Dulin v. Hunter

McCLELLAN, J. In réspect of tbe rights of an assignee of a mortgage securing indebtednesss not evidenced by negotiable paper, there are two distinct lines of authority establishing different doctrines in their respective jurisdictions. In New York, and perhaps in one or two other States, tbe rule is, that tbe purchaser of such a mortgage succeeds only to tbe rights of tbe mortgagee, and is chargeable with notice of j and tabes subject to, the equities existing, not only between tbe mortgagor and mortgagee, but also between tbe latter and third persons, at tbe time of tbe transfer.—Bush v. Lathrop, 22 N. Y. 535. In other States — Pennsylvania, New Jersey and Michigan among them — tbe assignee of such a mortgage is chargeable only with notice of equities existing between the mortgagor and mortgagee, and this limitation is based on tbe consideration that an assignee can readily inquire of tbe mortgagor what claims he may have against the debt and mortgage which tbe assignee is about to purchase, but be may not be able by tbe utmost diligence to acquire knowledge of tbe latent equity of some third person. — 15 Am. & Eng. Encyc. of Law; pp. 860-1. And this is tbe view taken by Chancellor Kent in Murray v. Lylburn, 2 Johns. Chan. 441, and declared in a dissenting opinion delivered by him as chief justice in tbe.case of Bebee v. Bank of New York, 1 Johns. (N. [542] Y.) 529. This court is committed to the doctrine last stated. In the case of Tison and Gordon v. People's Saving and Loan Asso., 57 Ala. 323, 331, the rule is thus declared by Brickell, C. J.: “The assignee of a mortgage, intended as security for a debt which is not negotiable, stands in the light of an assignee of a mere chose in action. The general and well-settled principle is, that the assignee of a chose in action takes it subject to all the defenses and equities existing against it at the time of the assignment. The rule is generally supposed to extend only to the equities and defenses of the mortgagor, and not an equity residing in some third person against the assignor, of which the assignee has no noticeciting among other cases that of Murray v. Lylburn, supra, and quoting from the opinion of Chancellor Kent therein, as follows: “The assignee can always go to the debtor, and ascertain what claims hé may have against the bond, or other chose in action, which he is about to purchase from the obligee; but he may not be able, with the utmost diligence, to ascertain the latent equity of some third person against the obligee. He has not any object to which he can direct his inquiries; and for this reason, the claim of the assignee, without notice, of a chose in action was preferred in the late case of Redfrain v. Ferrier (1 Dowe’s Rep. 50), to that of a third party setting up a select equity against the assignor. Lord Eldon observed in that case, that ‘if it were not to be so, no assignment could ever be taken with safety’.” And this doctrine was re-affirmed in the later case of Goldthwaite v. National Bank, 67 Ala. 549, 554, where it is said by Clopton, J., for the court: “While it is true that the assignee of a paper, not negotiable, takes it subject to all the equities to which it was subject in the hands of the assignor, this is here understood to mean the equities existing between the original parties, and not equities which may arise as to other parties in the course of the transfer;” citing Tison & Gordon v. P. S. L. Asso., supra. We conceive these cases to have established in this State the rule, that defenses and equities existing, between a mortgagee and third persons will not affect the rights of an as-signee of the mortgage, unless he had notice thereof at the time of the assignment, and that an assignee for value of a subsequent mortgage, without actual notice of a prior unrecorded mortgage, is not prejudiced by the fact that his assignor, the mortgagee, took with notice of the first mortgage. The evidence was without conflict that the mortgage under which plaintiff claims title to the property in suit was not recorded until after the defendant became á purchaser for [543] value of the mortgage under wbicb be claims title thereto. This state of the case imposed on plaintiff the onus of proving that the defendant purchased with notice of the prior in-cumbrance. The onus was not discharged by proof that defendant’s assignors had such notice when the second mortgage was executed. There was no evidence that defendant himself had such notice. The plaintiff therefore failed to make out her case ; and the court erred in refusing to give the affirmative charge, and charge 2 requested by defendant, as also in that part of the general charge to which an exception was reserved. Reversed and remanded.