Case ID: ohio-st_53/html/0118-01.html
Source: Caselaw Access Project
Author: {"author": "Spear, J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Kernohan v. Manss, et al.
    
      Mortgage security for promissory notes — Assignment of mortgage to secure forged notes — Subsequent sale by mortgagee of genuine note before mattirity — On foreclosure, lien of holder of genuine note preferred to that of holder of mortgage.
    
    M. executed to eight persons, a mortgage to secure eight promissory notes, made to them respectively. The notes were delivered to the several mortgagees, and the mortgage to McG., one of the mortgagees. It was then duly recorded. After record, without objection by the others, McG. took possession of the mortgage and of three of the notes belonging to other mortgagees, for safe keeping-. Afterward, and before maturity of any of the notes, McG., claiming to be the owner of the mortgage and of all the notes, for a valuable consideration, received of K., assigned and delivered to him the mortgage and forged copies of all of tile notes, with forged indorsements on each, except that on the note purporting to be made to him the indorsement was genuine. The assignment purported, also, to transfer the notes secured by the mortgage. McG. retained in Ms own possession the genuine notes. Afterward, but before the maturity of the nóte made to McG., he, for a valuable consideration, indorsed and delivered the genuine note to M. and M.. informing them that the note, with others, was secured by mortgage on certain real estate. Before taking the note, M. and M. had the records examined and found that the statements of McG. respecting the mortgage security were correct. He also stated that he, with the consent of the other mortgagees, was holding the original mortgage for himself, and as custodian for the others. They did not ask to see the original mortgage, and did not see it. K. and M. and M. acted in entire good faith, neither having a suspicion that a fraud was contemplated by McG.
    
