Case Name: Jackson A. Jordan and others v. Andrew Forlong
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1869-12
Citations: 19 Ohio St. 89
Docket Number: 
Parties: Jackson A. Jordan and others v. Andrew Forlong.
Judges: Brinkerhoff, C.J., and Welch, White, and Dat, JJ., concurred.
Reporter: Ohio State Reports, New Service
Volume: 19
Pages: 89–97

Head Matter:
Jackson A. Jordan and others v. Andrew Forlong.
W. wade and delivered sundry negotiable promissory notes, and, at the same time, to secure their payment, executed to the payee a mortgage upon real estate, which was duly recorded. The notes and mortgage came by indorsement to the hands of S., by whom they were surrendered to W., who gave him, in lieu thereof, a new note, secured by a mortgage upon other property. W. afterward, and before the maturity of the notes thus lifted, through the agency of D. and C., caused them again to be negotiated, for value, to other parties who received them in good faith, and without notice of the prior transactions. The mortgage given to secure them remained uncancelled upon the record. W. afterward made and delivered to D. and C. sundry other negotiable notes, and to secure their payment gave a mortgage upon the premises covered hy the first mortgage. A portion of these notes were subsequently assigned for value to F. Held:
1. That as against the holders and indorsers of the notes which had been re-negotiated, W. and his subsequent mortgagees were equitably es-topped to claim that the lien of the first mortgage had been discharged by the transaction with S.
S. That the equitable lien held by F. under the last mortgage must be postponed to that of the indorsers and holders of the notes secured by the first mortgage.
Error to tbe district court of Montgomery county.
Tire original action, out of which the present case arises, was brought in the court of common pleas of Montgomery county, by the administratrix of the estate of George Brumbaugh, deceased, against Moses B. Walker and others, upon a negotiable promissory note executed and delivered by Walker to Albert E. McClure and Daniel A. Haynes, for §500, and which before its maturity bad been assigned and transferred to plaintiff’s intestate, and also upon a mortgage given by Walker to secure this and other similar notes held by other parties. These parties as well as others claiming to hold liens against the mortgaged premises under other mortgages, and otherwise, were all made defendants in the action.
During the pendency of the suit, the mortgaged premises were sold under an order made in the ease, and the proceeds of sale were' found insufficient to discharge all the liens.
Upon final hearing ,the following state of facts was found by the court:
“That on the 6th day of August, 1856, the defendant Moses 33. "Walker executed and delivered to the defendants Albert E. McClure and Daniel A. Haynes a mortgage upon said premises to secure the payment of eight negotiable promissory notes of even date therewith, for $500 each, payable respectively to the order of said McClure and Haynes, as follows:'April 1/1861; April 1, 1862; April 1, 1863; April 1, 1864; April 1, 1865 ; April 1, 1866; April 1, 1867, and April 1,1868. That the first of said notes was assigned before due to plaintiff, who obtained judgment thereon, and then assigned the same to defendant Andrew Forlong, to whom there is now due on said judgment the sum of $424. That the last seven of said notes were, before the same became due, for a valuable consideration, assigned and transferred by said McClure and Haynes to defendant J. A. Jordan, and by him, for a valuable consideration, to the defendant Stith M. Sullivan; that afterwards, to wit, on the 22d day of December, A.D. 1859, the said mortgagor, M. 33. Walker, executed to said S. -M. Sullivan a new note and mortgage upon other property of said Walker, and delivered the same to said Sullivan in lieu of and exchange for said seven notes and mortgage upon said premises in petition described, and said Sullivan then and there sm-rendered and delivered up to said Walker said seven notes and mortgage, and accepted said new note and mortgage in full satisfaction of all his claim or interest in said seven notes, and of all his claim or lien upon said premises under or by virtue of said mortgage, whicli, so far as the same was a security for said seven notes, was tliereby fully paid and satisfied. That the said Walker afterwards placed the said notes in the hands of the defendants, Davis & Guppy, by whom the same were afterwards, before the maturity thereof, in good faith, for a valuable consideration, and without notice of said payment, respectively assigned and delivered to the following par ties, viz., to the defendant John W. Stoddard, the two notes falling due April 1,1861, and April 1,1867; to the defendant Benjamin E. Eater, the three notes falling due April 1, 1862, April 1, 1863, and April 1, 1868, to whom said mortgage was also transferred and delivered, and now remains uncancelled on the record; to the defendant Samuel Tate, the note payable April 1, 1866; and to the defendant Elihu S. Williams the note payable April 1, 1865.”
