Brooke v. Struthers

• Decision Date: 31 July 1896
• Citation: 68 N.W. 272,110 Mich. 562
• Court: Michigan Supreme Court
• Parties: BROOKE v. STRUTHERS ET AL.

68 N.W. 272

110 Mich. 562

BROOKE v. STRUTHERS ET AL.

Supreme Court of Michigan

July 31, 1896

Appeal from circuit court, Charlevoix county, in chancery; Roscoe L Corbett, Judge.

Suit by Fannie T. Brooke against Andrew R. Struthers and others. Decree for defendants. Complainant appeals. Reversed.

Harlow P. Davock, for appellant.

Lyon &amp Dooling, for appellees.

HOOKER, J.

The complainant filed a bill to foreclose a real-estate mortgage given by Struthers to the Michigan Mortgage Company to secure a writing which reads as follows: "2,706. $1,100.00. St Johns, Mich., April 1st, 1890. For value received, April 1st 1893, I promise to pay the Michigan Mortgage Company Limited, or bearer, eleven hundred dollars, with interest at seven per cent. per annum, payable semiannually, which said interest is represented by six coupon notes, one payable at the maturity of each installment of interest, and when paid shall be a voucher for the payment of said installments of interest respectively. All payable at the office of the Michigan Mortgage Company, Limited, St. Johns, Michigan, with exchange on New York. It is expressly agreed that if the interest should be unpaid and in arrears for the space of 30 days, then, from and after the lapse of the said 30 days, the whole of said principal sum, with all interest unpaid, may, at the option of the holder thereof, become and be due and payable immediately thereafter. This note is of even date with a certain real-estate mortgage made by the maker hereof to said payee and collateral hereto. Andrew R. Struthers." These were assigned by instrument in writing to the complainant in the following language: "The Michigan Mortgage Company, Limited, does hereby sell, assign, and transfer unto said Fannie L. Brooke all its right, title, and interest in and to a certain mortgage (and note accompanying), etc." After the mortgage became due, the Michigan Mortgage Company accepted a new mortgage upon the premises, to take the place of the first; Struthers having no notice of the complainant's ownership, and having made such adjustment in good faith. Under such circumstances the mortgagor would be protected if he had paid the mortgage, unless the mortgage were given to secure negotiable paper which was negotiated before due. How.Ann.St. � 5687, provides: "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 payment made by them, or either of them, to the mortgagee." See, also, Jones, Mortg. �� 473, 791; Jones v. Smith, 22 Mich. 363, and cases cited. Any such payment need not necessarily have been made in money. If it were negotiable paper that could be enforced against him, or property which had come to the hands of a bona fide holder for value, the same would be true. But a new promise, unperformed, would not relieve the mortgagor, so long as it remained in the hands of the mortgagee, and was not of negotiable character. but, if the mortgage were given to secure negotiable paper, and was itself negotiable, because so given, then the mortgagor would pay at his peril if he did not require the production of the obligations. Jones, Mortg. � 957. Hence, if this paper was negotiable, and was assigned for value before maturity, and the mortgage company had no authority to take a new mortgage to itself in satisfaction, the complainant's claim as against the defendant Struthers would not be affected. Markey v. Corey (decided at the present term) 66 N.W. 493. Again, Knapp claims equities as against the complainant, as assignee of the second mortgage, which, as to its provisions, was exactly like the first. If he has acquired rights against Struthers, it is for the reason that the note is negotiable, because, if it is not, he took it subject to all equities existing between Struthers and the mortgage company, on the principle that the assignee of a chose in action takes it subject to equities existing between the parties. The principle is elementary, and does not require the citation of authorities. That it applies in cases of mortgages where unaccompanied by negotiable paper, see Jones, Mortg. � 842, and cases cited; Reeves v. Scully, Walk. (Mich.) 248; Russel v. Waite, Id. 31; Nichols v. Lee, 10 Mich. 526. That he has a prior claim to the complainant unless his mortgage was valid as against Struthers, may not be contended, but, should it be, the same question-i. e. negotiability-is involved. His connection with the matter is as follows: He had done business for many years with the Michigan Mortgage Company, and, becoming dissatisfied with it, a correspondence began October 9, 1890, in relation to his securities which he had procured from the company. This continued until March 21, 1892, when he threatened to employ an attorney, and use force in settling