Case Name: Charles Hollinshead vs. John Stuart & Co.
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1898-05-27
Citations: 8 N.D. 35
Docket Number: 
Parties: Charles Hollinshead vs. John Stuart & Co.
Judges: All concur.
Reporter: North Dakota Reports
Volume: 8
Pages: 35–44

Head Matter:
Charles Hollinshead vs. John Stuart & Co.
Opinion filed May 27th, 1898.
Negotiable Paper — Implied Notice of Transfer.
A debtor is chargeable with notice of the transfer by his creditor of a negotiable instrument on which he is maker, and thereafter he cannot safely pay the original creditor, although he is ignorant of , such transfer.
No Implied Notice of Transfer of Ordinary Debt.
The rule is otherwise as to an ordinary debt.
Payment of Paper Without Its Production.
Whether, however, a debtor ignorant of a previous transfer can make final payment of the principal to one who is not at the time the owner of the claim (such claim being represented by a written instrument), without calling for the production of such instrument, and yet be protected as to such payment, is not decided.
Increased Interest After Maturity — Does Not Destroy Negotiability.
A note otherwise negotiable is not rendered nonnegotiable by the fact that it provides that after maturity the rate of interest shall be higher, or by the further provision that in case of default in the payment of interest the holder of the note may, at his option, declare the whole principal due.
Estoppel Against Owner of Paper.
After the payee of a note, and the mortgagee in the mortgage given to secure the same, had transferred them to another, the debtor, ignorant of such transfer, continued to pay the interest to the original creditor; and the purchaser, by delivering the interest coupons to such original creditor, to be sent to the debtor by it, instead of sending them directly to the debtor, confirmed the debtor’s belief that the original creditor was still the real creditor. Held, that the purchaser was estopped from setting up his ownership to defeat the subsequent payment of the principal by the debtor to the original creditor.
No Ostensible Agency Created.
Held, • further, that the debtor could not justify^ such payment on the ground that the purchaser had created an ostensible agency, because it appeared that the debtor did not deal with the original creditor as the agent of the purchaser, or assume that any such agency existed, but, on the contrary, dealt with such orginal creditor solely as the actual owner of the securities.
ON REHEARING.
Payment of Negotiable Paper to Payee Without its Production and After Transfer No Defense.
The fact that an indorsee of a negotiable note with interest coupons attached forwarded the coupon notes, as the interest matured, to the original payee, to be delivered to the maker upon payment, and the further fact that such maker paid such coupon notes with the full belief on his part, but in the absence of all inquiry, that the original payee was the owner thereof, do not estop the indorsee, where the maker paid the principal to the original payee while the note remained in the hands of the indorsee, from setting up the indorsement to himself, or from denying all agency on the part of the payee to collect such note.
Note Payable at Particular Office. "
When a negotiable promissory note is made payable at a particular office, such fact does not constitute the party in charge of such office the agent of the holder of such note to receive the money thereon, unless such note is in the possession of such party.
Appeal from District Court, Barnes County; Glaspell, J.
Action by Charles Hollinshead against the Globe Investment Company, defendant, to secure the satisfaction of a certain mortgage and for the statutory penalty. John Stuart & Company intervened. Plaintiff purchased the mortgaged premises from William Glass and as part of the purchase price assumed and agreed to pay the mortgage thereon given by his grantor to the Globe Investment Company. Prior to the purchase of said property by plaintiff, the Globe Investment Company had assigned its mortgage to intervener and endorsed and delivered to intervener the notes by it secured. Plaintiff, without knowledge of intervener’s ownership of the notes and mortgage, paid the amount secured to the Globe Investment Company. Plaintiff had judgment and intervener appealed.
Reversed.
Morrill & Engerud, for appellant.