      Held: On foreclosure of the mortgage, the debt to M. and M. is entitled to preference over that of K.
    ( Decided June 11, 1895.)
    Error to the Circuit Court of Hamilton county.
    The action below was a proceeding in the probate court of Hamilton county for the sale of lands of Gano Martin, deceased, to pay debts, in which the plaintiff in error and the defendants in error were cross-petitioners, each claiming to hold a lien prior to that of the other upon the lands in question. That court found in favor of John and Louis Manss, from which Kernohan appealed. On the trial in the common pleas the following undisputed facts appeared, viz.: *
    On January 1, 1879, Gano Martin, the then owner of the real estate sold in this action, being in feeble health, and desiring to make some sort of settlement of his estate before he died, providing as well for his children and widow as for certain .creditors (amongst whom was one William R. McGill, to whom he was then indebted in the amount of 87,602.72), executed a mortgage deed covering his said real estate; the consideration named was 816,113.69; the grantees were said McGill and seven others. The mortgage was conditioned to secure the payment of eight promissory notes, each dated January 1, 1879, payable five years after date, with 8 per cent, interest, payable annually, except one on which no interest was payable until after Gano Martin’s death.
    The mortgage deed was then delivered to McGill, with the consent of the other mo rtgagees, he (McGill) stating he'would put it in his safe for safe keeping. It was left for record January 20, 1879, with the recorder of Hamilton county, and duly recorded, and thereafter, without objection by the other mortgagees, remained in the possession of said McGill until delivered to said Kernohan, as hereinafter stated. The note for $7,602.72 was also delivered to McGill at the same time, and the notes to order of three other mortgagees were also delivered, unindorsed, to McGill, at the same time, for safe keeping. Some time afterwards, one of the mortgagees (George Martin) sold his note to William R. McGill, and, so far as appears, McGill never owned, or had any interest in any of the other notes. The note for $7,602.72 remained in the possession of McGill until delivered to John and Louis Manss, as hereinafter stated.
    On the 8th day of February, 1879, being prior to the maturity of the notes secured by said mortgage, Robert Kernohan made a loan of $11,000 to McGill, who, amongst other collateral, transferred and assigned to Kernohan the said mortgage, and what purported to be all the notes secured thereby. At the time of the transfer McGill was the owner and holder of the genuine note for $7,602.^2, secured by said mortgage. ' This transfer was made in the following manner: Before the payment of the $11,000, McGill produced to Kernohan, and his attorney, the original mortg’ag’e deed from Gano Martin, and the following assignment was indorsed thereon:
    “For value received, I hereby assign and transfer to Robert Kernohan, his representatives and assigns, the within mortgage and the notes secured thereby.
    “February 8, 1879. William R. McGill.”
    The assignment was then and there signed by William R. McGill. At the same time eight certain papers answering in form to the eight notes described in the mortgage, including one for $7,602.72, were produced by said McGill as the original genuine notes secured by said mortgage; the said papers were at the time they were produced, indorsed in blank with the name of the payees thereof, except that for $7,602.72, which was indorsed as hereafter stated. At the same time he signed the said assignment on the back of the mortgage, McGill indorsed each of said papers (including that for $7,602.72 drawn to his own order, which hitherto had been unindorsed), with his own signature, and the words “protest waived,” as appears thereon; and thereupon the said papers and mortgage were delivered to Kernohan, with the other collateral, and said sum of $11,000 paid. The mortgage so assigned and delivered was the genuine mortgage deed executed by Gano Martin and wife; but the papers purporting to be the notes secured thereby, and so delivered and indorsed by said McGill, are each and everyone of them forgeries' (except the indorsements of McGill thereon), though they were delivered to Kernohan by McGill as genuine.
    Kernohan received the mortgage, and what purported to be the real notes, as above, duly indorsed and delivered to him, in good faith and for value, supposing said notes to be genuine, and they remained in his possession until after the death of McGill, which took place July 2, 1884, and until this action was begun. Kernohan did not know, or have any cause to know of such forgery, and that said notes were not genuine, until after the death of McGill.
    Interest on said loan of $11,000 was paid by McGill up to his death. The amounts realized from the other collateral, together with any amount that has been, or may be ordered, paid to him in this case, will not discharge said debt of $11,000. The estate of said Gano Martin is insolvent. The assignment on the mortgage was not left for record or entered until April 25, 1884.
    On or about April 1, 1879, being after the transaction with Kernohan, but prior to the maturity of said note for $7,602.72, the defendants,’John and Lewis Manss, loaned William R. McGill the sum of $4,000, taking his note dated May 8,' 1879, for same, McGill at that time transferring to them by indorsement and delivery, as collateral for said loan, the original genuine note for $7,602.72, made by Gano Martin’ which notwithstanding his transaction with Kernohan, he had retained possession of. John and Louis Manss did not learn until a week or ten days after McGill’s death of any other note purporting to be of the amount of the note so indorsed and delivered as collateral. At the time of the transaction between McGill and the Manss brothers, McGill stated that the note was secured by a mortgage; that it was given to secure other notes, to the other pajees, and that he, by and with the consent of all the other mortgagees, was holding the mortgage for himself and as custodian for the other holders of notes secured by the mortgage, and also told them that he thought the mortgage notes safe. Before loaning the money they had an examination made of the records, which showed that the mortgage was as represented, and that there was no other mortgage against the property; they did not ask McGill to let them see the mortgage deed, nor did they at any time see it, but relied upon McGill’s statement that he had it.
    They, before and after the maturity of the note, made other advances to McGill .to the extent of $11,300 additional to.said sum of $4,000, and also received other collateral, it being agreed with McGill at the time said other advances were made, that the note for $7,602.72, together with the other collateral, should stand as security for all the advances. Some of the other collateral were known by Manss Bros, to be the mortgage notes ; but in no instance did they require the production of the mortgage deed securing the same, again relying upon McGill’s statements to them. They have not been able to realize upon any of the said other collateral, as in each case the mortgage notes, and -other instruments, are claimed to be forgeries.
    There is no question as to the good faith of either Kernohan or the brothers Manss.
    Upon these facts the court held that John and Louis Manss were the owners and holders of the genuine note for $7,602.72, given by Martin to McGill, that it was secured by the mortgage, and was the first lien and decreed accordingly. On error the circuit court affirmed this judgment, and Kernohan now asks that those judgments be reversed.
    
