Jordon v. Cheney

Walton, J. One who takes a mortgagee’s title holds it in trust for the owner of the debt to secure which the mortgage was given. If a mortgage is given to secure negotiable promissory notes, and the notes are transferred, the mortgagee and all claiming under him will hold the mortgaged property in trust for the holder of the notes. To secure this result it is not necessary that there should be any recorded transfer of the notes or mortgage. Nor is an assignment of the mortgage necessary. If the mortgage is duly recorded, the record is notice to all the world of the character of the mortgagee’s title; and one taking title from or through him will obtain only a mortgagee’s tille, and be chargeable with notice that the notes are liable to be transferred, if they are not already transferred, and that he [362] must- hold the estate in trust for the holder of the notes to secure which the 'mortgage was ' given, whoever that holder may be. No written declaration of the trust is necessary under the statute of frauds, because the trust arises by implication of law. Such is the settled law of this state. Moore v. Ware, 38 Maine, 496; Buck v. Swazey, 35 Maine, 41; Johnson v. Candage, 31 Maine, 28. This rule of law is decisive in favor of the plaintiff. He is the holder of negotiable notes secured by a mortgage of real estate. They were transferred to him before they became payable. He thereby acquired an equitable title to the real estate which no act of the mortgagee could invalidate. True, he did not take a written assignment of the mortgage. Such an assignment was not necessary. His title in equity was complete without it. At law his title would be defective for the reason that our statutes declare that no interest in lands can be transferred except by deed. In equity, however, his title was complete when he became the holder of the notes. The case shows that the mortgagee afterward fraudulently obtained from the mortgagor a quitclaim deed of the premises, and that he (the mortgagee) then conveyed them to a third person, taking notes and a mortgage to secure the purchase money to the amount of three thousand dollars, and afterward assigned the notes, except one for one hundred dollars, and the mortgage, to the defendant (Cheney) as security for a loan of four hundred and thirty-five dollars. There is nothing to impeach the good faith of this defendant. But his title is inferior to the plaintiff’s. In equity the plaintiff’s title antedates his, and he must hold in subjection to it. There was no merger of the equity of redemption and the legal title in the mortgagee. The outstanding equitable title of the plaintiff would prevent such a result. A merger takes place only when the whole title, equitable as well as legal, unites in the same person. The cases cited and relied upon by the defendant’s counsel (namely, Mitchell v. Burnham, 44 Maine, 286, and Torrey v. Deavitt, 12 Reporter, 508), are not in conflict with this conclusion. It is undoubtedly true, as hold in these cases, that a mortgagor, and those claiming under him, [363] when exercising their right to redeem, may treat the mortgagee as still the holder of the mortgage notes or debt till notified to the contrary; and that they are chargeable with constructive notice of an assignment only when there is a duly recorded deed of assignment. But this rule is not applicable to mortgagees and those claiming under them. With respect to them it is enough that the original mortgage is recorded. We cannot doubt that in equity the plaintiff has the better title, and is entitled to the relief prayed for. Bill sustained. Decree as prayed for with costs for the plaintiff against the defendant Cheney. Appueton, C. J., Barrows, Danforth, Virgest and SyhoNDS, JJ., concurred.