
    Bostian et al. v. Cholley et al.
    (Decided October 13, 1933.)
    
      Messrs. Seemann é Seemamn, for plaintiffs in error.
    
      
      Mr. John F. Cholley and Mr. Curtis M. Shelter, for defendants in error.
   Lemert, J.

This cause comes into this court on error from the Common Pleas Court of Stark county, Ohio. The parties appear in the same order in which they appeared in the court below.

This case originated in the Common Pleas Court when the plaintiff, Arthur L. Bostian, filed an action to quiet title to a portion of the property involved in this lawsuit. An answer and cross-petition was filed by one of the defendants, Jennie Cholley, who later appeared to be the only defendant interested in the outcome of this proceeding, other than Joseph P. Howenstein. The cross-petition set up the facts that this defendant was the owner and holder of two promissory notes, one for $70Q and another for $800, which were secured by a mortgage which was a lien on the property in question, part of which was claimed by Arthur L. Bostian.

The record before us shows that on or about December 20,1913,. Joseph Bergold and Mary J. Bergold sold the premises in question to Louis H. Campbell and Dollie Campbell. At the time a warranty deed was given and a mortgage for $3,000 covering the premises in question was given by the grantees to the grantor. This mortgage secured four notes, one for $500, one for $700, one for $800 and one for $1,000. This mortgage was duly recorded a few days after given, and on January 2, 1914, the transfer of this mortgage was duly recorded in the proper office, which record shows the following: “For a good and valuable consideration, I hereby sell and transfer notes dated December 20, 1913, one for $700.00, due in two years and one for $800.00, due in three years and so much of this mortgage to secure said notes, to M. Stern.”

On December 14, 1914, the record shows that the notes for $500 and $1,000 were paid and cancelled, leaving a balance of $1,500, with a mortgage securing them.

On December 14,1914, Louis H. Campbell and Dollie Campbell resold the premises to Joseph M. Bergold. The record further shows that in January, 1916, Clara W. Stern, as administratrix of the estate of Max Stern, indorsed and transferred the notes for $700 and $800 and the mortgage securing them to Wehl Brothers. The record further shows that some time during the year 1917 the said two notes and mortgage were sold and transferred to John B. Monnier by Wehl Brothers, and on April 1, 1918, John B. Monnier died intestate, leaving Jennie Cholley his only child. Then by inheritance Jennie Cholley became owner and holder of the said two notes and mortgage in question.

The record shows that on February 8, 1918, Joseph M. Bergold and Mary Bergold, by warranty deed, transferred to Joseph P. Howenstein about ten acres of the premises in question. This deed was recorded about February 25, 1918. Thereafter, in January of 1921, there was recorded in the recorder’s office of Stark county, Ohio, an instrument in the words and figures as follows:

“We, Joseph M. Bergold and M. Stern of Stark County, State of Ohio, do hereby certify that a certain mortgage given by Louis H. Campbell and Dollie Campbell to Joseph M. Bergold is fully paid and satisfied and the recorder of Stark County is hereby requested to enter such satisfaction upon the record; said mortgage is dated the 20th day of December, 1913 calling for $3,000.00 in payments; is recorded in Record of Mortgages, Stark County, Ohio, in Volume 518, page 509.

“In witness whereof, we hereunto set my hand this First day of January, A. D. 19.....
“ [Signed] Joseph M. Bergold
“M. Stern
“By S.”

All of the transfers and contracts set out herein were recorded as shown in the record when this case came to trial in the Court of Common Pleas-. The question presented in the court below and presented to this court is whether or not the plaintiff, Arthur L. Bostian, and the defendant, Joseph P. Howenstein, were innocent purchasers and without notice of the existence of said mortgage lien against the premises at the time of purchase, or, in other words, whether or not, with the state of the records as they existed at that time, the law will protect Arthur L. Bostian against the interest claimed by Jennie Cholley, under her mortgage covering the premises which he purchased? For the said Bostian to succeed in the claim he makes, he, as purchaser, is bound to show that he was an innocent purchaser, free from any knowledge whatsoever of a prior recorded mortgage and transfer thereof.

