Wilson v. Campbell

• Decision Date: 31 July 1896
• Citation: 68 N.W. 278,110 Mich. 580
• Court: Michigan Supreme Court
• Parties: WILSON v. CAMPBELL.

68 N.W. 278

110 Mich. 580

WILSON v. CAMPBELL.

Supreme Court of Michigan

July 31, 1896

Appeal from circuit court, Grand Traverse county, in chancery Roscoe L. Corbett, Judge.

Bill by Robert H. Wilson against Elizabeth A. Campbell. Decree for complainant, and defendant appeals. Reversed.

Lyon & Dooling, for appellant.

Dodge &amp Corell, for appellee.

MONTGOMERY J.

The hearing is on a bill filed by the complainant to compel the discharge of a mortgage executed by Freeling H. Potter and wife to defendant, and on a cross bill filed to foreclose the mortgage. The complainant has succeeded to the title of Potter. The facts are that on January 27 1886, Potter made his promissory note, payable to E. E. White or bearer, for $550, due April 1, 1892, with coupons attached, representing the installments of interest. Principal and interest were made payable at the office of S S. Walker, St. Johns, Mich. The note contained a provision that in case of default in the payment of interest continuing for 30 days the whole principal and interest unpaid should, at the option of the holder of the note, become due. This note was secured by a mortgage with a condition for the payment of the principal and interest of the note and all taxes and assessments of whatever nature which may be levied upon the described premises as soon and as often as the same may become due and payable. The mortgage contained the following agreement: "Should any default be made in the payment of said taxes, assessments, interest, or any part thereof, on any day whereof the same is made payable, as above expressed, and should the same remain unpaid and in arrears for the space of thirty days, then and from thenceforth-that is to say, from the lapse of thirty days-the aforesaid principal sum of five hundred fifty dollars, with all arrearages of interest thereupon, and all taxes, assessments, and _____ unpaid shall, at the option of said obligee, his executors, administrators, or assigns, become and be due and payable immediately thereafter, although the time above limited for the payment thereof may not then have expired, anything hereinbefore contained to the contrary notwithstanding." The note and mortgage were assigned to the defendant June 14, 1887, and possession of the same delivered to her. She has since retained possession of the securities at her home in Skaneateles, N.Y. At about the date of the maturity of the coupons the defendant was accustomed to detach the coupons, and send them forward to Walker, Walker & White and the Michigan Mortgage Company, Limited, for collection. The assignment of the mortgage to complainant was not recorded until April 13, 1894. October 3, 1888, Potter and wife sold the mortgaged premises to the complainant, he taking subject to the mortgage. At about the date of the maturity of the mortgage, complainant, supposing, as he testifies, that the Michigan Mortgage Company, Limited, owned this mortgage, applied for a loan of an additional sum, and negotiations culminated in his executing, under the date of April 1, 1892, a note and mortgage in the sum of $700, payable to the Michigan Mortgage Company, Limited. This mortgage was, on the 27th of April, 1892, assigned to Mrs. John F. Nichols, who is made defendant in the cross bill. It appears that the defendant, Mrs. Campbell, became a stockholder in the Michigan Mortgage Company, Limited, in 1891. The court below decreed a discharge of defendant's mortgage, and stated the reasons as follows: "The course of dealing between Mrs. Campbell and the Michigan Mortgage Company, Limited, in submitting to the company the interest coupon notes for collection as they matured, her neglect to record her assignment until after the execution of the second mortgage of $700, April 1, 1892, and the fact that she was a member and stockholder of the partnership association Michigan Mortgage Company, Limited, at the date of the execution of said $700 mortgage, estops her from challenging the authority of said company to receive payment of her mortgage, inasmuch as the reception of said payment by said company was an act within the scope of its authority." Defendant, Mrs. Campbell, appeals.

