Setze v. First National Bank

Hill, J. (After stating the foregoing facts.) 1. The mortgage note sued on in this case was payable to 0. E. Setze or order. It was therefore negotiable. The petition alleges that it was transferred and assigned to the plaintiff, which brought suit against the maker to enforce it. There is no formal transfer or assignment of the note and mortgage in writing, and the question is whether the simple indorsement of the name of the payee in the note on the back thereof operates to transfer not only the note but the lien created by the mortgage to the plaintiff, which claims to be the holder for value and sues as such. A promissory note is negotiable by indorsement of 'the payee or holder. Civil Code, § 4273. Civil Code § 4276, declares: “The transfer of notes secured by a mortgage or otherwise conveys to the transferee the benefit of the security.” See, to the same effect, Roberts v. Mansfield,, 32 Ga. 228; Murray v. Jones, 50 Ga. 109; Berrie v. Smith, 97 Ga. 784, 785 (25 S. E. 757). Civil Code § 3345 is as follows: “All transfers and assignments of rent notes, mortgage notes, and other such evidences of indebtedness, secured either by contract lien or out of which a lien springs by operation of law, shall be sufficiently technical and valid where such transfer or assignment plainly seeks to pass the title to any of such papers in writing from one person to another.” The act of 1899 (Acts 1899, p. 90), embodied in the Civil Code, §§ 3345-3347, was remedial in its nature, and, as expressed in the caption, was' “to provide for the more full and complete transfer and assignment of rent notes, mortgage notes, . . so that upon a- simple transfer for value of such rent note, mortgage note, and other .such evidences of indebtedness, the lien connected therewith is carried and follows as a necessary incident of such transfer, so as to allow such transferee or assignee of the same, without more, to foreclose and enforce the same in his own name.” The purpose of this act was, therefore, not to lessen the power of .assignment, but to broaden it, so as to do away with, as much as- possible, the formality of transfers of [606] lien notes. Prior to the act of 1899, promissory notes payable to order were negotiable merely by the indorsement of the payee. The transfer of notes secured by a mortgage or otherwise carried with it the benefit of the lien of the mortgage. The expressed purpose of the act of 1899 was to provide for the more full and complete transfer of notes secured by liens, so 'that upon a “simple transfer” of such notes the lien connected therewith is carried, and the transferee can foreclose in his own name. Therefore, in this ease, the note and mortgage to secure it. being embodied in a single instrument, and the indorsement and delivery thereof being sufficient to transfer the title to the note payable to order, it was a sufficient “simple transfer” of the entire paper to carry title thereto to the person to whom it was delivered so indorsed. But it is argued that mortgage notes can not be transferred by simple indorsement, inasmuch as the act of 1899 (Civil Code, § 3345) provides that the transfer of mortgage notes shall be “in writing from one person to another.” It is insisted that the language of the act of 1899 does not come under the law merchant, where a simple indorsement is sufficient to convey the title and transfer the note to any one who might legally hold it; but that in order to carry the lien of the mortgage with the note, there must be a written assignment in which the name of the assignee is set forth. At common law the title to a mortgage did not pass by a simple indorsement in blank. The act of 1899 is a remedial statute, designed to do away with the formal and technical rule as to assignments and transfers of liens, so that the law merchant will apply as well to notes carrying liens as to those which do not. Even a casual reading of. the caption of the act of 1899 will show that such was the evident purpose of the legislature. And in the body of the act the matter relating to the transfer of liens provides that the effect of such transfer or assignment of such notes will be to completely and fully carry such lien “as a necessary incident thereof.” And section 3 of the act provides that upon the “simple transfer” of any mortgage note, etc., the transferee can foreclose it in his own name. The whole act breathes with the spirit -of simplifying the method of transferring liens which attach to certain notes, including mortgage notes. The act of 1899 did not repeal section 4276 of the Civil Code, quoted supra, but was intended to simplify the manner of transferring notes secured by liens, ete. The act of 1899 should be construed [607] in connection with section 4276; and so construed, we think the simple indorsement of the name of the payee in a. mortgage note payable to order, on the back thereof, gives the holder for value the right to foreclose the mortgage in his own name. From what has been said, we think the petition set forth a cause of action, so that the plaintiff in the court below could proceed in its own name to foreclose the mortgage. The overruling of the general demurrer was not error. Barnes v. Fleetwood, 5 Ga. App. 296 (63 S. E. 60). 2. One of the prayers of the petition is that the “mortgage may be declared a lien upon said land for the principal, including interest and attorney’s fees, as hereinbefore set out, and costs, and that said mortgage be foreclosed and the equity of redemption therein forever barred, and that said land be sold to pay this debt, after paying the debt, if any, due the Society of the African Mission of Baltimore City.” The petition as originally brought alleged that the Society of the African Mission of Baltimore City had a first mortgage on the property described in the petition, for $2,200, which matured October 16th, 1908, and was extended for five years from the date of maturity. By amendment to the petition it was alleged that there is no such corporation as the Society of the 'African Mission of Baltimore City, as set out in defendant’s answer, and that said defendant had no transactions with said society. We think the special demurrer to this portion of the petition should have been sustained, and to that extent the judgment of the court below is reversed. That portion of the petition referred to in this division of the opinion should have been stricken. No necessity is shown in the petition for such a decree as prayed for. A general judgment is prayed against the defendant, and the insolvency of the defendant is not alleged. The Society of the African Mission of Baltimore City, whose first mortgage would be affected by such a decree, is not a party to this suit. The plaintiff does by amendment allege that there is no such corporation, and that the defendant had no transaction with the corporation. But the plaintiff will not be heard to deny the validity of the first mortgage, when the note under which it sued in terms expressly states that it is a second mortgage on the property, the first-being given to the “Society of African Mission of Baltimore City.” Jenkins v. Southern Ry. Co., 109 Ga. 35 (34 S. E. 355); Long v. Bullard, 59 Ga. 355 (3). No reason is shown why the society above named had not a [608] valid first mortgage lien on the property described in the note sued on, as declared in the note itself. We do not think that the portion of the petition under review alleges any facts which take the case out of the usual procedure where a foreclosure is sought on property having first and second liens thereon. For these reasons, we think the court should have sustained the demurrer to this extent. 3. The note on which suit was brought contained a provision for the payment of. 10 per cent, attorney’s fees on principal and interest in case of collection by suit or through an attorney. The petition alleged that notice of intention to bring suit and collect attorney’s fees had been given to the defendant in writing, stating the term of court to which suit would be brought, 10 days prior to the filing thereof. A special demurrer was filed, on the ground that a copy of the notice should have been attached to the petition-This was unnecessary. The suit was not brought on the notice, but on the note. The statute requires notice in order to make this provision of the note enforceable. It was necessary to allege the giving of such notice, but the allegations of the petition were sufficient, and it was not necessary to attach a copy of the notice which had been given. As the plaintiff in error has secured a material modification of the judgment of the court below, she is entitled to the costs of .bringing the case to the Supreme Court. Judgment affirmed in part and reversed in part. All the Justices concur.