up his matters, which he seems to have expected the mortgage company to attend to. This appears to have been adjusted, and on March 15, 1893, he sent the mortgage company $1,750 to purchase a mortgage of a Mr. Brown, about which there had apparently been correspondence. On March 29, 1893, the mortgage company wrote to Knapp, stating that the Brown mortgage was sold before the draft came, and stating, "Inclosed we hand you our draft, $1,750." This letter described another loan for $1,800, apologized for keeping the draft 10 days after purchasing it for him, and adds: "If this meets your approval, return the draft to us by return mail, as loan will commence April 1st, and send us another draft for the other $50." On March 30th Knapp wrote, saying that he had just sent Walker $15.75 in coupons, and would inclose the balance of $50, needed to make the $1,800. This was acknowledged April 3d, with the promise to report, and on April 29th Knapp wrote again, having heard nothing, and asked the return of the money if a safe investment could not be made. On May 1st the company wrote, saying that the $1,800 loan had fallen through, and that they "had sent out papers for two loans, one-Struthers, $1,100," they would forward as soon as papers were returned from register's office. On May 4th the Struthers mortgage was sent. On May 8th Knap asked them for information about the true situation and value of Struthers' property. This was given. Correspondence continued about the remainder of the $1,800. Knapp kept the Struthers mortgage. Struthers, as against the company, had a right to have the first mortgage discharged. That was the only consideration for the second mortgage. As long as the company held it, the existence of the first mortgage in the hands of the complainant was a complete defense against it, and, unless the note was negotiable, Knapp took it subject to these equities, and had no greater right to enforce the mortgage against Struthers than the company had, in the absence of an estoppel. The complainant had asked the company to collect the mortgage, and to let her know when they needed a discharge. The correspondence shows that it was expected that the company would collect the money, and, had payment been made to them by Struthers, we should think, upon this record, that it amounted to a payment to her. On April 21st complainant wrote the company as follows: "Detroit, April 21st, 1893. E. E. White, Esq., St. Johns, Mich.-Dear Sir: Your favor of the 20th inst. at hand, and noted. We understand from what you say regarding Struthers that he does not expect to pay, for we gave 60 days' notice, and, if he expected to, would have done so by this time. If he wants to renew, can you not place the security with some one else, and get the money for us in that way? We have figured on using this money, and it will inconvenience us if arrangements are not made shortly." To this she received the following: "April 22nd, 1893. Howard Brooke, Esq., 59 Buhl Block, Detroit, Mich.-Dear Sir: Replying to yours of the 21st, I acknowledge receipt of the circulars inclosed therein. In reference to Struthers, would say that I see I did not make myself clear to you. We have already sent renewal papers to Mr. Struthers to take up your loan, having placed it with other parties, it being exceedingly choice; and as soon as the papers are in we will remit to you for same. We think it will be a matter of no great delay. We notified him when you notified us, that the same may be adjusted at once. Respectfully, The Michigan Mortgage Company, Limited, by E. E. White. Treas." After repeated solicitations, she received the interest due at the maturity of the mortgage, but nothing more. It is contended that she authorized the company to take the course it did, and that Knapp is therefore protected against

her claim. We think this is not deducible from the record. It did not need authority from Mrs. Brooke to authorize Struthers to give, or the company to take, a new mortgage for any purpose of their own; and under our view of the facts, if such mortgage had produced the money, and it had come to the hands of the mortgage company as the result of the giving of the mortgage, and its purchase by Knapp, we should consider the complainant bound by it, and Struthers discharged, for the reason that we think that the mortgage company was authorized to collect the obligation. But such was not the fact. The company received the money on March 15th, which was a month before the mortgage assigned to Knapp was acknowledged, and a month and six days before the letter suggesting a loan as a means of getting her money was written by Mrs. Brooke. It was thenceforth Knapp's debtor. The money was not sent to buy this mortgage, and we find nothing to satisfy us that it was in the hands of the company at the time the mortgage was given or assigned. On the contrary, we are convinced...