      
      Drausvn Wulsin, and Frank C. Suire, for plaintiff .in error.
    A mortgage does not secure a note, or other evidence of indebtedness named in it, as such, but secures the debt or promise to repay, of which the mortgage equally with the note is an evidence. This is made clear when we consider that the mortgagee can foreclose or maintain ejectment, even though the note be barred by the statute of limitations. Fisher's Exrs. v. Mossman, 11 Ohio St., 42; Nichols v. Briggs, 18 S. Car., 484. Also that the mortgage is valid, and secures the debt even though the note or other evidence of such debt, recited in the mortgage, be changed. Nesbit v. Worts, 37 Ohio St., 378; Kuhns v. McGeogh, 38 Ohio St., 468; Choteau v. Thompson, 3 Ohio St., 427; Pattersons. Johnson, 7 Ohio, parti, 227; Bailey v. Smith, 14 Ohio St., 410; Richardson v. Wright's Estate, 2 N. E. Rep., 603; Kimberly’s Appeal, 5 Cent. Rep., 460; Bank v. Manufacturing Co., 96 N. Car., 298; Hoffner s. Wilhelm, 68 La., 510. Also that the mortgage is enforceable, though the note be void, because the consideration therefor was illegal, or because of a fraudulent alteration therein. Raquel v. Roll, 7 Ohio, part 2, 70; Williams v. Englebrecht, 37 Ohio St., 383; Smith, Admr., v. Smith et al., 2 S. E. Rep., 78; Plyler v. Elliott, 19 S. Car., 257; McCaughlin v. Williams, 15 S. Car., 505. Also that the mortgage is valid and enforceable for the mortgage debt, even though the obligor of the bond described in the mortg-age has received a certificate of discharge under the bankrupt act. Childs v. Childs, 10 Ohio St., 339; Stewart v. Anderson, 10 Ala., 504; Stedman v. Garrett, 18 Vt., 346.
    The doctrine laid down by these cases all rests upon the principle that the mortgage really secures the debt, of which the note, or other personal security is but one evidence; it secures the substance, not the proof of the substance; it secures the promise to repay itself, not the evidence of such promise. Kernohan, by the transaction of February 8, 1879, became the owner of the note, the mortgage debt and the mortgage security. McGill parted with all his interest in the note, debt and mortgage security to Kernohan. Kernohan v. Durham, 48 Ohio St., 1; Daniels Neg. Instruments, sections 748, 748a; Jones on Mortgages, section 805; section 834.
    Kernohan, had he discovered the fraud, could have filed a bill in equity to enforce the transfer by indorsement. 1 Chitty on Bill, 10th ed., 167; Smith v. Armstrong, Peak’s N. P. C., 50; Arden v. Watkins, 3 East., 317; Ex parte Greening, 13 Vesey, 206; Ex parte Mowbray, 1 Jac. & Walker, 428; Ex parte Hall, 1 Rose, 14. And such indorsement, when made, would have related back to and taken effect as of the time when the actual transfer took place. Smith v. Armstrong, Peak’s N. P. C., 50; Anonymous, 1 Campb., 492.
    And the courts have even gone further and held, that not only by subsequent indorsement does the indorsee take as of the time when the original transfer took place, but he takes free from equities attaching either prior or subsequent to such transfer. Watkins v. Maule, 2 Jac. & Walker, 237; Baggerly v. Gaither, 2 Jones (N. C.) Eq., 80; Buckley v. Chapman, 9 Conn., 5; Phillips v. Bank of Lewiston, 18 Pa. St., 403; Selfridge v. Northhampton Bank, 8 W. & S., 320; Burrows v. Keays, 37 Mich., 431.
    The written assignment of February 8, 1879, transferred to Kernolian the legal title to the land described m the mortgage. It is a mistake to speak of a mortgage in Ohio as being a mere incident of the debt, or as a mere lien, or security, or collateral contract. In Ohio, • a mortgage, at all events as between the parties thereto and those claiming under them, is a conveyance of land. Raquet v. Roll, 7 Ohio, part 2, 73. It is also well settled in Ohio, that after condition broken, the legal estate, in mortgaged premises, becomes absolute in the mortgagee, as between him and the mortgagor, and those claiming under him. Bands and Wife v. Kendall, 16 Ohio, 671; Heighway v. Pendleton, 15 Ohio, 736; Fishers v. Kramers' Lessee, 16 Ohio, 124; Nolan v. Ermston, 18 Ohio, 277; Childs v. Childs, et al., 10 Ohio St., 344; Allen v. Averly, 24 Ohio St., 97. This is well illustrated by the fact that the mortgagee can, after condition broken, maintain ejectment, to which certain defenses, e. g., illegality of consideration, cannot be set up. Ely's Lessee v. Maguire, 2 Ohio, 233; Raquet v. Roll, 7 Ohio, part 2, 73; Williams v. Englebrecht, 37 Ohio St., 386. Story’s Equity Pleading’ (10thed.), sections 188, 189, 1892; Hilton v. Lathrop, 46 Me., 297; Hill v. Adams, 2 Atkins, 39; Chambers v. Goldwin, 9 Vesey, Jr., 268; Lennon v. Porter et al., 2 Gray, 473; Wetherell v. Collins, 3 Mad., 255; Drew v. Harmun, 5 Price, 319. The same rule applies in a strict foreclosure, which is nothing more or less than a cutting off of the equity of redemption. Story’s Equity Pleading’ (10th ed.), section 201. Moreover, in every action of foreclosure the owner of the equity of redemption is entitled to come in and pay the debt, and upon his so doing, the court will decree a reconveyance of the legal title. Story’s Equity Pleading (10thed.), Sections 74a, 200; Wood v. Williams, Mad., 186; Scott v. Nicoll, 3 Russ., 476; Hickens v. Kelley, 2 Small and Gif., 264; Clerkson v. Bowyer, 2 Vernon, 67; Allens. Everly, 24 Ohio St., 97; Denby v. Mellgrew, 58 Ala., 148. In cases where a sale is ordered the same rule and reason applies as in strict foreclosures. Prout v. Hoge, 57 Ala., 28; Bibb v. Hawley, 59 Ala., 403.
    All the rights and remedies of the owner of the legal title are vested in the executor instead of the heir. McGuffey v. Finley, 20 Ohio, 474; Grant & Ludlow’s Adm., 8 Ohio St., 1 Swartz v. Leist, 13 Ohio St., 425; Westerman v. Westerman, 25 Ohio St. 500; John v. Bridgman, 27 Ohio St., 22; Smith & Benedict’s R. S., Sec. 907b; Templeton v. Horn, 82 Ill., 491; Watson v. Railroad Co., 47 N. Y., 157; Kernohan paid value, had no notice, is not estopped, was honest and was guilty of no laches. Holliger v. Bates, 43 Ohio St., 437; Walker v. Bement, 42 Ill., 281. Nor is there any room for any estoppel against Kernohan, for by no act of his was the apparent ownership of the note conferred upon McGill. So the case of Chandler v. Coomoes, 33 Ohio St., 178 does not apply, and that decision is carefully limited, if not practically overruled, by Osborne v. McClelland, 43 Ohio St., 306.
    It cannot be claimed Manss Brothers have any interest at all in the mortgage debt, as distinguished from the note. Davis v. Austin, 1 Vesey, Jr., 247; Kernohan v. Durham, 48 Ohio St., 1.
    Nor can it be claimed Manss Bros, got any legal title to the mortgage security, or what is the same thing, the land covered by the mortgage. Their only possible claim to any ■ interest therein, is • by virtue of a supposed equity, that the mortgage follows the note. Swartz v. Leist, 13 Ohio St., 419.
    
