Payne v. Bensley

Burnett, J., delivered the opinion of the Court—Terry, C. J., concurring. The only question in this case is, whether a negotiable premissary note not yet due, and bona fide taken as collateral security for a pre-existing debt, is subject, in the hands of the endorsee, to any defence existing at the date of the assignment, between the original parties. ■ The authorities on this point have been conflicting; and the research and industry of counsel have brought b'efore us the leading decisions on both sides of .this question. It will not be necessary to attempt a review of the numerous authorities to which we have been referred. The greater number of decisions would seem to support the position taken by the counsel of defendant, while the more recent decisions sustain that of the plaintiff, without giving any decided opinion upon the point. I must say, with Chancellor Kent, alluding to the decision in Swift v. Tyson, 16 Peters, 1, that “ I am inclined to concur in that decision, as the plainer and better doctrine.” 3 Kent, 80; note A. But all the authorities agree in one position, that if there be any new consideration for the assignment, then the assignee is a holder for value, and the maker is precluded from resorting to defences that he might make against the payee, were the suit brought by him. It is insisted by the counsel for the plaintiff, that before he took the note of Bensley as collateral security for the pre-existing debt, Payne had a remedy,, by attachment, against his debtor, but that by taking the collateral security the plaintiff lost that remedy, and that the loss of this remedy constituted a new consideration moving from Payne to his debtor, the assignee of the note. [267] ‘ By the provisions of the one hundred and twentieth section of the Practice Act, the remedy, by attachment, does not,exist where the contract is “ secured by a mortgage upon real or personal property." It is conceived that the force of this point made by the counsel of plaintiff, will depend upon the construction of the phrase “ mortgage upon personal property," as used in our statutes. ■ In strictness, the assignment of this note to Payne was not a mortgage, but a mere pledge, of the note. Dewey v. Bowman, July, 1857. Under the' old decisions, the legal ownership of mortgaged real estate was vested in the mortgagee. 4 Kent, 138. But by repeated decisions of this Court, it has been settled that under our statute, a mortgage is a mere security for the debt, and the legal title remains in the mortgagor until foreclosure and sale. 2 Cal. Rep., 387, 492; 5 Cal. Rep., 334; Guy and Angier v. Ide, January, 1856; Practice Act, §§ 260, 266. If, then, the word mortgage, when applied to real property, only means a security for the debt, should not the same word in the same sentence, and in the same connection, mean the same thing when applied to personal property ? The object of the attachment is to obtain security for the judgment; and when the party already has that security, the statute will not allow him to use this process to obtain that which he already possesses. Whether the creditor has a mortgage upon real or a pledge of personal property, he has security for his debt. In both cases, he has substantially the same interest in the property. The mortgage, in the one case, and the pledge in the other, must be essentially the same, and intended to accomplish the same end. It would then seem clear that the intention of the Legislature was to use the word mortgage, as applicable to personal property, in its widest extent. If we give it a strict construction, and say that the word, as used in the statute, can only apply in a strict sense, then the term can have no rational meaning, in the connection in which it is found. “ A mortgage of personal property passes the present legal title in the property itself to the mortgagee, subject to be rp-vested in the mortgagor, his heirs or assigns, upon the performance, by him, or them, of an express condition subsequent.” Dewey v. Bowman. The title of the property being already in the mortgagee, remains in him if the condition subsequent bo not performed. The mortgagee has no occasion to sue, as the mortgagor had no positive obligation to perform. There is nothing that the mortgagee lias to enforce by suit. Mow, the. statute clearly contemplated such a mortgage upon real and personal estate, as constituted a security for a contract that must be enforced by a sale of the property, either with or without suit. But a mortgage of personal property cannot constitute a security for debt any more than could a conditional [268] sale. The difference between a mortgage and a conditional sale of personal property is substantially this : In the first, the property passes at once, subject to be re-passed upon the performance of an express condition subsequent, while in the second, no present title passes to the purchaser, but rests upon the performance of the condition subsequent. This could not have been the intention of the Legislature. And if we hold that the term must be taken in its strict sense, when used in the one hundred and twentieth section of the Practice Act, then a creditor can still attach, though holding a pledge of personal property at the same time. It is no answer to this view of the case to say that the credit- or is not compelled to hold the collateral security, but may surrender it at any time, and attach. It may admit of great doubt whether he could surrender the security and attach without the consent of his debtor. The latter has acquired some rights, by giving the collateral security, as well as the former. This freedom from the oppressive remedy by attachment, may have constituted the principal motive on the part of the debtor, for giving collateral security for a pre-existing debt. The relation of the parties to each other, is not the same after this collateral security is given, as it was before. The District Court seems to have taken the correct view of the law applicable to the case, and its decision is therefore affirmed.