Longan v. Carpenter

• Decision Date: 01 July 1870
• Citation: 1 Colo. 205
• Parties: LONGAN v. CARPENTER.
• Court: Colorado Supreme Court

1 Colo. 205

LONGAN v. CARPENTER.

Supreme Court of Colorado

July, 1870

Appeal from District Court, Jefferson County.

APPELLEE filed his bill to foreclose a mortgage given by appellant to Jacob B. Carpenter. He alleged that the mortgage was given to secure a note for $980, dated March 5, 1867 payable six months after date at the Colorado National Bank to Jacob B. Carpenter or order, that on the 24th of July 1867, Jacob B. Carpenter assigned the note and mortgage to him.

Appellant in her answer denied all knowledge of the assignment and averred that, at the date of the mortgage, in addition to the mortgage security, she delivered to J. B. C. as collateral and further security for the sum of money specified in the note and mortgage, 103 sacks of good merchantable wheat flour then of the value of $1,236, and 7,500 lbs. of wheat then of the value of $450, which, she alleged, said J. B. C. agreed to sell and apply to the payment of the sum due him on said note and mortgage; or, if not sold, to return on payment or tender of payment of the sum of money specified in the note and mortgage. Appellant also alleged, that, at the maturity of the note, she tendered the sum of $1,180 at the Colorado National Bank in payment of the note, and demanded the return of the note and mortgage and the flour and wheat to her which was refused. Appellant averred further, that J. B. C. appropriated the said flour and wheat, of the value of $1,686, to his own use and refused to account there for. The master found that there was due upon the note and mortgage $1,622.68. At the hearing, the deposition of William Longan was read. He testified that the mortgaged premises belonged to his mother, the appellant; that appellant borrowed from J. B. C. $980, and gave the mortgage and 100 sacks of flour and 7,520 or 7,530 lbs. of wheat as security; that the flour and wheat were in a house on Blake street belonging to Williams & Miller, and that J. B. C. took Williams & Miller's receipt for it; that J. B. C. authorized witness and his brother to take the flour and wheat to the mountains and dispose of it, if they would pay to Williams & Miller the market price for the same in Denver; that Williams & Miller should indorse the amount so paid on the note. That, in the latter part of April of 1st of May, 1867, witness got 560 or 660 lbs. of wheat from Williams & Miller and paid them 4 1/2 cents per lb. for it; that this was a portion of the wheat given to J. B. C. as aforesaid; witness at other times got flour of the same lot and paid Williams & Miller there for at $8.50 a sack; witness could not tell the exact number of sacks he got; in July, 1867, Williams & Miller failed in business and witness found a lot of the flour and wheat being disposed of; witness went to J. B. C. and tried to get him to save the wheat and flour. J. B. C. stated that he was not going to get himself in any law suit about it, and declined to take any steps about the matter; said that he was sufficiently secured by the mortgage and that he would give the warehouse receipt for the flour and wheat back to witness; that he would assign the receipt to witness so that he could go and get the flour and wheat.

Witness further stated that, after Williams & Miller failed, Mr. Miller of that firm told him that J. B. C. was the owner of the flour and wheat, and that he would account to him alone for it, which he had done, and that J. B. C. had authorized its disposal, and that witness would look at Williams & Miller's books and they would show just what had been done with the flour and wheat. Witness told J. B. C. what Miller had said, and J. B. C. said he would give witness the receipt. When witness asked him where it was, he said witness would have to go to his lawyers as they had his papers. On cross-excamination witness stated: The wheat and flour was in the warehouse of Williams & Miller before the loan was made; that we had before that time borrowed money, about $600, on the flour alone; the first loan was about sixty days before that of J. B. C.'s was made; the grain and flour belonged to witness and his brother; the warehouse receipt was given to Mr. Kountze as security for the first loan; the old warehouse receipt was taken up, with the money borrowed of J. B. C., and the first loan so paid off.

Jesse B. Longan testified that he pleaded the flour and grain to J. B. C. as security for the payment of the note; that he had previously borrowed money at the bank, and that Williams & Miller became his security there for, and they had the flour in their possession; that Williams & Miller arranged the loan with J. B. C. and that the money was borrowed of J. B. C. for himself and his brother William Longan; that the flour and wheat were owned by himself and William Longan; in other respects his testimony was substantially the same as that of William Longan.