      • But our adversaries claim, whatever Kernohan’s title to the land may be, they are the bona fide holders, for value, before maturity, of the note, which proposition at this time we admit for the sake of the argument, and as the mortgage follows the note, they are consequent^ the bona fide holders, for value, before maturity, of the mortage security ; and as a necessary result from the above, they are entitled to the same rights in the security, that the}^ would have in an action on the note. Bailey v. Smith, 14 Ohio St., 396 ; Ranney v. Hardy, 43 Ohio St., 157; Osborne v. McClelland, 43 Ohio St., 284; Heller v. Meis, 1 C. S. C. R. 477; Timberman v. Hawley, 2 C. C. Rep., 27; Johnson v. Carpenter, 7,, Minn., 176; Hostetter v. Alexander, 22 Minn., 559 , Scott v. Austen, 36 Minn., 460; Oster v. Hickley, 35 Minn., 245; Schmidts. Frey 8 Robinson (La.); 435; Bouligny v. Fortier, 17 La. Ann., 121 ; Morris v. White, 28 La. Ann., 855; Butler v. Stockton, 33 La. Ann., 170,; Grassley v. Reinbeck, 4 Ill. App., 341; Walker v. Dement, 42 Ill., 272; Kleeman v. Frisbie, 63 Ill., 482; White v. Southerland, 64 Ill., 181; Haskell v. Brown, 65 Ill., 29; Bryant v. Vix, 83 Ill., 11; Towner v. McClelland, 110 Ill., 542; Scott v. Magloughlin, 133 Ill., 30 ; Temple v. Whittier, 5 Western Rep. (Ill.), 144 ; Taber v. Foy, 56 Iowa, 539; First Rational Bank v. Bryan, 62 Iowa, 42.
    The general rule as to assignments of dioses in action undoubtedly is, that the assignee, though without notice of the defect, takes subject to all equities existing against the assignor. There can be however, equities (1) in favor of the original debtor, or (2) in favor of some prior assignor, or (3) in favor of third parties. The last two are what are known or described as latent equities, and arise in this case. Pomeroy Equity Jurisprudence, section 703 ; Bush v. Lathrop, 22 N. Y., 535; Walker v. Dement, 42 Ill., 277; Anderson v. Sharp, 44 Ohio St., 260; Greene v. Merrick, 64 N. Y., 220; Allen v. Smitherman, 6 Iredell Eq., 341; Davis v. Bechstein, 69 N. Y., 440 ; Towner v. McClelland, 110 Ill., 542; Osborne v. McClelland, 43 Ohio St., 284; Morris v. White, 28 La. An., 855; Pitton v. Martin, 1 Sandf. Ch., 569; Sherwood v. Meadow Valley Mfg. Co., 50 Cal., 412; Barstow v. Savage Mfg. Co., 64 Cal., 388; Barry v. Equitable L. A. Soc., 59 N. Y., 587; Chandler v. Coombs, 33 Ohio St., 178; Taylor v. Bates, 5 Cowen, 376; Lindsay v. Wilson, 2 Dev. & B., 85; Fairbanks v. Sargent, 5 Cent. Rep., 919; Bradley v. Root, 5 Paige, 632; Coon et al. v. Reed, 79 Pa., St., 240; Allen v. Watt, 79 Ill., 284; Muir v. Schenck, 3 Hill, 228; Shropshire Union Ry. v. The Queen, L. R., 7 Eng., and Irish App. Cases, 496; Reid v. Sprague, 72 N. Y., 457; Downer v. Bank, 39 Vt., 25; Schaffer v. Reilly, 50 N. Y., 61; Ranney v. Hardy, 43 Ohio St., 157; Trustees Union College v. Wheeler, 61 N. Y., 88; Crane v. Turner, 67 N. Y., 437; Seymour v. Kinney, 106 N. Y., 230; Brooks v. Record, 47 Ill., 30; Grassly v. Reinbeck, 4 Ill. App. 341; Mangles v. Dixon, 3 H. L. C., 702; Maybin v. Kirby, 4 Rich Eq., 105.
    Manss Bros, are not bona fide holders without notice of the note itself. Strong v. Jackson, 123 Mass., 60; Taylor v. Page, 6 Allen, 86; Crane v. March, 4 Pick., 131; Abele v. McGuigan, 78 Mich., 415.
    
