Connecticut Mut. Life Ins. Co. v. Talbot

• Decision Date: 21 December 1887
• Citation: 14 N.E. 586,113 Ind. 373
• Parties: Connecticut Mut. Life Ins. Co. v. Talbot et al.
• Court: Indiana Supreme Court

113 Ind. 373

14 N.E. 586

Connecticut Mut. Life Ins. Co.

v.Talbot et al.¹

Supreme Court of Indiana.

December 21, 1887.

Appeal from superior court, Marion county; Lewis C. Walker, Judge.

Peelle & Taylor, for appellant. Duncan, Smith & Wilson, for appellees.

Mitchell, C. J.

The questions for decision arise upon facts specially found by the court. Those facts, so far as they are material, are as follows: On May 3, 1871, Talbot and wife executed a mortgage, which was afterwards duly recorded, to the Thames Loan & Trust Company, to secure a loan of $3,000, payable on the third day of May, 1876. On the thirty-first day of January, 1874, the same mortgagors executed another mortgage, conveying the same property to William H. Morrison, to secure another debt of $3,000. This last debt was evidenced by a promissory note, payable to Morrison or order one year after date. The mortgage recited that it was given as a security for the debt evidenced by the above-mentioned note, and also to secure any renewal of the note therein described. This mortgage was also duly recorded. Before the note matured Morrison assigned it to Tomlinson, by a written indorsement on the back thereof. There was no assignment of the mortgage, otherwise than as it was carried by the indorsement written upon the note, and there was hence nothing upon the record to indicate that the note and mortgage were not held and owned by the mortgagee. The note thus secured and assigned was renewed annually, the maker giving a new note at the end of each year of like tenor as the first payable to Tomlinson. The renewal notes were indorsed by Morrison. On the fifteenth day of March, 1881, Morrison died, and shortly thereafter his widow, Mary Morrison, became the duly-qualified administratrix of his estate. The debt to the trust company had become due. It had been renewed and fallen due a second time. Talbot negotiated a loan of $3,000 with the Connecticut Mutual Life Insurance Company. The loan was negotiated with Mr. Moore, as agent of the insurance company. The money so negotiated for was designed to be used in paying off the debt due to the trust company, and secured by the trust company mortgage above mentioned. Mrs. Morrison, as administratrix of the estate of William H. Morrison, executed a release of the Morrison mortgage. This release was executed and recorded on the eleventh day of October, 1881. Tomlinson had no knowledge of the release, nor had he given authority to any one to release the mortgage. The debt held by him had not been paid. On the same day that the Morrison mortgage was released, Talbot and wife conveyed the same real estate to the insurance company as a security for the loan of $3,000 negotiated from it through its agent, Moore. The money thus borrowed was paid over to the trust company in satisfaction of the debt due it from Talbot, which indebtedness was secured by a renewal of the first mortgage taken by it on the real estate in question. Moore, who acted as the agent for the insurance company in making the loan to Talbot, had been furnished with an abstract of title to the land mortgaged, some time prior to the loan, and thereby he knew of the Morrison mortgage; but at the time the loan was made to Talbot, the release executed by the administratrix had been put on record. The release recited that the mortgage had been fully paid and satisfied, and Moore had no knowledge that it was not paid. The court in its finding, draws the inference that Moore did not demand the production of the Morrison note and mortgage, nor make any inquiry as to the authority of the administratrix to execute the release. It should be observed that, at the time the trust company took its second or renewal mortgage in 1876, William H. Morrison, by an entry on the mortgage record, waived the priority of the Morrison mortgage over that last taken by the trust company. This was done without authority from Tomlinson. Upon the facts found, the superior court was of opinion that the release and satisfaction price, executed by Mrs. Morrison and placed of record, was not effectual as against Tomlinson, the assignee of the Morrison note and mortgage, and it was accordingly decreed that the Morrison mortgage have priority over that of the insurance company, notwithstanding the release.

That the indorsee of a promissory note secured by mortgage succeeds to the benefits of the mortgage security, even though the latter be not formally assigned, is a familiar proposition. The written indorsement of the payee on the note carries the legal title therein to the indorsee; and the mortgage, being a mere incident to, and security for, the debt, the assignee of the note becomes equitably entitled to participate in the security to the extent of his interest or ownership in the debt. The right of such an assignee to participate in the mortgage is wholly equitable, and grows out of the fact that equity regards the mortgage as being merely accessory to the debt. It is, of course, certain that, as between the mortgagee and his assignee and all others having notice of their respective rights, the former can do nothing to prejudice the rights of the latter, after the debt has been assigned. Whether the assignment of a mortgage was such an instrument as was entitled to be recorded prior to the act which came in force July 2, 1877, or whether prior to that act an assignment could be so made on the record, as that in either case the record would operate as notice of the assignment, and to what extent innocent purchasers and subsequent mortgagees, who advanced money on the faith of a release entered of record by a prior mortgagee, might rely upon such release, have heretofore been subjects of more or less extended discussion and consideration by this court. Reeves v. Hayes, 95 Ind. 521. Whatever conclusion we might arrive at, as at present advised, in respect to whether or not assignments of mortgages were within the recording acts prior to July 2, 1877, there is no room to doubt but that such assignments are affected by the act last above named. Whether or not the questions considered in Reeves v. Hayes, supra, are longer of any general importance, it is clear that they are of no practical moment as applied to the present case. It is assumed everywhere that, if the recording acts afford the assignee of a mortgage the opportunity of giving notice of his rights by procuring and putting of record an assignment of the mortgage, a neglect on his part to do so will estop him from ascertaining the invalidity of a duly-recorded release, executed by his assignor, after an innocent purchaser has paid his money on the faith of the public records. It is settled everywhere that unrecorded assignments of mortgages are void as against subsequent purchasers, whose interests may be affected thereby, and whose conveyances are duly recorded, provided such assignments are embraced by the recording acts. Bacon v. Van Schoonhoven, 87 N. Y. 446;Decker v. Boice, 83 N. Y. 215;Swartz v. Leist, 13 Ohio St. 419;Yerger v. Barz, 56 Iowa, 77, 8 N. E. Rep. 769; Henderson v. Pilgrim, 22 Tex. 464; Boone, Mortg. § 92; 1 Jones, Mortg. § 472; Reeves v. Hayes, supra, and authorities there cited. The effect of the act of 1877, construed in connection with section 2931, was to postpone or render assignments of mortgages void, as against any subsequent purchaser or mortgagee in good faith for a valuable consideration, unless such assignments were recorded as therein provided. It follows that when assignments of mortgages are within the recording acts, a release, executed by the person who appears by the records to be the owner of the mortgage, is sufficient to protect a purchaser who has in good faith parted with his money on the faith of such a release, and without other notice than that afforded by the record. Blunt v. Norris, 123 Mass. 55. The act which went into force July 2, 1877, (sections 1093, 1094, Rev. St. 1881,) provides that “any mortgage of record, or any part thereof, may be assigned by the mortgagee, or any assignee thereof, either by an assignment entered on the margin of such record, signed by the person making the assignment, and attested by the recorder, or by a separate instrument executed and acknowledged,” etc. It also provides that the assignment, if by a separate instrument, may be recorded on the margin of the record where the mortgage is recorded, or in the mortgage record of the county; and it provides further that, after the assignment is so made or entered of record, the mortgagor and all other persons shall be bound thereby. It also authorizes any assignee, or his personal representative, to release or enter satisfaction of the mortgage of record.

It is argued that, because the debt secured by the Morrison mortgage was assigned to...