
    The Peoples State Bank of Wauseon v. The First National Bank of Napoleon et al.
    (Decided May 25, 1931.)
    
      Messrs. Pasos on & Canfield, for plaintiff.
    
      Mr. George A. Meekison, Mr. Theo. Daman and Mr. Ferd G. Behrens, for defendants.
   Richards, J.

William Burgess died testate on April 30, 1923, owning 141 acres of land. This land was subject to two mortgages held by the plaintiff bank, People’s State Bank of Wauseon, the first for $6,000, and the second for $13,800. The mortgage for $13,800 also covered a tract of 80 acres of land owned by the wife of Burgess. By his will, which was duly probated, Burgess gave to his daughter Carrie Belle Prentiss the sum of $2,000, and an undivided one-fourth interest in his real estate. She was appointed and qualified as executrix, and filed her final account in the probate court, which was approved on April 22,1930, and she was discharged, but the indebtedness on tbe two mortgages had not been paid. Tbe evidence discloses that at tbe time of tbe death of William Burgess, be was insolvent, and tbe estate has so continued to the knowledge of plaintiff.

In January, 1928, Mrs. Prentiss and her husband executed a mortgage to tbe defendant bank in tbe amount of $2,122.46, drawing interest at 7 per cent., covering her one-fourth interest in tbe 141-acre tract devised to her in tbe will of her father, and it also purports to cover her claim for tbe legacy of $2,000, and recites that it was subject to two mortgages held by tbe People’s State Bank of Wauseon. All of these mortgages were duly placed on record.

In July, 1929, tbe widow and all tbe heirs and devisees of William Burgess executed a quitclaim deed to tbe plaintiff bank for all tbe above realty, which was delivered to tbe bank on August 2, 1929, and thereupon tbe two notes, one for $6,000 and tbe other for $13,800, were delivered to tbe widow, Mary Ann Burgess, and tbe mortgages to secure tbe same were released of record. On receipt of tbe deed, tbe plaintiff paid to tbe widow $1,000, but this was in adjustment of a claim she bad for growing crops and other matters. Tbe bank thereupon took possession of tbe real estate, and it and its assigns have remained in possession ever since. In March, 1930, tbe plaintiff entered into a written contract to sell tbe premises to tbe defendant L. A. Wagler. Tbe plaintiff, in November, 1929, tore down a barn which was situated on tbe premises.

This action is brought to quiet plaintiff’s title to tbe premises and to procure a cancellation of tbe mortgage held by the defendant bank, and for all proper and equitable relief.

The evidence discloses that the plaintiff, at the time it took the deed from the widow and heirs, and surrendered the notes, and canceled the mortgages, had no actual knowledge of the existence of the mortgage given to the defendant bank; but the latter mortgage was on record, and plaintiff is, of course, chargeable with constructive notice of its existence. We- think the evidence shows that the value of the property conveyed to the plaintiff was and is substantially less than the amount of plaintiff’s two mortgages, but the defendant bank has introduced evidence tending to show that the value is greater than the claim of plaintiff. In view of all the evidence, we can find no intent on the part of the plaintiff to merge the mortgages with the title to the real estate when it was to the manifest interest of the plaintiff to keep the mortgages alive. Bell v. Tenny, 29 Ohio St., 240, 243; Case v. Golnar, 33 Ohio App., 389, 169 N. E., 724. Certainly the plaintiff should be required first to exhaust the land on which the defendant bank has no mortgage.

The indebtedness of William Burgess at the time of his death was a charge upon his real estate; the personal assets being exhausted.

The rights of the parties to this action must be determined on equitable principles. The defendant bank has an equitable right to foreclosure and to require that the real estate be sold and the sale made in separate parcels, the land upon which it has no mortgage to be sold first and then the tract for 141 acres. An accounting should be taken of the income received from the land during the time it has been held by the plaintiff, and it should be charged therewith, and also with the reasonable value to. the farm of the barn which it tore down, and the bank should be credited with reasonable disbursements made on account of the land. If, on a sale of the property by the sheriff, it should be found that the proceeds are not sufficient to pay the taxes, costs and the amount of the mortgages due to the plaintiff, and some amount to be applied next upon the mortgage held by the defendant bank, then the costs of the proceedings leading up to the sale and the costs of the sale and distribution should be taxed against the defendant bank. If, however, the sale should realize a sufficient amount so that there will be some of the proceeds left to be applied upon the claim of the defendant bank; the proceeds shall be paid as follows: First, taxes and legal assessments; second, costs of court; third, the mortgage indebtedness on the two mortgages held by the plaintiff, and interest thereon, less the net amount, if any, received by the bank by way of rentals or otherwise from the property, and less also the damage, if any, resulting to the property by the destruction of the barn; fourth, such part of the balance, if any, as would have gone to Clara Belle Prentiss, shall be paid to the defendant bank to the extent of its claim; fifth, in the event that there should be any surplus after these payments, the remainder shall be paid to the plaintiff bank.

The defendant bank is ordered, within ten days from the filing of the journal entry in this case, to file in court an election whether it desires to proceed and have the property sold at sheriff’s sale or desires not to proceed. If it fail to file such election within the time named, or elects not to have the property sold in foreclosure, then the title of the plaintiff bank shall be quieted to the premises conveyed to it.

This case in many of its aspects is similar to the case of Eythe v. Commercial Bank & Savings Company, ante, 150, 178 N. E., 425, decided by this court on December 29, 1930. In that case a similar order was made to the one made in the case at bar.

It is further ordered that this cause be remanded to the court of common pleas to carry this decree into effect.

Decree accordingly.

Lloyd and Williams, JJ., concur.  