Northwestern National Bank v. Freeman/Opinion of the Court

by Joseph McKenna

United States Supreme Court

171 U.S. 620

Northwestern National Bank  v.  Freeman

The contest is for priority. The territorial supreme court awarded it to the mortgages of the appellees. The appellants contend that this was error, because of the fact that the mortgages, respectively, covered 5,000 and 1,000 head of sheep, and that Fulton owned 6,200 head, and that hence the mortgages were invalid, on account of insufficient descriptions. The mortgages do not state that Fulton owned a greater number than those he mortgaged, but the fact is found by the court.

The rule is laid down that, as to third persons who have acquired interests, a description in a mortgage of a given number of articles out of a larger number is not sufficient. Jones, Chat. Mortg. § 56 et seq., and cases cited.

But such a mortgage is valid against those who know the facts. Cole v. Green, 77 Iowa, 307, 42 N. W. 304; Clapp v. Trowbridge, 74 Iowa, 550, 38 N. W. 411.

The mortgage of January 4, 1893, executed by Fulton to the Arizona Lumber & Timber Company, was undoubtedly taken by the latter, not only with actual notice, but it was expressly made subject to the prior ones to appellees. The finding of the court is: 'At the instance of appellees said appellant, Arizona Lumber & Timber Company, permitted the following recital to be inserted in said lastmentioned mortgage, namely: 'This being subject to a mortgage on 5,000 of above sheep to Arizona Central Bank, and one on 1,000 head, and the residence property to John Vories; said number, as described in mortgages, to be kept good out of increase.' There was consideration for the foregoing recital in the mortgage of January 4, 1893, namely, that the appellees should forbear to foreclose their mortgages, and should release their claim on the wool clip of 1893; the wool at that time not having been shorn.'

The court further finds that on August 30, 1893, Fulton paid to the Arizona Lumber & Timber Company $3,000 out of the proceeds of the wool from the mortgaged sheep, secured from the company an advance of $500, and for that and the amount due on his note 'executed his negotiable promissory note, payable in ninety days, securing the same by a chattel mortgage for the sum of $6,000.' In this mortgage there was no recital, or reference to the existence, of any other mortgage. On the 29th of September, 1893, and prior to this maturity, the 'appellant the Arizona Lumber & Timber Company, representing that said mortgage was a first lien, sold, indorsed, and delivered the note and mortgage to the appellant the Northwestern National Bank.' It is this note and mortgage that are in controversy, and which are claimed as prior liens to the mortgages of appellees. The bank is found to be an innocent purchaser for value. By this is meant that it had no actual notice of the prior mortgages. Did the law impute notice to it? Certainly not by the record of the mortgages to appellees. Did it by the record of the mortgage of January 4, 1893, to the Arizona Lumber & Timber Company? If the bank was charged with notice of that mortgage, it was charged with notice of its contents. 'Notice of a deed is notice of its whole contents, so far as they affect the transaction in which notice of the deed is acquired.' 2 Schoales & L. 315, cited and approved in Boggs v. Varner, 6 Watts & S. 473.

A purchaser is charged with notice of every fact shown by the records, and is presumed to know every other fact which an examination suggested by the records would have disclosed. Devl. Deeds, §§ 710, 710a, and cases cited. The mortgage of January 4, 1893, to the Arizona Lumber & Timber Company, was by the same mortgagor as that of August 30th,-the one sold to the Northwestern National Bank,-and covered the same sheep; and hence, under the rule announced, the bank was charged with notice of it and of its recitals. It was not given up or satisfied. It was preserved as an independant lien.

It was not satisfied, appellants say, because it covered other property besides the sheep. This is an insufficient reason. If the debt it secured was paid, there was no reason for retaining the lien on any property. But, whatever the reason, it was retained, and affected the title. That is the material circumstance, and not in whose name it stood. It was in the chain of the title, and affected it. It would have been found, if looked for, and would have notified the bank of the transactions which conducted to it, and caused it to be made subject to the mortgages of the appellees. We therefore think the territorial courts committed no error where they assigned priority to those mortgages. Nor was it error to subordinate the attachment and judgment of the Riordan Mercantile Company to them. That company had, according to the finding of the court, actual notice.

The territorial court found that on the 18th of December, 1893, there were 1,000 head of ewes remaining out of all the sheep which existed on July 10, 1890, the date of the mortgages to appellees; that the remainder of the ewes, all of the male sheep, and the lambs had died, been consumed, sold, or lost. The findings are absolutely silent as to whether there were or were not other sheep in existence at that time, or at the time the decree was entered. We infer from the briefs of counsel that there were others,-the increase of those mortgaged,-and there is a contention as to whether these are covered by the lien of the mortgages.

Under the rule that the incident follows the principal, a mortgage of domestic animals covers the increase of such animals, though it is silent as to such increase. This court said in Cattle Co. v. Mann, 130 U.S. 69, 9 Sup. Ct. 458, by Mr. Justice Harlan: '* * * According to the maxim, 'Partus sequitur ventrem,' the brood of all tame and domestic animals belong to the owner of the dam or mother.' 2 Bl. Comm. 390. See, also, Pyeatt v. Powell (decided by the circuit court of appeals for the Eighth circuit) 10 U.S. App. 200, 2 C. C. A. 367, and 51 Fed. 551, and cases cited.

But whatever was doubtful or disputable in the mortgages of appellees as to the increase was resolved and settled by agreement between all who had interests, and was expressed in the mortgage of January 4, 1893. There is nothing in the record to show a substitution, except by the increase, and therefore we are not called upon to pass upon some of the interesting questions argued by appellants. Nor are we embarrassed by considerations of the increase being in, or having passed out of, the 'period of nurture.' Such considerations are only important when a subsequent purchaser or mortgagee has taken without notice, actual or constructive, which we have seen the Northwestern National Bank did not.

The objections to testimony assigned as error in the fourth and seventh assignments of error were not well taken. The testimony showed the transactions, and the relations of the parties to them.

Decree affirmed.

Notes