"We note that the mortgage was recorded back in 1913, and the transfer thereof to M. Stern was recorded in 1914. The plaintiff, therefore, had knowledge that such a mortgage was in existence, and, from all the records' available, it was standing in the name of M. Stern. This was true in June of 1920, when the land contract was entered into to purchase the premises from Joseph M. Bérgold. While it is true that in January, 1921, there was recorded an instrument which purported to be a release of said mortgage, this was months after the plaintiff had entered into a land contract to purchase from Bergold. Even though this purported release had been recorded prior to the time he entered into the land contract, and even though it was recorded prior to the time he accepted a warranty deed from Mr. Bergold, it seems to us that the purported. release in itself, as shown on the records, was a definite warning to him that there was still standing against the premises a valid mortgage and lien, which had not been canceled, and which should have put him on his guard and called him to inquire what disposition had been made of the mortgage. This should have been notice to him for the reason that on the face of the instrument it was shown that M. Stern, who was the holder of the mortgage, did not sign the release, and there was nothing to show any lawful authority delegated to any one else to sign the release.

The purported release was signed by Joseph M. Bergold, who, as the record shows, had previously transferred his interest in this mortgage, and it was also signed, “M. Stern by S.” The signature on this purported release was notice to Mr. Bostian that M. Stern had not released his interest in the mortgage, and, if Mr. Bostian had made inquiry after seeing this signature, he would have learned that M. Stern had died some five or six years prior to the date of this instrument, and that in 1916 his interest had been transferred to another party. Notwithstanding this warning which was on the record, the plaintiff disregarded it and proceeded to accept a warranty deed for the premises. Under such circumstances, can it be said that he was an innocent purchaser without notice that a good and valid mortgage against this property was in the hands of another party?

In order that an agent may transfer an interest in real estate, it is necessary that the agent be given such authority by a written instrument, signed by the party holding such interest in real estate. There is nothing in the record before us to show that any agent of M. Stern had received such authority. Since Mr. Stern Lad died five or six years prior to the time that the purported release was executed, he could not have given such authority.

It is a well-settled rule that a person taking a conveyance of real estate is chargeable with notice of the existence of a prior mortgage, where, without actually discovering it, he becomes acquainted with facts pointing to it such as would raise a doubt in the mind of a man of ordinary prudence, not to be satisfied without an investigation, that there is an incumbrance of some kind.

See 41 Corpus Juris, page 555, Section 508, wherein this proposition is laid down:

‘ ‘ A person taking a conveyance or mortgage of real property is chargeable with notice of the existence of a prior mortgage or deed or other encumbrance, where, without actually discovering it, he becomes acquainted with facts pointing to it, such as would raise a doubt in the mind of a man of ordinary prudence, not to be satisfied without an investigation, and where his inquiries, if pursued diligently and in the right quarter, would have led to the discovery of the true state of the title. This applies not only where the prior charge is recited or referred to in a conveyance in his chain of title, but also where his knowledge of.' the suspicious circumstances is derived from other than documentary sources, or however it may be acquired. And it is an essential part of the rule that an inquiry, once suggested or started, should be prosecuted with care and diligence. Thus, if the person knows that some paper has been executed which may or may not affect the title to the property, it is his business to find out what it was and what was its effect; and so also, if he knows that there are some liens on the property, he must ascertain how many and what they are.”

To the same effect, on the proposition of constructive notice, we find that 41 Corpus Juris, page 554, Section 506, lays down the following: “Constructive notice of a prior deed or mortgage will have the same effect as actual notice in postponing to it the rights of a subsequent grantee or encumbrancer taking with such notice, the notice here meant being such as is imputable from an opportunity to acquire knowledge-coupled with the duty to seek it in the exercise of a reasonable degree of care and prudence.”

From an examination of the record in this case, we are of the opinion that the facts clearly show that the plaintiff herein should have been put on his guard, and that a man of ordinary prudence would have made an investigation, and, if he had inquired diligently and without much effort, would have discovered the state of the title to this property. The same principle of law is well discussed in Jones on Mortgages, Volume 1 (8th Ed.), Section 677, page 976.

We are of the opinion that the plaintiff herein did not heed the signs and signals seen by him in the records, and this amounted to notice to him. He is therefore not an innocent purchaser within the law, and it therefore follows that the finding and judgment of the court below will be, and the same is hereby, affirmed.

Judgment affirmed.

Sherick, P. J., and Montgomery, J., concur.  