20 F. Cas. 822 | U.S. Circuit Court for the District of Eastern Wisconsin | 1872
The mortgage of Michael Reynolds to Van Slyke is a recorded mortgage lien on the one undivided fourth part of the premises described. That part ox the description of the land as being me undivided half part cannot control the clause creating the lien, as against subsequent in-cumbrances. As to them the clause creating the lien is the test.
The record of this mortgage is constructive notice of an apparent lien in favor of Van Slyke to the amount of 85,000, according to the terms and conditions of the bond mentioned; and Ripley accepted his mortgage with that constructive notice. He might have inquired after the bond, to ascertain its real conditions, but he did not. He testifies that he never saw the bond, nor ever knew nor inquired what had been done under it. The mortgage did no injustice to Ripley. It was a legal lien for 85,000, expressed on its face, and of which he had lawful notice by the record. It was not required that the condition of the bond be recited in the mortgage. The reference to the bono-
The pleadings and proofs involve the equitable interests of the complainant under his mortgage, and of Andrew Sexton as assignee of N. B. Van Slyke’s mortgage.
It is understood that there did not exist any indebtedness from Reynolds to Van Slyke at the date of the bond and mortgage. It is also understood that Sexton cannot acquire by the assignment- of the bond and mortgage, a greater equity than Van Slyke had at the date of the assignment of these securities.
The notes of Reynolds had been discounted by the First National Bank of Madison, of which Van Slyke was the president, at his instance and request, made on the faith and credit of the securities. Notes were made by Reynolds and handed to Van Slyke, and he procured them to be discounted by the bank; and on the books of the bank the money was placed to the credit of Reynolds. The notes were renewed from time to time, until they came to be represented, so far as any indebtedness existed, by two notes of $2,000 each, numbered 3334, 3300, dated September 25, ISOS, and prior to complainant’s mortgage. These notes were payable to the First National Bank of Madison. It does not appear that they were indorsed by Van Slyke. They were a continuation of the original indebtedness.
Van Slyke, being president of the bank, had the bond and mortgage made to himself, the bank being prohibited by the national banking act of .Tune 3, 1S04, from taking real estate security for present loans. The loan was made by the bank, and Mr. Van Slyke’s ingenuity does not relieve the bank from the imputation of violating the statutory prohibition. But the point of invalidity of the securities for this reason, is not made by the pleadings.
The bank became the creditor in fact of Reynolds, and Van Slyke stood as surety, the loan having been made by the bank at his request and on his responsibility. The bank could hold Van Slyke for the debt in equity, upon the strength of the securities of indemnity held by him in his own name. The bank had the legal right to hold Van Slyke for the debt, or to require him, in equity, to surrender the securities. The securities to Van Slyke were, in equity, securities to the bank, the real creditor. The legal liability of Van Slyke to the bank was not prohibited by the statute of frauds. It •was not a promise to pay the debt of another, but an original contract with the bank, upon which the loan was obtained. The two notes of $2,000 each fell within the condition of the bond and mortgage to Van Slyke.
Five thousand dollars were appropriated to the discharge of the two notes of $2,000, with interest, and the residue applied to the credit of Reynolds, on some other indebtedness to the bank.
It appears that Van Slyke, the president and agent of the bank, had notice of Ripley’s mortgage in December, 1868. Reynolds, on the day of the transfer of the securities to Sexton, gave a note' to Van Slyke, or bearer, for $5,000, payable at the bank one year after date. This was done under the impression that the mortgage of Reynolds was a lien for the full amount of the debt mentioned on its face, without regard to its reference to the condition of the bond. Van Slyke and the bank, upon the payment of $5,000 by Sexton, relinquished all further claim or right under the bond and mortgage, and to the note of John Reynolds, made at the same time, to Van Slyke or bearer, by which Van Slyke evidently intended all obligations or liability for the debt of Reynolds and all further interest in the securities to cease, and Sexton to collect the debt at his own cost and charges, as expressed in the assignment. And the note of $5,000, payable to Van Slyke or bearer, was intended as evidence that Sexton held an indebtedness against Reynolds equal in amount to the bond and mortgage.
The note of Reynolds, given in April, 1869, the time of the assignment of the securities to Sexton, was merely an evidence of a personal promise on the part of Reynolds for the difference between the two $2,000 notes and the note of $5,000. For this difference the mortgage was no security, being an advance made subsequent to the 10th December, 186S, when Van Slyke had notice of Ripley’s mortgage, and he was not under obligation to make further advances upon such note. Equity excludes both Van Slyke and Sexton as to the surplus over the two notes and interest. To that extent Sexton- has a prior lien on the one undivided fourth part of the mortgaged premises. Decree accordingly.
