Montague & Co. v. Aygarn , 164 Ill. App. 596 ( 1911 )

Mr. Presiding Justice GIeorge W. Thompson

delivered the opinion of the court.

Appellants insist that the court erred in overruling the demurrer to the bill. After the demurrer was overruled appellants filed answers. By answering over after the demurrer was overruled they have waived their right to assign error on the ruling upon the demurrer (Bauerle v. Long, 165 Ill. 340; Anderson v. Olsen, 188 Ill. 502), except in so far as they may have the same advantage on final hearing, of the failure of the bill to state a cause of action and as to jurisdictional defects.

The main contention of appellants is that the equities of the appellant hank are prior to the equities of appellee. The decree finds that the advances made hy appellee and the hank and the assignments taken by them respectively from Aygarn were in good faith on the part of the assignees. Aygarn had a written lease from Earp with an option in it to purchase the real estate described in it at any time within the lifetime of the lease upon the payment of $1100. Within a few days after the lease and option to purchase was delivered to him he assigned and hypothecated the lease and option to purchase, to the appellant bank, to secure a loan of $4000 made to him by the bank. Thereafter Aygarn made valuable improvements on the property by building an elevator thereon. He then secured a loan from appellee of $1200 and subsequently a further loan of $645.75 on the faith of an assignment of the lease and contract that he already had assigned to the bank, the assignment made to appellee being on a separate paper. The appellee had no knowledge of the assignment of the contract to the bank until after appellee had filed its assignment for record in the recorder ’s office of Livingston county. The bank had no notice of the independent assignment of the contract by Aygarn to appellee. Aygarn, who is insolvent, was in actual possession of the property for which appellee and appellant bank each believed it held a contract transferring to itself all the equity of Aygarn.

The contract that Aygarn received from Earp was an assignable contract. Perkins v. Hadsell, 50 Ill. 216; Guyer v. Warren, 175 Ill. 328; Adams v. Peabody Coal Co., 230 Ill. 469. That contract, unlike a promissory note, giving the grantee certain rights in real estate, could be assigned and transferred either by an assignment on the paper itself or upon a separate instrument. i Cyc. 40. Neither the assignment to appellee nor that to appellant is under seal, although the original contract is under seal, but it has been held that in equity an assignment not under seal, of a sealed instrument, will transfer an equitable title. Barrett v. Hinckley, 124 Ill. 32. Section 28 of chapter 30 of the Statutes (Hurd’s) provides that: “Deeds, mortgages, powers of attorney and other instruments relating to or affecting the title to real estate in this state shall be recorded in the county in which such real estate is situated. ’ ’ Section 30 provides that “All deeds, mortgages and other instruments of writing which are authorized to be recorded shall take effect and be in force from and after the time of filing the same for record, and not before, as to all creditors and subsequent purchasers without notice; and all such deeds and title papers shall be adjudged void as to all such creditors and subsequent purchasers without notice until the same shall be filed for record.” The word “subsequent” as used in the recording act has reference to the recording and not to the date of the instrument, and while the transaction between a grantor and a grantee is complete upon the execution and delivery of the instrument, yet as between the grantee and third persons without notice, it is not complete until the instrument is filed for record. Doyle v. Teas, 4 Scam. 202; West Chicago Street Ry. Co. v. Morrison, 160 Ill. 288.

Any instrument affecting or relating to title to real estate may be recorded, although not acknowledged, and will operate as constructive notice to subsequent purchasers- or creditors (Reed v. Kemp, 16 Ill. 445; Willoughby v. Lawrence, 116 Ill. 11; B. & O. S. W. R. R. Co. v. Brubaker, 217 Ill. 462), and the recording of an equitable title to land operates as constructive notice, to the same extent as the recording of the legal title, to those who deal with the person having the equitable title or interest or 'others claiming under him. Powell v. Jeffries, 4 Scam. 387.

Appellants, Eylar and the bank, having failed to record the assignment of the contract held by them, had no equitable title that could affect the rights of third parties who without notice of the rights of appellants might secure the interest of Aygarn, who was in possession of the premises. Appellee by placing its equitable assignment on record before it had any notice of the equities of Eylar or the bank, secured, for its equitable right and title, precedence over any right of Eylar or the bank. The trial court properly held that the advances made by appellee on the faith of its assignment were a prior lien to the loan made by the bank on the strength of the assignment to its president.

The decree contains no provision or order concerning the repayment of the $1146 that the bank paid to Earp to secure the deed which clearly was a lien prior to any claim of appellee. Appellee had notice that the $1100 and rent was due to Earp, and the bank having paid that, the grantee of the bank should have been subrogated to the rights of the bank in that regard. Appellee argues that appellants have not asked that the doctrine of subrogation be applied to the case. Appellee is the complainant and is the party asking for equitable relief, and can only have such relief as it is equitably entitled to. The allegations of the bill show the equities of the parties concerning the sum paid Earp in the original contract. Appellants, defendants, are contending that all the equities in the property they are in possession of are with them. The decree should have preserved to appellants any equities they were entitled to.

Appellants insist that appellee by not making the tender on the trial and keeping it good has waived its right to its prior lien. We cannot agree with that contention. The parties are in a court of equity and must do equity. The court should have decreed that the sum of $1146 and legal interest thereon from the time that sum was paid by the bank for the deed should have been paid to Earp, the grantee of the bank, from the first proceeds of the sale after the payment of costs, then the sum due appellee should be paid with legal interest from the date of the decree and the remainder if any should be paid to Earp the holder of the legal title by deed from the bank.

Appellee has assigned as a cross error that the trial court erred in not allowing interest on the money advanced by it to Aygarn. While the evidence shows that $1200 was advanced by appellee to Aygarn about the time the assignment of July 2, 1903, was made to appellee, it also shows that Aygarn continued to ship grain to appellee in large quantities and drew drafts on appellee until some time in February, 1904. The sum due appellee appears to be a balance due on an open account and there is no evidence of an account stated.

Appellee has made no argument or statement showing how it claims it is entitled to interest. While the statute provides that a creditor is entitled to interest on money lent or advanced, yet if there was a running account then it is not entitled to interest until after there was an account stated. As the record now is the court did not err in refusing to allow interest to appellee and it, by failing to argue or discuss its assignment of cross error, has waived such assignment. Brewer & Hoffmann Brewing Co. v. Boddie, 162 Ill. 346; Duggan v. Ryan, 211 Ill. 133; Davenport Etc. R. R. v. DeYaeger, 112 Ill. App. 537.

The decree of the court is affirmed' in so far as it finds the lien of appellee to be superior to that of the bank for the loan made to Aygarn but is reversed because it does not find that the sum paid by the bank to Earp to secure the deed was a first lien prior to that of appellee. The cause is remanded with directions to enter a decree pursuant to this opinion.

Affirmed in part and reversed in part, and remanded with directions.