice to guide them." This case was followed in McClure v. Burris, 16 Iowa, 591. In Bowling v. Cook, 39 Iowa, 200, the court, referring to these cases, says: "The doctrine is announced in the case first cited, and is followed in the second, that an assignment of a mortgage, like other instruments affecting real estate, is invalid against subsequent purchasers without notice (and a mortgagee is a .purchaser) unless it be recorded. The subsequent mortgagee would not be affected by an assignment of a prior mortgage, unless charged with actual notice, or the assignment has been duly recorded. Following this doctrine, we hold that,-if the party executing the second mortgage appear from the record to be the one to whom the first was executed, and its assignment is not shown by the record, the equities of the second mortgage are superior to the first." It is further said: "In- the absence of the record of an assignment of the mortgage in such a case, the separation of the mortgage interest and the title afterwards acquired would not appear so as to defeat the merger, and a purchaser, having no notice of the assignment, would be warranted in presuming that it had happened, and the mortgage interest had been thus extinguished." In Parmenter v. Oakley, 69 Iowa, 389 (28 N. W. Rep. 653),the court, after referring to Bowling v. Cook, supra, and Reel v. Wilson, 64 Iowa, 13 (19 N. W. Rep. 814), says as follows: "The doctrine of thése decisions is applicable to the. case at bar. The mortgage, in the absence of any transfer shown by the record, is presumed to be owned and controlled by the mortgagee, and all men may deal with the mortgage or the land, resting upon this presumption, in the absence of actual knowledge of the assignment of the mortgage. The policy of our registry laws is that the records shall disclose the true condition of lands as to title • and incumbrances. These laws are for the protection of all concerned in lands, and they should and do apply to transfers of mortgages as well as to the mortgages themselves. It is no greater hardship to require the assignee of a mortgage to record the assignment than to require the mortgagee to record his mortgage. The record in both cases is equally demanded for the pro tection of persons having dealings with the land. Vandercook v. Baker, 48 Iowa, 199, and other cases cited by plaintiff's counsel, are not in conflict with the views we have expressed." See, also, Van Gorder v. Hanna, 72 Iowa, 573 (34 N. W. Rep. 332). In Livermore v. Maxwell, 87 Iowa, 706 (55 N. W. Rep. 40), it is said: "If the assignment of the notes did not operate as an equitable assignment of the trust deed, the plaintiff would have no rights under it; but, having the equitable assignment, he must, under our recording acts, place his assignment on record to bind subsequent purchasers and mortgagees who act without notice. The plaintiff, by his failure to have his assignment recorded, induced the defendant to make the loan it did, and put it into the power of J. M. Dunn to obtain and embezzle the money; and under the rule quoted above, he must bear the consequences." In Quincy v. Ginsbach, 92 Iowa, 144 (60 N. W. Rep. 511), the rule of the foregoing case is followed. Appellant's counsel quote from Bank v. Woodman, 93 Iowa, 668 (62 N. W. Rep. 31), as follows: "The law makes provision for the satisfaction of the record of mortgages when the debts they secure are paid, and the practice is so common, that where one is not canceled, it naturally gives rise to the thought that "it is not paid, even though the period of limitation -has run." The question in that case was, whether the debt was barred, and the language quoted is not applicable to a case where the mortgagee joins in the conveyance that operates as a cancellation of the mortgage as to the mortgagee, it appears to us entirely clear, under the authorities cited, that the rule in this state is, that the assignee of a debt secured by mortgage must give notice on the record of the transfer, to be entitled to preference over subsequent purchasers or mortgagees, without notice of the transfer. So viewing the law, it follows that the decree of the district court must be affirmed.