Marshall & Ilsley Bank v. Mooney

205 Mich. 513 | Mich. | 1919

Bird, C. J.

. The thing sought to be done in this proceeding is to foreclose a mortgage for $2,000 given by defendants to the plaintiff bank on certain real estate in Van Burén county. The circumstances attending the giving of the mortgage are that defendant Mooney was financially interested in the Milwaukee Western Cold Storage Company, a Wisconsin corporation, and was one of the directors thereof. In January, 1914, the company’s business needs required a loan of $12,-000. Application was made to the plaintiff bank. The bank was unwilling to make the loan unless the company’s paper was indorsed by the directors. This was assented to by the directors and the note was made by the company and indorsed by the six directors, including defendant Mooney. There is some testimony to the effect that the directors agreed that those not responsible should secure their indorsements to the bank. On account of this agreement, or for the purpose of restricting his liability, defendant Mooney gave to the bank the note and mortgage in question for the purpose of securing his indorsement. The $12,000 note became due on May 28, 1914, and was renewed. It was renewed again on September 28th, and again on January 28, 1915, defendant Mooney' signing each renewal with the other directors except the last one. The last renewal of January 28, 1915, he did not sign. Soon after the last renewal the company went into bankruptcy and later paid a dividend of 9.6%. After this dividend was deducted from the: amount of the note the other five directors, who indorsed the last renewal, paid the balance of the $12,000' note, and the same, together with defendants’ note: and mortgage, was surrendered to them. A demand! was then made upon Mooney for contribution but he did not respond. The five directors thereupon turned the note and mortgage over to the bank for collection and it commenced this foreclosure proceeding.

Defendants answered the bill and denied the right of the bank to foreclose the mortgage because the principal indebtedness to which the present note and mortgage was collateral had been paid and canceled, thereby releasing the lien, and because plaintiff had no such interest in the note as would permit it to recover thereon, and by way of cross-bill they ask to have their note and mortgage declared canceled and surrendered to them. These objections of defendants were overruled and relief upon their cross-bill was denied. A decree ordering a foreclosure and sale was made and defendants have appealed therefrom.

Defendants executed the note and mortgage in question to secure the plaintiff bank on defendant Mooney’s indorsement of the company’s note, dated January 28, 1914. Defendants’ note and mortgage bore the same date. The principal note was renewed on May 28th and again on September 28th, with six indorsers. On January 28th it was renewed again without defendant Mooney’s indorsement. The last note indorsed by Mooney was canceled and marked paid by plaintiff. It was paid by the note indorsed by the five directors and dated January. 28, 1915. Whether Mooney had knowledge of the last extension does not appear, but whether he did or not, the last note was finally paid by the five indorsers and the indebtedness and note canceled. In any view of the case this had the effect of releasing the lien created by defendants’ mortgage. 31 Cyc. p. 853, and cases; 22 Am. & "Eng. Enc. -Law, p. 881. The effect of making payment of the principal indebtedness released the lien and plaintiff no longer had any right to the possession of defendants’ collateral, and as between the bank and defendants it was the duty of the bank to surrender both note and mortgage to the defendants.

It is insisted in the brief that defendant’s coindorsers have equities in the note and mortgage, and that this is an attempt to enforce it for their benefit. It is quite possible they may’ have a right to demand of defendant Mooney that he contribute- his share of the amount paid on the principal indebtedness, but the doctrine of contribution would give them no legal title to nor lien on the note and mortgage. It must not be overlooked that this collateral was furnished to the payee by a surety and not by the maker. Had the note and mortgage in question been given by the maker of the note, upon payment thereof by the sureties, they would have a right to demand the col-laterals, but that rule does not apply where a third party furnishes security in aid of an indorsement. 32 Cyc. p. 294.

Plaintiff does not pose in the bill of complaint as assignee, nominal party or in a representative capacity, but it does pose as the real party in interest. By the testimony it is disclosed that plaintiff had neither equitable nor legal title to defendants’ note and mortgage when the action was commenced, or that it had any lien thereon. It would, therefore, seem that plaintiff has no such interest in the subject-matter of the controversy as would entitle it to relief.

Counsel argues that section 6092, 2 Comp. Laws 1915, authorizes the suit in plaintiff’s name. This section provides that:

“The holder of a negotiable instrument may sue thereon in his own name, and payment to him in due course discharges the instrument.”

The bank was a holder for value of defendants’ note to the extent of its lien. Section 6068, 2 Comp. Laws 1915. This section provides that:

“Where the holder has a Hen on the instrument, arising either from contract or by implication of law, he is deemed a holder for value to the extent of his lien.”

See, also, Graham v. Smith, 155 Mich. 65.

We think it would follow that after the indebtedness was paid and the lien discharged, the bank would not be a holder of the note within the meaning of the foregoing statute. We are of the opinion that under the provision of the judicature act (3 Comp. Laws 1915, § 12353), which commands that “every action shall be prosecuted in the name of the real •party in interest,” no relief can be granted to the plaintiff, and as the record does not call upon us to consider what the liabilities or equities, or rights of subrogation may be as between Mooney and his 'coindorsers, we conclude that the decree must be reversed and the bill dismissed. Defendants will not ■be entitled to a decree on their cross-bill against plaintiff for a cancellation and surrender of their note and mortgage, because it is apparent that all parties claiming an interest are not before the court. Defendants will recover their costs of both courts.

Ostrander, Moore, Steere, Brooke, Fellows. Stone, and Kuhn, JJ., concurred.