Black v. Reno

• Decision Date: 24 February 1894
• Docket Number: 3,653.
• Citation: 59 F. 917
• Parties: BLACK et al. v. RENO et al.
• Court: U.S. District Court — Eastern District of Missouri

59 F. 917

BLACK et al. v. RENO et al.

No. 3,653.

United States Circuit Court, E.D. Missouri, Eastern Division.

February 24, 1894

This is a bill in equity to foreclose a mortgage on real estate situate in Pemiscot county, in this state. On the 13th day of September, 1886, the respondent W. A. Reno, then unmarried executed his two several promissory notes to the co-respondent John W. Reno, each for the sum of $5,000 payable to order,--the first of said notes being payable five years after date, and the second ten years after date; the first bearing 10 per cent. interest, and the second 8 per cent. interest, per annum from date,--to secure the payment of which the said W. A. Reno, at the time of the execution of said notes, executed and delivered to said John W. Reno a deed of mortgage on certain described lands in said county containing about 391.63 acres, which said mortgage was duly recorded in the recorder's office of said county on the 14th day of December, 1886. The conditions of said mortgage were, in substance, that if the said W. A. Reno should pay the sum specified in said notes, and the interest due thereon, according to the tenor and effect of said notes, the conveyance should be void, 'but, if the said he should not be well and truly paid when same become due and payable according to tenor and effect thereof, the deed should remain in full force;' and the said John W. Reno was authorized to proceed to sell the said real estate, or any part thereof at public vendue to the highest bidder, at the courthouse door of said county, on giving 30 days' public notice, and upon such sale and payment of the purchase money he should execute and deliver a deed of said property to said purchaser, and out of the proceeds of such sale he should pay, first, the expenses of the trust, and next whatever might be in arrears and unpaid on said land, whether principal or interest, and the balance, if any, should be paid over to said William A. Reno. To understand the last recitation it should be stated that the said notes represented what was claimed by the parties thereto to be the purchase money of the sale of said land from said John W. to William A. Reno, the said John W. being the father of said William A. Thereafter, on the 26th day of March, 1889, said John W. Reno borrowed from the complainants the sum of $4,000, and executed to them his two several promissory notes, each for $2,500, payable in one and two years thereafter; and to secure the payment of said notes, and as a part of the consideration of said loan, the said John W. Reno transferred them by the indorsement of his name thereon, and delivered the same to the complainants, together with said mortgage deed. Upon the maturity of said notes so executed by John W. Reno to complainants, the same remaining unpaid, complainants instituted suit in this court against said John W. Reno, and obtained judgment thereon, June, 1891, for the sum of $4,000, with 6 per cent. interest from the 26th day of March, 1887, and which judgment was by consent of parties. No part of said judgment having been satisfied, the complainants instituted this action on the 10th day of March, 1892, on said notes for $5,000 each, so held by them as collateral security, and to foreclose said mortgage, and to have the lands sold to satisfy the same. The bill joins, as co-respondents with the said Renos, James H. Howard and W. R. Fields, as subsequent incumbrancers, or as asserting some right and interest in the said property. As the respondent Fields has offered no proof in support of his answer, and does not appear at the hearing of this cause, it is not deemed necessary to make, in this connection, any detailed statement relative to his defense, as it does not touch the merits of the controversy. After the transaction aforesaid between the complainants and John W. Reno, the said Reno went to the recorder's office in Pemiscot county, and entered satisfaction, on the margin of the record of said mortgage deed, as to 160 acres of said land, and thereupon he took from his said son, William A. Reno, another note for $1,800, secured by mortgage on said 160 acres of land. This was of date June 10, 1890. This note John W. Reno negotiated to one Hunter for value received, on exhibiting to him an abstract of the title to said land, showing said satisfaction of the mortgage to the 160 acres. This mortgage was foreclosed, and Hunter became the purchaser thereunder, and then conveyed to the respondent Howard, who claims to be a purchaser for value, without notice of the first mortgage. He sets up in his answer other matters, which are sufficiently noticed in the opinion herein.

Harvey & Hill and J. E. McKerghan, for complainants.

W. W. McDowell and Lubke & Muench, for respondents.

PHILIPS District Judge, (after stating the facts.)

1. The claim of respondent Howard that he sustains the relation of an innocent purchaser is not tenable. It is the settled rule of law in this state, where the land is situated, and the transaction respecting the mortgage was had, that where negotiable notes, like these, secured by deed of mortgage or trust duly recorded, are transferred for value to a third party before maturity, such transfer not only carries the mortgage with the notes, but a subsequent acknowledgment of record by the mortgagee of satisfaction of the debt secured, or any part thereof, without the knowledge or assent of the holder of the note, does not affect or impair the mortgage lien, and is of no effect in favor of one buying on the faith of such release. Anderson v. Baumgartner, 27 Mo. 80; Goodfellow v. Stillwell, 73 Mo. 19; Joerdon v. Schrimpf, 77 Mo. 383; Logan v. Smith, 62 Mo. 459; Lee v. Clark, 89 Mo. 553, 1 S.W. 142; Hagerman v. Sutton, 91 Mo. 520-533, 4 S.W. 73.

2. Taking the notes as collateral security for money at the time loaned on the faith thereof constituted the complainants innocent holders for value. 2 Rand. Com. Paper, §§ 456, 799; 1 Daniel, Neg. Inst. § 771; Logan v. Smith, 62 Mo. 455. This is especially the rule of the federal courts. Carpenter v. Longan, 16 Wall. 271; Swift v. Smith, 102 U.S. 442; Sawyer v. Prickett, 19 Wall. 147; Bank v. Matthews, 98 U.S. 621; Oates v. Bank, 100 U.S. 246.

3. The resort to the action at law and recovery of judgment therein on the notes executed by John W. Reno to complainants constituted no bar to this action, that judgment being unsatisfied; and especially so when Reno is insolvent. 2 Rand. Com. Paper, § 796. The pledgee takes commercial paper as a trust for the pledger, and it becomes his duty to proceed to collect the same on its maturity; and he need not defer its collection until the maturity of the original debt. Id. § 795.

4. It is objected that this action is premature, for the reason that, by the terms of the mortgage deed, no foreclosure is permissible until after the maturity of the 10-years note. The first note and all the interest thereon were past due when this suit was instituted, and no interest had been paid on the 10-years note. If this action is to be postponed until after December 13, 1896, the situation of the creditor is most unfortunate. It is very questionable whether the whole security be sufficient to discharge the judgment of complainants against John W. Reno, and it is quite clear from all the evidence and circumstances in the case, that it is not near adequate, at this time, for the redemption of the mortgage debt. The principal and interest of the two notes at the end of 10 years would amount to $19,000. The maker of the notes, as well as the assignor, is not only insolvent, but the possession of the land and the usufruct thereof have passed from them under a junior incumbrance and judgment. In such condition of the security, a chancellor would at least grant the prayer of the bill for the appointment of a receiver, to secure to the mortgagor the rentals of the lands in mitigation of the accumulating interest, amounting to $900 per annum,--a sum undoubtedly far in excess of the value of the rentals. Before a court of equity would give a construction to the mortgage productive of such dire results, it should certainly clearly appear on the face of the mortgage deed that it was within its terms that the mortgagee should be so postponed. Of course, a court of equity could not, in this action, afford relief against the express contract of the parties...