First National Bank of Sheridan v. Citizens' State Bank of Dubuque

Potter, Chiee Justice.

This suit was instituted in the District Court April 22, 1899, by the Citizens’ State Bank .of Dubuque, Iowa, for the purpose of foreclosing three certain real estate mortgages executed by George Tschirgi and his wife, Marie T. Tschirgi, to secure the payment of certain promissory notes given by said George Tschirgi, or by him and his wife. Matthew Tschirgi, the father of George, the First National Bank of Sheridan and E. A Whitney were made *52parties defendants as having or claiming to halve some interest in or liens upon the lands covered by the mortgages. Pending the settlement of the issues in the case, Catherine Tschirgi, the wife of Matthew, was made a party defendant, and her interest was disclosed by appropriate pleadings, as was also the interest of Matthew Tschirgi. Simeon E. Baldwin does not seem to have appeared in the cause until the rendition of the final decree, whereby, by consent of all the parties, the title to a certain tract of the lands involved was quieted in him. The First National Bank of Sheridan being interested in the lands, or a part thereof, as the owner of a mortgage executed to E. A. Whitney by said George and Marie T. Tschirgi, appeared and answered, and b)' cross-petition set forth its mortgage and prayed for its foreclosure, alleging- the same to constitute a lien superior and prior to the mortgages held by the plaintiff, notwithstanding that it was subsequent as to time of execution.

Five separate tracts of land were originally involved in the controversy, but in this court the contest is narrowed to two of the tracts. The title to one of the tracts originally involved was, as above stated, quieted in Simeon E. Baldwin, by consent of all, the parties; and by like consent the title to another tract was quieted in Matthew Tschirgi. A third tract, upon which the plaintiff was decreed a first and prior lien under one of its mortgages, is out of the case, the defendant bank, plaintiff in error here, not complaining of the decree in that respect.

By the final decree of the District Court, the mortgages upon the other two tracts held by the plaintiff, the Citizens’ State Bank of Dubuque, were found and adjudged to be prior and superior to the mortgage of the defendant bank— the First National Bank of Sheridan; and the mortgage of the last named bank was adjudged void so far as it affected the homestead of the mortgagors; and in the decree providing for the sale of the homestead, the homestead exemption of $1,500 was ordered paid to said George and *53Marie T. Tschirgi, after satisfaction of the amount due upon the mortgage of the Citizens’ State Bank covering that tract, and before the application of any of the proceeds of the sale thereof, toward the mortgage thereon of the First National Bank.

The First National Bank of Sheridan brings the cause here on error, and complains of'the decree in so far as it relates to the homestead and the validity of its mortgage covering the same, and adjudgés the mortgages of the plaintiff bank to constitute superior liens upon the two tracts now in controversy. Before proceeding to a discussion of these matters, we will dispose of a preliminary question raised by plaintiff in error.

The cause was tried and submitted to the court, and thereupon taken under advisement on the 4th day of January, 1900. Final decree and judgment was rendered August 30, 1900. The findings of the court to some extent at least are contained in the decree, but it is contended that there is not a separate statement of the conclusions of fact and law; and it is urged that error was committed by the court in failing to state its conclusions of law and fact separately, as requested by the plaintiff in error. It may be, and doubtless should be, conceded that the decree does not in form and substance amount to a separate statement of the conclusions of law and fact as contemplated by the statute providing therefor when requested; indeed, the decree states that the issues are found generally for the' plaintiff. The statute on the subject is as follows: •

“Upon the trial of questions of fact by the court, it shall not be necessary for the court to state its findings, except, generally, for the plaintiff or defendant, unless one of the parties request it, with the view of excepting to the decision of the court upon the questions of law involved in the trial, in which case the court shall 'state in writing the conclusions of fact found separately'-from the conclusions of law.” (R. S., Sec. 3660.)