      William E. Jones and J. J. Glidden, for defendants in error.
    It may safely be asserted that no case can be found which does not sustain the title of a bonafide indorsee for value, before maturity, without notice of any equities. The note made by Martin to McGill, for the payment of $7,602.72, was received by Manss from McGill, the payee, by his indorsement thereon, before maturity, for a good consideration, without notice of any equities against it. Section3171, Revised Statutes, provides that all notes payable to any person or order shall be negotiable by indorsement thereon, so as to ab-. solutety transfer and vest the property thereof in each and every indorsee or holder successively. This principle has been recognized as the law at least as far back as Swift v. Tyson, 16 Peters, 1, wherein the court assumed this proposition to be too clear to require argument or authority to support it. Since that decision, two other cases have been ably and fully considered by the Supreme Court of the United States, in the cases of Goodman v. Simons, 20 How., 343, and Murray v. Lardner, 2 Wall., 110. Johnson v. Way, 27 Ohio St., 380; 1 Parsons on Notes, 258; Comstock v. Hannah, 76 Ill., 531; Goodman v. Harvey, 4 Ald. and Ell., 870; Murray v. Lyburn, 2 Johns., Ch.443; Mott v. Clarke, 9 Pa. St., 399.
    If Manss had only received the note, without any indorsement, thus having the equitable title to. it, before he learned of the transaction between McGill and Kernohan, and afterwards learning of it, he, Manss, might even then by taking an indorsement of the note, have acquired the legal title, in aid of his equity, and the two rights so united, would have prevailed in a court of equity. Adams’ Equity, 161; Gibler v. Trimble, 14 Ohio, 323; Watkins v. Maule, 2 Jac. and Walker, 237; Murray v. Lyburn, 2 Johns., Ch.443; Mott v. Clark, 9 Pa. St. 399; Silverman v. Bullock, 98 Ill., 11; Stewart v. Smith, 17 Ohio St., 82.
    
