Case Name: William E. Clarke, appellant, v. George W. Forbes and others, appellees
Court: Nebraska Supreme Court
Jurisdiction: Nebraska
Decision Date: 1880-01
Citations: 9 Neb. 476
Docket Number: 
Parties: William E. Clarke, appellant, v. George W. Forbes and others, appellees.
Judges: 
Reporter: Nebraska Reports
Volume: 9
Pages: 476–479

Head Matter:
William E. Clarke, appellant, v. George W. Forbes and others, appellees.
Mortgages: priority of lien: fraud. In 1870 F. executed a mortgage on certain I'eal estate to the Omaha National Bank, which was recorded in January, 1874. In January, 1873, F. executed another mortgage upon the same property to 0., his brother-in-law, as trustee for N., the father-in-law of 0. and F., which was duly recorded. This mortgage was fraudulent as to creditors of F. In October, 1873, proceedings in bankruptcy were instituted against F. In April, 1874, while these proceedings were pending, F. obtained a letter from the president of the bank, addressed “to whom it may concern,” stating that if F. could borrow $10,000 to $12,000 he could adjust his unsecured debts. This letter was presented to O., who loaned F. $5,000, N. surrendering to him the mortgage above described. A portion of this money was paid directly to the bank upon an unsecured debt against F. Held, that there being no testimony showing O. to have had knowledge of any fraud between F. and N., he took the mortgage free from that defense, and that the lien of the bank mortgage was subject to his.
This was an appeal by plaintiff from a decree rendered by Savage, J., in tbe district court of Douglas county. Tbe opinion contains a statement of facts sufficient to an understanding of the case.
George W. Doane, for appellant.
George W. Ambrose and JS. Wakeley, for Omaha National Bank, appellee.

Opinion:
Maxwell, Oh. J.
On the 7th day of December, 1870, George ~W. Eorbes executed and delivered to the Omaha National Bank a note for the sum of $19,899.08, secured by mortgage on real estate, the agreement between the parties being that the mortgage was not to be recorded for some time, to enable Eorbes to make a further loan upon a portion of the real estate described in the mortgage. The mortgage in question was recorded on the 22d day of January, 1874.
In January, 1873, Eorbes applied -to the plaintiff, who is his brother-in-law, and a resident of Cleveland, Ohio, to negotiate a loan for him of the sum of $10,-000, and, to secure the payment of the same, executed a mortgage to the plaintiff upon certain real estate in the city of Omaha. This mortgage was recorded in Eebruary, 1873. During the summer of 1873 Eorbes drew upon Clarke at various times to the amount of $10,000, all the money but $500 paid thereon being paid with money transmitted to Clarke by one Newton, the father-in-law of Eorbes and Clarke. Newton at the time was in the employ of Eorbes, and a considerable portion of the money transmitted by him appears to have belonged to Eorbes.
On the 10th day of October, 1873, proceedings in bankruptcy were instituted against the firm of Eorbes & Hawzer, of which George "W". Eorbes was a member, and soon thereafter said firm were adjudged bankrupts.
In April, 1874, Eorbes being anxious to relieve himself from these proceedings, undertook to raise a sufficient sum of money to effect a composition with his creditors, of which the Omaha National Bank was one for a considerable amount in excess of the amount due on the note and mortgage; and to aid him in doing so he obtained a letter from the president of the bank, addressed "to whom it may concern," stating that " Mr. George "W. Eorbes, the bearer hereof, one of the old settlers of Omaha, visits the east with- the view of raising some means with which to free him from his difficulties. And, from the showing he has made me of his affairs, I am freely of the opinion that if he can raise ten to twelve thousand dollars he can at once settle all his unsecured debts. I shall aid Mr. E. all in my power to this end. Respectfully, Ezra Millard, president."
This letter is dated April 23, 1874, and was delivered to Eorbes, who at once applied to Clarke to negotiate a loan for him. Clarke being unable to borrow money upon the securities offered, it was arranged between Eorbes, Newton, and himself that he should loan Eorbes $5,000 — about $3,000 of his own money, and about $2,000 belonging to one Gardiner, Newton to surrender to Clarke the mortgage heretofore described, and that Eorbes should furnish to Clark an additional $5,000, who should thereupon authorize the bank to draw upon him for the sum of $10,000. This arrangement was carried out, two drafts being drawn by the bank upon Clarke for $5,000 each, which were duly paid, the money being applied to the payment of the unsecured debts of Eorbes, a portion of which was held by the bank.
In 1877 Clarke instituted proceedings in the district court of Douglas county to foreclose the mortgage in question. The bank answered the petition of plaintiff, setting up various defenses, which it is unnecessary to notice in detail, and claimed that the lien of the mortgage to tbe bank was prior to that of tbe plaintiff, and on tbe trial of tbe cause tbe court so found. Tbe plaintiff appeals to this court.
Whatever tbe rights of tbe bank may be as against Eorbes and Newton, there is an entire failure of testimony to show that tbe plaintiff bad notice of any fraudulent collusion between them. This notice was necessary to make tbe defense of fraud available. So far as appears, tbe plaintiff is a bona fide purchaser, and in good faith paid bis money for tbe mortgage in question, a considerable portion of tbe avails of wbicb were paid to tbe bank upon Eorbes' insecured debt. There is nothing in tbe objection that tbe mortgage to tbe plaintiff bad fulfilled its purposes when assigned to Clarke for tbe money loaned. This is not a case where tbe mortgage bad been satisfied and kept on foot as security for a new loan. If such was tbe case tbe defendant's position would be correct, and tbe lien have ceased absolutely. But in the case at bar, while tbe words " sale " or " sold " are not used, it is clear that tbe transfer from Newton to Clarke was in fact a sale, and that be is now tbe owner of tbe mortgage. Tbe equities of tbe case are clearly with tbe plaintiff. Tbe judgment of tbe district court in regard to tbe priority of liens is therefore reversed, and tbe lien of tbe bank made subject to that of tbe plaintiff.
Judgment accordingly.