*54One of the grounds for new trial set forth in the motion therefor was that the court erred in failing and refusing to state and find its conclusions of fact and law separately, as requested by defendant bank; and attached to the motion appears to have been an affidavit of the attorney for the bank setting forth that, “after the said cause had been submitted to the aforesaid court for its decision and judgment, and after the Presiding Judge had indicated what his decision or the decision of the court would be, and had requested the attorney "for the plaintiff to draw up the decree in accordance therewith, but before entering of the decision and judgment in the said action, to-wit, on or about the 20th of June, 1900, affiant, in behalf of the defendant bank, made request in writing of the said Presiding Judge that the said court and judge should state and find its conclusions of fact and of law separately.” The record is elsewhere silent respecting the request for separate findings, and for this reason we think that the question is not presented.

The record should disclose that a request for separate statement of conclusions of fact and law was in fact made, and that it was made in due season. And a recital in the motion for new trial, or a statement in the affidavit attached to the motion, that a request was made, is insufficient. (Smith v. Uhler, 99 Ind., 140; Nickless v. Pearson, 126 Ind., 477; Van Horn v. State, 5 Wyo., 501; Elliott App. Pro., Sec. 732.) But not having been made until after the judge had announced his decision, and directed the preparation of decree, more than five months after the cause had been submitted, the request came too late. The court was not then required to comply with it. (Elliott App. Pro., Sec. 732; Toledo v. Barnes, 1 O. N. P., 188; Wilcox v. Byington, 36 Kan., 212; 12 Pac., 826; Ross v. Baker, 58 Neb., 402.) In the case last above cited, under a statute precisely like our own, the Nebraska court say that “it is proper, in order that the trial judge may examine and consider the questions of fact and law, and formulate and pre*55pare the requisite statements, that the request should be made at the time of the trial, and not later than at the final submission of the cause for decision, or at a later time, to be fixed by the court. The judge should not be called upon at the same time of the rendition of .the decree to then particularize in regard to every conclusion of fact and also of law. He undoubtedly might and may do so. We think it discretionary with him, if the request is made later than at the time we have indicated, whether he will comply with it or not.”

The mortgage held by the plaintiff in error, and under its cross-petition sought to be foreclosed, covered, in addition to other lands’, a tract of one hundred and sixty acres found to be the homestead of the 'mortgagors, George and Marie T. Tschirgi. The mortgage was given by them to E. A. Whitney to secure the payment of a note made payable to him. He testified that, at the time of the execution of the mortgage, he had no interest in it nor in the debt, but that the debt secured belonged to the bank, and the note and mortgage were made to him for the benefit of the bank. It was, as he testified, the result of an indebtedness previously due to him that he had'.turned over to the bank. Subsequently he endorsed the note to the bank. He testified that when the note and mortgage were made he was merely acting for the bank. The court found that the mortgage was given to Whitney, as trustee for the bank. The acknowledgment of the mortgage was taken before and certified by a notary public, who was at the time the cashier of the bank and one of its stockholders. Upon the ground that the mortgage was acknowledged before a party interested therein, and in the debt secured thereby, it was held void as to the homestead, to the extent of fifteen hundred dollars, the homestead interest.

Our statute provides that every sale, mortgage, disposal or incumbrance of a homestead shall be “absolutely void” unless the wife of the owner or occupant, if he have any, shall, separate and apart from her said husband, freely *56and voluntarily sign and acknowledge the instrument of writing, conveying, mortgaging, disposing of, or incumbering such homestead, and the officer taking her acknowledgment shall fully apprise her of her right and the effect of signing and acknowledging such instrument. It is provided further that no deed or other instrument shall be construed as releasing the right of homestead, unless the same shall contain a clause expressly releasing or waiving such right. And in such case the certificate of acknowledgment shall contain a clause substantiall)' as follows: “Including the release and waiver of the right of homestead,” or other words which will expressly show that the parties executing the deed or other instrument intended to release such right; and that no release or waiver of the right of homestead by the husband shall bind the wife unless she join in such release or waiver. (R. S., Sec. 2770; see also Sec. 2776.)

The provisions of the statute make the proposition too clear to require discussion that an acknowledgment taken as required by the statute was an essential element to render the mortgage in question effectual and valid as a release or waiver of the homestead right. (Ogden Building Association v. Mensch, 196 Ill., 554; Gage v. Wheeler, 129 Ill., 197.) And it follows that, should it be held that the acknowledgment was taken and certified to by an officer at the time and in that instance disqualified and incompetent to act, then the District Court correctly adjudged the mortgage void as affecting the homestead interest.