The note in this case contains this provision: “If any interest remains unpaid ten days after it becomes due, the principal shall at once become due, at the option of the holder, without notice.'"’ This provision does not render the note uncertain as to time of payment so as to destroy its negotiable character. § 4852, 4861, Rev. Codes; Daniels Neg. Inst. 41; Wilson v. Campbell, 68 N. W. Rep. 278; Merrill v. Hurley, 62 N. W. Rep. 958; Kerr v. Morrison, 25 S. W. Rep. ioxx; Crossmore v. Page, 73 Cal. 213; Roberts v. Snow, 27 Neb. 425; Ernst v. Steckman, 74 Pa. 13; Cisne v. Childeston, 85 111. 523; Charlton v. Reed, 16 N. W. Rep.' 64; Walker v. Woolen, 54 Ind. 164; Capron v. Capron, 44 Vt. 410; Palmer v. Hummer, 10 Kan. 464; DeHass v. Roberts, 59 Fed. Rep. 853; Chicago, &c. v. Bank, 136 U. S. 268. The transfer of the note carried with it the mortgage. Sec. 4707, Rev. Codes; Lee v. Clark, 1 S. W. Rep. 142; Porter v. Ourada, 71 N. W. Rep. 52. After transfer the mortgagee had no right to accept payment of the mortgage debt unless he was agent of the transferee. Lee v. Clark, 1 S. W. Rep. 142; Brayley v. Ellis, 32 N. W. Rep. 254. _
_ Possession of the interest coupons for collection is not evidence of authority to collect the principal debt. Wilson.v. Campbell, 68 N. W. Rep. 278; Jones on Mortgages, 964; Stark v. Olsen, 63 N. W. Rep. 37; Eggert v. Beyer, 62 N. W. Rep. 57; Porter v. Ourada, Ji N. W. Rep. 52; Richards v. Waller, 68 N. W. Rep. 1053; J°y v- Vance, 62 N. W. Rep. 140; Brayley v. Ellis, 32 N. W. Rep. 254. If the instrument evidencing the debt is non-negotiable and the debtor, without notice of its transfer, pays the mortgagee, he is protected though an assignment of the mortgage is of record. Porter v. Ourada, 71 N. W. Rep 52; Stark v. Olsen 63 N. W. Rep. 37; Williams v. Keyes, 51 N. W. Rep. 520; Eggert v. Beyer, 62 N. W. Rep. 57. An equitable estoppel to be available as a defense must be specifically pleaded. 8 Enc. PI. & Pr. 7; Parliman v. Young, 2 Dak. 184, 4 N. W. Rep. 711. None of the elements of an estoppel are here present. 7 Enc. Law, 12-X7. Au estoppel is odious and if anything is left to inference it must be against the estoppel. 8 Enc. PI. & Pr. 9 & 10. The Globe Investment Company in receiving the money was the agent of plaintiff and not of Stuart & Co. Stark v. Olsen, 63 N. W. Rep. 37-41.
Winterer & Winterer, for respondent.
. The note in this case was not a negotiable instrument within the meaning of the statute. § § 4853, 4854 & 4859, Rev. Codes; First National Bank v. Laughlin, 4 N. D. 39; Garretson v. Purdy, 3 Dak. 178, 14 N. W. Rep. 100; Hegler v. Comstock, 45 N. W. Rep. 331, 1 S. D. 138; Flagg v. School District, 4 N. D. 30, 58 N. W. Rep. 499. The mortgage and note must be construed together as one contract, and the mortgage contains stipulations destroying its negotiability. Lockrow v. Kline, 46 Pac Rep. 720; Brooks v. Struthers, 68 N. W. Rep. 272.
Payment to the original payee of a non-negotiable instrument without notice of the assignment, will satisfy the liability. Lockrow v. Kline, 46 Pac. Rep. 720. Intervener failed to record his assignment of mortgage, or to inform plaintiff that he owned the notes. Jones v. Fidelity Loan & Trust Co., 63 N. W. Rep. 553, 7 S. D. 122; Perkins v. Matheson, 19 Pac Rep. 633; Low v. Fox, 9 N. W. Rep. 131. The privileged character of negotiable paper does not extend to the mortgage by which it is secured. Hostetter v. Alexander, 22 Minn. 559; Johnson v. Carpenter, 7 Minn. 176.

Opinion:
Corliss, C. J.
The plaintiff, having once paid the mortgage upon his land, claims by this action a right to have the same discharged of record, and the note and mortgage surrendered to him. The fact of payment is undisputed. So is the fact that the payment was not made to the one who at the time thereof was the owner of the note and mortgage. Plaintiff therefore cannot justify the payment, as to the defendant, unless he can make out a case of estoppel as against such defendant. The note and mortgage were given by William Glass to the Globe Investment Company on the 21st of December, 1891. On the 14th of March, 1892, plaintiff purchased the mortgaged premises from Glass, and in his deed he assumed the payment of such mortgage. On the 26th of December, 1894, plaintiff paid the mortgage to the Globe Investment Company, the original mortgagee; but at this time such company was'not the owner thereof, the note and mortgage having been previously transferred to the defendant, John Stuart & Co. Were there no other facts in this case, the payment would not protect the plaintiff against liability to pay the same debt to the defendant. It is true that with respect to ordinary dioses in action the rule is that the assignee thereof, if he would prevent payment to the assignor by the debtor, must notify the debtor of the assignment. Any payment made by such debtor in ignorance of the assignment is a good payment of the claim. Van Keuren v. Corkins, 66 N. Y. 77; Insurance Co. v. Smith, 2 Barb. Ch. 82; Reed v. Marble, 10 Paige, 409; Wanzer v. Cary, 12 Hun. 403; Bury v. Hartman, 4 Serg. & R. 175; Brindle v. McIlvaine, 9 Serg. & R. 74; Hodgdon v. Naglee, 5 Watts & S. 217, 219; Trustees v. Wheeler, 61 N. Y. 88, 111; Mitchell v. Burnham, 44 Me. 286, 303, 304. This appears to be the law even in cases where the debt is evidenced by a written instrument. Van Keuren v. Corkins, 66 N. Y. 77; Bury v. Hartman, 4 Serg. & R. 175; Brindle v. McIlvaine, 9 Serg. & R. 74. But see Brown v. Blydenburgh, 7 N. Y. 141. On this latter point we do not, however, wish to express any opinion. With respect to negotiable paper the rule is different. The maker must, at his peril, ascertain at the time of payment whether the payee is still owner thereof. Although the purchaser of such paper does not notify the debtor of the fact of such purchase, and although the latter is ignorant thereof, still he is, in law, chargeable with notice of the rights of the purchaser, and therefore he pays the original creditor at his own risk. Porter v. Ourada (Neb.) 71 N. W. Rep. 52; Eggert v. Beyer (Neb.) 62 N. W. Rep. 57; Brayley v. Ellis (Iowa) 32 N. W. Rep. 254; Windle v. Bonebroke, 23 Fed. Rep. 165; Burnhans v. Hutcheson, 25 Kan. 625.