Jacob B. Carpenter testified that he assigned the note and mortgage to B. Plate Carpenter, the complainant below, in July, 1867; that, when the flour and wheat were pleadged to him, it was understood that the same should lay in the store of Williams & Miller until the note became due, unless the Longans should take a portion thereof to the mountains, and in that event, the Longans would pay to Williams & Miller the market price there for in Denver, and the amount so paid was to be indorsed on the note. This witness also testified as to the circumstances attending the failure of Williams & Miller. He also stated that he received $1,000 upon the assignment of the note and mortgage, and that he never received any of the proceeds of the sales of the wheat and flour nor ordered the sale of it, nor exercised any control over it in any manner whatever.

There was other testimony corroborating the foregoing and also conflicting testimony as to the tender alleged to have been made by the respondent, which it is unnecessary to refer to. An assignment of the mortgage executed by J. B. C. was given in evidence and also the promissory note before mentioned, which was signed by Mahala Longan and Jesse B. Longan, and appeared to have been indorsed without recourse by J. B. C.

The court decreed for the complainant below, and found that there was due to him the sum of $1,820, being the full amount of the note, and that the mortgage premises be sold to satisfy the same.

Messrs. BROWN & MECHLING, for appellant.

Mr. ALFRED SAYRE and Mr. DANIEL SAYRE, for appellee.

BELFORD J.

This was a bill in chancery to foreclosure a mortgage filed by the appellee, as the assignee of one Jacob B. Carpenter. The mortgage was given to secure a negotiable note. The mortgage bears date March 5th, 1867, and is payable to Jacob B. Carpenter or his heirs or assigns, and was by him assigned to the complainant on the 20th day of July, 1867. The assignment was properly recorded on the 7th day of February, 1868. The defendant, in her answer, denies all knowledge of the assignment, and avers that the date of said mortgage, she, in addition to the said mortgage security, delivered to the said Jacob B. Carpenter, as collateral and further security for the payment of the said sum of money, specified in said note and mortgage, one hundred and thirty sacks of good merchantable wheat flour, then of the value of $1,236, and seven thousand five hundred pounds of wheat of the value of $450, which she alleges said Carpenter agreed to sell and apply to the payment of the sum due him on said note and mortgage, or, if not sold, to be returned on payment or tender of payment of said note and mortgage. She further charges that said Carpenter sold said flour and wheat, and appropriated the sum to his own use, and refuses to account to her for the proceeds. This cause his been ably argued by counsel, and has received great consideration from this court. The principle involved has never been before adjudicated in this territory, and in the States where it has received judicial notice the decisions are in direct conflict. It is claimed by the appellee that the note secured by the mortgage is a negotiable note, that it was negotiated before due, and that the assignee being a bona fide purchaser of the note without notice, took it and the mortgage freed and discharged from all equities and defenses that existed in favor fo the mortgagor and against the mortgagee. There is no evidence showing that B. Platte Carpenter had, before or at the time of the assignment of the note, any knowledge of the wheat and flour given by Mahala Longan as further security to Jacob B. Carpenter.

It is contended by the appellant, that, having taken security by way of mortgage, that that security qualifies the rights of the mortgagee and those claiming under him, and that, when an action is brought to foreclose the mortgage, that that instrument, together with the note secured thereby, passes into the category of obligations to which defenses and equities may attach and be made available into whosesoever hands they fall. We are free to admit that this question is surrounded with great difficulties, and deeply regret that no settled and uniform rule exists in this country on the subject. The supreme courts of Wisconsin, Michigan and Illinois, so far as we have been able to discover, are the only courts that have passed upon the matter in controversy. In Illinois, the rule is laid down as claimed by the appellant. They hold there that, although the note secured by the mortgage is negotiable, still it is open to whatever defenses existed against the mortgagee. A different rule obtains in Wisconsin and Michigan. Amid this conflict of authorities, we feel at liberty to choose our course, and shall endeavor to follow that which, in our judgment, is recommended by the better reason. What relation does a mortgage sustain to...