Chase v. Commerce Trust Co.
| Decision Date | 25 September 1923 |
| Docket Number | 14260. |
| Citation | 224 P. 148,101 Okla. 182,1923 OK 676 |
| Parties | CHASE v. COMMERCE TRUST CO. ET AL. |
| Court | Oklahoma Supreme Court |
Rehearing Denied Nov. 20, 1923.
Opinion Modified and Second Rehearing Denied April 1, 1924.
Syllabus by the Court.
A mortgage securing the payment of a negotiable note is merely an incident and accessory to the note, and partakes of its negotiability. The indorsement and delivery of the note carries with it the mortgage without any formal assignment thereof.
Sections 5251, 5252, Comp. Stat. 1921, are sufficiently comprehensive to include assignments of real estate mortgages, and such assignments must be recorded to charge subsequent purchasers or incumbrancers with constructive notice thereof.
The recording of an assignment of a mortgage covering real estate is necessary in order to protect the assignee thereof against a subsequent fraudulent discharge of record by the mortgagee should the property thereafter pass into the hands of a bona fide purchaser relying upon such recorded discharge.
Payment of a negotiable note before maturity to any one other than the holder thereof, or his duly authorized agent to receive such payment, is at the risk of the payer.
Payment of a negotiable note, secured by a mortgage, by the mortgagor or his grantee, when made to the mortgagee not in possession of the note and mortgage, is not binding upon an assignee thereof before maturity, who had possession of the papers at the time of payment, unless he had expressly or impliedly authorized such payment.
Record examined, and held, that the plaintiff was not a purchaser or incumbrancer in good faith relying upon a recorded release of the mortgage; that payment of the note to the mortgagee, who was not in possession of the note and mortgage, but who had indorsed the note and assigned the mortgage before maturity to the defendant C., who had possession thereof at the time of such payment, was not binding upon C., but was made at plaintiff's risk. And held, further, that under the facts in this case the holder of the note and mortgage was not estopped to deny the agency of the mortgagee to collect the debt.
Appeal from District Court, Bryan County; Geo. S. March, Judge.
Action by the Commerce Trust Company against Jim Osborne and others. From a judgment for plaintiff, defendant Frank H. Chase appeals. Reversed and remanded, with directions.
E. C Stanard and C. H. Ennis, both of Shawnee, for plaintiff in error.
Hatchett & Ferguson and V. B. Hayes, all of Durant, for defendants in error.
This was an action by the Commerce Trust Company, as plaintiff against Jim Osborne, Nora Osborne, J. C. Walden, and Frank H Chase, as defendants, to recover upon a promissory note, and for the foreclosure of a mortgage securing the same, executed by Jim Osborne and Nora Osborne, his wife, to the plaintiff, and covering certain lands in Bryan county. The only controversy presented here is that between the plaintiff and the defendant Frank H. Chase.
The facts, briefly stated, are: That on April 2, 1917, J. M. Finch and Vader Finch, his wife, executed and delivered to Aurelius-Swanson Company their negotiable promissory note for the sum of $2,000, maturing on December 1, 1926, and to secure the payment thereof, on the same day, executed and delivered to Aurelius-Swanson Company their mortgage upon 150 acres of land in Bryan county; said mortgage being filed for record on the 2d day of July, 1917. On November 19, 1917, Aurelius-Swanson Company, for value, sold, indorsed, and delivered said note to H. B. Chase, the father of Frank H. Chase, and at the same time executed an assignment of said mortgage in which the name of the assignee was not given, and delivered the same to H. B. Chase. H. B. Chase died in November, 1918, and Frank H. Chase purchased the note and mortgage for value, from his estate, and received all papers in connection with said loan, including the application therefor.
By the terms of this application, Finch appointed Aurelius-Swanson Company his agent to procure the loan from any person, persons, or corporation, and to forward to the holder of the notes for principal and interest, the interest as the same became due and the principal whenever it might, for any cause, become due and payable.
