17 S.E. 296 | N.C. | 1893
The action was brought by W. A. Dunn, receiver of the Clinton Loan Association, to foreclose a mortgage made by defendant Merritt to A. S.C. Powell to secure three sealed notes which Powell had, without endorsement, deposited with the association as collateral security for his two unpaid notes. The mortgaged land was subsequently conveyed to the defendants J. A. Ferrell and T. M. Ferrell, who, by giving Powell, the mortgagee, credit on an old account, paid him the amount of the secured bonds, Powell promising to have the mortgage canceled. The Ferrells knew that there was an outstanding mortgage on the land, but had no actual notice that the bonds secured by it had been transferred *204 to the plaintiff association. At the time of the settlement with Powell the Ferrells did not inquire who owned or held the bonds, and required no explanation from Powell as to why he did not produce them.
On the trial the plaintiffs insisted that (1) the defendants Ferrell were not protected under the facts by want of notice; (2) that in taking the deed from Merritt they took merely an equity of redemption, and, being subsequent in time to the right of the plaintiffs, they were inferior in right. His Honor refused so to rule and gave judgment for defendants Ferrell, and plaintiffs appealed.
The defendant Merritt executed to A. S.C. Powell the bonds and mortgage described in the pleadings, and shortly thereafter the said Powell assigned the bonds, without endorsement, to the plaintiff. The plaintiff took them subject to any equities or other defenses existing at the time of or before notice of the assignment (245) (Spence v. Tapscott,
The plaintiff argues that neither party acquired any legal interest, and that the payment consisting simply of the crediting of an account due the Ferrells by Powell, their equities are equal, and this being so the case should be decided for the plaintiff upon the principle embodied in the maxim qui prior est in tempore potion est jure. While the principle may possibly apply, we prefer to rest our decision upon another ground, and this is that in making the alleged payment the defendants were guilty of such gross negligence as amounts to constructive notice of the assignment of the bonds to the plaintiff. Of course there can be no question that if the mortgagor or any one claiming under him makes a payment with such notice, "he does it in his own wrong and must suffer the loss." 1 Jones Mort., 817.
About a year after the assignment of the bonds the mortgagor sold the land to the Ferrells, and the latter claim that they paid off the mortgage indebtedness by crediting an account which they held against the mortgagee, with five hundred dollars, as above stated. At the time of the transaction the said Ferrells had actual knowledge of the existence of the bonds and mortgage, but they made no inquiry as to who had possession *205 of them, nor did they require that they should be produced or the mortgage canceled. They seem to have relied entirely upon the bare promise of Powell to surrender them to Merritt.
It is a general principle that where one has notice of an (246) opposing claim he is put upon inquiry, and is presumed to have notice of every fact which a proper inquiry would have enabled him to discover. Bunting v. Rix,
In this country we have very high authority in favor of its application to cases like the present. In 1 Jones Mortgages, 820, it is laid down that under such circumstances "the mortgagor is bound to take notice of such an assignment upon the discharge of his debt, because proper diligence on his part (or of one who has purchased his equity of redemption) demands that he should require the production of the notes before paying."
In Kellogg v. Smith,
In Reeves v. Hayes,
The foregoing authorities go much farther than is necessary to sustain the plaintiffs' contention, and indeed are in advance of some of the decisions in England and America, which do not require the production of the instruments, but only that an inquiry be made and a plausible excuse by given for their absence. Some of the cases are evidently influenced by the existence of statutory provisions for the registration of assignments of mortgages, the courts requiring a slighter degree of diligence where such laws obtain than is sanctioned elsewhere.
With a due appreciation of the importance of guarding the doctrine of constructive notice so that it may be kept within proper limits, we must conclude that, taking either of the views we have presented, the Ferrells were affected with constructive notice, as they made no inquiry whatever as to the ownership or possession of the bonds, nor was any excuse given for their nonproduction.
We are of the opinion that there should be a
NEW TRIAL.
Cited: Wynn v. Grant,
(248)