Source: http://openjurist.org/59/f1d/917
Timestamp: 2016-12-09 09:04:25
Document Index: 552790310

Matched Legal Cases: ['§ 723', '§ 456', '§ 771', '§ 796', '§ 795', '§ 1176', '§ 795']

59 F1d 917 | OpenJurist
59 F. 917 - HomeFederal Reporter, First Series 59 F.
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BLACK V. RENO.
equitable features, if the legal remedy by pecuniary judgment is complete, sufficient, and certain, it must be resorted to. Buzard v. Houston, 119 U. S. 347, 7 Sup. Ct. 249. The judiciary act of 1789 provides that "suits in equity shall not be sustained in either of the courts of the United States in any case where a plain, adequate, and complete remedy may be had at law." Rev. St. § 723. While a defendant may waive his right to object to the jurisdiction, by failure to take the objection in due time, he is entitled, whenever he expressly claims it, as the defendant has done in this case by his answer,to its benefit. The right is one involving his constitutional privilege of a trial by jury, and cannot be denied by the court. In the present action the remedy granted is substantially the same as that which could have been given in an action at law, and no other relief could have been granted. These facts are conclusive of. the question of jurisdiction. It results that the decree of the court below must be reversed, and the cause be remanded to the circuit court with instructions to dismiss the bill as to this appellant for want of jurisdiction, but without prejudice; costs to be taxed against appellee.
BLACK et at.· v. RENO et al. (Circuit Court, E. D. Missouri, E. D.
No.3,653.
February 24, 1894.)
MORTGAGES-THANRFER-J"JEN- DISCHARGE.
Where negotiable notes secured by a mortgage duly recorded are transferred for value before maturity to a third person, a subsequent acknowledgment of record by the mortgagee of satisfaction of the debt secured does not impair the lien of the mortgage unless it was made with the knowledge or assent of the holder of the notes; and hence a purchaser of the mortgaged land Is not protected by such release, though he purchases on the faith of It. Taking notes as collateral security for money loaned at the time will constitute the lender a holder for value of such notes.
NEGOTIABLE INSTRUME::<lTS-THANSFER-HoLDERS FOR VAI,UE.
SAME-COLLATERAL SECURITy-ACTION.
The recovery of judgment against the maker of a note will not bar the creditor's action on other notes taken by him as collateral security for the loan, so long as that judgment remains unsatisfied.
MORTGAGES-FoRECI>OSURE-lNSTALLMENTS OF DEBT.
A mortgage recited that It was given to secure the payment of two notes, one payable in five, and the other In ten, years, with interest payable annually; and the condition required the maker to pay "the notes and all interest that may be due thereon, according to the tenor and effect of said notes." Both notes and mortgage were transferred as collateral security for a·loan, which was not paid at maturity; and the holder brought suit to foreclose the mortgage, the first note being due and unpaid, and no interest having been paid on either note. Held, that he was entitled to foreclose without waiting for the maturity of the second note. Where foreclosure Is sought of a mortgage securing several notes, only part of which are due, the court will order the sale or so much of the land as Is necessary to pay the overdue notes, leaving thp. decree to stand as security for the others; or, if the land is not susceptible of division,
SAME-SALE-INSTALLMENTS NO'!' YET DUE.
It will order that afteli' paying order. '
FEDERArL ltEPORTER,
sold, and that the ba1aJ;loo ,ot the proceeds, Dotes, !;Ie pal(l, Into court, and held subject to its , ;'" . ' ,
6 SAME-PURCHASERS SUBJECT TO LIEN-MARSHALING.
Where part of tliemol-tga.ged land hils been sold, but remains subject to the lien, its sale 011 foreclosure will be postponed until it is sure that the proceeds of the residue are not sufficient to satisfy the debt; and a reasonable time will the owner In which to satisfy balance due after such proceeds'are IippUed to the debt. Where the owner of land executes a mortgage thereon while he is unmaJrrfed, his SUbsequent marriage cannot raise any homestead right In the laDPAls against the mOrtgagee.