      The fact that Martin is dead, and that his estate is insolvent, cannot affect the rights of, Manss • in the note. Were Martin living, a personal judgment could be taken against him, by Manss, on the note and his property would have to respond to it. A note payable to order when properly indorsed and delivered, for value before due, is, in the hands of a bona ficle holder, free from all equities between the original parties. Revised Statutes, section 3171.
    ■ Even though McGill in fact had delivered to Kernohan the genuine note by indorsement thereon, then had stolen it from him, and still before maturity, for value delivered the note, without notice of fraud, defect of title, or other fact impeaching it, in his hands to Manss, still Manss would own the note and would be entitled to recover in it. Daniels on Notes, 677, and also on page 2; 2 Parsons -on Notes, 265, 268; Welch v. Goodwin, 123 Mass., 71; City Bank v. Perkins, 29 N. Y., 554; Phelan v. Moss, 67 Pa. (17 P. F. Smith), 59.
    It seems necessary under the terms of the conditions of this mortgage, to discuss the question whether the note represents the debt or the mortgage represents it. This mortgag’e was given to secure the payment of the note, not the note to secure the mortgage. When the note is paid the mortgage should be cancelled, and the mortgagor may require that it be done. Daniels v. Densmore, 32 Neb., 40; Kling v. Ballentine, 40 Ohio St., 395; Cleveland v. Cohrs, 10 S. C., 224; Miles v. Gray, 4 B. Mon., 517; Wright v. Eaves, 10 Rich. Eq., 582.
    A mortgage note if negotiable in form is of course assignable, and the assignee takes the legal title to it. When, therefore, the debt is in the form of a negotiable note, a legal transfer of this, carries with it the mortgage security; and inasmuch as a negotiable promissory note by the commercial law, when assigned for value before maturity passes to the assignee free from all equitable defenses to which it was subject in the hands of the payee, it does not lose this character which it has under the commercial law, when it is secured by mortgage. Jones on Mortgages, 834; Allen v. First Nat. Bank, 23 Ohio St., 104; Alsdorf v. Reed, 45 Ohio St., 653; Holmes v. Gardner, 29 W. L. B., 214; 2 Story’s Eq. Jur., section 1016; Ranney v. Hardy, 43 Ohio St., 16; Merrick v. Bartholick, 47 Barb., 253; Briggs v. Hunnerwold, 35 Mich., 479; Guver v. Hord, 20 Ind., 395; Carpenter v. Longan, 16 Wall., 271; Jacksons. Willard, 4 John., Ch. 43; Jordans. Cheney, 74 Me., 359; Pomeroy’s Eq. Jur., 1210; Jones on Mortgages, 818; Ober v. Gallagher, 93 U. S. (3 Otto), 199; Jackson v. Blodgett, 5 Cowen, 206; Morris v. Bacon, 123 Mass., 60; Banger v. Bancroft, 12 Gray, 365; Miller v. Larned, 103 Ill., 562; Himrod v. Gillman et al., 35 N. E. Rep., 373; 44 Ill. App., 516.
   Spear, J.

The question presented by the record, is whether, both parties, acting in good faith, one who obtains title to a mortgage given to secure several notes to several persons, by assignment for value bjr one of the mortgagees with delivery of the same and a forged copy of one of several notes secured thereb}7, indorsed by the paj^ee who was then the owner of the genuine note, obtains a lien for money thus advanced on the faith of the security, in preference to the bona, fide indorsee for value of the genuine note obtained afterwards, both transactions occurring before the maturity of the note ?

