North v. J. W. McClintock, Inc.

*296Roberds, J.

On September 15, 1947, W. M. Harper and his wife Beola Harper executed to McClintock, the appellee, a corporation, a note for the principal sum of $500, due December 1, 1947, bearing 6% interest from date until paid. The makers of the note also executed on the same day a deed of trust to T. R. Jackson, trustee, for the benefit of McClintock covering a lot and improvements in Belzoni, Mississippi, to secure payment of said note. The trust deed contained a provision that “. ‘. . all further and future advances, cash, merchandise, or other things of value that may be made to the grantor or grantors herein during the life of this contract are hereby secured as the principal of this obligation. ’

On December 27, 1847, the Harpers paid the sum of $245.67 on the $500.00 debt.

On April 5, 1948, the Harpers executed a deed of trust to Mrs. A. M. North on the same lot to secure payment of their promissory note of the same date to Mrs. North *297for the sum of $5000.00, due and payable May 1, 1948, bearing 6% interest per annum from date until paid.

Also, on the same date, to wit: April 5, the Harpers executed to Mrs. North a quitclaim deed to the property.

The North trust deed was duly recorded the day executed, but the quitclaim deed appears to have been recorded some time later.

“On or about” April 28, 1948, McClintock, Inc., had an oral agreement with the Harpers under which it agreed to lend the Harpers an additional sum of $650.00, with which W. M. Harper expected to settle a claim of one Mobile Eobinson against him, growing out of the sale by Harper to Eobinson of a stolen automobile. The Harpers on April 28, 1948, executed to McClintock, Inc., a promissory note for $650.00, due September 1, 1948, bearing 6% interest per annum until paid, but instead of dating the note April 28 it was dated back to December 2,1947. No money was paid by McClintock as a result of this note transaction until October 20,1948, when $650.00 was deposited in a bank by McClintock to the credit of Mobile Eobinson.

In the meantime, and on September 21, the trustee began advertisement of the land for sale under the Mc-Clintock trust deed. The sale was had October 23, at which McClintock purchased for the sum of $650.00 according to the trustee’s deed.

Mrs. North offered to pay McClintock his debt and costs except the $650.00 debt. That was refused, and she then filed the bill in this cause on October 21, renewing the tender and praying that the McClintock trust deed be cancelled as security for the $650.00 note and that her rights to the property be declared a superior claim as to that note. The Chancellor dismissed the bill.

A number of questions are raised on this appeal and the members of the court are not in accord as to some of them. However, with the exception of one member of the court, we are agreed that the Chancellor was mani-. *298festly in error in holding, if he did so hold, (there being no opinion in the record), that McClintock, when he had the agreement with Harper and took the Harper note on April 28, did not have actual knowledge of the existence of the North trust deed and quitclaim deed. If McClintock had such actual knowledge, the Chancellor was in error in dismissing the bill, as shown later herein.

This is the evidence as to whether McClintock had such actual knowledge: The sworn bill charged McClintock did have such actual knowledge. McClintock’s answer said, “Defendant admits that he had constructive notice of the aforesaid deed of trust and deed to A. M. North by virtue of the recordation of same and that he acquired actual notice thereof shortly after the same were recorded”. Now, McClintock took his $650.00 note April 28. The North trust deed was recorded April 5, twenty-three days prior to the $650.00 note transaction. The time of the “actual notice” to McClintock, admitted in his answer, might well be assumed to be within that twenty-three days.

