Noyes v. White

The opinion of the court was delivered by Brewer, J.: Can a mortgagee, holding two notes payable at different dates, and secured by one mortgage, transfer before the maturity of either, the note last to become due with the mortgage, so as to give to such last note priority in satisfaction out of the mortgaged property? We think he can, both on reason and authority. Both notes and mortgage are subjects of contract. The only parties originally having rights are the mortgagor and mortgagee. To the mortgagor, having pledged his real estate as security for both notes, it is immaterial which has priority, so long as he is not called upon to pay either until it is due. Why then cannot the mortgagee contract with a purchaser of the second [645] note that he may have priority in the security? Who suffers wrong? Is it not a legitimate subject of contract? Is it against public policy, immoral, or prohibited by statute? Clearly not. A mortgagee, holding notes, can release the mortgage and still hold valid notes; he can.release the mortgage as to one note, and hold it good as to the rest. He can release part of the mortgaged property from the lien of the mortgage, and hold it good as to the balance. So may he give to the purchaser of one note priority over all the other notes in,the security. In Wright v. Parker, 2 Aiken, 212, the chancellor says: “If Mann chose to assign to Sherman all his interest in the mortgaged premises as security for the payment of the two notes therein. assigned to him, , he. had a right so to do; and in such case nothing would remain for his after-assignment to the orator to operate upon.” And in Grattan v. Wiggins, 23 Cal., 30, the supreme court says: “ It is clear that 'the mortgagee has the right by agreement to fix the rights of the holders of the several notes to the mortgage-security, and such an agreement may be implied from the circumstances of the transfer.” See also Bryant v. Damon, 6 Gray, 564; Bank v. Tarleton, 23 Miss., 123; Lyndon v. Keith, 9 Vt., 299. Did the mortgagee in this case by his transfers and agreements give any priority? The district court found that he ■did. There were four notes. While holding the first, second, and fourth, and shortly before the maturity of the first, he indorsed the second and fourth, and also transferred the mortgage with this assignment, to-wit: “In consideration of the sum of two thousand dollars to me in hand paid, I do hereby sell, transfer, and assign to James Shearer, all my right, title, and interest in and to the within mortgage. Richard Albrey. “Lawrence, June 23d, 1870.” At the time of this assignment Albrey had a right and interest in the mortgage so far as it gave security for three notes. All of this right and interest he assigned. Does not this indicate. that so far as the assignee is concerned it was [646] intended that he should have the full benefit of the mortgage, as security? Again, why assign the mortgage at all? ' Theí indorsement of the note transferred its proportionate interest' in1 the mortgage-security. Counsel says it was that the assignee might release the mortgage, and that the rule' is-to assign the mortgage to the indorsee of the last note. If this be the rule, it is á rule broken as often as kept. For a. mere delivery of the mortgage, with an indorsement of the note, is as common as a written assignment of the mortgage. There is nothing in the findings to conflict in the slightest degree with this view of the intention of the parties. We have-not the testimony before ais, and .there.may.have -been much' •in that- to support the finding of the court -as to the intention and-effect of-this assignment. In the case from California,, heretofore cited, the- court uses this languaeg: “ In .this case the court found that at the time of -the transfer and delivery of the note to Foster, Cook also assigned and delivered the-mortgage to Foster to secure him in the payment of thé $5,000 called for by the note. This shows a special agreement between Cook (who then held all the notes) and Foster, by Avhich the latter Avas to hold the mortgage as security for the payment of the note then assigned to him, thereby giving: him a right to full payment from the proceeds of the mortgage.” See also other cases cited. ■We think then that by the assignment to Shearer priority AA'as giAron to him. The mortgagee could not then by any subsequent indorsement of the first note destroy that priority Avhich he had transferred to Shearer. No question of notice- or knoAvledge is raised in the findings of fact, and none therefore need be considered by us. It is true, one of the-conclusions of laAAr states that common prudence' requires the-purchaser of a mortgage note to examine the mortgage, and' that an inspection of the records is insufficient. Upon what facts the district court"based this enunciation of law, wre 'are. noAvhere informed, and hence care not to discuss any -abstract'- - proposition. ... It-is alleged as error that protest damages Avere not allowed; ■ [647] to' plaintiff. It seems to be conceded that the notice was insufficient;- but counsel claims that protest and notice are distirict and'separate acts, and that the statute allows damages for- protest. Notice is necessary to charge the indorser. Without it a demand of payment, and protest for nonpayment, avail nothing. Tate v. Sullivan, 30 Md., 464. It seems to us that under the 14th section of the act concerning bonds, notes and bills, (Gen. Stat., p. 116,) there must be sufficient to charge the indorser before' any damages can be claimed. Where there is no indorser, though the note' be' protested, no damages can be .recovered. German v. Ritchie, ante, p. 106. The judgment will be affirmed. All the Justices concurring.