Sargent v. Cooley

Decision Date14 November 1902
Citation94 N.W. 576,12 N.D. 1
CourtNorth Dakota Supreme Court

Appeal from the District Court, Grand Forks county. Fisk, J.

Action by F. S. Sargent, as receiver of the Security Trust Company against John E. Cooley and Minnie E. Clifford. Judgment for defendants, and plaintiff appeals.

Reversed.

Judgment of the trial court reversed; and judgment entered in favor of the plaintiff.

Templeton & Rex, for appellant.

Proof to break down a mortgage must be "clear, satisfactory and specific, and of such a character as to leave in the mind of the chancellor no hesitation or substantial doubt." McGuin v. Lee, 10 N.D. 160, 86 N.W. 717.

Under the statute of this state, "A grant cannot be delivered to the grantee conditionally. Delivery to him, or his agent as such, is necessarily absolute; and the instrument takes effect thereupon, discharged of any condition on which the delivery was made." Rev. Codes, 1899, section 3517. A mortgage is a grant. Rev. Codes, section 4727. The provisions of the chapter on transfers in general concerning the delivery of grants absolute and conditional, apply to all written contracts. Rev. Codes, 1899, section 3890. Merrill v. Hurley, (S. D.) 62 N.W. 958; Mowry v Henry, 86 Cal. 471, 25 P. 17. The same rule applies to delivery of mortgages as to deeds. 20 Enc. of Law, 905.

Delivery without mistake or fraud, of a duly executed deed, passes a title, which can be divested only by a condition in the deed itself. 9 Am. & Eng. Enc. of Law 163. Deed, land contract or other instrument cannot be delivered to grantee, or obligee or other beneficiary, as an escrow. Lowber v. Connit, 36 Wis. 176. 11 Am. & Eng. Enc. of Law, 337.

The taker of a negotiable promissory note of a third person as collateral security to a pre-existing debt, is, under the great weight of authority, a bona fide purchaser. Dunham v. Peterson, 5 N.D. 417, 67 N.W. 293. The existing obligation is sufficient to sustain the security. Rev. Codes, 1899, section 3872. Bank v. Lamont, 5 N.D. 393, 67 N.W. 145.

Tracy R. Bangs, for respondents.

Mortgages have been recognized as accommodation paper, and are often made for the sole purpose of accommodation. Bridges Adm'r v. Blake, et al. 6 N.E. 833.

The mortgage was simply left with Mr. Clifford to be retained as collateral to any liability of the Security Trust Company by reason of the negotiation of the notes; and if the notes were never negotiated, then the time never came when the mortgage was of any effect, Hence there never was a delivery, and the Trust Company has no rights in it. This would be true even though it were a deed. Gilbert v. North America Fire Ins. Co., 23 Wend. 43.

WALLIN, C. J. YOUNG and MORGAN, JJ., concur.

OPINION

WALLIN, C. J.

This action is brought to foreclose a mortgage upon real estate, which mortgage was executed by the defendant, John E. Cooley, and delivered by him to the Security Trust Company; and, upon its face, the mortgage purports to secure a promissory note for $ 500, dated December 20, 1893, which note was executed by said Cooley, and was by him delivered at the date of its execution to the Security Trust Company. After a trial without a jury the district court entered a money judgment against defendant Cooley for the amount claimed in the complaint; but it was further adjudged by that court in substance, that the mortgage sought to be foreclosed by this action is invalid, and was at all times worthless as a security in the hands of the Security Trust Company, and the court below directed the plaintiff to cancel the same of record and surrender it to the defendant John E. Cooley. From such judgment, plaintiff appeals to this court, and demands a trial of certain issues of fact in this court, which are specified as follows: (1) Was the mortgage in suit executed, acknowledged and delivered by defendant Cooley? (2) If so, was the same given to secure a part of the debt evidenced by the note sued on herein? (3) If so, has said mortgage ever in any manner been released, discharged or otherwise rendered of no effect?

In this court the controlling question presented for determination is whether the mortgage is a valid security, and, as such, available to the plaintiff for purposes of foreclosure. The contention of the defendant Cooley is fully set out in his answer to the complaint as follows:

"(2) Further answering, this defendant alleges that the said mortgage was given to the said Security Trust Company by this defendant without any consideration whatever therefor, but simply as an accommodation to the said Security Trust Company, to enable it to sell, assign, transfer, negotiate, and hypothecate the note evidencing the indebtedness described in said mortgage to some person or persons to this defendant unknown, and to enable the said trust company to make a true statement to such purchaser, transferee, or pledgee that the said note was secured by mortgage on real estate, and to enable the said trust company to realize on said note by negotiating or hypothecating the same.

"(3) That at the time of the making and delivery of the said mortgage, it was understood and agreed by and between the said Security Trust Company and this defendant that the said mortgage should be, and was, given for the sole purpose as set forth in paragraph 2 of this third defense, and that the same should be, and was, accepted by the said trust company for the same purpose, and no other; that it was further stipulated and agreed by and between the said trust company and this defendant that the said mortgage was not given or received as security to the said trust company, but that the same was given and received, and was by the said parties understood and intended to be, as security only to the transferee or the pledgee of the said note; and it was further agreed that the said mortgage should not be placed of record, but that the same should remain in the office of the said trust company until the said note should be returned to the said trust company, and that then the said mortgage should be delivered up to this defendant and canceled.

"(4) That the said mortgage has wholly fulfilled the purpose for which the same was made and accepted, that the said note evidencing the indebtedness purporting to be secured by said mortgage has been returned to the said trust company, and that the defendant, under the terms of the said agreement, is now entitled to have the same delivered up to him and canceled. Wherefore this defendant asks that the plaintiff's cause of action be dismissed, and that he, the said defendant, do have judgment against the said plaintiff for his costs and disbursements herein."

Upon the issues as specified in the statement of the case, the first question of fact presented is whether defendant John E. Cooley executed the mortgage, and delivered the same to the Security Trust Company. As to this question of mere fact there is, and can be, no contention. It is conceded that subsequent to the delivery of the $ 500 note described in the mortgage, and on February 19, 1894, the defendant Cooley did execute and deliver the mortgage to the Security Trust Company and further, that after said company became insolvent, and on July 27, 1897, said mortgage was recorded in the office of the register of deeds of Grand Forks county.

The second question of fact is whether the mortgage was given to secure a part of the debt evidenced by the note sued on. We are quite clear that an affirmative answer must also be given to this question. It appears by the answer, as well as by the testimony, that in so far as the mortgage was intended to operate as security for the performance of any act whatever it was given, and intended to be given to secure the $ 500 note described in the mortgage, which note, it appears, has never been paid; and the same has been merged in, and forms a part of, the note sued on in this action. Nor is such merger controverted in this court. If we understand the position taken by appellant's counsel in this court, it is not that the mortgage was not, in any event, intended to be given as a security for the payment of the $ 500 note described in the mortgage. On the contrary, the contention of counsel corresponds to the averments in the answer of the defendant Cooley in this respect, and both are to the effect that the mortgage was given, and intended to be given, to secure the debt evidenced by the note described in the mortgage; but it is further contended and alleged in behalf of John E. Cooley, that he executed the mortgage as an accommodation to the mortgagee, and without consideration, and pursuant to an agreement in substance as follows: (1) That the mortgage was in no event to take effect or operate as a security in favor of the...

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