SAME-LIEN-HoMESTEAD.
USURY8WBEN AVAILABLE AS DEFENSE.
a note has been reduced to judgment, and the amount recovered iSllo,greater than what might have beel). recovered under the laws of thestttt/!, even If the contract had been usurious, the question of usury in the' :original transaction cannot be raised by one who is proceeded agalnsttu3 respect of collateralseeurlty given for such note.
In On final hearing. Bill by Robert J. Black .and others agflfgst John W. Reno and others. Decree for complainants.
This Is a bUI In equity to foreclose a. mortgage on real estate situate In Pemlscot county. In this state. On the 13th day of September. 1886, the respondent W. A. Reno,' then unmarried, executed his two several promissory fol.' the sum of $5,000, payanotes to the co·respondent JoJm W. Heno, ble to order,-the first of said notes, being payable five years after date, und th'e second ten years. after date; the first bearing 10 per cent. interest, :lnd the second 8 per cent. Interest, per annum from date,-to secure the 'Payment of which the said W. A. Reno, at' the time of the execution of said llotes, executed and delivered to said John W. Reno a deed of mortgage on. certain lands in said county, containing about 39:1..63 acres, which (mid, ', was duly recorded in the .., office of said county on the 14th diit'ot"December, 1886. The conditions of said mortgllge were, in substance, that tile said W. A. Reno shouldVll:Y the :;Jum specified in said notes, and the thereon, according to the tenor and effect of said notes. the ,'should be void: "but, If the sild he shoilld' not be well and truly paid when' same become due and payable according to tenor and effect thereof, the deed should remain in full force;'" arid the said John W. Reno was 'to proceed to sell the said real estate, or any part thereof, at jjublfc vendue to the highesfbldder, at the courthouse door of said county, on giving 30 days' publfc notice, 'and upon' such sale and payment of the purchase money he should execute and deliver a of said property tosaid purchaser, ,and out of the proceeds of such sale he should pay, first, the expenses of the trust, and next whatever tnight be in arrears and unpaid on said land, whether principal or ,Interest, and the balance, If any, should be paid over to said William A. Reno. To understand the last recitation it should· be stated that the said Dotes represented what was claimed by the parties thel1eto to be the purchase money of the sale of said land from said .Tohn W.to WiJliam A. Reno"tbe said John W. beIng the father of saidWnHam A. Thereafter, on the 26th day of March, 1889, said John W; Reno borrowed, from the' complainants the sumof$4,OOO,and executed to them his two several llromissory notes, each for $2,500,payaole I·n one and two years thereafter.;.andto secure the payment of said notes, and as a part of the consideration of said loan, the said John W. Reno transferred them by the indorsement othis Dame thereon, and delivered the same to the complainants, matul;'ity of said notes so extogether with said mortgage deed., Upon ecuted by Johl1 W. Reno to comp!a!:Ilants, the same remaining unpaid, compJ,ginants instituted suit In thisCQurt'against.sai4 John W. Reno, and obtained judgment thereon, June, 1891"fo1'; the sum ot$4.. 000, with 6 per cent. interest from the 26th day of March, 1887. andwlllqh' judgment was by consent of
parties. No part of said judgmElnt having been satisfied, the .complainants instituted this action on the 10th day of March, 1892, on said notes for $5,000 each, so held by them as collateral security, and to foreclose said mortgage, and to have the lands sold to satisfy the same. The bill joins, as co-respondents with the said Renos, James H. Howard and W. R. Fields, 3S subseqvent incumbrancers, or as asserting some right and interest in the s3id property. As the respondent Ii'ields has offered no proof in support of his 3nswer, and does not appear at the hearing of this cause, it is not deemed necessary to make, in this connection, any detailed statement relative to his defense, as it does not touch the merits of the controversy. After the transaction afore· said between the complainants and John W. Reno, the said Reno went to the recorder's office in Pemiscot county, and entered satisfaction, on the margin of the record of said mortgage deed, as to 160 acres of said land, and thereupon he took from his said son, William A. Reno, another note for $1,800. secured by mortgage on said 160 acres of land. This was of date June 10, 1890. This note John W. Reno negotiated to one Hunter for value received, on exhibiting to him an abstract of the title to said land, showing said satisfaction of the mortgage to the 160 acres. This mortgage was foreclosed, and Hunter became the purchaser thereunder, and then conveyed to the respondent Howard, who claims to be a purchaser for. value, without notice of the first mortgage. He sets up in his answer other matters, which are sufficiently noticed in the opinion herein.
