
    Collins and Others v. Kemp and Another.
    Suit hy A and B against C, D and E, alleging these facts: That C, being indebted to A, B and E, respectively, in sums named, evidenced by promissory notes, and being then the owner of-a tract of land described, and in failing circumstances, was desirous of securing all of said claims; that to that end, and for the purpose of avoiding the expense of making separate mortgages, C executed to E a mortgage upon said land, expressing a consideration sufficient to cover all of said debts; that by an express agreement between A, B, C and E, the said notes held by A and B were to be secured by the mortgage, together with that held by E; that it was agreed that C should execute his notes to E for the amounts due A and B, and that E should execute to A and B his notes for like amounts; that the plaintiffs are ignorant whether C did execute his notes to E, but that E refuses to execute his notes to' the plaintiffs; that C became insolvent and left the State, and that afterwards D, the wife of C, in a suit for divorce, recovered a judgment for alimony, and purchased the mortgaged premises upon execution, and that E, having been fully paid his debt, for the purpose of defrauding the plaintiffs, has surrendered the mortgage and refuses to pay them. The relief asked was a foreclosure of the mortgage. The mortgage described several notes payable to E, but there was nothing on the face of it to show that the plaintiffs had any interest in it. After the.purchase of the lands by D on her execution, she paid E the amount claimed by him under the mortgage and took it up.
    
      H'eld, that the mortgage, as described in the complaint, was not an assignment for the benefit of creditors, within the meaning of the statute upon that subject.
    
      Held, also, that as E was only to" be liable to the plaintiffs upon condition that C executed to him his notes for like amounts, the complaint was bad for the want of an averment that this had been done.
    
      
      Held, also, that if D purchased the land in good faith, and afterwards bought in the mortgage, without any notice of the claim of the plaintiffs, she is entitled to protection against that claim.
    APPEAL from the Dubois Circuit Court.
   Gregory, C. J.

The appellees filed a complaint against the appellants, charging that on the 8th of November, 1865, James Collins was indebted to Thompson, by note, in the sum of $640 40, and to Nicholas Sinegar, by note, jointly with W. Jb\ Kemp, who was his surety, in the sum of $600; and that Collins was also indebted to the appellee, Green Kemp, in the sum of $100. . Copies of all these notes are made exhibits to the complaint. That on the 8th day of September, 1865, Collins was the owner of a tract of land described, in Dubois county; that he was in failing circumstances, and about to become insolvent, owning but little, if anything, else besides said land, which was worth $3,000; that being desirous of securing the parties above named, as well as others, the. amount of said debts, and for the purpose of avoiding the expense of giving separate mortgages, and for the purpose of avoiding all questions as to the priorities of liens upon said lands, and for the purpose of giving each of said creditors equal security, said Collins executed and delivered to Thompson a mortgage upon said lands, expressing the consideration of $2,500, which was sufficient to cover Collins’ indebtedness, and that^the mortgage was duly recorded on the 14th day of November, 1865. A copy of the mortgage is set out. The complaint further charges that the mortgage was intended to secure other claims, but plaintiffs do not know to whom they are due; that by an express agreement and understanding between Collins, Thompson and Kemp, the claims above mentioned were to be secured by the mortgage, and the lien upon the land was to be for the benefit of all said appellees and said Thompson, and that no one should be preferred; that in order to make Collins’ indebtedness to his several creditors agree with the descriptions of the notes mentioned in the mortgage, it was agreed that Collins should execute to Thompson notes corresponding with, the sums expreásed in said mortgage, and that Thompson should execute his notes to the appellees for their several debts; that plaintiffs are ignorant as to whether Collins executed his notes or not, but that Thompson refuses to execute his notes to appellees, or to pay their said debts; that within a few days after making the mortgage, Collins left the State, wholly insolvent, and owning no other property; that shortly afterwards, W. F. Kemp paid Sinegdr the note for $500, as surety for Collins; that shortly after James Collins left the State, appellant Mary brought a suit for divorce, in the Warrick Circuit Court, against said James, and claims to have recovered a judgment for alimony, and, upon execution issued thereon, to have sold the property mentioned in the mortgage, and to have become the purchaser thereof, and that though Thompson was fully paid by Collins, he has, for the purpose of cheating the appellees, delivered the mortgage to the appellant, and now refuses to pay Kemp, or to foreclose the. mortgage, or to deliver the same to the appellees, and said Mary sets up title to the Mnd in fee simple. Prayer, that the appellees’ rights, under the mortgage, may be established, and for a foreclosure of the mortgage and sale of the land. The ' notes are set out as follows: 1. Rote from James Collins and W. F. Kemp to Nicholas Sinegar, dated October 31,1865, at twelve months, for $500. 2. Rote from James Collins'to C. A. Kemp, dated November 22,1864, at twelve months, for $100. 3. Rote from James Collins to G-. A. Kemp, dated 'January 13,1864, at twelve months, for $100. The mortgage, which is in the statutory form, is to Thompson, of the lands described in the complaint, and, after the description of the land, proceeds thus: “To secure the payment of the following described notes, given by James Collins to William Thompson: Ro.’l, for six hundred and forty-seven dollars and sixty-six cents, dated November 7, 1865, due twelve months after date; Ro. 2, for five hundred dollars, dated October 31,1865, due twelve months after date, without interest; Ro. 3, for two hundred and twelve dollars, due; No. 4, for two hundred and twenty-four dollars, due February, 1866, with interest from date; No. 5, for two hundred and-dollars, due -; No. 7, for five hundred and eighty-six dollars and thirty-six cents, due three years after date, November 8, 1865, with interest from date.”

