Burns v. Burns

I think the case should be affirmed and respectfully dissent. This is an equity case involving the order of priority between three lienholders. The original mortgagee acquired the first lien against this realty. While the original mortgagee held this lien, and before it was barred by the statute of limitations, Mitchell secured his judgment lien. After the mortgage was barred by the statute, Eichhoff secured his judgment. So on March 7, 1942, the liens against the property were as follows: (1) Stark Doan, the original mortgagee, held a mortgage that was barred by the statute of limitations (2) Mitchell held a judgment lien, and (3) Eichhoff held a later judgment lien. On that day Doan assigned the note and mortgage to Damien Burns, the mortgagor's brother, and the mortgagor and his wife executed a revival acknowledgment to Damien Burns. Damien Burns bases his right of priority on this revival agreement he secured from his brother.

In the case of Kerndt Bros. v. Porterfield, 56 Iowa 412, 414,9 N.W. 322, 323, this court held that a second mortgage is junior when it is obtained before the statutory period expired on a first mortgage, even if the first mortgage is revived after the expiration of the statutory period. Judge Bliss would overrule this case, but I believe a study of the case would not warrant the conclusion that it holds that, in all cases, the revived first mortgage is superior to the second mortgage. In the course of the opinion, Justice Black stated:

"As between the mortgagor and mortgagee it cannot be doubted that a new promise which is sufficient to revive the debt will also revive the mortgage. It seems that the same rule ought to prevail against all persons interested in the mortgaged propertyunless there exist reasons which in equity would render itunconscionable to enforce the mortgage lien as against theirinterest. * * * We think, however, that equities may arise which would defeat or suspend the lien in order to protect the interest of others." (Italics supplied.)

The conclusion reached by the court in the Porterfield case is that:

"He [second mortgagee] can urge no equity which will relieve his property from the lien of the [first] mortgage."

In the case of First National Bank v. Woodman, 93 Iowa 668,678, 62 N.W. 28, 31, 57 Am. St. Rep. 287, we quoted from the Porterfield case and spoke of "controlling equities." There the revival was executed before the bar of the statute against the first mortgage but the later mortgages were given to secure pre-existing debts. In holding the revived first mortgage superior, we stated:

"In view of the statute on the subject, and the authorities cited, we regard it as fairly well settled that in the absence of controlling equities, a second mortgagee, where a prior mortgage is uncanceled, must take notice of the fact whether or not the cause of action thereon has been revived. In this case the equities are not controlling in behalf of appellees. Except a small sum the mortgages were given for pre-existing debts owing before the action was barred on appellee's mortgage."

In Gilman v. Heitman, 137 Iowa 336, 346, 113 N.W. 932, 935, this court, speaking through Justice Weaver, stated:

"In Kerndt v. Porterfield, 56 Iowa, 412, the question presented was whether a new promise of a mortgagor would have the effect to remove the bar of the statute of limitations as against subsequent liens taken before the mortgage became barred, and not foreclosed until after the revival of the indebtedness. This inquiry we there answered in the affirmative. That ruling has since been followed in Bank v. Woodman, 93 Iowa, 668; Hellman v. Kiene, 73 Iowa, 448; Freeburg v. Eksell, 123 Iowa, 464."

In all of these cases involving situations where the holder of a revived lien is asserting priority over other lienholders or grantees who acquired their liens or titles before or after the statutory period expired, the true rule is that the revived first lien will be superior if the controlling equities are in favor of the holder of this lien. In the ordinary case of a mortgage revived after the statutory period, the equities, as against a second mortgagee who secured his mortgage before the statutory period on the first mortgage expired, are usually in favor of the revived first mortgage. If, after the first mortgage is barred, the mortgagor again sells or mortgages the land and then revives the first mortgage, the equities would usually favor the grantee or second mortgagee. The point is that it is the application of equitable principles to the facts in each case that determines the priority.

Now, with the rule of the foregoing cases in mind, let us make a further examination of the evidence in this case. We learn from the record that the assignment of the first mortgage to the mortgagor's brother, and the revival promise given to the assignee, were all part of a plan whereby the mortgagor's brother would emerge with the property or the first lien on the property at little cost to himself. There is some evidence that Doan had been trying to collect his mortgage, but Damien Burns saw Doan a few days before March 7, 1942, and told him that this mortgage he held against his brother Joe Burns was outlawed but that he would give him $50 for it. Doan testified that Damien Burns paid him $50 for the assignment of this $2,500 mortgage and agreed to pay him another $100. Doan testified that he did not remember when the other $100 was to be paid but he "guessed it was on condition if Damien wins the priority here." The record shows that on the day Damien received the assignment of the note and mortgage his brother Joe immediately accommodated him with a new acknowledgment and promise to pay the mortgage. It is upon this record that Damien asserts his priority. I feel that, within the controlling-equity rule, Damien Burns should not be given priority over either of the judgment creditors. The legal effect of the assignment that clothes him with the rights of his assignor is immaterial. Upon his claim of priority he must establish superior equities in his favor before this court will grant a superior order of priority.

I feel that under this record reasons exist "which in equity would render it unconscionable to enforce the mortgage lien" as against the judgment creditors, within the rule announced in Kerndt Bros. v. Porterfield, supra. The general purpose of the statute with respect to revival agreements is to enable the honest debtor to revive the debt in return for the forbearance his creditor has shown to him. This general purpose should not be thwarted by a scheme that does not benefit any of the creditors.

I would hold that Damien Burns failed to establish controlling equities in his favor and that the judgment creditors hold liens superior to his lien in the order established by the trial court, and I would therefore affirm the trial court. I am authorized to state that Justice Miller concurs in this opinion.

MILLER, J., joins in this dissent.