Western Nat. Bank of New York v. Maverick Nat. Bank of Boston

• Decision Date: 01 August 1892
• Citation: 16 S.E. 942,90 Ga. 339
• Parties: WESTERN NAT. BANK OF NEW YORK v. MAVERICK NAT. BANK OF BOSTON.
• Court: Georgia Supreme Court

16 S.E. 942

90 Ga. 339

WESTERN NAT. BANK OF NEW YORK v. MAVERICK NAT. BANK OF BOSTON.

Supreme Court of Georgia

August 1, 1892

Syllabus by the Court.

Where a mortgage upon realty is given for securing several negotiable promissory notes, some of which notes are negotiated by the mortgagee before maturity, and others are retained by him and after the maturity of all the notes the mortgagee, in his own name, and without ever having made any assignment of the mortgage or any interest therein, forecloses for the whole amount of the notes so transferred and retained, and afterwards assigns the judgment of foreclosure to one of his creditors, who, besides extinguishing his antecedent debt against the mortgagee, pays the latter a large sum in cash the debt and the cash together being the consideration of the assignment, the assignee, if he takes the assignment without any notice of the transfer of the notes, or that the transferee had any interest in the mortgage security or in the judgment of foreclosure, acquires the title to the judgment unaffected by the secret equity of the transferee and the latter cannot recover from the assignee any part of the proceeds of such judgment after the judgment has been paid off by the mortgagor. The equities protected by section 3597 of the Code, irrespective of notice, are equities between the parties to the judgment, and not those in favor of strangers to the judgment, as to whose names and interest the record is silent.

Error from superior court, Troup county; S.W. HARRIS, Judge.

Action by the Maverick National Bank of Boston against the Western National Bank of New York to recover the amount of notes fraudulently assigned to defendant. Judgment for plaintiff. Defendant's motion for a new trial was overruled, and it brings error. Reversed.

R. A. S. Freeman and N. J. & T. A. Hammond, for plaintiff in error.

F. M. Longley & Son and P. H. Brewster, for defendant in error.

SIMMONS J.

The Maverick National Bank of Boston recovered against Huguley & Co. and the Western National Bank of New York upon the following state of facts: Certain promissory notes of the Alabama & Georgia Manufacturing Company to Huguley & Co., amounting in the aggregate to $15,000, were delivered by the latter to the plaintiff, before maturity, as security for a debt of $5,000, and interest. To secure these notes and others not transferred to the plaintiffs, the maker of the notes had given to Huguley & Co. a mortgage on certain real estate, but no assignment of this mortgage or of any interest in it was made to the plaintiffs. After all the notes had matured, Huguley & Co., in their own name, foreclosed the mortgage for the entire indebtedness which it had been given to secure, having first gotten back the transferred notes, after maturity, from the transferee, under an agreement with the latter to hold them "in trust, to be exhibited in court" in the foreclosure proceeding, and to return them immediately thereafter. Without the knowledge or consent of the transferee of the notes, Huguley & Co. assigned the judgment of foreclosure to the Western National Bank of New York, the consideration of the assignment being the extinguishment by the assignee of its antecedent debt against them, and the payment of a large sum in cash. Afterwards, at a receiver's sale of all the property of the mortgagor, the assignee of the judgment, together with other persons, who were joined as defendants in this case, purchased the property, and the amount of the judgment was credited by the receiver as part payment of the purchase money. The plaintiff, in its petition, claimed that it was legally and equitably entitled to follow into the property thus purchased the collateral which it alleged had been fraudulently taken from it, and it prayed for a money decree against the defendants for the amount of the indebtedness to secure which the collateral had been given, or, if all the defendants were not parties to the fraud, then against such only as had participated in it. Huguley & Co. filed no defense, but the Western National Bank answered, and in its answer set up that the assignment of the judgment had been taken by it in good faith, without notice of the transfer of the notes in question to the plaintiff, or that the plaintiff had any interest in the mortgage security, or in the judgment of foreclosure. On the trial there was evidence tending to establish this defense. The verdict was for the full amount sued for, and the Western National Bank made a motion for a new trial, which was overruled, and it excepted. The grounds of exception mainly relied upon are based upon the failure of the court below to charge the jury as to the defense of good faith and want of notice on the part of the assignee of the judgment. In this we think the court erred. We think if the assignee took the judgment in good faith, and without notice of the plaintiff's equity, the title was taken free from that equity.

It was contended in behalf of the defendant in error that the doctrine caveat emptor applies to the purchaser of a judgment, not only as to the equities of the debtor, but as to all equities which at the time of the transfer exist against the judgment in the hands of the assignor; and in support of this view the following authorities are cited Davies v. Austen, 1 Ves. Jr. 247; Cockell v. Taylor, 15 Eng. Law & Eq. 101; Bush v. Lathrop, 22 N.Y. 535; Sheldon v. Edwards, 35 N.Y. 279; Schaeffer v. Reilly, 50 N.Y. 61; Clarke v. Hogeman, 13 W.Va. 718; Downer v. Bank, 39 Vt. 25; Cox v. Palmer, 60 Miss. 793; Mitchell v. Hockett, 25 Cal. 538; 2 Pom. Eq. Jur. § 703 et seq. On the other hand, numerous decisions are cited to the effect that the assignee is not affected by the latent equities of third persons, not parties to the judgment, of which he had no notice at the time of the assignment. Mr. Black, in his work on Judgments, states that this is "the generally recognized doctrine." Volume 2, § 956, (Ed. 1891.) To the same effect see 2 Freem. Judgm. (Ed. 1892.) § 428, and cases cited; 12 Amer. & Eng. Enc. Law 149 c, and notes. We have found no decision of this court which deals with the exact question here presented. Under our statutes, however, we think the question is free from difficulty. An examination of the cases cited for the...