« ΠροηγούμενηΣυνέχεια »
will be adjudged a mortgage. The controlling element is the existence of the debt, and the execution of an instrument to secure it. This elementary doctrine disposes of the objection suggested, rather than urged, against the second paragraph of the cross-complaint.
The third paragraph of the cross-complaint contains these material allegations: That on the seventh day of July, 1873, Doherty and his wife executed to George Phelps a mortgage on part of the land described in the appellant's complaint to secure the payment of the purchase money; that on the following day this mortgage was recorded; that it was subsequently assigned to Thomas Humpherys; that after the assignment of the mortgage, on the seventh day of March, 1878, Doherty entered into an agreement with Humpherys wherein an extension of time for the payment of the debt secured by the mortgage was granted, and, pursuant to the agreement, Doherty and wife executed to Humpherys a deed, absolute on its face, to secure the amount due on the purchase-money mortgage; that, after the execution of this deed, Humpherys, without intending to release his lien for the purchase money, and without having received any consideration, entered a release of the purchasemoney mortgage on the records of Floyd county; that appellant's mortgage was not executed for purchase money; and was not executed until after the purchase-money mortgage was executed and recorded.
The argument of appellant, that a release may not be shown to have been executed without consideration, cannot prevail. A release, like any other contract, may be shown to lack the essential elements of consideration.
The difficult question is as to the effect of the transaction of March 7, 1878, upon the rights of the appellant under his mortgage executed in December, 1875. The mortgage executed to Phelps in July, 1873, was for the purchase money of the land, and, both in equity and in priority of time, was the superior lien. If the transaction of March, 1878, did not destroy this superiority, it must prevail over the lien of the appellant's mortgage. If the appellant had taken his mortgage upon the faith of the release entered of record, we think his rights would be paramount; but this he did not do, for he accepted his mortgage in 1875, when the record showed the purchase-money mortgage to be in full force. No injustice is therefore done him by continuing the lien of that mortgage. He is not prejudiced by continuing that lien in force; for he had constructive notice, when he took his mortgage, that it was subordinate to the mortgage for the purchase money. The holder of the purchasemoney mortgage, on the other hand, would lose the priority of his lien if it should be held that his mortgage was extinguished by the transaction of March, 1878. We think it the duty of the courts to avert this unjust result, and we have no doubt that it can be done by the application of the familiar rule of equity, that courts will keep alive an incumbrance when equity requires it, and it was not the intention of the parties that the incumbrance should be extinguished.
The rule of which we are speaking was thus stated in Lowrey v. Byers, 80 Ind. 443: “It is an elementary rule that equity will consider an incumbrance as in force if the ends of justice can thereby be attained.” In another case, it was said: “When a new mortgage is substituted in ignorance of an intervening lien, the mortgage released through mistake may be restored in equity, and given its original priority as a lien, where the rights of innocent third parties will not be affected." Sidener v. Pavey, 77 Ind. 241; see page 246.
Mr. Pomeroy, in speaking of a lien that will be kept alive, says: "If there is no reason for keeping it alive, then equity will, in the absence of any declaration of his intention, destroy it; but, if there is any reason for keeping it alive, such as the existence of another incumbrance, equity will not destroy it.” Pom. Eq. Jur. § 791.
This general principle has very often been recognized and enforced by this court. Howe ý. Woodruff, 12 Ind. 214; Troost. v. Davis, 31 Ind. 37; Smith
v. Ostermeyer, 68 Ind. 432; Haggerty v. Byrne, 75 Ind. 499; Hewitt v. Powers, 84 Ind. 295; McClain v. Sullivan, 85. Ind. 174; Elston v. Castor, 101 Ind. 426, see page 443.
In the case before us we have both the equity and the intention existing in favor of the appellee.
The case of Harris v. Boone, 69 Ind: 300, cited by the appellant, is strongly against him upon the point that a release executed without consideration is ineffective; nor does it decide that a release without consideration is only invalid as between the parties. We suppose that, if the appellant had in good faith acquired rights upon the faith of the release, then the fact that it was without consideration would not defeat these rights; but here the appellant did not act upon the release at all.
The case of Millspaugh v. McBride, 7 Paige, 509, is only relevant to this controversy for the reason that it declares the general doctrine that equity will keep an incumbrance alive to subserve the purposes of justice. It does not, even by the remotest implication, sustain the position of counsel that, as no notice was given to appellant of the transaction of March 7, 1878, this lien became the paramount one.
