Home Ins. Co. v. Citizens Bank
| Citation | 178 So. 589,181 Miss. 181 |
| Decision Date | 07 February 1938 |
| Docket Number | 33005 |
| Court | Mississippi Supreme Court |
| Parties | HOME INS. Co. v. CITIZENS BANK |
APPEAL from chancery court of Forrest county HON. H. M. McINTOSH Special Chancellor.
Suit by the florae Insurance Company against the Citizens Bank to recover the amount of a mortgage and mortgage note indorsed by defendant without recourse and for rescission. From a judgment sustaining a general demurrer, plaintiff appeals. Affirmed and remanded.
Affirmed and remanded.
L. Barrett Jones, of Jackson, and E. C. Fishel, of Hattiesburg, for appellant.
It is well settled that one who assigns a mortgage, even without recourse, guarantees and warrants the validity of the instrument, and, if the warranty fails, is liable thereon.
It is no defense to a suit, where the warranty fails in such a case, that the assignment of the mortgage was taken after the maturity of the notes, because the suit is not on the notes as such, but upon the warranty of the assignment under which the validity of the paper is absolutely warranted by the assignor. Moreover, the demurrer does not challenge the fact nor assert, that the loss which occurred under this policy, occurred after the maturity of the notes. As a matter of fact, at the time the fire occurred in this case, the notes were not due, but were due before the assignment by appellee to appellant, the intervening time having been taken up in negotiations between appellee and appellant. We insist, however, that regardless of the due date of the paper and whether matured or not, one may not assign, even without recourse endorsement, and escape the warranty of validity which goes with the assignment. We stress again the fact that this is not a suit on the notes, but a suit on the warranty, going with the assignment of the paper, and particularly with the assignment of the security, the mortgage.
41 C. J., page 683, par. 699, and page 705, par. 729, notes 89, 90; Koek v. Hinkle, 35 Pa.Super. 421; Hexter v. Bast, 719 A. 252, 11 A. S. R. 874.
There can be no doubt about the fact that this bill charges, and the demurrer admits that the appellee claimed as mortgagee under a valid mortgage, and obtained payment through the mortgagee clause on the theory that it held a valid mortgage. Subsequent events, ending in the decree of the Chancery Court of Forrest County, Mississippi, ruled that the mortgage was invalid as to the property covered by the insurance. Hence, appellee is guilty of misrepresentation of both fact and law as to the status of its mortgage, and its rights thereunder. It had no claim against this appellant under its fire policy, except on the ground that it held a valid mortgage, and was entitled to collect under the mortgagee clause. It is in the attitude, pure and simple, of any other person, who had obtained something for nothing. If it can be retained, in the face of the misrepresentations and in the face of the breach of its warranty, then the law of fraud and the law of warranty mean exactly nothing. We submit that equity will not tolerate any such attitude or any such dealings.
If appellant had sued appellee the day it was enjoined from making the sale, appellant would have been promptly met with a plea in abatement to the effect that it had prematurely sued appellee, and appellee would have relied upon the tendency of the suit between appellant and Jackson in the support of the plea, and the plea would have been good. Appellant did not know and could not charge a breach of warranty until the title to the mortgage failed, or rather until the mortgage was declared invalid.
The rule is laid down in 37 C. J., to the effect that there can be no fixed rule as to when the statute of limitations commences to run on an implied or quasi contract, and that it depends upon the facts of each case.
37 C. J. 855, par. 218; Nickles v. U.S. 42 F. 757; Sargent v. Currier, 49 N.H. 310, 6 Am. Rep. 524; Gross v. Kierski, 41 Cal. 111; Word v. Cavin, 1 Head (Tenn.) 406; Caplinger v. Vaden, 5 Humphreys (Tenn.) 629.
To say the least of it, the breach in this case was concealed until appellant was enjoined from making sale under the mortgage.
Broaddus Institute v. Siers, 68 W.Va. 125, 69 S.E. 468.
We also contend that the warranty in this case is contained in a written contract. The assignment of the mortgage is in writing, and as a matter of fact, the very terminology of the assignment, or in other words, the writing itself, is depended upon by appellee, for it argues that since the assignment was a non-recourse assignment, and given after the maturity of notes, secured by the mortgage, we took the mortgage charged with all defenses existing to it. To put it another way, appellee itself attempts to defend upon a clause which it says the language used necessarily is implied in the writing, and that the six year statute applies and not the three year statute, and the fact that one of the terms of the contract flows because the law of the land is written into the contract does not change the fact.
It is well settled law that every contract written, where there is a statute controlling the subject matter, has written into the contract the terms of the statute, whether referred to in the actual contract or not, and we see no difference between the law of statutes and the law contained in decisions.
Heidelberg & Roberts, of Hattiesburg, for appellee.
In some jurisdictions it is held that the assignment of a chose in action, or obligation of any sort, does not imply a warranty that it will be paid or performed, and the assignor will not be responsible to the assignee on fault of the party liable unless he has rendered himself liable by an express contract or has been guilty of fraud and this is especially true where the assignment purports to convey only the assignor's right, title and interest in the obligation assigned.
5 C. J. 969, par. 158; Houston v. Burney, 10 Miss. 583; Griel v. Lomax, 86 Ala. 132, 5 So. 325; Carrier v. Eastis, 20 So. 595; Epler v. Funk, 8 Pa. 468.
Unless it is manifest that the words "without recourse" were intended to express a different meaning, they must be given their ordinary effect, which is that the indorser assumes no contractual liability by virtue of the indorsement itself.
Kaill v. Bell, 88 Kans. 666, 129 P. 1135; 69 C. J. 1318, par. 3.
Our court in more recent decisions has discussed the effects of the words "without recourse" in an indorsement, and it is held that an indorsement without recourse is a qualified indorsement. It is a simple assignment without recourse.
Sections 2694 and 2719, Code of 1930; Develbliss v. Burns, 161 Miss. 795, 138 So. 346; 91 A.L.R. 404; 8 Am. Juris., page 251, par. 542.
Where note and mortgage were sold by mortgagee and indorsed without recourse, there was no implied guaranty of sufficiency of guarantor's title to mortgaged property since words "without recourse" constituted indorser mere assignor, and subject to no liability except as implied guarantor that instruments were genuine, that he had good title to them, and that he was not aware of any illegality in them.
In this connection we desire to call to the attention of the court that the bill of complaint filed in the trial court does not charge the Citizens Bank of Hattiesburg with any knowledge of the deficiency of the deed of trust as to a part of the security identified therein. Their only claim and contention is that by making assignment to appellant without recourse the Citizens Bank of Hattiesburg impliedly guaranteed or warranted the enforceability of the deed of trust and note. Such is not the law.
There are a great many other authorities which we might cite in support of our view that where the assignment is without recourse no warranty of title or genuineness is implied.
Maxfield v. Jones, 106 Ark. 346, 153 S.W. 584; Crawford v. McDonald, 12 Va. 189; Scofield v. Moore, 31 Ia. 241.
There is no equity on the face of the bill.
55 C. J. 255, par. 226.
The bill of complaint states no cause of action against Citizens Bank of Hattiesburg.
41 C. J. 704, par. 729; Green v. Morris, 117 Miss. 635, 78 So. 550.
If we concede for the sake of argument that there exists a guaranty or warranty, still, the insurance company would have no right of action against the Citizens Bank of Hattiesburg until it had exhausted its remedy against the principal, William E. Jackson.
Craig v. Parkis, 40 N.Y. 181, 100 Am. Dec. 469; Barnes v Baker, 2 Mich. 377; Gregg v....
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