Court Opinion

ID: 3990737
Source: CourtListenerOpinion
Date Created: 2016-07-06 10:50:45.883336+00
Date Added: 2024-06-11T14:18:31.412235
License: Public Domain

I cannot concur in the reasoning of or the results reached by the majority. In my judgment, there was no concealment whatever, and therefore the authorities cited by the majority have no application. The transaction was a clean, straight-forward, and reasonable business arrangement by which the bank released its mortgage security of record for the purpose of making the trust deed, securing the bond issue, a first lien on the mortgaged property. At the same time, as a part of the same transaction, and embodied in the same written instrument, it was provided that the bank should be restored to its security if for any reason the bonds were not sold and the money therefrom not received. *Page 81 
The deed intended as a mortgage, now in issue, was executed and delivered in pursuance to that agreement. That mortgage (deed) could not then have been recorded without defeating the whole purpose in mind. It must necessarily remain off the record until the trust deed was executed and recorded, and there was no reason to record it at least until it was known that the bond issue had failed. The agreement was in the possession of the bank, together with the bonds, and it must be held that anyone dealing, or contemplating dealing, with the L.Y. Stayton Company, having constructive notice that all of its property was pledged to secure an indebtedness of $100,000, would be bound to make inquiry as to whether the bonds had been issued and sold. Such inquiry would not and could not be complete without inquiring of the bank, which was the trustee under the trust deed, and since fraud is never presumed, the only presumption which can be indulged is that the bank's officials would have acted honestly and fairly with all inquirers and would have informed them of the whole arrangement so that they would have known that the property of the L.Y. Stayton Company, instead of being subject to a mortgage of $100,000, was actually subject to a mortgage of but some $30,000. In other words, the record informed would-be grantors of credit to the Stayton Company that its property was subject to a $100,000 mortgage; inquiry and the consequent revealing of what the majority thinks was concealed would have established the fact that the actual mortgage lien existing was less than one-third of that amount.
I therefore hold that, if those dealing with the Stayton Company chose to rely upon the record without inquiry, they cannot now complain because their debtor's property was incumbered for only one-third of the amount of which the record gave them notice. If they *Page 82 
had been diligent enough to inquire they would have learned the true facts and found that the bonds for $100,000 were not sold; that the trust deed was therefore unenforcible, and that, as a part of the arrangement by which the trust deed was placed of record, it was agreed that in any such event the prior and lesser mortgage should be restored.
In my opinion, no creditor of the Stayton Company has been wronged; the credit advanced has been in the face of constructive notice of a lien three times the size of that which appellant here seeks to enforce; no facts were concealed; reasonable diligence would have brought full information which would have been more favorable than the record revealed, and therefore the judgment appealed from should be reversed.
FULLERTON and MACKINTOSH, JJ., concur with TOLMAN, J.