Mullison's Estate

The opinion of the court was delivered, by Sharswood, J. When the five mortgages bearing date September 21st 1868 were executed by John R. Mullison in favor of Thomas J. Butterworth, without consideration, but for the purpose of being subsequently sold to raise money upon for the use of the mortgagor, Butterworth held them merely as a trustee for Mullison, bound to dispose of them according to his direction. There was no agreement by Butterworth to advance the money, and even if there had been a positive undertaking by him to sell the mortgages and hold the proceeds for Mullison’s use, it would have been only a gratuitous promise to perform the duty of the trust which he at the same time assumed. It would not give consideration to the mortgages themselves as would a personal engagement by the mortgagee to advance the money in the future. It would not, therefore, make the mortgages available as against subsequent lien-creditors of the mortgagor, at least not from their date, though it may be conceded that they would be valid securities from the time of the advances, whether made by the mortgagee or his assignee. This seems to be the clear result of all [216] the cases: Terhoven v. Kerns, 2 Barr 96; Parmentier v. Gillespie, 9 Id. 86; Moroney’s Appeal, 12 Harris 372, s. c. 3 American Law Reg. 169. Upon the facts as reported by the auditor below and not the subject of exception, Kaas, the assignee of Butterworth, must be held to have taken the mortgages with notice that they were without consideration but made for the mere purpose of raising money by the sale of them — that they were not owned by the mortgagee but by the mortgagor. This was quite sufficient to put him upon inquiry as to whether there were any intervening liens or encumbrances, between the date of the mortgages and his purchase. For in what is an entirely analogous case it has always been held that when the maker of an endorsed note offers it for discount, that is not in the usual course of business, and is primá facie evidence that it is an accommodation note. If the transaction were real the payee would be the owner of the note — he alone would have a right to sell and dispose of it: Parke v. Smith, 4 W. & S. 287; Eckert v. Cameron, 7 Wright 121; Byles on Bills 126, note 1. So if the mortgagor negotiates the sale of a mortgage it is a circumstance which ought to put the purchaser upon inquiry. The auditor reports, “ that the whole transaction of the sale of the mortgages to Kaas was carried on by Mullison. He had possession of the mortgages. He gave information as to the condition of the property. He produced the surveyor’s certificate of survey. Pie obtained from Butterworth assignments in blank, in which afterwards the name of Kaas was inserted. He signed the collateral agreement with Kaas, and finally upon a written order of Butterworth’s received the whole $2800, consideration-money, and receipted for Butterworth for the same.” There was certainly in all this sufficient to put Kaas upon inquiry as to what the true relation was between Butterworth and Mullison. No inquiry was ever made upon the subject. Washington J. Stevenson, the present appellant, who is the assignee of Kaas, stands in no better position than his assignor. The auditor reports it as a fact that “ prior to the execution and delivery of this last assignment, Mr. Stevenson was notified by Richardson L. Wright, Jr., Esq., — the attorney in fact of the mortgagor — that the creditors of the latter would contest the payment of the mortgages.” The assignee of a mortgage takes it subject to all equities between the original parties, but not to any secret equities of strangers, not arising out of the instrument: Mott v. Clark, 9 Barr 399; Taylor v. Gitt, 10 Id. 428; McConnell v. Wenrich, 4 Harris 365. It is unnecessary to decide in this case, and we do not decide, that if Kaas or Stevenson had, either of them, fairly stood in the position of bon& fide purchasers of the mortgages without notice that they were originally executed without consideration, for the purpose of raising money by their subsequent [217] sale, but had become assignee under circumstances which would have estopped the mortgagor as by a declaration by him of no defence or set-off — that the appellant would have been affected by the liens subsequent to the date of record of the mortgages, whether of judgments or mechanics’ claims upon the property. A person to whom a mortgage is offered for sale, either by the mortgagee, his agent or broker, and who makes due inquiry of the mortgagor, and receives from him a declaration that he has no defence or set-off, and then in good faith pays his money, would present, perhaps, a different case for the consideration of a court of equity from that which is presented by this appellant. Decree affirmed and appeal dismissed at the costs of the appellant.