In July, 1918, Finch and wife conveyed the land to Jim Osborne, who assumed payment of "a mortgage indebtedness originally given to Aurelius-Swanson Company in the sum of $2,000, with interest thereon from July 22, 1919." On November 1, 1920, Jim Osborne and Nora Osborne, his wife, executed and delivered to the Commerce Trust Company their principal note for $3,200, and a second note for $960, and mortgages securing the same, covering said lands. After the execution and delivery to it of said notes and mortgages, the Commerce Trust Company paid Aurelius-Swanson Company the sum of $2,120, being the amount of principal and the interest then due on the note and mortgage executed by Finch and wife and held by Chase, and upon payment of said amount, and on September 8, 1921, Aurelius-Swanson Company executed and delivered to the Commerce Trust Company a release of said mortgage, whereupon the trust company paid the balance of the loan to Jim Osborne. Afterwards, and on October 24, 1921, the assignment of said mortgage from Aurelius-Swanson Company to Frank H. Chase was filed for record. Both H. B. Chase and Frank H. Chase kept the Finch note and mortgage in a bank in Rockport, Ill. Osborne paid the interest due for the years 1918, 1919, and 1920, through Aurelius-Swanson Company, and such interest was paid to the bank and the interest coupons sent to Osborne. Aurelius-Swanson Company did not have the note and mortgage in its possession at the time of the payment to it by the trust company, but the same had been in the possession of H. B. Chase or Frank H. Chase at all times since November, 1917. Chase had not authorized Aurelius-Swanson Company to collect the amount of said note and knew nothing of the payment thereof until November, 1921. Aurelius-Swanson Company never accounted to Chase for the money received by it from the Commerce Trust Company.
Osborne defaulted in the payment of the note and mortgage for $960, whereupon the Commerce Trust Company brought this suit to foreclose said second mortgage, making Frank H. Chase a party defendant. Chase filed his answer and cross-petition, bringing in J. M. Finch and Vader Finch as parties defendant, and sought judgment against them for the amount of the principal note and accrued interest thereon executed by them, and prayed a foreclosure of the mortgage securing said note.
The trial court found generally for the plaintiff, the Commerce Trust Company, and decreed a foreclosure of its mortgage, and denied Chase any relief whatever, and from this judgment Chase has appealed.
The principal question presented for our attention is the effect, if any, upon the rights of the parties of the failure of Chase to record the assignment of the mortgage to him before such mortgage was released by Aurelius-Swanson Company.
On behalf of Chase it is argued that there is no statute requiring the recording of such assignment, and, this being true, the note and mortgage will be enforced in the hands of a bona fide holder, even though he does not record a formal assignment of the mortgage; while the Commerce Trust Company insists that the assignment of the mortgage is a contract or an instrument relating to real estate, and is invalid as to third persons unless acknowledged and recorded under the provisions of sections 1154-1155, Rev. Laws 1910, and sections 5251-5252 Comp. Statutes of 1921.
A determination of this question necessarily involves the consideration of several rules of law applicable to the foregoing state of facts. It must be borne in mind that as the note from Finch and wife to Aurelius-Swanson Company was negotiable, and was by the company, for value sold, indorsed and delivered to H. B. Chase before its maturity, the sale and indorsement thereof carried with it the mortgage, for by the great weight of authority the mortgage securing the payment of a note is merely an incident and accessory to it, and the indorsement and delivery of a note carries with it the mortgage without any formal assignment thereof. Carpenter v. Longan, 83 U.S. (16 Wall.) 271, 21 L.Ed. 313; New Orleans Canal & Banking Co. v. Montgomery, 95 U.S. 19, 24 L.Ed. 346; Swift v. Bank of Washington, 114 F. 643, 52 C. C. A. 339; Smith v. First National Bank, 23 Okl. 411, 104 P. 1080, 29 L. R. A. (N. S.) 576; Local Investment Co. v. Humes, 51 Okl. 251, 151 P. 878; Sheets v. Hocker, 34 Okl. 676, 128 P. 725; Mutual Benefit Life Ins. Co. v. Huntington, 57 Kan. 744, 48 P. 19; Burhans v. Hutcheson, 25 Kan. 625, 37 Am. Rep. 274; National Live Stock Bank v. First National Bank, 203 U.S. 296, 27 S.Ct. 79, 51 L.Ed. 192; Koen v. Miller, 105 Ark. 152, 150 S.W. 411; Middle Kauff v. Bell, 111 Kan. 206, 207 P. 194; Jones on Mortgages (7th Ed.) § 481-A. Therefore, Chase having acquired the note and mortgage in good faith before maturity, should have prevailed unless, as contended by the trust company, and found by the court, his failure to place of record the assignment of the mortgage to him or give notice of his ownership thereof precluded a recovery.
The Commerce Trust Company maintains that the payment of the note to the record owner of the mortgage discharges the mortgage and says that this is especially true when the mortgage does not show on its face that the note secured by it is negotiable, and cite as authority for this contention 27 Cyc. 1387; Fox v. Cipra, 5 Kan. App. 312, 48 P. 452; Mutual Life Ins. Co. v. Hall (Ky.) 50 S.W. 254; Koetter v. German-American Title Co., 53 S.W. 32, 21 Ky....
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