The original bill asserts, and apparently bases the claim for relief on the statement, that the Michigan Mortgage Company, Limited, was duly appointed by the defendant, Mrs. Campbell, as her duly-authorized agent to receive, accept, and account for any and all money received in payment upon said mortgage, either as interest or principal; and avers payment to her agent, the mortgage company, for the defendant. The sworn answer of defendant denies such agency. The bill does not proceed upon the theory that the complainant was misled by defendant's failure to record the assignment, but, as Mrs. Nichols is brought in to answer the cross bill, and entitled to be heard, we find it necessary to treat of this question. In Williams v. Keyes, 90 Mich. 296, 51 N.W. 520, we held, following Dutton v. Ives, 5 Mich. 515, that the holder of a negotiable security is alone the one prima facie entitled to receive the payment, and that the maker is not authorized to assume that negotiable paper secured by mortgage has not been transferred. See, also, Jones, Mortg. � 957. However the failure to record the assignment may affect one subsequently deriving title or right through the mortgagee, the maker of a negotiable note secured by a mortgage cannot discharge his liability by payment to one not the holder, or authorized by the holder to receive the payment. We are not able to discover that the defendant ever authorized the Michigan Mortgage Company, Limited, to collect the principal of this note, or to collect more than the interest coupons on the same being forwarded to it for the purpose. In this respect the case is so similar to others decided by this court that we think it unprofitable to discuss this feature here at length. See Joy v. Vance (Mich.) 62 N.W. 140, and cases cited; Bromley v. Lathrop (Mich.) 63 N.W. 510; Trowbridge v. Ross (Mich.) 63 N.W. 534.

We are at a loss to understand how the fact that the defendant is a stockholder in the Michigan Mortgage Company, Limited, affects her right to assert that the officers of the company exceeded their authority in accepting payment of the mortgage. To the extent that she contributed to the stock of the corporation it may be said that she risked her investment, and relied upon the honesty of the managers, but beyond this the company was not her agent by mere force of the fact that she was a stockholder. If the note and mortgage were negotiable, it follows that the complainant has not made a payment to one either in fact or apparently clothed with authority to receive it. But it is contended that the note is not negotiable, the ground being that the note gives an option to declare the whole amount due in case of default in payment of an installment of interest, and, while the point is not made, the question suggests itself whether the similar provision contained in the mortgage, giving a like option in case of default in payment of taxes, renders the security nonnegotiable, and, as this question is discussed in Brooke v. Struthers (now pending before us) 68 N.W. 272, we consider both questions.

In Littlefield v. Hodge, 6 Mich. 327, it was held that a note in form negotiable is none the less negotiable when secured by a mortgage containing provisions not repugnant to it. We apprehend the test in such cases is, are the provisions of the mortgage such as to introduce uncertainty as to time or amount? What elements of uncertainty inconsistent with negotiability her exist, if any? Is there such uncertainty as to time as renders the note nonnegotiable? It seems to me very clear that the answer must be in the negative. Carlon v. Kenealy, 12 Mees. & W 139; German Mut. Ins. Co. v. Franck, 22 Ind. 364; Walker v. Woollen, 54 Ind. 164; Cota v. Buck, 7 Metc. (Mass.) 588; Kiskadden v. Allen, 7 Colo. 206, 3 P. 221; Dobbins v. Oberman, 17 Neb. 163, 22 N.W. 356; Ernst v. Steckman, 74 Pa. St. 13; Charlton v. Reed, 61 Iowa, 166, 16 N.W. 64; Chicago Railway Equipment Co. v. Merchants' Bank, 136 U.S. 268, 10 S.Ct. 999; Cisne v. Chidester, 85 Ill. 525. In Carlon v. Kenealy it was determined that a note payable in installments, subject to a condition that, on default being made in payment of the first installment, the whole amount shall become due, is assignable within the statute 3 & 4 Anne, c. 9. Parke, B., in deciding the point, said: "Almost every note payable by installments has such a condition. It is not a contingency; it depends upon the act of the maker himself, and on his default it becomes a promissory note for the whole amount." In Ernst v. Steckman a note payable 12 months after date, or before, if made out of the sale...