That the note in question was negotiable, we have no doubt. Its negotiability is attacked on two grounds: First, because it provides for a different rate of interest after maturity; second, because it contains a elapse that, in case of default for ten days in the payment of interest, the whole of the principal may, at the option of the holder, become clue. We regard it as settled law that the fact that the date of payment may be accelerated by the default of the debtor does not effect the negotiability of the paper. Chicago Ry. Equipment Co. v. Merchants' Bank, 136 U. S. 268; 10 Sup. Ct. 999; Merrill v. Hurley (S. D.) 62 N. W. Rep. 958; Wilson v. Campbell (Mich.) 68 N. W. Rep. 278; Ernst v. Steckman, 74 Pa. St. 13; Cisne v. Chidester, 85 Ill. 523 ; Walker v. Woolen, 54 Ind. 164; De Hass v. Roberts, 59 Fed. Rep. 853; 1 Daniel, Neg. Inst. § 48; Roberts v. Snow, 27 Neb. 425, 43 N. W. Rep. 241.
It is also clear that the fact that the rate of interest was, after maturity of the note, to be higher, did not render the same nonnegotiable. Merrill v. Hurley (S. D.) 62 N. W. Rep. 958; Towne v. Rice, 122 Mass. 67; Parker v. Plymell, 23 Kan. 402; Hope v. Barker, 43 Mo. App. 632; Crump v. Berdan, 97 Mich. 293, 56 N. W. Rep. 559.
The note and mortgage appear to have been transferred to the defendant on the 2d of February, 1892. Plaintiff purchased the land, subject to the mortgage, on the 14th of March, 1892. Thereafter he paid the interest each year to the. mortgagee, the Globe Investment Company, undoubtedly believing that it was still the owner of the security. He had no knowledge of the transfer thereof to the defendant, and after he had made his first payment of interest, and had obtained the .interest coupon, he naturally assumed that he was correct in his belief. Each year's payment of interest could have only one effect; i. e. to strengthen this conviction. Who was responsible for this belief ? The facts admit of only one answer to this inquiry. The defendant knew that it had not notified the plaintiff of the purchase by it of the note and mortgage. It plainly saw that plaintiff was dealing with the assignor as though it were still the owner of these papers. Each time it delivered to the assignor the interest coupons, on receipt of the money, and suffered the latter to surrender them to the plaintiff. Instead of sending such coupons directly to him itself, and thus dealing with him personally, it did an act which was, to its knowledge, tantamount to a representaron by it to the plaintiff that it was not, but that the assignor was, the owner of the obligation. So long as it failed to disabuse his mind of this false impression for which it was responsible, he was justified, as against the defendent, in continuing to deal with the assignor as the real owner. And it follows that the payment of the principal made by him to the assignor constitutes a good payment of the note and mortgage. Were there no element of estoppel in this case, the plaintiff would have to suffer the consequences of his own carelessness in paying a written instrument without demanding the production thereof at the time of payment; he being chargeable with knowledge of the fact that it might have been previously transferred. But while a purchaser of negotiable paper, and perhaps of any other written instrument, may safely remain silent, and can, despite the silence, insist that payments to the assignor shall not be charged against him, he cannot by his conduct create a belief in the mind of the debtor that the former owner is still the real owner, without being bound by all' payments made by the debtor to such former owner while such belief remains unchanged. Our decision - rests upon the elementary principle of equitable estoppel. We reach the same conclusion as the learned District Judge, but on a different ground. We are unable to discover in the case any question of ostensible agency. Before the plaintiff can claim that the defendant held the Globe Investment Company out to him as its agent, and therefore is estopped from denying such agency, he must be.. able to satisfy us that he dealt with such company believing it to be such agent because of the conduct of the defendant. Now, it is obvious from the facts of this case that plaintiff has at no time ever regarded the Globe Investment Company as defendant's agent at all. He has never known the defendant as the principal in the transaction.. He has all the time proceeded on the theory, not that defendant was the owner of the securities, and the Globe Investment Company its agent, but that the latter was itself the owner thereof, and the only party interested in the matter, aside from himself.
November 9, 1898.
The judgment of the District Court is affirmed.
All concur.