Huttig Manufacturing Co. v. Burhans

127 N.W. 991, 148 Iowa 657

• Court: Supreme Court of Iowa
• Decided: October 19, 1910
• Status: Published

Opinion

McClain, J.

Two reasons are assigned for appellee to sustain the action of the trial court in refusing to decree a foreclosure of the mortgage on the homestead: Pirst, that under the statute (Code, section 2976) the homestead could be sold under a mortgage covering such homestead and other property “only for a deficiency remaining after exhausting all other property” covered by the mortgage; and, second, that the mortgagor was induced to execute the' mortgage by a representation that, if the homestead was included in the mortgage, the plaintiff would first be required to exhaust the other property before resorting to the homestead.

Both these contentions are predicated on findings of the federal court in bankruptcy proceedings against E. D. Winter & Co. and D. Winter that the latter was liable for the debts of'the former, that at the time the mortgage in question was given D. Winter was insolvent, and that plaintiff was chargeable with notice óf that fact so that the mortgage recorded within four months prior to the institution of bankruptcy proceedings was fraudulent as to other creditors and void (Huttig Mfg. Co. v. Edwards, 160 Fed. 619, 87 C. C. A. 521), wherefore the property of D. Winter other than the homestead included within the mortgage was sold for the benefit of firm creditors, a portion of the amount realized being paid to plaintiff as such creditor on the indebtedness secured by the mortgage leaving about $12,000 of said claim unsatisfied, for which amount plaintiff is attempting to foreclose the mortgage on the homestead.

I. Mortgages: foreclosure: sale of homestead. I. Under the statutory provision above cited, plaintiff, having a mortgage covering the homestead and other property of the mortgagor, was bound to exhaust the other property before resorting to the homestead, and the contention for the appellee is that it did not exhaust the other property, which was by the bankruptcy court found not to be subject to the mortgage on account of its invalidity under the bankruptcy law and was sold under the order of that court, the proceeds being applied to the satisfaction of the claims of the firm creditors, including the plaintiff. We find no authority, however, for giving the statutory language the interpretation thus sought to be placed upon it. It can not have been the intention of the Legislature, as we think, to provide that, if the portion of the property other than the homestead included in the mortgage is found not to be available to the mortgagor under his mortgage for the satisfaction of his debt, his claim on the. homestead is thereby defeated. When such property has been found not available to the mortgagor in the satisfaction of the mortgage indebtedness, then it is “exhausted” so far as the mortgagee is concerned. It can not reasonably be contended that, if the mortgagee finds that the property other than the homestead included within his mortgage is subject to prior liens which in fact exhaust it, he is thereby deprived of the benefit of his mortgage on the homestead. The statute does not provide that the other property must have been exhausted “for the payment of the debt” secured by the mortgage, but only that such other property pledged by the same contract for the payment of the debt shall have been exhausted. As a matter of fact, the property other than the homestead had been applied to the satisfaction of plaintiff’s claim secured by the mortgage, but only pro tanto with the other claims which were unsecured, and we think that by filing its claim as a general creditor and taking its pro rata share of the proceeds of such other property the plaintiff had exhausted its remedy as to such property.

c „„ „ Of5niort-Ons gagee' II. The contention for appellee that plaintiff has not complied with its promise made to the mortgagor as an inducement to the execution of the mortgage that the homestead would not be resorted to until all of the other property covered by the mortgage had been exhausted, is answered by the same course of reasoning as that above applied to the claim with reference to the interpretation of the statute. Plaintiff has exhausted its remedy as to other property. The promise was not that the value of the other property, without regard to whether such value could be made available to plaintiff in the satisfaction of his claim, should be deducted from such claim before resort was had to the homestead, but only that under the law plaintiff would be first required to exhaust the other property, or that such other property must be exhausted before resort was had to the homestead. These statements made to the mortgagor as an inducement for including the homestead within the mortgage purported to be nothing but a statement of a rule of law'. But, even if they are to be interpreted as statements of fact, they were true when made, and, if they could be interpreted as a promise, they have been complied with so that in no respect can appellee complain.

At the time the mortgage was executed, plaintiff had no knowledge that D. Winter was liable for the indebtedness of the firm of E. D. Winter. So far as plaintiff knew or was advised by D. Winter, the liability of the latter for the indebtedness of the firm was limited to plaintiff’s claim, which D. Winter had expressly guaranteed. It is true that the bankruptcy court held, first, that D. Winter was liable for the indebtedness of the firm because it had been contracted in reliance on the representations expressly or impliedly sanctioned by D. Winter that he was a member of the firm; and, second, that plaintiff might have ascertained at the time it took its mortgage that D. Winter was So largely indebted as to render him insolvent. But it is not contended that the mortgage was taken by plaintiff in contemplation of the proceedings in bankruptcy which were subsequently instituted, nor, if such proceedings had not been instituted within four months after the recording of the mortgage, that such mortgage would have been invalid. It therefore appears .that, when plaintiff took its mortgage, it was acting properly, and solely for the purpose of securing its claim, and became obligated under the statute .and under the representations made to the mortgagor to resort to the homestead only so far as its claim could not be satisfied by resort to the property not'constituting the homestead. If such other property is not and never lias been available to the plaintiff for the satisfaction of that portion of its claim which it is now seeking to enforce as against the homestead, there is nothing in the statute nor in the representations and promises made for plaintiff when the mortgage was executed to defeat' the rights which it is seeking to assert in this action.

Eor these reasons, the decree of the trial court is reversed.