Mitchell v. Brinkman
| Decision Date | 09 May 1925 |
| Docket Number | 25,702 |
| Parties | OTIS C. MITCHELL et al., Appellants, v. (F. M. PERKINS) H. C. BRINKMAN et al., Appellees |
| Court | Kansas Supreme Court |
Decided January, 1925.
Appeal from Elk district court; GEORGE J. BENSON, judge.
Judgment affirmed.
SYLLABUS BY THE COURT.
1. BILLS AND NOTES--Form of Indorsement--Holder in Due Course. Under the negotiable instruments act, a writing on the back of a negotiable promissory note in these words, accompanied by delivery of the note before its maturity to the persons named in the writing, is an indorsement of the note, following Farnsworth v. Burdick, 94 Kan. 749, 147 P. 863; id. 95 Kan. 642, 147 P. 863; and that part of paragraph 2 of the syllabus and of the concluding paragraph of the opinion in Nelson v. Southworth, 93 Kan. 532, 144 P. 835, at variance therewith is overruled.
2. SAME--Holder in Due Course--Constructive Notice. The fact that the public record of land titles disclosed that the makers of a promissory note and mortgage had no record title to the property they assumed to mortgage to secure the payment of their negotiable promissory note was not sufficient to charge the indorsees, to whom the note had been assigned and transferred, with notice of the note's infirmities nor destroy their rights as holders in due course.
3. SAME--Note and Mortgage--Bona Fide Purchaser--Duty to Examine Abstract. The fact that the indorsees to whom the note and mortgage given as security were assigned and transferred failed to demand an abstract of title to the property, which abstract would have disclosed that the title did not stand in the name of the mortgagors at the time the mortgage was executed and recorded, was not sufficient to charge the parties acquiring the note by indorsement with notice of infirmities in the note nor require them to meet defenses which would have been good against the original payee.
4. SAME--Holder in Due Course--Evidence. For the purpose of borrowing money, plaintiffs executed their negotiable promissory note and mortgage on property they planned to buy. They delivered the instruments to an agent of the payee, without receiving the money therefor. The payee sold, transferred and assigned the note and mortgage to third parties before maturity. Plaintiffs brought an action to cancel the assignment and to quiet their title, alleging that the transferees acquired the note and security with notice of infirmities or with such notice of probable defects in the title to the property mortgaged to secure the payment of the note as put them upon inquiry. Held, that the evidence inherent in the circumstances set out in the opinion was insufficient to sustain plaintiffs' cause of action, and a judgment in favor of defendants for the amount of the note and to foreclose the mortgage was not erroneous.
A. F. Sims, of Howard, for the appellants.
John J. Riling, and Edward T. Riling, both of Lawrence, for the appellees.
OPINION
This is another case where the makers of a promissory note and mortgage for borrowed money let the instruments get out of their hands without receiving the money therefor.
In May, 1920, the plaintiffs, husband and wife, desired to buy a house and town lots in Longton, and applied to one McCutchan, local agent of F. M. Perkins, a loan broker of Lawrence, for a loan of $ 1,500 with which to pay for the property. Plaintiffs executed a note and mortgage on the property they planned to buy, payable to the order of F. M. Perkins, for $ 1,500, dated May 1, 1920.
Plaintiffs intrusted the note and mortgage to McCutchan, who assured them he would keep them at his office until the money came. McCutchan broke faith with plaintiffs and forwarded the instruments to Perkins. The mortgage was recorded on June 9, 1920, and on June 22, 1920, Perkins sold, assigned and transferred the note and mortgage to H. C. Brinkman and wife without recourse. The assignment of the mortgage to the Brinkmans was recorded December 1, 1921. Plaintiffs never received a cent for their note and mortgage. They had no deed to the property at the time they executed the mortgage thereon, but afterwards procured a conveyance of it, and temporarily borrowed the money to pay for the property from Mitchell's mother.
McCutchan died a violent death, and Perkins was sent to the penitentiary for one of a number of dishonest transactions not greatly different from the one here narrated. (The State v. Perkins, 112 Kan. 458, 210 P. 1091; Juniata College v. Warren, ante, p. 228, 118 Kan. 228, 235 P. 98.)
Plaintiffs' prayer was for a decree quieting their title, to cancel and set aside the assignment, and for an adjudication that they were the owners in fee as against defendants, and for all other appropriate relief in equity.
Defendants Brinkman and wife answered denying such material parts of plaintiffs' petition as was necessary for them to traverse, and in appropriate recitals set up their bona fide ownership of the note and mortgage as holders in due course, set up plaintiffs' default in payment of principal and interest according to the tenor of the note; and defendants prayed judgment on the note and to foreclose the mortgage given as its security.
To sustain the issues in plaintiffs' behalf they made the most of what odds and ends of evidence might be gleaned or deduced from the circumstances and correspondence which passed between plaintiffs and Perkins, McCutchan and Perkins, and Brinkman and plaintiffs.
A jury was waived; the trial court heard the evidence, and found generally and specially for Brinkman and wife, gave judgment accordingly, and decreed foreclosure of the mortgaged property to satisfy the judgment.
Plaintiffs appeal, contending first that the note was not transferred by indorsement but was delivered to defendant upon an assignment, under which, plaintiffs say, the defenses available against the original holder are good against the Brinkmans. The assignment read:
Plaintiffs cite Nelson v. Southworth, 93 Kan. 532, 144 P. 835 to support their argument. It is undeniable that the concluding paragraph of the opinion in that case, although not necessary to the righteous decision reached therein, does support plaintiffs' position. But neither the concluding paragraph of that opinion nor the corresponding part of the second section of the syllabus were necessary to that decision, since the trial court found on the evidence that the transferees were not innocent holders in due course and that they acquired them pendente lite. However that may be, in Farnsworth v. Burdick, 94 Kan. 749, 147 P. 863, the effect of the adoption of the negotiable instruments act was carefully considered with particular reference to the matter of assignments executed on the back of the instrument, and the decision virtually overruled that part of Nelson v. Southworth, supra, relied on by plaintiffs. It was not so declared in the latter opinion, and indeed the main features of the opinion in Nelson v. Southworth,...
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