The authority of a party interested in a conveyance to act officially in taking the acknowledgment of the execution thereof has been the subject of frequent judicial determination ; and the general rule, sustained by the great weight of authority, is that an acknowledgment taken before one who is a party to the conveyance or is interested therein is void. (Ogden Building Association v. Mensch, 196 Ill., 554; Kothe v. Krag-Reynolds Co. (Ind. App.), 50 N. E., 594; Horbach v. Tyrrell, 48 Neb., 514; Withers *57v. Baird, 7 Watts., 227; Brown v. Moore, 38 Tex., 648; Davis v. Beasley, 75 Va., 491; Groesbeck v. Seeley, 13 Mich., 329; Miles v. Kelley, 16 Tex. Civ. App., 147; 1 Devlin on Deeds (2nd Ed.), See. 467; 1 Cyc., 553, and cases cited; 1 Ency. D. (2nd Ed.), 493, and cases cited.) In Cyclopedia of Law and Procedure it is said: “Because of the probative force accorded' to the certificate, as well as the usually important consequences of the instrument itself, public policy forbids that the act of taking and certifying the acknowledgment should be exercised by a person financially or beneficially interested in the transaction.”

Our attention has been directed, to the fact that in one case at least where the rule above stated is laid down, there was a statute expressly declaring interest of the officer a disqualification; but it is to be observed that, in that case, the general question was elaborately discussed, and the conclusion reached that, independent of the statute, the disqualification on account of interest existed on grounds of public policy. (Kothe v. Krag-Reynolds Co., supra.) It is true that the same reasons have not always been assigned as the ground or foundation for the principle that interest in the conveyance constitute a disqualification. Some of the decisions have held the act of taking the acknowledgment, especially of a married woman when the law requires it to be taken separate and apart from her husband, to be judicial, and the disqualification is declared upon that theory. As to whether the act is a judicial one or ministerial only, there appears to be some conflict hi the authorities. Other decisions have found the reason for the rule in the conclusiveness of the officer’s certificate, while still others, and among them several of the more recent decisions, and which seem to us to have entered into a deeper consideration of the question, maintain the rule upon the broad ground of public policy, in the absence of any statutory declaration on the subject; and whether the act be ministerial or judicial is regarded as immaterial, or at least as unnecessary to a decision of the question.

*58O.ur statutes do not expressly disqualify an officer from taking an acknowledgment in case he should be interested in the transaction or the instrument, nor is the certificate of a notary made conclusive of the facts therein contained. The certificate is, however, constituted presumptive evidence. (R. S., Sec. 2602.) And all deeds and other conveyances of 'any interest in lands, executed, attested and acknowledged in accordance with the statutory requirements, may be read in evidence without, in the first instance, furnishing other or additional proof of the execution thereof. (R. S., Sec. 2739.) And in case of the loss of the instrument, the record thereof may likewise be read in evidence. (Id.) These provisions, together with those declaring a conveyance properly executed, and acknowledged, when recorded, to operate as constructive notice thereof, serve to attach to an acknowledgment very important and far-reaching consequences. We perceive no sufficient reason, therefore, for going counter to the overwhelming weight of authority, and discarding the general rule prohibiting an officer financially or beneficially interested in a conveyance from taking the required acknowledgment of its execution. Not only do we think the rule a sound one, hut the reasons therefor are peculiarly persuasive when applied to the case of an acknowledgment such as that required on the part of a wife in order to release the homestead right under the provisions of our statutes.

