Johnson v. Carpenter

7 Minn. 176 | Minn. | 1862

By the Qourt

Elardrau, J.

On the 17th of December, 1855, John McKenzie gave a mortgage on the premises in question, to John Osborne, for $207, payable in three years, with interest at thirty per cent, per annum, which mortgage was to secure a negotiable promissory note of same date and amount, and due at the same time. The mortgage was recorded February 19, 1856.

On the 4th day of June, 1856, said McKenzie executed to said Osborne a second mortgage on the same premises, to secure the payment of another promissory note for $370, due in one year, with interest at twenty-five per cent, per annum.

On the 17th of March, 1858, said Osborne assigned the first note and mortgage to William W. Eastman, and Eastman, on the 23d day of May, 1861, assigned the same to Kate G-. Carpenter, both of which assignments were recorded on the'23d of May, 1861.

On the 11th day of June, 1859, prior to the recording of the assignment of the first mortgage, the Plaintiff, without any knowledge of such assignment, and supposing that the first note and mortgage belonged to Osborne, made a loan to Osborne of $219.50, and took as security therefor an assignment of the second note and mortgage, which assignment was duly recorded..

The jury by their special verdict, find that “John McKenzie paid to John Osborne the amount of the first note and mortgage ipentioned in the complaint, and purporting to be assigned to W. W. Eastman, March 17, 1858, in good faith and without'any knowledge of any assignment or sale thereof by said Osborne, the mortgagee,” and that “ they have no evidence of the time at which said payment was made.”

As the verdict of the jury leaves the time of the payment of the above sum uncertain, and as the counsel for the Defendants makes a question as to whether it was a general payment without special application to the first note and mortgage, or was intended to be so applied, we will settle these two points here. The jury, it is true, find that McKenzie paid1 to Osborne the amount of the first note and mortgage, and not that he paid the note and mortgage, or the debt secured by them, but taking the two circumstances together, that the sum paid was exactly the amount of that debt, and that the jury find that he paid it in good faith and without any knowledge of any assignment or sale of the first note and mortgage, we think the fair interpretation of the verdict is, that the payment was made upon that debt, and not generally upon both. The time of the payment must be governed by the legal presumption that when it is uncertain whether such a payment is made before, on, or after the due day of the debt, it will be taken to have been made on the day. 3 Cow. & Hill's Notes to Phillips Ev., 3d Ed., p. 500, and cases there cited Powell's Law of Mortgages, 3d Ed., p. 55. The mortgage was therefore paid on the 20th day of December, 1858. As between the mortgagor and the assignee of the mortgage, this payment extinguished the mortgage, unless that instrument partook of the negotiable qualities of the note for which it stood as collateral security, and this result would follow, even if the assignment had been recorded, provided the mortgagor had no actual knowledge. of the assignment at the time of making the payment. The statutes of this State, although they place assignments of mortgages on the same footing as conveyances of real estate, (Comp. Stat. 405, sec. 63), and the assignees of mortgages upon the. same footing as purchasers of real estate, (Comp. Stat. 405, sec. 62,) in respect to the effect of recording or omitting to record such assignments, they make a special exception in favor of mortgagors, by providing in sec. 28, p. 400, of the compiled statutes that “ the recording of an assignment of a mortgage, shall not, in itself, be deemed notice of such assignment to the mortgagor, his heirs or personal representatives, so as to invalidate any payments made by them, or either of them to the mortgagee.” It seems, therefore, that a mortgagor may always pay his mortgage debt to the mortgagee, whether the mortgage has been assigned or not, if he pays in good faith and without knowledge of the assignment, and also that an assignee to be fully protected against such payments, must do more than simply place his assignments on record, he must bring home to the mortgagor actual notice that the assignment has been made. It will be observed that this provision of statute is general in its application to mortgages, making no exception in regard to such as are collateral to negotiable paper.

