Illinois Standard Mortgage Corp. v. Collins

STATEMENT BY THE COURT.

Appellant seeks foreclosure of a mortgage dated May 15, 1929, which secures an indebtedness of thirteen hundred dollars ($1,300) executed by E. W. Collins and wife and G. G. Brooks and wife.

Appellee, Young Men's Building Loan Association, by its receiver, George N. Greenhaw, seek a foreclosure of a mortgage in their behalf covering the same property described in appellant's mortgage, dated January 30, 1925. Each of the aforementioned for record.

A preponderance of the testimony introduced on the trial of the case in reference to the execution of the two mortgages is to the following effect:

During the year 1925 and long prior thereto, the appellee, Young Men's Building Loan Association, was doing a general building and loan business in and around Jonesboro. During the same period of time, the Homebuilders' Corporation of Jonesboro was doing business at the same location as implied from its name. The Homebuilders' Corporation was used as an outlet for the accumulated cash of the Young Men's Building Loan Association. During the period of time covered by this controversy, E. W. Collins was president of the Homebuilders' Corporation and was a member of the board of directors of the Young Men's Building Loan Association. During the same period of time, G. G. Brooks was the secretary of the Young Men's Building Loan Association and was secretary of the Homebuilders' Corporation. A. G. Brooks admittedly was also the supervising manager of the business affairs of both corporations.

In 1929 the Young' Men's Building Loan Association became embarrassed for want of cash. Thereupon, a scheme was evolved for selling individual mortgages to outside concerns for the purpose of raising the cash reserve of the Homebuilders' Corporation and the Young Men's Building Loan Association.

Immediately prior to May 5, 1929, application was made by Homebuilders' Corporation requesting a loan from appellants on the property in this controversy. On this application appellants refused to loan to the Homebuilders' Corporation and required that the title to the piece of property be conveyed to individuals. Thereupon, the Homebuilders' Corporation conveyed the fee simple title to this piece of property to E. W. Collins and G. G. Brooks, and these individuals in turn executed appellant's mortgage. By mistake or otherwise, the abstract of title furnished by Collins and Brooks to appellant did not show appellee's mortgage of date, January 30, 1925.

The mortgage executed by Collins and Brooks to appellant warranted the property conveyed to be free and clear of incumbrances. Upon examination of the abstract furnished by Collins and Brooks to appellant, which failed to show the mortgage of date, January 30, 1925, appellant's attorney approved the title and the loan. Thereupon, a check was remitted to E. W. Collins and G. G. Brooks, and they in turn cashed the same and delivered the proceeds to Homebuilders' Corporation. Within two or three days thereafter remittances were made by the Homebuilders' Corporation to the Young Men's Building Loan Association aggregating a total sum in excess of the amount of this loan.

According to the records of the Young Men's Building Loan Association, after the execution of appellant's mortgage, collections on the 1925 mortgage ceased. The original mortgage and notes which accompanied it were lost from the files of the Young Men's Building Loan Association. This condition prevailed until the filing of this suit. Collins and Brooks remained in their respective positions with the two companies until February, 1931. In testimony it was conceded by Collins and Brooks that, had the abstract tendered by them to appellant shown the mortgage of January 30, 1925, same would have been satisfied in full. It was further shown by testimony that at the time appellant accepted the loan and title tendered by Collins and Brooks the Young Men's Building Loan Association turned over to the appellant the uncanceled fire insurance policy on the property, and same was thereafter carried for the benefit of appellant. Other facts may be referred to in the opinion. The chancellor found the issues in favor of appellees, and this appeal is prosecuted to reverse that decree. (after stating the facts). We find it unnecessary to discuss the many interesting questions discussed by counsel. The question of estoppel is decisive of all issues here presented. The testimony shows conclusively that at all the times here in controversy E. W. Collins was president of the Homebuilders' Corporation and an active member of the board of directors of the Young Men's Building Loan Association. During the same period of time G. G. Brooks was the secretary of the Young Men's Building Loan Association and the Homebuilders' Corporation, and, in addition thereto, Brooks was the supervising manager of all the business of both corporations. During the same period of time and in the absence of Brooks from the office, Collins had charge of the affairs of both corporations. Collins and Brooks executed the application for the loan which is secured by appellant's mortgage. In conformity therewith, they jointly executed the mortgage and notes which accompanied it. The proceeds of the loan was remitted by appellant to Collins and Brooks, and it in turn paid it over to the Homebuilders' Corporation, and it is fairly inferable that this identical money was paid over by the Homebuilders' Corporation to the Young Men's Building Loan Association. The fact is, we think no other reasonable inference can be drawn from the testimony. It would be inequitable and unjust to permit the Young Men's Building Loan Association to take appellant's money delivered on the faith of a first mortgage, then assert a superior claim and right under a mortgage which would have been released had attention been directed to it. Under the facts and circumstances of this case, we are convinced that the Young Men's Building Loan Association received and accepted appellant's money with the full knowledge and information that appellant thought it was receiving a first mortgage on the property in controversy, and this based upon the solemn representations of G. G. Brooks, who was then the supervising manager and secretary of the Young Men's Building Loan Association, to the effect that appellant's mortgage was a first mortgage against the property in controversy. Equity holds a person to a representation made or position assumed, where otherwise inequitable consequences would result to another who has, in good faith, relied thereon. Such an estoppel is founded on morality and justice, and especially concerns conscience and equity. It needs neither a consideration nor a legal obligation to support it. See 19, vol. 10 R.C.L., p. 689. Again, acceptance of any benefit from a transaction or contract, with knowledge or notice of the facts and rights, would and should create an estoppel. See 22, 10 R.C.L., p. 694. There can be no question in the instant case but that knowledge of Brooks was knowledge to the Young Men's Building Loan Association.

This court has held that, "if a creditor of a fraudulent grantor, with knowledge of the fraud, accepts from the grantee the purchase price agreed to be paid for the land, he thereby affirms the sale, and waives right to complain of the fraud." Millington v. Hill, 47 Ark. 301,1 S.W. 547. This rule has full application to the facts of this case. The Young Men's Building Loan Association had full knowledge that an application was being made to appellant for a loan on the property which it now claims adversely and with this knowledge accepted the proceeds of the loan. By doing this, it is estopped in asserting rights under its mortgage of 1925 superior to that of appellant.

For the reasons aforesaid, the decree is reversed, and the cause is remanded with directions that the property be sold and the proceeds arising therefrom be disbursed; first, to the costs attending the sale; secondly, to appellant in the aggregate sum due it under its notes and mortgages, and, if any balance remain, same to be paid to the Young Men's Building Loan Association.