Turman v. Sanford , 69 Ark. 95 ( 1901 )

Riddick, J.,

(after stating the facts). The questions presented by this appeal are: Did the mortgage from Turman to. Gilbreath inure to the benefit of Gilbreath’s mortgagee, Peace? And did Sanford, by purchasing at the Peace foreclosure sale, succeed to the rights of Peace, and become entitled to the possession of the land? The statute upon which Sanford bases his right to recover is as follows: “If any person shall convey any real estate by deed purporting to convey the same in fee simple absolute, or any less estate, and shall not at the time of such conveyance have the legal estate in such lands, but shall afterward acquire the same, the legal or equitable estate afterward acquired shall immediately pass to the grantee, and such conveyance shall be as valid as if such legal or equitable estate had been in the grantor at the time of the conveyance.” Sand. & H. Dig. § 699. Under this statute if Gilbreath had, subsequent to the execution of his mortgage to Peace, acquired title in his own right to the land mortgaged, it would, by virtue of the statute, have inured to the benefit of his mortgagee. Kline v. Ragland, 47 Ark. 111. But he only secured a mortgage .upon it; for, though the deed obtained from Turman was absolute in form, it is admitted that it was executed to secure a debt, and was in law a mortgage, and must be treated as such. And there is room for doubt whether the interest in mortgaged land acquired by the mortgagee by virtue of the mortgage before foreclosure is such an estate as will by the statute pass to a grantee to whom he has conveyed the land prior to his mortgage. For the mortgagee before the foreclosure is neither at law nor in equity the real owner of the land. The legal title, it is true, passes to him by the mortgage, but he holds it for the protection of his debt, and for that purpose only. If he takes possession before foreclosure, he must account to the mortgagor for rents and profits, and so soon as his debt is paid his rights in the land cease. He has before foreclosure no such estate in the land as can be attached for his debts or levied upon and sold under execution. If he dies, his widow has no right of dower in it as real estate. His interest as mortgagee does not descend to his heir, but passes to his personal representative as personal assets. On the other hand, all the usual incidents of ownership belong to the mortgagor in possession of the mortgaged land before foreclosure. His interest therein can be attached for his debts or levied upon and sold under execution. He can maintain an action of ejectment for the land against a stranger, and the mortgage cannot be set up as a defense. In case of death his interest therein passes not to his administrator as per-sonaltv, but descends as real estate to his heir, and his widow is entitled to dower in it as in other real property. Thus, while, ior the purpose of protecting the mortgage debt, the mortgagee, as between himself and the mortgagor, is considered the owner of the land, for other purposes and between other parties not holding under the mortgage the mortgagor is the owner. The interest of the mortgagor is considered and treated as real estate, while that of the mortgagee is only a personal asset. Terry v. Rosell, 32 Ark. 478; Miles v. Shepard, 30 Conn. 98; 1 Jones, Mort. (5th Ed.), §§ 11, 15, 664, 698, 699, 703; 3 Pomeroy’s Equity, §§ 1186, 1187.

There are other objections to the contention that the interest of a mortgagee will pass under this statute. The statute only purports to pass real estate, but, if only the legal title in the mortgagee passed, it would be worthless, for the legal title can be used by the mortgagee only to collect his debt, and without the debt it would .avail nothing. On the other hand, if we adopt the contention that 'the statute operates as an assignment of the mortgage debt as well, the effect might be to pass something of more value than 'the land, for lands are sometimes mortgaged for more than their ■value, and in such a case if the mortgagor is solvent the debt is rof more value than the land mortgaged.

For these reasons, we feel inclined to the opinion that Gilbreath by the mortgage from Turman did not acquire such an estate as would pass under this statute to his mortgagee, Peace. But, conceding that the interest he acquired as mortgagee from Turman did pass by the statute, it would still be liable to be defeated by the payment of the debt from Turman to Gilbreath. If Peace wished to prevent this, and to subject the interest acquired by Gilbreath .under the Turman mortgage to his debt, he should, before payment was made, have given Turman notice of his claim, and in his proceedings to foreclose should have made Turman a party, and set out in his complaint this after-acquired mortgage of Gilbreath, and asked to have it subjected to his claim. But he did not do this. He neither gave notice to Turman of his claim, nor made him a party to his foreclosure suit.

Turman paid off his debt to Gilbreath, and there is nothing in the record to show that he had any notice either of the mortgage to Peace or of the claim against his land based on that mortgage until after he had discharged his debt to Gilbreath. The record of the mortgage from Gilbreath to Peace was not notice to Turman, for he was not holding under Gilbreath, and there was no reason why he should search the records to discover conveyances made by Gilbreath. It is sometimes said that the record of a deed is notice to all the world, but it is more accurate to say that it is notice only to those claiming title under the same grantor. They are the persons for whose benefit the registration is required, and whose duty it is to- take notice of it, such as subsequent purchasers and mortgagees dealing with the title in the line of which the recorded deed stands. Maul v. Rider, 59 Pa. St. 167, 171; 2 Devlin, Deeds (2d Ed.), §§ 712, 713.

The record is not notice to outside parties having no connection with the title of which the recorded deed is a part, and the record of the Peace mortgage was not notice to Turman; for, as before stated, he does not hold under Gilbreath, and there is nothing else in the record to show that he had notice. Under these circumstances a payment by Turman of his debt to Gilbreath secured by the mortgage left no beneficial interest in Gilbreath for the statute to act upon. The statute in reference to the grantor’s after-acquired title was enacted to prevent fraud and effect justice, but under the circumstances here it would be neither right or just to compel Turman to pay his mortgage debt a second time to one who had given him no notice of his claim until after the payment of the debt.

Eor these reasons we think the plaintiff, under the facts stated in the record, cannot recover. The judgment is therefore reversed, and the cause remanded for new trial.

Bunn, C. J., dissents.