First Nat. Bank v. Andrews

• Decision Date: 15 November 1893
• Citation: 34 P. 913,7 Wash. 261
• Court: Washington Supreme Court
• Parties: FIRST NAT. BANK OF ABERDEEN v. ANDREWS ET AL. YOUNG v. SAME.

34 P. 913

7 Wash. 261

FIRST NAT. BANK OF ABERDEEN v. ANDREWS ET AL.

YOUNG v. SAME.

Supreme Court of Washington

November 15, 1893

Appeal from superior court, Chehalis county; Mason Irwin, Judge.

Consolidated actions by the First National Bank of Aberdeen against Julius Andrews and others, and by Alexander Young against the said Andrews and said bank. From a judgment in favor of the bank Young appeals. Reversed.

N. W Bush, for appellant.

McKinlay Linn & Bridges, for respondents.

DUNBAR C.J.

On December 31, 1891, Andrews made his two promissory notes payable to E. C. Finch, numbered 1 and 2. No. 1 was payable six months from date and No. 2 was payable nine months from date. At the time of the execution of the notes, Andrews made and delivered to Finch a mortgage on real estate, to secure the payment of both of said notes. On said day Finch sold note No. 1 to the First National Bank of Aberdeen, and guarantied the payment thereof. No assignment of any part of the mortgage was made to the bank, nor was the mortgage delivered to it. The mortgage was recorded by Finch on March 28, 1892, in the proper office of record. On April 9, 1892, Finch sold note No. 2 to Alexander Young, and indorsed it without recourse on him, but at the same time he made and delivered a written assignment to so much of said mortgage as secured the payment of note No. 2, and also delivered to Young the mortgage itself. An action was brought by the bank, to which Young was made a party. Young afterwards brought an action to foreclose, and these actions were consolidated by the court, and upon which trial the court decided that the note of the bank was entitled to a priority of the proceeds arising from the sale of the mortgaged premises.

There are two questions of law involved in this case: First, the question of authority on the part of the national bank to take a mortgage on real estate to secure payment of a loan where a debt had not been previously contracted; second, the question of priority where the holder of two promissory notes, coming due at different times, secured by mortgage parts with their ownership to different persons at different times, and the sum realized from the sale of the mortgaged premises proves insufficient to pay the notes in full. The first question involves the determination of the scope and extent of the prohibition imposed upon national banks by sections 5136, 5137, of the Revised Statutes of the United States, which provide, in substance, that a national bank may loan money on personal security, and that it may purchase, hold, and convey real estate for the following purposes, and no other: (1) Such as may be necessary for its immediate accommodation in the transaction of its business; (2) such as shall be mortgaged to it in good faith by way of security for debts previously contracted; (3) such as shall be conveyed to it for satisfaction of debts previously contracted in the course of its dealings; (4) such as it shall purchase at sales under judgments, decrees, or mortgages held by the association, or shall purchase to secure debts to it. Upon the construction of this statute the courts of the different states are divided, but the supreme court of the United States has uniformly held that a distinction can be made between borrowing money on real estate and accepting an assignment of a mortgage by the mortgagee as security for money borrowed by the said mortgagee. This doctrine was first announced in Bank...