Harvey & Hill and J. E. for complainants. W. W. McDowell and Lubke & Muench, for respondents. PHILIPS, District Judge, (after etating the facts.) .1. The claim of respondent Howard that he sustains the relation of an innocent purchaser is not tenable. It is the settled rule of law in this state, where the land is situated, and the transaction respecting the mortgage was had, that where negotiable notes, like these, secured by deed of mortgage or trust duly recorded, are trimsferred for value to a third party before maturity, such transfer not only carries the mortgage with the notes, but a subsequent acknowledgment of re.cord by the mortgagee of satisfaction of the debt secured, or any part thereof, without the knowledge or assent of the holder of the note, does not affect or impair the mortgage lien, and is of no effect in favor of one buying on the faith of such release. Anderson v. Baumgartner, 27 Mo. 80; Goodfellow v. Stillwell, 73 Mo. 19; Joerdon v. Schrimpf, 77 Mo. 383; Logan v. Smith, 62 Mo. 459; Lee v. Clark, 89 Mo. 553,1 S. W. 142; Hagerman v. Sutton, 91 Mo. 520--533, 4 S. W. 73. 2. Taking the notes as collateral security for money at the,. time loaned on tile faith thereof constituted the complainants innocent holders for value. 2 Rand. Com. Paper, §§ 456, 799; 1 Daniel, Neg. Inst. § 771 ; Logan v. Smith, 62 Mo. 455. This is especially the rule of the federal courts. Carpenter v. Longan, 16 Wall. 271; Swift v. Smith,102 U. S. 442; Sawyer v. Prickett, 19 Wall. 147; Bank v. Matthews, 98 U. '621; Oates v. Bank, 100 U. S. 246. 3. The resort to the action at law and recovery of judgment therein on the notes executed by John W. Reno to complainants constituted no bar to this action, that judgment being unsatisfied; and especially so when Reno is insolvent. 2 Rand. Com. Paper, § 796. The pledgee takes paper as a trust for the pledgor, and it becomes his duty to proceed to collect the same on its maturity;
debt." Id.§ 795. , ' " " , ".,' ' , '4. 11: is objected that' this action is premature, for the reason that,by the terms of the mortgage deed, no foreclosure is permissible until after the maturity of the 10-years note. The first note and a]1theinterest thereon were past due when this suit was in· stituted,and no interest had been paid . on the 10-years note. If this action is to be postponed until after December 13, 1896, the situatioD;0f.the creditor is most unfortunate. It is very question· able whether the whole security be sufficient to discharge the judg· ment of complainants against John W. Reno, and it is quite clear, from all the evidence and 'circumstances in the case, that it is not near4dequate" at this, ,time, for the redemption of .the mortgage principal and interest of the two, notes at the end of debt·. 10 years would amount to".$19,000., ,The maker of the notes, as well as the assignor, is not Qnly insolvent, but the possession of the land and the usufruct thereof have passed from them under a junior incumbrance and judgment. In such condition of the security, prayer of the ;bill for the ap· a chancellor would at least grant pointmentota receiver, to secure tO,the mortgagor the rentals of the lands in mitigation of the accumulating interest, amounting to $900 per annum,-a, sum undoubtedly .far in excess of the value of the rentals. ,.' a court' of equity give a construction to the mortgage Productive of such dire results, it should certainly clearly on. the face of the mortgage deed that it was within its -terms that the lH0rtg'agee should be so postponed. Of course,a court of equity could not, in this action,'a,fford relief against the express contract of the parties. The courts universaII;r hold that, under a mortgage to secure a debtpayableiJ,l' instaJlments, the right to foreclose arises anyone installment, in the absence of any provision on a default clearly interdicting the right; and there is a strong disposition and tendency in the courts of chancery to apply this rule to defaults in the payment of annual accruing interest. 2 Jones, Mortg. §§ 1176, 1177., They combat the proposition, often taken by counsel, that snch interest ought not to be considered in the light of an in· stallment of the principal, put they assert that interest unpaid be· R. 11 Eq. comes principal pro tanto. In Seaton v. Twyford, 591,therewas a loan of £400, by way of mortgage, at 5 per cent., J;l()t to be called In for five years. , Judgment at law was sought by the mortgagor to ,be enjoined. Inter alia, the chancellor observed:,