The appellant Mary Collins demurred to the complaint for want of sufficient facts, but the demurrer was overruled and she excepted, and filed an answer in three paragraphs. 1. The general denial. 2. Admitting the execution of the mortgage by Collins to Thompson, setting out a copy, and alleging that the mortgage was made to secure the payment of two notes, of which copies are made exhibits; that after the making of said notes, appellant obtained a decree for alimony, in the Warrick Circuit Court, against James Collins, for $8,000; that an execution was duly issued and delivered to the sheriff of Dubois county, who, by virtue thereof, on the 7th day of July, 1866, sold the mortgaged premises to the appellant, and gave her a certificate of purchase, which is also made an exhibit, and is in the usual form; that under said purchase she has ever since been in possession of said premises, claiming them as owner in fee, and receiving the rents and profits therefrom; that after said sale, appellant purchased said notes and mortgage from Thompson, who assigned the same to her, and denying all notice of appellees’ claim.

The third paragraph is the same as the second, with the additional allegation that the appellant Mary Collins, before buying at sheriff’s sale, inquired of Thompson concerning the mortgage, and he told her the two notes mentioned in the answer were all the notes about which he knew anything, and that Thompson further told her that he never agreed to hold said mortgage, as trustee or otherwise, for the other creditors. This paragraph also prays a foreclosure upon said notes. The notes set out in the answer are a note made by James Collins, payable to M. K. Hall, dated January 24, 1864, du& March 1, 1865, for $100; and one dated November 7,1865, to William Thompson, at one year, for §647 66.

There was a reply in denial of the second and third paragraphs of the answer. Trial b.y the .court; finding and judgment for the appellees, and a decree for the sale of the mortgaged premises and a foreclosure óf the equity of redemption of the appellant. A motion for a new trial, assigning for cause, 1st, that the judgment is contrary to law; 2d, not sustained by sufficient evidence; and 3d, that the court erred in improperly admitting certain evidence, was overruled and exception taken.

