Nash v. Kelley

The opinion of the court was delivered by Redfield, J. In April, 1873, Catherine Kelley conveyed lot No. 50 to Ellen Welch, and took back a mortgage to secure the purchase-money of $450, in nine $50 notes, signed by said Ellen and her husband, Patrick Welch. Welches lived on the premises until January 9, 1875. March 12, 1875, Kelley turned these notes over to Patrick McKenzie, as payment or security for a purchase of a stock of goods. March 15, 1875, McKenzie turned these notes out to the petitioners, to secure them for a debt, and for a further indorsement. On January 2, 1875, McKenzie mortgaged the premises to Sutton, with full covenants of title and warranty. On the 6th of May, Welch and wife conveyed the premises to McKenzie, who agreed, in consideration therefor, to surrender these mortgage notes to be cancelled, and pay Welch for his improvements. May 13, 1875, McKenzie procures Kelley to discharge the mortgage on the record, upon his promise to surrender the notes the next day. At the time McKenzie executed his mortgage of the premises to Sutton, he had no color of title, and Welch and wife were in possession, claiming to own the lot in-question. At the time Welch and wife conveyed to McKenzie, May 6, 1875, the petitioners were the owners of the mortgage notes, and the equitable owners of the mortgage. The mortgage is the incident of the debt, and the transfer of the notes operated as an equitable transfer of the mortgage given [430] for their security. Belding v. Manley, 21 Vt. 550. The discharge of the mortgage of record by Kelley, was fraudulent and inoperative as to the petitioners. I. As between the parties and privies, the title acquired by McKenzie on the 6th of May, 1875, enured to Sutton in discharge of the covenants in the deed of January 2,1875. And this is the effect upon subsequent-acquired title, notwithstanding the covenants were in a deed of mortgage. Jarvis v. Aikens, 25 Vt. 635. But the petitioners claim under the original mortgage to Kelley as the owners of the mortgage notes. There is no question but that their title to the notes is absolute. But the counsel for Sutton claim, that as the petitioners derived their title to the notes through McKenzie after he had executed his mortgage to .Sutton, the notes became purged, so to speak, of their mortgage security upon these premises. There is force in the claim that McKenzie himself would be estopped from arresting this mortgage against Sutton, by reason of his covenants. But, we think that it does not logically and necessarily follow that parties who had in good faith purchased the notes of McKenzie, might not be the absolute owners of the notes with all the equitable and incidental rights attached to them. The mortgage debt represented by the notes could not enure to Sutton, to feed the estoppel created by McKenzie’s covenants: for the mortgage notes are property which McKenzie might lawfully own and sell, and vest good title in the purchaser. The mortgage without the notes is neither title nor evidence of title. It passes with the notes as an incident of the debt, and expires when the notes are paid. II. The notes were made payable to Catherine Kelley, or orders, and by her indorsed, and at the time they were purchased by the petitioners they were current, negotiable paper; and no question is made but that the petitioners obtained the absolute and indefeasible title and ownership of the notes. They took the notes with all the rights that adhered to them — the personal responsibility of Welch and wife as signers ; the guaranty of Catherine Kelley as indorser ; and the mortgage security superadded. [431] Although the mortgage may be a mere chose in action, and the assignee may have obtained by an assignment no greater right or interest than the assignor possessed, yet, in this case, the purchasers of these notes obtained a perfect title as of current negotiable paper, and therefore take all benefit of the inherent qualities of the paper, and also all accessory and incidental benefits that legally are attached to it. Judgment affirmed.