and he'need not defer its collection until the maturity of the original
""n ls, not, iomr, opinion, oPlilU to that, if the case were taken 1nto chamberlJ fpi the purpobe of preparing a mortgage deed under sucb decree as I have mentioned, the mortgage wottlllnot be in the most ordinary form, giving five years to pay the mortgage" Jl!oney, but mak1ng 1t a condition of that that the interest, 1n tj:le mean time; should be paid. The fanure to pay the 1pterest in a mortgage prepared 1n the most ordinary form would release the mortgagee froni the necessity of walling five years before he exercises sUch powers as a, mortgagee possesses. The mortgagor who stipulates that he shall bave flveyears to pay the mortgage money must, of necessity, Whether it ls expressed or not, undertake at the same time that, if be fans to do {bat which is 1ncumbent upon him during the of five years to do, the' :re$trict1ons upon "the mortgagee (that Is, to walt five years on the mortgagor) should cease."
See, also, Edwards Martin, 25 Law J. Ch. 284; Bank v. Chester, 11 Pa. St, 292; Richards v. Holmes, 18 How. 145, 146. This mortgage recites the two notes,-one payable in five, the other in ten, years, with Interest per annum,-and it specificalljr requires the maker to pay said notes, "and all interest that may be due thereon, accQrding to the tenor and effect of said notes." While the word "he" occurs in the conditions inadvertently instead of "notes," the clear meaning and import is that if the said notes, "when they become due and payable according to the tenor and effect thereof," should not be paid, the right to foreclose should attach. These notes might have been transferred separately to different purchasers. In such case, would not the default in the payment of the first note at maturity have been a failure to pay when the same became due and payable according to the tenor and effect thereof? The holder would have been entitled to foreclose, and the proceeds of the sale thereunder would be applied, first, to the satisfaction of the first note. Buford v. Smith, 7 Mo. 489; Mitchell v. Ladew, 36 Mo. 531; Huffard v. Gottberg, 54 Mo. 271. Construing this mortgage in the light of the whole transaction, this objection is overruled. 5. We are next brought to face the question as to the character and extent of the decree to be rendered where the holder of all the notes proceeds to foreclosure on default of the first, but before maturity of the last, note. In the absence of a provision in the mortgage that a default in the one shall render the others due for the purpose of foreclosure, there being no statutory regulation on the subject in this state, I understand the chancery rule to be that a decree of foreclosure wlU go for the amount of the debt due, and a sale will be decreed of so much of the mortgaged premises as will be sufficient to satisfy the amount due, and the decree will stand as a security for the remaining installments as they become due; but, if the property be not susceptible of division into parcels without injury to the whole, it may be sold as an entirety, and any surplus realized beyond a sum requisite to satisfy the debt due will be returned into court, subject to application by the chancellor. In such case, in the conservation of the best interests of all concerned in the fund, the chancellor will at once direct its application to the liquidation of the deferred installments, with such rebate of interest thereon as may be just and equitable. King v. Longworth, 7 Ohio, 585; Peyton v. Ayres, 2 Md. Ch. 67; Brinckerhoff v. Thallhimer, 2 Johns. Ch. 486; Olcott v. Bynum, 17 Wall. 62, 63; Railroad Co. v. Fosdick, 106 U. So 68, 69, 1 Sup. Ct, 10. To this end the chancellor may refer the matter to a master to report upon the divisibility of the land into parcels, and its value, as to whether it would be probably sufficient to so sat,isfy the whole debt, and the like; in short, the chancellor, in the exercise of a wise discretion, will, in the particular case, make such decree as, in his judgment, will best subserve the rights and interests of all parties concerned. The evidence taken in this case obviates the necessity of a reference to a master. As the respondent Howard of the land under the Renos, subject to complainholds 160
FEDERALBEPORTE'R,
yol. 59.