Thus far we have referred to the general rule. We come now to the degree or character of interest that will operate to render the officer incompetent to act, as applicable to the facts in the case at bar. There seems to be a direct and somewhat formidable conflict in the authorities as to whether one who is an officer of a corporation, but not a stockholder, is thereby disqualified to take the acknowledgment of an instrument to which the corporation is a party, or in which it is interested. We need not consider that question, since in the case before us the notary was *59not only an officer, and one of the principal officers of the bank, but he was also a stockholder. In such a case the authorities present a much greater unanimity; and with remarkably few exceptions, one who is. a stockholder, as well as an officer of the interested corporation, is held to be disqualified. (Ogden Building Association v. Mensch, 99 Ill. App., 67; 196 Ill., 554; Kothe v. Krag-Reynolds Co., 50 N. E., 594; Horbach v. Tyrrell, 48 Neb., 514; Wilson v. Griess (Neb.), 90 N. W., 866; Smith v. Clark, 100 la., 605; Hays v. Home B. & L. Assn., 124 Ala., 663; 1 Cyc., 555; Iron Belt B. & L. Assn. v. Groves, 96 Va., 138; Merced Bank v. Rosenthal, 99 Cal., 39; Bank v. Rivers, 36 Fla., 575; Miles v. Kelley, 16 Tex. Civ. App., 147.)

An excellent and thorough discussion of this question is to be found in the opinion of the court in Ogden B. Assn. v. Mensch, supra. The bank had the sole beneficial interest in the mortgage in question. Although the bank was not named therein as grantee, the individual to whom it was given acted simply for the bank, and he had no interest in it except as trustee for the bank. The paper evidence of the indebtedness was held by the bank, and it had the right to demand the endorsement of the payee therein named at any time. More than that, the mortgagors understood that the debt was due the bank, and that the mortgage was given to secure the bank on account of the debt due to it from them or from the husband, George Tschirgi.

We are unable to escape the conclusion that the notary taking the acknowledgment was incompetent to do so, and for that reason that the mortgage is void as to the homestead. The court committed no error in so holding.

In the second cause of action set out in the petition of the plaintiff, the Citizens’ State Bank, it is alleged in substance that on November 22, 1887, George Tschirgi made and delivered to one D. H. Moon his promissory note for $7,316, payable on or before — years after date, and that the said note is lost; that to secure its payment George *60Tschirgi and wife made, executed and delivered their mortgage deed covering certain lands, which are described in the petition. The recording of the mortgage is alleged and also assignments thereof from said Moon to one Kiene, and from the latter to Matthew Tschirgi. Thereafter, it is averred, the original note being lost, and there being then due thereon the sum of $1,291.84, said George Tschirgi, on February 8, 1898, made and delivered to said Matthew .Tschirgi his certain promissory note in renewal of said indebtedness for the said unpaid balance. The renewal note is set out in full in the petition, whereby it appears that it was made payable in two years after date, with interest, payable annually, at the rate of eight per cent, per annum; ■ and that it provided on its face that a failure to pay any of the interest within thirty days after it should become due should cause the whole note to become due and collectable at once, at the option of the holder. It is recited in the note that it is given as a renewal of part of the debt secured by mortgage to D. H. Moon, and assigned to M. Tschirgi. It is then alleged that the note had been endorsed and delivered to the plaintiff as collateral security for a certain described indebtedness due from said Matthew Tschirgi, and that the maker had failed to pay the interest that fell due in February, 1899, in consequence whereof the plaintiff elected to declare the whole principal sum to be due, together with the unpaid interest.

It is now contended on behalf of the defendant hank, plaintiff in error here, that as to it, a second mortgagee, action on the debt was barred by the statute of limitations, for the reason that as it is argued that the first mortgagee could not by consenting to an extension of the time of payment of his debt prevent the statute of limitations from running so far as the rights of the second mortgagee are concerned.

As to this, it is sufficient to say that the statute of limitations was not pleaded by the defendant bank. We do not understand that the well settled rule that the statute is not available under a denial is attempted to be controverted by *61counsel; but it seems to be urged that an allegation in the answer that the lien of the defendant is prior and superior 'to that of plaintiff was sufficient to raise the question of the statute of limitations, or, at any rate, that in the .absence of a motion to compel it to reform its pleading, the defendant, having made the said averment, should have been permitted to so amend its answer as to clearly plead the bar of the statute.

