Price v. Northern Bond & Mortg. Co.
| Decision Date | 07 April 1931 |
| Docket Number | 22804. |
| Citation | 161 Wash. 690,297 P. 786 |
| Court | Washington Supreme Court |
| Parties | PRICE v. NORTHERN BOND & MORTGAGE CO. NATIONAL BANK OF COMMERCE OF SEATTLE v. MALMSTEN et al. |
Department 2.
Appeal from Superior Court, King County; Mitchell T. Gilliam, Judge.
Suit by John G. Price against the Northern Bond & Mortgage Company. After the appointment of a receiver for the defendant, O. G Hensel and wife, as mortgagors desiring to pay off belance of mortgage indebtedness, secured an order in the receivership proceedings directed against L. W. Barnard, receiver, the National Bank of Commerce of Seattle, and against August Malmsten and others, requiring them to show cause why the money should not be paid to a stakeholder, and thereafter issues were made up between the National Bank of Commerce of Seattle and August Malmsten and others as to their respective claims to the money. From judgment for August Malmsten and others, the National Bank of Commerce of Seattle appeals.
Affirmed.
Kerr & McCord, of Seattle, for appellant.
Peters Powell, Evans & McLaren, of Seattle, for respondents.
The parties to this proceeding are in agreement as to most of the facts, the questions in dispute being questions of law. The facts out of which the legal questions arise are substantially as follows:
In November, 1926, one Hensel, together with his wife, executed and delivered to the Northern Bond & Mortgage Company (hereinafter referred to as the mortgage company) their certain promissory note for $7,000, secured by real estate mortgage upon property which presumably was wholly adequate as security. This mortgage was duly recorded. Within a few days thereafter, the mortgage company assigned the mortgage above referred to, together with the note secured thereby, to the National City Bank of Seattle, now the National Bank of Commerce, which will be hereinafter referred to as the bank. This assignment of the note and mortgage to the bank was as security for a certain issue of bonds theretofore authorized by the mortgage company under a written agreement duly executed between itself and the bank, providing that the bank should act as trustee in the interest of those who might purchase the bonds. This trust agreement and its terms will be hereinafter more fully referred to.
Although the Hensel note and mortgage were assigned to the bank in 1926, the bank did not record the assignment of the mortgage until more than three years thereafter, and until after the mortgage company had been adjudged insolvent and placed in the hands of a receiver, the assignment being recorded January 3, 1930.
As a part of its business in lending money, taking security, and selling and dealing in securities, the mortgage company devised a plan for making and selling what are described in the record as participating certificates. These certificates by their terms purported to convey to the particular purchaser named therein a proportionate or pro rata amount or share of a particularly named note and real estate mortgage therein definitely referred to. These were sold in the ordinary course of business to small investors just as negotiable bonds might be sold over the counter. The respondents in this case, without any notice or knowledge of the assignment of the Hensel note and mortgage to the bank, purchased from the mortgage company, in the regular course of business, participating certificates in the Hensel mortgage, the purchases being made at varying dates between December 1, 1926, and the middle of February following. The trial court found that these purchasers, the respondents, in each instance, were purchasers for value without any knowledge of any rights of the bank in and to the security in which they had purchased undivided pro rata interests. In each instance, when the respondents so purchased, the participating certificate was delivered, accompanied by a mortgage title insurance policy for the amount of the respective certificate, issued by a title insurance company in good standing, the policies naming the mortgage company as the owner of the mortgage. All of these policies were issued after the bank had received its assignment of the mortgage, and were delivered to the purchasers of participating certificates as a part of the transaction of purchase.