ants'lhmgage, it is to direct that the portion of the premises by the mortgage not claimed by him should first be sold .under' the as the same is practically segregatedfrom the 160 acres occupied by Howard, and that the latter should})eS9Id(if necessary,to satisfy any'balance due the com· to Howard; of course, a reasonany bafan,ce on complalliants' debt after sale of the other portion of thepreIilises, alid also giving to him the right'dfelection as to whether the 160 acres shall be sold in lump . 6:''\;'V. .A.. Reno being uD;Dlarriedat the time of the execution of then6tes and mortgage ana their transfer to complainants, there is no fOundation for the Claim set up in Howard's answer respectllig a.'hoin'estead right in the land arising On the subsequent mar'of W. A.Reno. ' 7.·The only remaining ·of importance to be answered is as to the sUm for· which theln011:gage lien shall be enforced against the -lande. The general rule is that the pledgee of a note and mortgage is, on 'default; permitted to recover the full value of the security, holding the surplus for those having equities therein. 2 Rand. Com. Paper; §§ 795-797. He holds as a trustee, and should take against the maker, W. A. Reno, for the whole sum due for thtf protection of John W.Reno,and the surplus on a foreclosure sale, if any, aftersa.tisfying' complainants' debt, would go in eqUity to the respondents, who have acquired all the title and estate in the land of said Reno. Prima facie, the amount called for on the face of the notes by J. W. Reno to complain- . ants, to wit, $5,000, and interest, is the sum which the complainants are ,entitled to have in this action. But they reduced their claim. to judgment at law, and the notes became merged therein. If it be conceded that the respondent Howard is not precluded by said judgment, is he in a position to show, as is claimed in argument by his counsel, that a part of the consideration of the notes executed by John W. Reno was for usurious interest? It may be conceded,for the purposes of this case, that a junior incumbrancer has an equitable right to come into chancery to redeem against ,a prior lienor, and to ha"9'ethe amount thereof reduced to the extent of the usury injected into the transaction. Perrine v. Poul· son, 53 Mo. 309. But this, respondent has not put himself in a. position to avail himself even of such questionable equity. He does not admit the complainants( right to any lien whatever; nor does he offer to redeem for the sum justly due; nor, indeed, has he tendered any proper issue of usury in his plea. The only and entire allegation is contained in the following hypothetical paragraph:
"If it be true that the compln1nants did acquire or receive possession of any notes described in the alleged ,mortgage of said lands by William A. Reno to John W.Reno, yet this defendant avers that complainants did so acquire possessIon of said notes and mortgage by virtue of an illegal and usurIOus transaction, and pot in good faith or for value.!'
What· trtmsaction, and how was it usurious ? This is a mere IItatemebtof a conclusion, and not the statement ,of an issuable