The court held, that, notwithstanding the payment of the notes and mortgage by Walker to Sullivan, the subsequent assignment and delivery of the notes, in good faith, for a valuable consideration, without notice, and before maturity, to said several parties, was also an assignment of the mortgage as a security for the notes, and that the same remains a subsisting lien upon the premises; and the court held that the several holders of the notes were entitled to the benefit of said security.
The court also found “that the defendant M. B. Walker on the 17th day of May, A.D. 1860, executed and delivered to defendants Davis & Cuppy a mortgage upon said premises to secure the payment of five promissory notes of even date therewith, for $2000 each, payable in one, two, three, four, and five years after date, which said mortgage became a lien upon said premises on the 19th day of May, 1860; and that said Davis & Cuppy, before the maturity thereof, endorsed and delivered the first three of said notes to the defendant Andi-ew Forlong, who is now the holder thereof.”
The payment of the lions thus found to be still subsisting under the mortgage to Hajmes and McClure, rendered the fund arising from the sale of the premises insufficient for the discharge of the notes held by Forlong and secured by the subsequent mortgage to Davis & Cuppy.
The defendant Forlong thereupon filed his petition in error in the district court, where he obtained a reversal of the judgment of the court of common pleas; the district court holding that the present plaintiffs, who claim under the mortgage to Haynes and McClure, were not entitled to priority over Forlong’s lien under the subsequent mortgage to Davff & Cuppy. To reverse tliis judgment of the district court the plaintiffs prosecute the present proceeding in error.
B. 8. JETci/rt and J. A. Jordam, for plaintiffs in error:
1. We claim that the mortgage to Haynes and McClure, seeming said seven notes of $500 each, is in full force. It is in full force because it has not been released. It will only be released when the court ■ find the notes it was meant to secure have been paid, and shall declare it released, or, when Haynes and McClure release it.
Whether, if Haynes and McClure and Jordan are released, and the court should so hold, it will still uphold the mortgage for the benefit of the present holders of the notes, who acquired it after Walker took it up, is another question.
As the law was generally understood in Ohio prior to the decision in case of Baily v. Smith, 14 Ohio St. 396, the present holders of the notes would have been protected by the mortgage. That case decided that if the note and mortgage were both obtained by fraud, the bona-fide endorsee of the note is not entitled to the benefit of the mortgage.
And while said notes remain so far unpaid as to leave Haynes and McClure and Jordan liable upon them as endorsers, the court will uphold it for their protection, and will order sale of said premises secured by mortgage, to pay the notes, and will give it the priority it is entitled to by its execution in 1856.
In the case at bar there was no fraud in the inception of the notes and mortgage. They were executed in good faith, and the notes passed into the hands of Sullivan in good faith and remained there until December 22d, 1859, when they were taken up by Walker. Tate, Williams, Stoddard, and Eaker claim under this mortgage at least an equity; and they claim that such equity dates for priority back to the date of the mortgage executed in 1856, and that Eorlong has nothing but an equity. He claims by virtue of notes endorsed to him, which gave him only an equity in a mortgage executed in 1860. There is nothing to show that Eorlong knew or supposed that the mortgage to Haynes and McClure was not in full force. It stood un'cancelled on the record, and hence he was not deceived.
