London & San Francisco Bank v. Bandmann
Before: Garoutte
Synopsis
Mortgage—Indebtedness and Advances—Lien not Extinguished.—A mortgage given to secure “the present indebtedness” of the mortgagor to the mortgagee, not describing nor referring to notes then evidencing such indebtedness, and also to secure further “advances” to be thereafter made by the mortgagor to the mortgagee, secures the “indebtedness,” and “advances,” as the “principal obligation,” referred to in section 2911 of the Civil Code, regardless of the instruments by which they may be evidenced, or of any change of form thereof, and so long as they remain subsisting obligations under new evidences of the amount thereof, and an action for the amount of the indebtedness and advances secured can be brought upon new notes evidencing the same, the lien of such mortgage is not extinguished under said section 2911 merely by the lapse of time within which an action might have been brought upon the original notes.
Id.—Mortgage not Needing “Creation” or “.Renewal”—Construction of Code.—Where the principal obligation secured has never become barred by the statute of limitations, and the lien of the original mortgage has not become extinguished under section 2911 of the Civil Code, there is no occasion to “create” a new mortgage, nor to “renew” the mortgage under section 2922 of the same code, by a “writing executed with the formalities required in the case of a grant of real property.”
Id.—“ Extension” of Mortgage—Broadening of Security.—The term “extended,” as used in section 2922 of the Civil Code, refers to a broadening of the security to cover additional advances, or obligations not included in the terms of the original mortgage; and the mortgage is inoperative as to obligations not included in the original mortgage or in a valid extension thereof under that section.
Id.—Note of Firm not Secured.—The amount of a note executed to the mortgagee by a firm of which the mortgagor was a member, which does not appear to have been any part of the indebtedness of the mortgagor at the time of the execution of the mortgage, nor an advance made in pursuance of the mortgage, is not secured by the mortgage, though incorporated as part of a note evidencing the indebtedness and advances thereby secured.
Id.—Agreement of Mortgagor to Pay Taxes—Invalid Agreement not Shown—Interest.—Upon foreclosure of a mortgage which assumed the form of a deed ana defeasance, an allegation and finding stating that the mortgagee required the mortgagor to pay the taxes upon the land ■ mortgaged without any diminution of the amount by reason of the mortgage, but not stating that the agreement of the mortgagor to pay the taxes was part of the mortgage contract, is not broad enough to establish an agreement violative of the constitution,' and making the interest uncollectible.
Id.—Payment of Interest—Waived of Objection by Mortgagor.—Where the interest upon the mortgage contract was paid by the mortgagor in accordance with his agreement, either directly or by ratification of sales of pledged personal property, the proceeds of which were applied to such payment, he thereby waives objection to the invalidity of the contract for payment of interest, and it is too late for him to complain thereof.
GAROUTTE, J. This action is brought to foreclose a mortgage executed July 21, 1888. This mortgage was given to secure “the present indebtedness of Julius Bandmann to said bank, and such advances as said bank may hereafter make to said Julius Bandmann, with interest thereon at the rate of eight per cent per annum.” The case is now before us upon an appeal from the judgment .without a hill of exceptions. By the findings of fact it appears that at the time the mortgage was given Bandmann was in debt to the bank in the sum of about sixty-eight thousand dollars which indebtedness was evidenced by two promissory notes. Subsequently these two notes were taken up and new notes given in lieu thereof. Advances were also made by the bank to Bandmann during this time, which were likewise evidenced by notes. Various payments upon some of these notes were made by Bandmann. The moneys so applied were the proceeds of sales of personal property also held by the bank as security for this indebtedness. Upon March 31, 1894, a settlement of the parties was had, and the indebtedness of Bandmann to the bank was thereupon ascertained to he forty-two thousand two hundred and fifty dollars, and a new note given for that amount, all former notes being surrendered and canceled. This new note included the balance of the old indebtedness, and all advances which had been made up to that date. Thereafter an additional advance of one hundred and ninety-one dollars and sixteen cents was made to Bandmann, and a note taken for that amount. It is now sought to foreclose the aforesaid mortgage [222]to secure the payment of the two notes last mentioned. After these two notes were given, and prior to the commencement of the action, Julius Bandmann conveyed the mortgaged property to Charles Bandmann, who is made a party defendant.
Section 2911 of the Civil Code reads: “A lien is extinguished by the lapse of the time within which, under the provisions of the Code of Civil Procedure, an action can be brought upon the principal obligation.” As shown by the finding of facts made by the trial court, it appears that the sixty-eight thousand dollars of indebtedness existing at the time the mortgage was given, July 21, 1888, was evidenced by two certain promissory notes. It is now claimed that these notes were the "principal obligation,” and that no action could be brought upon them after July, 1892, and hence the lien of the mortgage became extinguished at that time by virtue of the provisions of the section of the code we have quoted. The mortgage was given to secure a "present indebtedness,” and this present indebtedness, and not the notes, was the “principal obligation” called for by the foregoing section of the code; and as long as that indebtedness was kept alive, as long as an action could be brought to recover the debt, the .mortgage lien was not extinguished. At the time this action of foreclosure was brought the indebtedness was still owing and recoverable in law. It was evidenced by a promissory note, to be sure, but that fact was immaterial. It was said in Flower v. Elwood, 66 Ill. 446: “As a general rule, the mere change in the form of the debt does not satisfy a mortgage given to secure it, unless it is intended to so operate. The lien of the debt attaches to the mortgaged property, and the lien can, as between the parties, only be destroyed by the payment or discharge of the debt, or by a release of the mortgage. Mere change of the form of the evidence of the debt in nowise affects the lien.” The same rule stands equally good as to the advances made. These advances were the "principal obligation,” and as long as they were kept alive the mortgage lien secured their payment. Whatever might be the law of the case, if this mortgage had been given to secure the payment of a certain promissory note, describing it, we are not now concerned. We have no such ease. Here the mortgage was given to secure a certain described indebtedness. Whether in fact it was then evidenced
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