The mortgagors Hensel made various payments on their mortgage debt from time to time, all such payments being made to the mortgage company. The written trust agreement between the bank and the mortgage company, executed in 1922, expressly reserved to the mortgage company the right to make collections both of principal and of interest upon any and all collateral thus deposited with the bank as security. That agreement also provided that the mortgage company might withdraw any of the securities so deposited at any time by depositing with the bank a proportionate amount of the bonds which had been taken up and paid by the mortgage company. In other words, the written agreement between the mortgage company and the bank recognized the mortgage company as the owner of the securities, with power to collect, and that the bank's rights were simply to hold for the purpose of securing the outstanding bonds.
After the appointment of a receiver for the mortgage company, the mortgagors Hensel desired to pay off the balance of their mortgage debt amounting to the sum of $5,400, and for that purpose secured an order in the receivership proceedings, directed against the receiver and the bank and against the respondents here as certificate holders, requiring them to show cause why the money should not be paid to a stakeholder designated by the court, and the mortgage satisfied. All parties appeared in response and consented that such an order be entered, and the order was made naming the bank as stakeholder. Apparently the money was paid in, and the mortgage was satisfied, and thereafter issues were made up between the bank and the respondents as to their respective claims to the money thus paid to the bank. After a trial of these issues, the trial court found that the bank had been negligent in not recording its assignment of the mortgage, that the respondents had purchased their participating certificates for value and in good faith, and that they were entitled to the money held by the bank as stakeholder; and entered judgment accordingly. From that judgment, the bank prosecutes this appeal.
Two legal questions are presented: First, is the Negotiable Instrument Law here applicable? And, second, is a subsequent assignee of a mortgage, or an interest therein, protected by the recording statute as would be one dealing with the property as distinguished from the mortgage? Or, in other words, is there any difference in legal principle between one dealing with the property and one dealing with the security which is a lien against the property?
As to the first question, it may be well to say that there is nothing in the trust agreement between the bank and the mortgage company which was made for the protection of the bondholders, and from which their...
To continue reading
Request your trial
-
Kim v. Lee
...void against subsequent bona fide purchasers for value who take without notice of the preceding mortgage. See Price v. N. Bond & Mortgage Co., 161 Wash. 690, 698, 297 P. 786 (1931). However, since a judgment creditor is not a purchaser, that is not an issue in the case at bar. See RCW 65.08......
-
In re Columbia Pacific Mortg., Inc.
...364 Ill. 467, 4 N.E.2d 830 (1936); Northern Bond & Mortgage v. Cowell, 172 Wash. 217, 20 P.2d 11 (1933); Price v. Northern Bond & Mortgage Co., 161 Wash. 690, 297 P. 786 (1931). Participation certificates have been enforced in a number of bankruptcy cases and receivership proceedings. FDIC ......
-
Second Nat. Bank of New Haven v. Dyer
... ... of the second assignee. In Price v. Northern Bond & ... Mortgage Co., 161 Wash. 690, 297 P. 786, the note ... ...
-
Beckman v. Ward, 24271.
... ... Cadwallader v. Sprengle, 131 Wash. 16, 228 P. 834; ... Price v. Northern Bond & Mortgage Co., 161 Wash ... 690, 297 P. 786; ... ...
-
Table of Cases
...P.2d 371 (1980): 10.7(1)(a) Preugschat v. Hedges, 41 Wn.2d 660, 251 P.2d 166 (1952): 17.2(4), 17.12(2) Price v. N. Bond & Mortgage Co., 161 Wash. 690, 297 P. 786 (1931): 20.11(2) Priestley Mining & Milling Co. v. Lenox Mining & Dev. Co., 41 Wn.2d 101, 247 P.2d 688 (1952): 17.3(2)(d)(iii) Pr......
-
§20.11 - Transfer of the Debt and Security by the Mortgagee
...purchaser or mortgagee. General Credit Corp. v. Lee James, Inc., 8 Wn.2d 185, 111 P.2d 762 (1941); Price v. N. Bond & Mortgage Co., 161 Wash. 690, 297 P. 786 (1931). Even though the recording of an assignment of mortgage is notice to all the world, Hargis v. Hargis Bank &Trust Co., 160 Wash......