The evidence is all in the record, and is, in substance, as follows: The appellees put in evidence the three notes sued on. The appellees then, over the objection and exception of the appellant, proved that shortly before the making of the mortgage to Thompson, Collins had gone to G. A. Kemp and asked him to take his land and pay his debts. Kemp declining, Collins made a deed of the land to Bust. Collins afterwards said ho could have done better; that his old friend, the defendant Thompson, proposed that he, Thompson, would have furnished the money, and that he, Collins, ought to have called upon him. Collins said if Bust would agree to it, he would mortgage to Thompson, he, Thompson, having intimated that the deed to fiust was not a safe mortgage; whereupon Bust agreed to it, and burned the deed to him. Kemp then told Collins that such an arrangement must be made as to secure his note against him. Collins said, “ well.” Thompson said nothing. Afterwards, G. Kemp went to see Thompson, who said that he knew nothing, except that he had furnished Collins some means. Afterwards, Thompson saw DeBruler, and said that he was informed that he was not liable any further than he acknowledged debts that were secured by the mortgage. Thompson afterwards told Kemp he would have nothing further to do with the matter; that the land was worth about §3,500, and that the mortgage was given to secure about §1,200, including the notes made exhibits to the complaint. Rust testified that he got the impression that Thompson was to take his place; that is, to take the land and pay the debts of Collins.

The appellant Mary A. Collins objected to the testimony of witnesses, as to what was said in her absence, the same being hearsay, and also irrelevant and incompetent.

The appellants put in evidence the record of the divorce suit, resulting in a sale of the mortgaged premises to her, and also the certificate of the sheriff) showing that she was entitled to a deed therefor; and Thompson also testified that the mortgage was made to him after the destruction of Bust’s deed, to secure the two notes due him; that he heard nothing about “ stepping in his 'shoes.” Collins said ho would like to have G. Kemp’s claim secured; and Thompson told him he had better give the mortgage to Kemp and Thompson; that there was no arrangement for Thompson to be a trustee for Collins„ Thompson accepted the mortgage and sold it to Mrs. Collins, and informed her at the time of the sale that the notes numbered 4 and 5 in the mortgage were all he knew anything about, they being his notes, for which she paid him, and that the sum covered by these notes was all he, Thompson, had any interest in. The sale of the mortgage was after the sheriff’s sale. The mortgage came to Thompson by mail, ten or twelve days after it was recorded, and that was the first he ever saw of it. .

The first error complained of is the overruling of the demurrer to the complaint. It is claimed that the instrument set out as a mortgage, and for the foreclosure of which the action is brought, is, by the allegations of the complaint, an assignment for the benefit of creditors, within the meaning of the act of March 5,1859, (1 (I. & II. 114) and is therefore void. We hold that it.is not an assignment within the meaning of the statute.

But wé think the complaint is bad for another reason. By the terms of the parol agreement set up, Collins was to execute his notes to Thompson corresponding with the sums expressed in the mortgage, and Thompson was to execute his notes to the appellees for their several debts. The allegation is, that the plaintiffs are ignorant as to whether Collins executed his notes or net. Thompson was under no obligation to execute his notes to the appellees until Collins complied with his contract with him. Thompson having agreed to be liable in a particular manner, could not be held in a different one. The notes of the appellees were not described in the mortgage. The mortgage could not be reformed in this respect, unless for fraud, accident or mistake. The rights of the appellant, Mary Collins, could not be affected by a parol agreement of which she had no notice. The court below erred in overruling the demurrer to the complaint. Under a proper averment of mistake, and notice thereof to Mary Collins, the evidence offered and admitted would have been legitimate.

A. Iglehart and J. S. Moore, for appellants.

L. Q. and C. A. Me Under and G. T. B. Carr, for appellees.

If Mrs. Collins was the purchaser, in good faith, of the mortgage to Thompson, without notice of the rights of the appellees, she cannot be affected by any parol agreement between Thompson, Collins and the appellees, made at the time of its execution. If she purchased the land at sheriff’s sale, in good faith, and then purchased in the outstanding mortgage, she is entitled, in the absence of notice, to be protected as a bona fide purchaser without notice.

The judgment is reversed, with costs, and the cause remandil, with directions to sustain the demurrer to the complaint, and for further proceedings.  