As a witness McClintock was asked if he knew of the existence of the North trust deed and quitclaim deed when he took the $650.00 note, and he replied, “No, sir, I didn’t”. When reminded of the admission in his answer he replied ‘ ‘ I knew it a short time later ’ ’. He was then asked “You say you didn’t know about the quitclaim deed to Mr. North”, and he replied “No, sir”. That was all the testimony on behalf of McClintock on that question. Mr. L. G-. North was and is the husband of Mrs. A. M. North. He had been engaged to represent as an attorney W. M. Harper on some seventeen charges of thefts of automobiles. That was the reason and occasion for execution by Harper of the North trust deed and deed. Mr. L. Gr. North testified as to the fact under consideration. He said that after execution of the North papers and before April 28 McClintock came to his office and they had a detailed discussion of the Harper sitúa*299tion; that Harper was in jail at the time; McClintock wanted to know how much money it would take to pay the attorney’s fees, which were the consideration for execution of the North papers; that he expressly told Mc-Clintock Mrs. North had the deed of trust and quitclaim deed, and he showed them to McClintock, and that Mc-Clintock then said to him, “You would take less than the amount shown in yours if we pay it off”, and that North said, “Yes, I will take less than that”; that he knew the date was between April 5th and April 15th. Now North gave that evidence after McClintock had testified as we have heretofore set .out. McClintock was not again placed on the stand. He did not deny what North said, except in the general way we have indicated above. Now in view of the admission in the answer of McClintock and the vagueness of his testimony in connection with his answer as to the time he actually knew of the existence of the North papers, as against the positive evidence of North of the time and place and details of the interview before April 28th, and the failure of McClintock to introduce evidence contradicting such positive, detailed evidence, a finding that McClintock did not, by April 28th, have actual knowledge of the North papers is, in our opinion, manifestly against the weight of the evidence on that question.

As to the applicable law, it is said in 36 Am. Jur. p. 808, Par. 234, “The greater array of authority, however, is found on the side of the doctrine that advances made after notice of subsequent interests do not have priority over such interests”. The rule is re-announced in 45 Am. Jur. p. 473, Par. 96. The rule is stated in 59 C. J. S., Mortgages, Section 230, page 299, in this language: “In accordance with the general rule, after notice of the attaching of a junior lien, the senior mortgagee ordinarily will not be protected in making further advances under his mortgage given to secure such advances, at least, where he was under no binding engagement to make such advances. ’ ’ These pronounce*300ments have reference to actual notice. Neither Gray v. Helm, 60 Miss. 131, nor Liberty Mercantile Go. v. Allen, 134 Miss. 354, 98 So. 774, announces a different rule. In both cases the mortgage contract obligated the mortgagees to make future advances. However, in the case at bar the provision for advances was a blanket provision. It in no way bound the mortgagee to advance further money. Such advancement was purely optional with McClintock. Indeed, when the trust deed was executed by the Harpers on September 15, 1947, the occasion for advancing future money had not arisen. Neither party had it in mind. McClintock testified to that. The occasion for such advancement came up later. Indeed, the agreement to do so, and apparently the first notice Mc-Clintock had that Harper wanted him to do so, was when they had the oral agreement April 28, 1948, some five months after the maturity date of the amount stated in the trust deed from Harper to McClintock. We think the announced rule is just and equitable. The only amount named in the McClintock trust deed was $500.00. McClintock was not obligated to advance any more. If he then had actual knowledge Harper had given another a trust deed on the same property, he should have declined to make further advances, but having done so, his security became second to the lien he knew was on the mortgaged property. We adopt the stated rule as being equitable and just. It is uncertain from the report of the case of Witczinski v. Everman, 51 Miss. 841, whether it announces a different rule from the one here adopted. We have not been able to find the original record.

The rule is especially applicable, and its effect is greatly strengthened in this case, by the fact that in addition to the existence of the North trust deed the Harpers had also executed to Mrs. North a deed to the property covered by the prior trust deed, and when McClintock agreed to furn’sh the $650.00 Harper had no title whatever to the security. In view of the stated rule as between *301mortgagees, we pretermit determination of the effect of the deed had there been no second trust deed. If McClintock had actual knowledge of the second trust deed when he agreed to advance the $650.00 then his security therefor Is second to the North deed of trust.

We remand the case so that it may be determined whether or not McClintock, when he had his agreement with Harper April 28 and took Harper’s note for $650.00, had actual knowledge of the existence of the North trust deed or the quitclaim deed. If so, the North claim is prior to McClintock’s security for the $650.00 indebtedness; if McClintock did not then have such actual knowledge, then his claim upon the mortgaged property to secure said indebtedness is superior to the claim of Mrs. North.

Reversed and remanded.

Lee, J., took no part in the decision of this case.