The appellant offered to prove by Mr. James V. Kelso that, at the time he was called upon by Thomas Humpherys and John Doherty to draw the deed executed by Doherty and wife to Humpherys, it was agreed that the deed should be absolute for the property in controversy; that Humpherys said that he intended to sell the property; that both Humpherys and Doherty were present, and assented to the arrangement; "that the papers were drawn according to instructions, and their deed and bond were executed independent of each other.” Before the offer was made, Mr. Kelso testified as follows: “On the twentieth day of April, when I took the acknowledgment of the chattel mortgage, I was an attorney at law, actively engaged in the practice of law, and had been for several years, having my office in Hedden building. I was at the time acting, in reference to that paper, as agent, so far as writing the mortgagé, for one, or I presume both, of the parties. I had nothing more to do with it than writing the mortgage, and wrote what they agreed upon. The understanding was that the mortgage was to secure rent of the place Doherty had conveyed to Humpherys. The deed from Doherty and wife was made in my office, in the Hedden building. When it was written, Mr. Doherty and Mr. Humpherys only were present. I took the acknowledgment. I think Humpherys came in first, then Doherty came; but I am not certain who came in first. I was acting simply as a notary public then. I had done no business for Mr. Humpherys before. I may have attended to some business for Mr. Doherty, but I do not remember now of having done so. Doherty signed the deed at my office, and then we went down to his home, and his wife signed it, and it was then handed to Mr. Humph. erys. The whole transaction was closed in my office. The title bond was drawn by me the same day the deed was made. I am not sure, but I think I drew the deed first, and the bond afterwards. I went with Doherty to his house to have the deed executed by his wife. I think I prepared both papers
. before I went to Doherty's. We met again at my office after dinner, and then the bond was signed. I wrote both papers under the instructions of Mr. Humpherys. He paid me for both of them, I think; but I am not certain. Mr. Humpherys never gave me any ernployment as an attorney. He told me what he wanted done. They talked to me fully about the matter. I was a friend to Mr. Hanlon, but not his attorney. I had sued both him and Doherty before thată: I had not been thë attorney for Doherty. I wrote the papers with the best skill I had as a lawyer. . I was not the attorney of Hanlon, Doherty, or Humpherys before that. I think it was the first time Humpherys had ever been in my office. He came, and inquired for Doherty; said Doherty was to meet him there for the purpose of making a deed. They both asked
my opinion as to how to arrange the papers; and the nature of the business was fully explained to me, and I fully understood their business.”
This offered evidence cannot be pronounced incompetent, on the ground that the communication to the witness was a privileged one. The general rule is that communications between attorney and client are privileged when they are confidential; but, where both parties are present, the communications cannot be regarded as confidential. It is obvious that, where both parties are present, the general rule cannot apply, for the element which gives vitality to the rule does not exist. The authorities are abundant and harmonious upon this question; for it is agreed on every hand that communications made to one who is acting for both parties is competent, and cannot be considered as privileged. Weeks v. Argent, 16 Mees. & W. 817; Dunn v. Amos, 14 Wis. 106; Mobile, etc., Co. v. Yeates, 67 Ala. 164; Gulick v. Gulick, 39 N. J. Eq. 516; Whiting v. Barney, 30 N. Y. 330; Hebbard v. Haughian, 70 N. Y. 54; Sherman v. Perkins, 27 Hun, 331; 1 Whart. Ev. § 587.
There is another ground upon which the competency of this evidence may be securely placed, and that is this: The capacity in which Mr. Kelso acted was that of scrivener, and not that of an attorney, and the communications to him cannot, under the rule declared in Borum v. Fouts, 15 Ind. 50, be deemed privileged. It was said in that case: “But such communications, in order to be privileged, must be addressed to an attorney in his professional character of a legal adviser, with a view to legal advice, which, as an attorney, it was his duty to give.
While we regard the exclusion of this evidence as erroneous, still we think the error a harmless one; for, upon the controlling facts, the result must have been the same had this evidence been admitted. What was said by the parties cannot make the transaction other than a mortgage; for, where a debt exists that is not extinguished by the conveyance of the property, the transaction is nothing more than a mortgage. That the pre-existing debt still remained undischarged, is evident from the facts and from the written instruments executed by the parties, and Kelso's testimony in no material particular tended to prove the contrary. It was of little importance that Humpherys in terms denominated the transaction a sale; for its character is to be determined from its substance, not from the mere name given it by one or both of the parties. The transaction constituted a mortgage, and “once a mortgage always a mortgage.” If we should concede that there was a sale,-and certainly Mr. Kelso's testimony tended to prove no more than this,—still the result reached must be the same, for the lien of the first mortgage would not have been merged.