2. There is still another view which may be taken of the case, namely: Walker may be regarded in his transaction with Sullivan in the light of a purchaser of his own paper. We see no objections to his beiDg allowed to deal in it; no reason why he might not be allowed to purchase and sell it again, the same as any other person.
If this view should be taken by the court, then the mortgage securing the notes to Haynes and McClure will remain undisturbed, and Haynes and McClure and Jordan will remain liable, and the mortgage under which Forlong claims will be postponed to it.
This, it seems to us, after all, is the most natural view which can be taken of the case. It is a view which at once frees it from all complications, for it leaves the parties to their liabilities as endorsers and protects them by their mortgage. Planters Bank v. White, 5 Humph. Rep. 441.
E. 8. Young for defendant in error:
The notes being negotiable, Ipy the law peculiar to such paper, the said plaintiffs in error, Stoddard, Eaker, Tate, and Williams, as bonco-ficle holders, before due, without notice, would, notwithstanding previous payment, be entitled to recover thereon. Now, was the mortgage subject to the same rule of law, or, in other words, was it negotiable, or so far .an incident to the notes as to be open to no defence, except such as could be made against them ?
There is no question that such had been the prevailing opinion, not only of the community generally, but of lawyers also. But Baily v. Smith, 14 Ohio St. 396, decided since this case was determined in the court of common pleas, and reported since the decision of the district court, has definitely settled this question. A mortgage is not negotiable; but whether standing alone or made to secure negotiable paper, simply a mere chose in action, open to all defences existing between the original parties. Ib. 413. This seems to me to be conclusive of this case.
That Eater, Stoddard, Tate, and Williams purchased the notes, before due, Iona fide, and without notice, gives them no better claim to the mortgage than they would have had if they had purchased them after due, and with full notice.
That Haynes, McClure, and Jordan are still liable on the notes as endorsers, gives them no claim to the mortgage; for it was not conditioned to indemnify them against such liability.
The mortgage was conditioned to pay a certain debt evidenced by these notes ; but the notes were not the debt; the notes and mortgage were only separate securities for it. Fisher v. Mossman, 11 Ohio St. 42; Hilton v. Chatwood, 11 Ohio St. 109; Longworth v. Flagg, 10 Ohio, 300.
Now, payment of the debt to Sullivan was payment of both the notes and the mortgage.
The notes, by a law peculiar to themselves, having been again put in circulation, before due, acquired new life, and the parties thereto, although once released by payment, incurred new obligations, or were again placed in jeopardy; but the mortgage, once paid, was dead, past resurrection.
To secure a new debt it was necessary to execute a new mortgage. The re-issue of the notes by Walker, for a new consideration, created a new debt. The present liability of Haynes, McClure, and Jordan arose solely from such re-issue. Their former liability on the notes, as endorsers, had been extinguished by payment.
That Haynes and McClure have never released, and still hold the legal title, amounts to nothing. It is the mere naked legal title; what will they do with it ? They had assigned all their interest. A formal release of record is not essential. Payment was an effectual release, and the sale was a release.
This court will not hold that Walker was a purchaser of his own paper and his own mortgage, in the sense claimed by plaintiffs, and had the right to re-issue the same.
li. 8. Ha/rt, for Haynes, in reply:
In the view which we take of the case, it can make no difference that, in contemplation of law, a debt is one thing, the security for it another — that the security maybe de stroyed and the debt still subsist. Nor even that, on Walker’s gettiug possession of the notes by his transaction with Sullivan, the mortgage ought to have been released. Most assuredly Ilaynes would not have released it without the notes being surrendered to him ; or at least not without his endorsement being erased. The only condition upon which it can be supposed he would have surrendered the mortgage is that named. The only condition upon which a court of equity would have ordered him either to surrender or cancel it, is the same.
