County Bank of San Luis Obispo v. Fox

California Supreme Court Nov 12, 1897 No. L. A. No. 284Published

Before: Belcher

AI Brief

AI-generated · verify before citing

Holding. The court held that a prior mortgage, even if recorded later, takes precedence over a subsequent mortgage where the subsequent mortgagee had actual notice of the prior interest, and the subsequent assignees failed to prove they were bona fide purchasers for value without notice.

Issues

Whether a mortgage recorded first takes priority over a prior mortgage when the subsequent mortgagee had actual notice of the prior mortgage.
Whether an assignee of a mortgage acquires rights superior to the assignor without pleading and proving the elements of a bona fide purchaser.

Disposition. affirmed

Quotations verified verbatim against the opinion

“the court found that the Farmers’ Union, at the time its note and mortgage were executed, had actual notice of the execution and existence of the Meads note and mortgage.”

“one who claims to be a bona fide purchaser must plead the facts essential to make him such, that is, that he purchased for value and paid the consideration before he had notice of the prior conveyance or mortgage.”

Synopsis

Mortgages—Conflict and Priority—Prior Recordation of Second Mortgage-Actual Notice—Unprotected Transfer.—The prior recordation of a second mortgage does not give it priority over a first mortgage which is subsequently recorded, where the mortgagee named in the second mortgage had actual notice of the execution and existence of the prior note and mortgage when the second mortgage was executed, while such mortgage remains in the hands of the mortgagee, or of his assignee, who takes without consideration, or subsequently to the record of the first mortgage.

Id,—Foreclosure — Conflicting Mortgages — Pleading—Protection of Bona Fide Assignee of Second Mortgage.—In a foreclosure suit, when there is a conflict as to priority of lien between an assignee of such second mortgage and the prior mortgagee, and it appears that the subsequent mortgagee, whose mortgage was first recorded, had actual notice of the prior mortgage, it devolves upon such assignee, . in order to claim protection as a tona fide, purchaser of the second mortgage for value, without notice of the prior mortgage, to plead and prove the facts essential to make him such tona fide purchaser, and to show that he took for value prior to the recordation of the first mortgage, and without actual notice thereof.

Id.—Constructive Notice to Assignee.—Where the court finds that the second mortgagee had actual notice of the prior mortgage, and there is neither allegation nor finding that any consideration was paid for the assignment of the second mortgage, and it does not appear but that it may have been made after recordation of the first mortgage, the assignee of the second mortgage will be deemed chargeable with constructive notice of the prior mortgage, and a decree giving priority of lien to the first mortgage will be affirmed.

BELCHER, C. This is an action to foreclose a mortgage, and the only question in the case is as to which of two mortgages on the same land has priority.

The facts are in substance as follows: On October 8, 1893, the defendant, W. H. Fox, executed to the defendant, Stella Payne Meads, his promissory note for seven hundred and fifty dollars, and a mortgage to secure payment of the same on one hundred and sixty acres of land then owned by him. This mortgage was duly recorded November 4, 189.3.

On October 10, 1893, Fox and his wife, Cynthia E. Fox, executed to the Farmers’ Union of San Miguel their promissory note for four hundred and eighty dollars and twenty cents, and a mortgage to secure pajunent thereof on the same one hundred and sixty acres of land. This mortgage was duly recorded on the twelfth day of the same month. Subsequently, the Farmers’ Union indorsed and assigned said note and mortgage to the First National Bank of San Luis Obispo, and the latter assigned the same to the plaintiff. It does not, however, appear from the complaint or findings when these assignments were made, or that either of them was ever recorded, or that any consideration was paid therefor.

The plaintiff commenced this action to foreclose the last-named mortgage, and the mortgagors suffered their defaults to be entered. The defendant, Meads, answered and filed a cross-complaint, setting up her mortgage and alleging that the lien thereof was prior and superior to that of plaintiff’s mortgage, and praying that her mortgage be foreclosed, the property sold, [63]and the proceeds of the sale, after paying the costs and expenses thereof, be applied first to the payment of the amount found due upon her note and mortgage.

The ease was tried, and the court found, among other things, that at the time the note and mortgage mentioned in the complaint were executed to the Farmers’ Union it had actual notice of the execution and existence of the note and mortgage held by said Stella Payne Meads, and that at the time of said assignment from the Farmers’ Union to said First National Bank the latter had no actual notice of the execution of the note and mortgage made to Stella Payne Meads, and no constructive notice thereof, unless the facts before stated constituted such notice. And, as conclusions of law, the court found that the lien of defendant’s mortgage was prior and superior to the lien of the plaintiff’s mortgage; that both mortgages be foreclosed and the property sold; that from the proceeds of the sale the expenses of sale be first paid, then the amount due defendant Meads, including her costs and attorney’s fees, and then the amount duei the plaintiff, its costs and attorney’s fees, with the usual order for docketing judgment for deficiencies, if any arise.

County Bank of San Luis Obispo v. Fox

AI Brief

Synopsis

More from California Supreme Court

Related research

AI Brief