This principle is asserted in the cases we have cited, and is thus stated by Mr. Jones: "Even when the parties have undertaken to discharge the mortgage upon the uniting of the estates of the mortgagor and the mortgagee in the latter, it will still be upheld as a source of title, wherever it is for his interest, by some intervening title or cause, that it should not be regarded as merged. It is presumed, as a matter of law, that the party must have intended to keep on foot his mortgage title when it was essential to his security against an intervening title, or for other purposes of security, although the parties, through ignorance of such intervening title, or through inadvertence, have actually discharged the mortgage, and canceled the notes.” 1 Jones, Mortg. 8 873. Many
courts have enforced this equitable principle. Lowman v. Lowman, 9 N. E. Rep. 245; Smith v. Swan, 29 N. W. Rep. 402; Edgerton v. Young, 43 Ill. 464; Young v. Hill, 31 N. J. Eq. 429; Stantons v. l'hompson, 49 N. H, 272; Hatch v. Kimball, 16 Me. 146; Clift v. White, 12 N. Y. 519; Forbes v. Moffatt, 18 Ves. 384.
In this case the equities are stronger than in most of the cases cited; for irere the purchase money was not paid, the mortgagor conveyed to the mort
gagee, and received a written defeasance, but the amount of the debt was not reduced, nor was there any change except in the form of the evidence and the security. It would be a palpable perversion of justice to permit an intervening mortgagee to creep in and deprive the holder of the purchase-money mortgage of his lien, and there is no principle of law or equity that will justify such a course.
We think that Doherty was not a competent witness under the provisions of the statute, as the suit was by the executrix upon a contract made with her testator. If, however, it were conceded that he was competent, his testimony could not have affected the result; for, upon the principle of equity stated in discussing Kelso's testimony, the judgment must have been for the appellee even if Doherty had testified that he sold the property to Humpherys.
In discussing the evidence, the appellant's counsel cite authorities upon the rights of bona fide purchasers; but it is unnecessary to consider them in detail, for they have no relevancy here. It is no doubt true that the appellant is entitled to protection, but he is not entitled to protection beyond the priority which his mortgage had at the time it was executed; and that would not make it paramount to the mortgage executed to secure the purchase money. In giving effect to the lien of the purchase-money mortgage, his lien is not displaced; it remains as it was when he accepted his mortgage. All that is done by the application of the principle which rules this case is, not to displace the junior lien, but to preserve the senior one. In permitting, as the principle does, the junior lien to keep its rank and priority, the holder of it gets what he expected, and all he expected, at the time he acquired his lien.
It was not necessary for the appellee to prove that the entry of sa action was made by mistake; for merger, in such cases as this, does not take away the first lien, even though all the evidences of the debt were purposely destroyed, but leaves it intact as against intervening mortgagees. 1 Jones, Mortg. § 873, and cases cited in note. If the appellant had taken his mortgage after the entry of satisfaction, and on the faith that the senior mortgage had been discharged, then counsel's argument would be valid; but, as applied to the actual case, it is without force. The principle of equity which governs this case is strongly illustrated by the case of Barnes v. Mott, 64 N. Y.. 397, in which it was held that, even as against sureties, a purchaser of land who had paid off a mortgage in ignorance of a lien held by the sureties was entitled to have the mortgage reinstated and foreclosed. The record before us presents a much stronger case for the application of the rule; for here the mortgagee was in one instant the holder of the mortgage lien, and in the next the owner of the fee, and there was no interval in which a junior lien could have crept in, so as to displace his superior equity. It would be as unnatural as unjust to presume that Humpherys took an absolute title at the expense of his lien for the purchase money, while, on the other hand, it is the most natural and reasonable of presumptions that he did not intend to lose the priority secured to him by his purchase-money mortgage. This is a reasonable presumption, and it is a just one, for it produces an equitable result that must commend itself to the approval of conscientious men. Judgment affirmed. HOWK, J., was not present when this case was considered.