It seems to us that the question will be solved by die application of simple and well established principles. The concession that each party acted hi e2itire good faith remor es' any necessity for considering equities, a2id leaves the case to be determhied on purely legal grounds.

The following propositions we consider are settled in Ohio:

1. Where a promissory 2iote is secured by mortgage, the note, not themortgage, represents the debt. The 2iiortgage is, therefore, a mere incident, and an assignme2it of such incident will not, in law, carry with it a transfer of the debt; on the other hand a transfer of the note by the owner so as to vest legal title in the indorsee will carry with it equitable ownership of tlie mortgage. And so, if the debt be evidenced by several promissory 2iotes, the legal transfer of a portion of the notes carries with it such proportional hiterest in the security as the notes transferred bear to the whole. Harkrader v. Leiby, 4 Ohio St., 602; Ex'rs of Swartz v. Zeist, 13 Ohio St., 419; Fithian v. Corwin, 17 Ohio St., 118; Allen v. Bank, 23 Ohio St., 97; Holmes v. Gardner, 50 Ohio St., 167.

2. Being but an incident of the debt, the mortgage remains, until foreclosure or possession taken, in the nature of a chose in action. Where given to secure notes it has no determinate value apart from the notes, and, as distinct from them, is 2iot a fit subject of assignment. A2id where the notes are legally tra2isferred, the mortg-agee, and all claiming under him, will hold the mortgaged property in trust for the holder of the notes. Jordon v. Cheney, 74 Me., 359; Jones on Mortgages, 818; Pomeroy’s Eq. Jur., section 1210.

3. All 2iotes payable to any person or order are negotiable by indorsement thereon, so as absolutely to transfer and vest the property thereof in each and every indorsee or holder successively. Such indorsee,or holder, may, in his own name, institute and maintain an action thereon against the maker. Sections 3171 and 3172, Revised Statutes.

4. A holder of negotiable paper who takes it before maturity for a valuable consideration, in the usual course of trade, without knowledge of facts which impeach its validity, holds it by a good title. To defeat a recovery it is not sufficient to show that he took it under circumstances which ought to excite suspicion in the mind of a prudent man. To have that effect, it must be shown that he took the paper under circumstances showing- bad faith or want of honesty on his'part. Nor does the note lose its commercial character when secured by mortgage. Johnson v. Way, 27 Ohio St., 374; Kitchen v. Loudenback, 48 Ohio St., 177.

Applying these rules to the facts, the following conclusions seem to result, viz. :

Kernohan, by the assignment of the mortgage, took the legal title to it so far as the same was owned by McGill, and an equitable right in the $7,602.72 note. He did not take, nor did McGill intend to transfer to him, any legal title to the note, for McGill kept, and intended to keep that in his own possession, unindorsed, and subject to his continued control. Such rights as Kernohan took he .might assert as against McGill, but John and Louis Manss alone can recover on the note. They, by their purchase and the indorsement to them by McGill, took a full title to it as against the world, together with the equitable title to the mortgage in whosesoever hands it might be. The one has the legal title to the incident, with an equitable right in the debt; the other the legal title to the debt, tog-ether with an equitable title to. the incident. As both cannot have precedence the weaker must give way to the stronger. The leg-al title to the incident must be subordinated to that which is superior, viz.: the legal title to the debt, although the holder of the incident acquired his right first. John and Louis Manss were, therefore, entitled to the proceeds of the mortgaged lands.

The case of Kernohan v. Durham, 48 Ohio St., 1, is relied upon by plaintiff in error. We think it does not support his contention. In that case Coddington took by indorsement the genuine note after due. Kernohan took an assignment of the mortgage which assignment also purported to transfer the note. This was not only before the transfer of the note to Coddington, but before the note was due. The holding is, that, as between Kernohan and McGill (the payee), the former took an equitable title to the genuine note, and hence, as Coddington’s title was acquired after the note had been dishonored, he coitld take no better right than his indorser had. The note being past due he was put upon inquiry, and was chargeable with whatever knowledge due inquiry would have elicited. The vital difference between the position of the holder of the note in that case and in this is, that, while Coddington took his title after clue and hence was charged with all infirmities, John and Louis Manss being- indorsees and purchasers for value in the ordinary course of trade, before due, took g-ood title as against the world.

Judgments afirmed.