It is claimed, however, by the counsel for the Defendants, that this mortgage was given to secure the note, is a mere incident to it, cannot be separated from it, and is to be affected by all equities that would influence it. The cases to which we are cited by the counsel, from the New York Courts, (3 John. Cases, 322; 1 John. R., 580, 4; ib. 41;) establish that the mortgage is an incident to the debt secured, and will pass to whomsoever receives a transfer of the debt, or become extinguished by the satisfaction of the debt, but they go no farther, and we fully agree with the decisions in that respect, regarding as we do, the law as there stated to have been long settled. Mortgages are not regarded as conveyances of land within the statute of frauds, so as to require a reconveyance or release to divest the title of the mortgagee ; any act, even forgiving the debt by parol, will discharge the mortgage. Powell on Mort., 3d Ed., 54.

The cases cited by the counsel, from Michigan and Wisconsin, do go to 'the full extent claimed by him, and hold that a mortgage given to secure a negotiable promissory note partakes of the privileges and immunities of commercial paper, so far as to exempt it from all equities existing between the mortgagor and mortgagee, if with the note it is transferred to a bona -fide bolder before due. Walk., ch. 248 ; 1 Cooley, 519; 3 Chand., 94; 4 Chand., 158; 9 Wis., 503 ; 11 Wis., 353; and Mr. Billiard, in his work on Mortgages, vol. 1, p. 526, see. 49 a, says, on the authority of Reeves vs. Scully, Walk., ch. 248, “ If the mortgage is given to' secure a negotiable note, and both are assigned before maturity to a bona fide indorsee, he takes clear of any equities between the original parties.” These Wisconsin and Michigan cases, the one being based upon the authority of tbe other, were evidently decided without much investigation of the question, and so far as we have been able to learn, from' a pretty full examination, both upon principle and authority, aided by the very elaborate and thorough brief of the counsel for the Appellant, stand alone, and Mr. Hilliard having adopted the Michigan rule in his text, without comment or further authority, does not add anything to its weight.

The rule as we collect it from the books, is, that where a debt is secured by a mortgage on real estate, and also by negotiable promissory note, the mortgage is a chose in action as between the mortgagor and any subsequent assignee, and is taken subject to the state of accounts between the mortgagor and mortgagee, at the time of the assignment, and to all payments made by the mortgagor to the mortgagee at any time before actual notice of the assignment. The mortgage is an incident to the debt, and whoever owns the latter is entitled to the benefit of the former to enforce payment, but he cannot rely on the privileged character of the note to ensure him the advantage of the mortgage. He must be vigilant in bringing home to the mortgagor the fact of the change of ownership in the mortgage. If the mortgagor pays the mortgage to the mortgagee after it has been assigned, without notice of the assignment, the lien is extinguished, and the land cleared of the incumbrance, and the mortgagee becomes a trustee of the sum paid for the benefit of the' owner of the debt. Any other rule would destroy the entire effect and force of the registry acts relative to the assignments of mortgages, because if such instruments can partake of the character of negotiable paper, no restraint upon their free transmission from hand to hand before maturity can be tolerated compatibly with the privileges enjoyed by such securities, but we see that the registry laws, without distinction, do impose the same disabilities upon mortgages and upon assignments of mortgages, as upon other conveyances of real estate, with the exception above noted in favor of mortgagors, which subjects them to even greater disabilities than ordinary conveyances. It appears to us that we would be making a startling innovation upon the long settled policy of the laws of real estate, should we concede to any security that carries with it an interest in, or lien upon lands, the volatile and transitory attributes of a mere promise to pay money. Such a doctrine is inherently vicious, and would tend very much to unsettle titles ; we cannot agree to it. Numerous authorities are collected upon this point in the brief of the Plaintiff to which we refer in support of our views.

Johnson, the Plaintiff, holding the second mortgage, is entitled to the benefit of payments made upon the first. Whitacre et als. v. Fuller et als., 5 Minn. R., 508.

The judgment of the District Court is reversed, and judgment ordered for the Plaintiff according to the prayer of his complaint.