NOTE. 1. MORTGAGE-ABSOLUTE DEED. A deed, although absolute in form, is in fact only a mortgage if given merely as security, Jackson v. Lawrence, 6 Sup. Ct. Rep. 915; Teal v. Walker, 4 Sup. Ct. Rep. 420; S. C. 5 Fed. Rep. 317; Roddy v. Brick, (N. J.) 6 Atl. Rep. 806; Grand United Order Odd Fellows' v. Merklin, (Md.) 5 Atl. Rep. 544; Pearce v. Wilson, (Pa.) 2 Atl. Rep. 99; Mellon v. Lemmon, Id. 56; Clark v. Watson, (Mass.) 5 N. E. Rep. 298 Cox v. Ratcliffe, (Ind.) 5 N. E. Rep. 5; Workman v. Greening, (IU.) 4 N. E. Rep. 385; Bailey v. Bailey, Id. 394;
McMillan v. Bissell, (Mich.) 29 N. W. Rep. 737; Scheiber v. Le Claire, (Wis.) 29 N. W. Rep.
570; Jeffrey v. Hursh, (Mich.) 25 N. W. Rep. 176; Niggeler v. Maurin, (Minn.) 24 N. W. Rep. 369; Hulin v. Stevens; (Mich.) 18 N. W. Rep. 569; Madigan v. Mead, (Minn.) 16 N. W. Rep. 539; Hurst v. Beaver, (Mich.) 16 N. W. Rep. 165; Butler v. Butler, (Wis.) 1 N. W. Rep. 70; and bill of sale will, under like circumstances, be construed as a chattel mortgage, Roddy v. Brick, (N. J.) 6 Atl. Rep. 806; Seavey v. Walker, (Ind.) 9 N. E. Rep. 347; Weed v. Mirick, (Mich.) 29 N. W. Rep. 78; Winner v. Hoyt, (Wis.) 28 N. W. Rep. 380 ; Manufacturer's Bank of Milwaukee v. Rugee, (Wis.) 18 N. W. Rep. 251; Rockwell v. Humphrey, (Wis.) 15 N. W. Rep. 394; McAnulty v. Seick, (Iowa,) 13 N. W. Rep. 743; Cooper v. Brock, (Mich.) 2 N. W. Rep. 660.
2. MERGER. The conveyance of mortgaged property to the mortgagee does not ate as a merger it it is not the intention or to the interest of the mortgagee that it should. Lowman v. Lowman, (III.) 9 N. E. Rep. 245; Temple v. Whittier, (Ill.) 7 N. E. Rep. 642; Smith v. Swan, (Iowa) 29 N. W. Rep. 402, and note.
(109 Ind. 235)
CINCINNATI, I., St. L. & C. Ry. Co. 0. PARKER.
(Supreme Court of Indiana. January 12, 1887.) 1. RAILROAD COMPANIES-FENCE-KILLING STOCK-BURDEN OF PROOF.
In an action against a railroad company for killing a horse, when it is shown that, at the place where the horse entered upon the track and was killed, the road was not securely fenced, the burden of proof is upon the company to show that it was
not bound to maintain a fence at that point.1 2. SAMEMJURISDICTION OF JUSTICE.
A complaint before a justice of the peace against a railroad company for killing stock need not allege that the stock was killed in the township in which the action is brought, for the jurisdiction of the justice, in such case, is co-extensive with the county.
Appeal from circuit court, Boone county.
ZOLLARS, J. Appellee brought this action to recover the value of a horse, which it is alleged went upon appellant's railway at a point where it was not, but ought to have been, securely fenced, and was there killed by one of appellant's trains. The errors assigned are that the complaint does not state facts sufficient to constitute a cause of action, and that the court below erred in overruling appellant's motion for a new trial.
It is contended that a new trial should have been granted, because the evidence does not show that, at the point where the horse went upon the track, the road should have been fenced so as to exclude animals. When it was shown, by the evidence in behalf of appellee, that, at the point where the horse went upon the track and was killed, the road was not securely fenced, the burden was upon the railway company to show, in order to escape liability, that at that point it was not bound to maintain fences. That it did not attempt to do. Evansville & T. H. R. Co. v. Musier, 101 Ind. 597; S. C. 1 N. E. Rep. 197.
It is further insisted that, as the action was commenced before a justice of the peace, the complaint is defective, because it does not show that the horse was killed in the township where the action was brought. That objection is not well taken. Such an action may be brought before any justice of the peace in the county where the animal is killed. Rev. St. 1881, § 4026; Wabash, St. L. & P. Ry. Co. v. Lash, 103 Ind. 80; S. C. 2 N. E. Rep. 250.
Judgment aflirmed, with costs.
1 See Atchison, T. & S. F. Ry. Co. v. Shaft, (Kan.) 6 Pac. Rep. 908; S. C. 9 Pac. Ref. 464.