After the cause had been submitted indeed, the court having granted the parties the privilege of amending their pleadings to conform them to the facts proven, defendant filed an amended answer, wherein the statute of limitations was specially pleaded; but, on motion, that part of the answer was stricken out by the court.

. It is clear that the allegation of the original answer relied on did not amount in an)r sense to a pleading of the statute of limitations, nor was it sufficient to furnish the- basis for the amendment subsequently attempted to be -made. The attempted amendment set up an altogether new defense; and even had there been a right upon proper showing under the statute to have interposed the defense by amendment before or even during trial, no such showing was made or offered as would have authorized the amendment at the time it was made; and it is plain that there exists no reasonable ground for the interference of this court with the order striking the allegations constituting the new defense from the amended answer.

It is, however, seriously argued that, in case the defendant bank should be held to have waived the statute of limitations by its failure to plead it, its mortgage ought to have preference over the first mortgage on the ground that the taking of the renewal note increased the burdens on the encumbered premises. Unless the extension of the time of payment thereby preventing the running of the- statute of limitations caused the burdens to be increased upon the mortgaged premises under the first mortgage, we are unable to see how such burdens were increased, except possibly that the rate *62of interest was increased by the renewal note. The rate provided by the original note was not disclosed, and counsel for defendant bank complains of that; but this court cannot assume that the rate was increased in order to disturb the judgment, should there be anything in the proposition that the circumstance would have operated to reverse the order of the mortgage liens. As already stated, the defendant bank is not in a position to take advantage of the statute of limitations. In this connection it is but proper to mention that, in support of the motion to strike the new defense from the amended answer, an affidavit of counsel for plaintiff below was presented to the effect that, had the statute been set out by way of defense before the trial, it could have been shown by proof of partial payments from time to time that the claim had at no time been barred; and an offer to make such proof without serious delay was made, should the defense be allowed to stand.

We have not considered the proposition contended for, that as against the second mortgagee the holder of the prior incumbrance could not by agreement with the mortgagor prevent the running of the statute, since we do not regard that question as within the issues. The rule is laid down that the mere extension of the time of payment in no way impairs the security even as against subsequent incumbrances, although the extension may be effected by a renewal of the mortgage note, (1 Jones on Mortgages, Sec. 355; 2 id., Secs. 924, 925, 942; 21 Ency. L. (2nd Ed.), 664, and cases cited; Kearby v. Hopkins, 14 Tex. Civ. App., 166.) And that the taking of a new note in place of the one originally given does not operate as an extinguishment of the mortgage lien, unless that is shown to have been the actual and express intention of the parties. (20 Ency. L. (2nd Ed.), 1063.) The thing secured is the debt, rather than the note or other evidence thereof, and so long as the, debt can be traced, whatever form it may assume, the security remains good as security for the debt. (20 Ency. L. (2nd Ed.), 959; 2 Jones on Mort., 924; Simmons Hdw. Co. v. *63Thomas, 147 Inch, 313; Bray v. First Ave. Coal Min. Co., 148 Ind., 599; McCoughrin v. Williams, 15 S. C., 505.)

Not only was there a failure to show that the taking of the renewal note was intended to operate as an extinguishment of the debt, but it definitely appears by recital in the body of the new note that it was given as a renewal of part of the debt secured by mortgage to Moon, which had been assigned to M. Tschirgi, the 'payee named in such renewal note.

The further objection is urged that the suit was prematurely brought. The ground of this objection is that the suit was commenced before the expiration of two years after the date of the renewal note. But the note itself provided for annual payments of interest, and that a failure to pay any interest within thirty days after date should cause the whole note to become due at once, at the option of the holder. That provision was as much a part of the agreement as the promise to pay within two years after date; and we are unaware of any rule of law that prevented the parties upon extending the time of payment of the debt, doubtless then past due, to make the extension for the full term of two years conditional upon the prompt payment of the annual interest, and if not paid that the holder should be authorized to declare the whole amount due.

