Zanietta v. McCulloch

Suit to foreclose mortgage executed by John W. McCulloch and wife. Defendant L. Belle Lees was substituted for Ontario National Bank, holder of subsequent mortgage on same premises, as defendant. L. Belle Lees then answered, contending the first mortgage had ceased to be lien and that her second mortgage by reason thereof was first lien on the mortgaged premises. The lower court so held and plaintiff appeals from the resulting decree.

On November 7, 1912, defendants J.W. McCulloch and Olive E. McCulloch, his wife, made, executed and delivered to plaintiff a certain indenture of mortgage upon certain real property in the City of Ontario, to secure the payment of a certain promissory note for $2,000 of even date therewith, signed by them, made payable to the order of plaintiff one year from the date thereof, and bearing interest at the rate of 10 per cent per annum from date until paid. Said mortgage was duly recorded on November 8, 1912, in the records of Malheur County, Oregon. The makers of the note paid the interest falling due thereon up to and including November 7, 1925, since which time they have been in default. No part of the principal sum has been paid. On November 20, 1924, for a valuable consideration, McCulloch and wife made, executed and delivered to Ontario National Bank another note and mortgage on the same land for $3,036.65, and they paid interest thereon according to the terms of the note until November 29, 1926, since which time they have also been in default in the payment of said note and mortgage.

Plaintiff commenced this suit to foreclose his mortgage, naming as defendants the McCullochs, the Ontario National Bank, and others having, or claiming to have, subsequent liens or interests in the mortgaged property. The complaint is in the usual form of a complaint seeking to foreclose a real estate mortgage. Before the time for answering had expired, an affidavit for the substitution of L. Belle Lees in place of Ontario National Bank was filed in the suit, in which it was shown that she had purchased from the bank the note and mortgage given by the McCullochs to the bank and was the owner and holder thereof; and an order was made substituting her as one of the defendants in the suit in lieu of the bank. She answered, setting up the execution and delivery of the note and mortgage which had been given to the bank, her purchase thereof, and that she was the owner and holder thereof; that the note and mortgage had been given for value, and that, by virtue of the provisions of Sections 9887-9890, Or. L., plaintiff's mortgage had ceased to be a lien on the mortgaged property on November 7, 1923, i.e., ten years from the date of the maturity of the note, and that, by reason thereof, her said mortgage was a first lien on the property, and the only mortgage lien against it, and prayed that her mortgage be decreed to be a first lien against the property.

In disposing of plaintiff's note and mortgage, the court decreed that plaintiff should have judgment against the two McCullochs, the makers thereof, for the amount due upon the note, but that, as against parties subsequently thereto acquiring a lien on the mortgaged property, the mortgage which had been given to secure the payment of plaintiff's note had, by virtue of the statute, ceased to be a lien against the mortgaged property on November 7, 1923, ten years from the date of the maturity of the note, and, in disposing of the mortgage of defendant Lees, decreed that it was a first lien against the mortgaged property and directed that the property be sold and the first proceeds arising from the sale be applied in satisfaction of the Lees mortgage. From this decree, plaintiff has appealed. AFFIRMED. Section 9887, Or. L., provides:

"No mortgage upon real estate now, heretofore or hereafter given, shall be a lien or incumbrance, or of any effect or validity for any purpose whatsoever, after the expiration of ten years from the date of the maturity of the obligation of indebtedness secured or evidenced by such mortgage, or from the date to which the payment thereof has been extended by agreement of record."

There is no agreement of record extending the time of payment of plaintiff's note.

Section 9890 provides:

"Nothing in this act contained shall be construed to bar the foreclosure of any such mortgage, nor shall said act or any portion thereof be plead or considered as a defense to any such foreclosure, if, within ten years immediately preceding the commencement of the suit to foreclose, there shall have been voluntarily paid any portion of the debt secured by the mortgage, or any interest thereon; provided, that the premises covered by such mortgage are still owned by the original mortgagor and are unaffected by any lien or liens, or rights of third parties which may have attached or intervened, subsequent to the expiration of the ten-year period in section 9887 described."

The premises covered by plaintiff's mortgage are, so far as the record shows, still owned by the original mortgagors, but they do not come within the exception of the statute because they are affected by the Lees mortgage lien, which lien attached or intervened subsequent to the expiration of the ten-year period. For that reason, and because of the express provisions of the statute, plaintiff's mortgage, as a mortgage, as against the Lees mortgage, or against any liens or rights of third parties attaching subsequent to November 7, 1923, has ceased to exist, and, by virtue of the statute, the mortgage given to the bank and assigned to Lees is a first mortgage upon the premises, and entitled the defendant Lees to the relief granted by the decree.

So far as our examination shows this statute has been considered in three cases only; in only one of these did the court attempt to determine its application to particular cases. In Hydraulic Mining Co. v. Smith, 100 Or. 86 (196 P. 811), and in Day v. Celoria, 116 Or. 250 (241 P. 58), the statute was referred to but the facts of neither case, as shown by the opinions of the court, brought the parties within its application and the effect of the statute in applicable cases was not determined. In State Land Board v. Lee, 84 Or. 431 (165 P. 372), in a decision written by Mr. Justice HARRIS, the statute was held to be not applicable to a mortgage given by a land owner to the State Land Board for moneys loaned by the board belonging to the irreducible school fund. The reason for the decision was that a limitation in a general statute has no application to the state, unless the state is expressly named in the statute or by necessary implication included within its provisions. But this decision and the reasons which controlled it have no application to plaintiff's mortgage. Here the state is not a party to the suit, nor has it any interest in plaintiff's mortgage. The effect of the decision in that case was to hold that the statute in question was a valid statute, and binding upon mortgages coming within its terms when held by private parties. With that decision we are in thorough accord, and we think it is controlling here.

For these reasons, the decree of the lower court must be affirmed. It is so ordered. AFFIRMED.

BEAN, McBRIDE and ROSSMAN, JJ., concur.