But if Walker could not claim the cancellation of the mortgage without first erasing the names of the endorsers from the notes it secured, how is his vendee of the mortgaged premises to be justified in the same claim? The Walker-Sullivan transaction, it must be borne in mind, according to the view we are now taking of the case, was not an absolute payment of the seven notes — was not payment at all.
Whilst the notes were yet in Walker’s hands, on getting them from Sullivan, was the time for Walker’s vendee to proceed ; and the mortgagees and endorsers on the notes were the parties to proceed against. True, even in that case he might have been met by an inquiry into Walker’s object in getting possession of them — Whether he was taking them up for the benefit of his vendee, or under the impression that he had the same right to purchase and sell them again as any other person ? Certainly, in the absence of all light upon Walker’s motive, not knowing that it had any ref erence whatever to the satisfaction of the mortgage, his vendee, in claiming the benefit of it, stands upon grounds exceedingly technical. A mere naked legal technicality is a bad standpoint from which to urge so gross an injustice as the release of the mortgage would be, leaving the endorsers upon the notes it secures bound upon them.
Finally we maintain, with entire confidence, that upon all the facts as they appear in the case the vendee of the estate is utterly estopped from insisting upon the discharge of this mortgage. In any view which can be taken, he is in no better situation for insisting upon its cancellation than Walkei himself — than "Walker was, the next hour after he had parted with the notes a second time, and as he has been ever since.

Opinion:
Scott, J.
The plaintiffs claim under a mortgage executed by M. B. Walker to Haynes and McClure in 1856, to secure the payment of sundry promissory notes, which, before their maturity, were negotiated to and received by the plaintiffs severally, for value, and without notice of any ground of defence either as against the notes or the mortgage. The mortgage under which they claim was duly recorded, and still remains uncancelled upon the record. The defendant For-long claims under a subsequent mortgage executed by Walker to Davis & Cuppy in 1860, to secure the payment of five negotiable promissory notes, three of which have been assigned to said Forlong.
It appears from the record that in 1859, Walker, the maker of all the notes in question, and the common mortgagor, lifted the notes now held by the plaintiffs from one Sullivan, who was then the owner and holder of them, and gave to Sullivan, in lieu thereof, a new note, and mortgage security upon other property. And it is claimed on behalf of Forlong that this was a payment of the notes, and consequently a discharge of the lien of the mortgage under which plaintiffs claim. Had Walker retained in his own hands or destroyed the notes thus lifted, such a claim might well have been made, and maintained either by him or his subsequent mortgagees. But we think it very clear that Walker, by causing these notes to be again negotiated, as unpaid notes, to hona-fide purchasers, is estopped, upon the plainest principles of equity, from claiming, either that the notes were paid, or that the mortgage security appearing upon the record was discharged by the previous transaction with Sullivan. To hold otherwise would be to sanction the grossest fraud upon the present plaintiffs. And it is equally clear that Davis & Cuppy, the subsequent mortgagees of Walker, occupy no better position than he does in this respect. They hold under him, and they are the very parties through whom the notes secured by the prior mortgage were re-negotiated and transfei'red to the plaintiffs. Having sold them at Walker's instance, as valid evidences of indebtedness against him, secured by a recorded mortgage, they are estopped from claiming for their own benefit that Walker had previously paid the notes, and thus discharged the mortgage which stood uncancelled upon the record. The rights of the defendant Eorlong, under the mortgage to Davis & Ouppy, are only of an equitable character. They arise wholly from the transfer to him of a portion of the notes which that mortgage purported to secure His equities are merely those of his assignors, Davis & Ouppy. He took the notes with constructive notice, at least, of the prior mortgage to Haynes and McClure. And if Davis <& Ouppy are estopped to deny its validity as a lien, he is equally so, for he simply stands in their shoes.
We think the judgment of the court of common pleas was right, and that in reversing it the district court erred.
Judgment of district court reversed, and that of the common pleas affirmed.
Brinkerhoff, C.J., and Welch, White, and Dat, JJ., concurred.