The third cause of action is based upon a note for $5,000, given April 6, 1893, by George Tschirgi . to Matthew Tschirgi, and a mortgage securing the same executed by said George Tschirgi and wife. The note was afterwards endorsed and the mortgage assigned to the plaintiff, the same being held by the latter as collateral security for the debt" already mentioned due to the plaintiff from Matthew Tschirgi. The maturity of the note was not seated therein otherwise than as follows : “-:-after date, without grace.” The rate of interest was not stated, the space therefor being left blank; but as to interest, it is alleged in the petition that interest had been paid up to October 6, 1894, in the sum of $450, the same being at the rate of six per cent. *64per annum. On the 17th day of February, 1898, George Tschirgi signed a paper reading as follows: “For value received, the matter of payment is hereby extended for two years from April 6, 1898, on a certain promissory note dated April 6, 1893, for $5,000, executed by me to Matthew Tschirgi, which note is hereby renewed for two years from April 6, 1898.”

The note provides that interest shall be payable annually, and both note and mortgage contain a provision to the effect that a failure to pay interest within thirty days after due shall cause the whole note to become due and collectible at once, at the option of the holder.

There is no allegation in the petition of the exercise of the option, but the default in the mortgage is alleged to have occurred by reason of the failure to pay the note when demand was made for payment, and failure to pay the annual interest due for the years 1895, 1896, 1897, 1898 and 1899, as well as failure to pay the taxes on the property for the year 1898; the intention being evident to treat the note as one payable on demand, and the attempted renewal for the period of two years from April, 1898, as not consummated, in the absence of consent thereto on the part of the holder. And it seems to be manifest that George Tschirgi could not of his own volition, without the consent of the holder, arbitrarily extend the time for the payment of the note. That there was any such consent or agreement between the parties is not shown, nor was any consideration therefor shown. At the date of the writing the note and mortgage had passed into the hands of the plaintiff, and the only allegation as to the writing is that it was made and delivered to Matthew Tschirgi, although the petition refers to it as George Tscjiirgi’s contract of renewal.

The same objections are made in respect to the third cause of action that are made to the second cause of action, which have already been sufficiently discussed. The same situation as to the statute of limitations prevails in respect to this note and mortgage as was found to exist in relation to the *65Moon note and mortgage; and it is unnecessary to enlarge upon what has been said on that Subject. Neither do we regard further discussion required as to the effect of the extension of the time of payment, or the premature institution of the suit; except that it might be said that, even should the writing of February, 1898, be considered as an extension for two years, it would at least be doubtful 'whether the conditions of the note" as to maturity at the option of the holder upon failure to pay interest did not continue in force.

We do not think the position of counsel for plaintiff in error can be sustained that the plaintiff declared upon an extension. It is not alleged that the time for payment was in fact extended, but what was alleged is explained above.

On the contrary, the averments of default in the conditions of the mortgage seem to proceed on the theory that there had been no valid or binding extension-. We have considered the objection that the action was brought prematurely on its merits, but it is at least questionable whether the objection was not waived by a failure to plead it in any way. Counsel for defendant in error advances the proposition that the matter not having been pleaded plaintiff in error is not in a position to take advantage of the point, even if it would have been well talcen, if presented in time. The objection not being a valid one, in our opinion, we do not decide the question as to whether such an objection must be raised, if at all, by demurrer, or answer, or some other pleading.

Our attention is called to the fact that the judgment of the court allows an attorney fee of one hundred dollars on account of the Moon mortgage, whereas the mortgage itself provides for an attorney fee of only fifty dollars. It was doubtless -the result of in inadvertance on the part of the court; and counsel for defendant in error bank concedes in his brief that the judgment sho'uid be modified to that extent, and thatrthey will be willing that it shall be done. We will leave that matter to be attended to in the District *66Court. It is apparent that the attention of the court was not called to the mistake. The motion for new trial does not charge error in the amount of the recovery, and it is doubtful, therefore, if it constitutes an error that should be rectified by order of the appellate court. (Syndicate Imp. Co. v. Bradley, 7 Wyo., 228.)

We have referred to and discussed all the points urged by counsel that have been deemed material to a determination' of the questions involved. We find no prejudicial error in the judgment, and it will therefore be affirmed. Affirmed.

Corn, J., and Knight, ]., concur.