Logan v. Smith

• Decision Date: 31 May 1876
• Citation: 62 Mo. 455
• Parties: JOHN S. LOGAN, Respondent, v. WILLIAM A. J. SMITH, AND SUSAN E. SMITH, Appellants.
• Court: Missouri Supreme Court

62 Mo. 455

JOHN S. LOGAN, Respondent,

v.WILLIAM A. J. SMITH, AND SUSAN E. SMITH, Appellants.

Supreme Court of Missouri.

May Term, 1876.

Appeal from Buchanan Circuit Court.

A. H. Vories & W. S. Greenlee, for Appellants.

I. Mortgages are not governed by the same law as commercial paper, and the assignment of Smith's note by Cowan could not vest the plaintiff with any higher rights or stronger equity, in the mortgage given by Smith, than Cowan himself had; and if in his hands the mortgage was canceled, or could not have been enforced, neither could plaintiff enforce it. (Potter vs. McDowell, 43 Mo., 93-98; Linville, etc. vs. Savage, 58 Mo., 248-255; Shirm vs. Fredericks, 56 Ills., 439; Bailey vs. Smith, 14 Ohio St., 396; Craft vs. Bunster, 9 Wis., 503-8.)

II. The note of Smith being assigned to plaintiff as collateral security for the loan of $1,200, any defense against Cowan is available against his assignee. (Goodman vs. Simmonds, 19 Mo., 106; Potter vs. McDowell, 43 Mo., 93-98.)John D. Strong, with Vinton Pike, for Respondent.

I. Plaintiff being a bona fide holder of the note and mortgage, evidence of any equities existing against Smith and Cowan in respect of this transaction is inadmissible. (Carpenter vs. Longan, 16 Wal., 271, and cases cited; 16 Wal. 468; 2 Pow. Mort., 973.) The authorities sustain this objection upon three grounds.

1. The mortgage follows the debt and partakes of its character. If the debt is negotiable, the mortgage must be. is an inseparable incident of the debt. (Croft vs. Bunster 9 Wis., 503.)

2. The mortgagee is a purchaser pro tanto, and may assign just as a fraudulent grantor of the fee may convey a valid title to an innocent purchaser. (Pierce vs. Farrar, 47 Me., 507.)

3. The mortgagor's contract is, that he wlll pay the note when it becomes due to any bona fide holder, without defense, and his property shall stand pledged for the fulfillment of that obligation. (Carpenter vs. Longan, supra.)

II. A mortgage has no separate existence and passes with an assignment of the debt. (Watson vs. Hawkins, 60 Mo., 554; McQuie vs. Peay, 58 Mo., 61; 2 Pow. Mort., 913.)

In Linville vs. Savage (58 Mo., 249), the point was not made by the assignees who asked a reversal of that case entirely upon other grounds.

HOUGH, Judge, delivered the opinion of the court.

This was a proceeding to foreclose a mortgage under the statute.

On the 17th day of January, 1870, Samuel F. Cowan sold and conveyed by warranty deed, to the defendant Smith, the land described in the mortgage sought to be foreclosed, for the sum of $3,000. The defendant paid $1,800 in cash, and for the remaining $1,200 made and delivered his negotiable promissory note of that date to said Cowan, payable on the 25th day of December, 1870, and to secure the payment of the same, executed said mortgage. At the date of said sale, there was on record a mortgage on said land, made by Cowan on the 22d day of December, 1869, to one Floyd, from whom Cowan had purchased said land, to secure the payment of two notes of $770 each for unpaid purchase money, dated August 30th, 1869, and due respectively on the 1st day of March, and on the 25th day of December, 1870.

The defendant, Smith, had no knowledge of this mortgage at the time of his purchase, and he first learned of its existence on the 25th day of March, 1870, when Floyd notified him that Cowan had made default in the payment of his first note. Smith then saw Cowan, and it was agreed between them that Smith should raise $500, and Cowan should raise the balance necessary to pay off said note. In pursuance of said agreement, Smith paid $500 to Floyd on the 25th day of May, 1870, which was credited on Smith's note to Cowan; but Cowan failed to raise any money whatever. It was then further agreed between them, that Smith should become responsible on the Floyd notes to the extent of the balance on his note to Cowan for $1,200, not then due, and thus extinguish his indebtedness to Cowan. Cowan then stated to him that the mortgage had not been recorded, and should not be, but the note was not surrendered. Time was given on the balance of the first note, as is shown by the date of payment, and Smith subsequently paid the whole of the Floyd notes, and had satisfaction of the mortgage entered of record.

On the 9th day of August, 1870, the plaintiff, Logan, loaned to Cowan the sum of $1,200, taking a note from him therefor, and a transfer of Smith's note for $1,200 as collateral security, being informed by Cowan that it was secured by the mortgage before mentioned. This mortgage was never recorded, nor was it delivered to Logan, and it appears from the evidence to have been lost.

Soon after this transaction Cowan became insolvent. Smith was notified of the transfer of his note to the plaintiff, a short time prior to its maturity, and before any payments were made by him on the Floyd notes, other than that of $500 on May 25th, 1870, which was indorsed on the note; but as we infer from the record, that Smith entered into some personal obligation to Floyd to the extent of his liability to Cowan, we shall not regard the payments thereafter made by him as affecting his rights. There was no evidence of any knowledge on the part of Logan, or of notice of any kind to him, of the arrangement made by Smith to discharge his debt to Cowan by paying the amount thereof to Floyd. The circuit court rendered judgment for the plaintiff on the note for the balance due and interest, and for foreclosure of the mortgage.

On the foregoing facts it is contended by the defendant, that the plaintiff was not entitled to judgment, first, because he could not be regarded as a bona fide holder of the Smith note, inasmuch as he took it as collateral security; and second, because...