Case Name: Boyle, Respondent, vs. Lybrand, Executor, imp., Appellant
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1902-01-28
Citations: 113 Wis. 79
Docket Number: 
Parties: Boyle, Respondent, vs. Lybrand, Executor, imp., Appellant.
Judges: 
Reporter: Wisconsin Reports
Volume: 113
Pages: 79–83

Head Matter:
Boyle, Respondent, vs. Lybrand, Executor, imp., Appellant.
January 10 —
January 28, 1902.
Promissory notes secured by mortgage: Assignment: Bona fide holder: Notice: Contributory negligence.
1. A negotiable promissory note secured by mortgage may be transferred before maturity, like other negotiable paper, and the bolder takes it with its accompanying security, discharged, of existing equities.
2. Mere suspicion by the purchaser of such note that there may be defect of title, or knowledge of circumstances which would excite suspicion as to the title in the mind of an ordinarily prudent man, unaccompanied by bad faith, is not sufficient to impair his title.
3. Plaintiff took as security for'a loan an assignment of a mortgage securing a note. The assignment was indorsed on the mortgage, the note not being produced and plaintiff never having possession thereof. Afterwards, and before plaintiff’s assignment was recorded, the mortgagee, for value, endorsed the note to defendant, representing that he had lost the mortgage, the defendant having first examined the records. The note was negotiable, and both transactions took place before maturity. Plaintiff brought action to quiet title to the mortgage in himself. Held, that the plaintiff was negligent in allowing the note to remain in the mortgagee’s hands, and, in the absence of any showing charging defendant with knowledge of the previous transfer, defendant had a better title to the note than plaintiff.
Appeal from a judgment of the circuit court for Rich-land county: Geo. Olemektson, Circuit Judge.
Reversed.
This is a statutory action to quiet title brought by the plaintiff, claiming to own a mortgage upon said real estate, for the purpose of obtaining a judgment declaring that the defendant’s testator, one J. W. Lybrand, now deceased, has no interest in said mortgage, and requiring said Lybrand to surrender and deliver up to the plaintiff the note which said mortgage was given to secure. The facts were not in dispute, and may be briefly stated as follows: January 2, 1895, John E. Wallace and Edward T. Wallace, sons of the defendant Patrick Wallace, executed and delivered to said Patrick Wallace and his wife, Johanna AVallace, a mortgage upon certain farm lands in Richland county to secure the payment of two notes owing by the said John and Edward, — one being in the sum of $1,000, drawn to Patrick Wallace or order,-payable eight years after date, with interest after due, and the other for the sum of $500, to Johanna Wallace, payable ten years after date, and without interest. Said mort gage was duly recorded in. the registry of deeds for Riebland county January 3, 1895. On November 30, 1896, the plaintiff, who is a nephew of the defendant Patrick Wallace, loaned the said Patrick Wallace $450, and received his promissory note therefor; and Patrick Wallace at the same time indorsed upon the said mortgage an assignment of the same,, 'together with the $1,000 note, as collateral security for the payment of the note to Boyle. This assignment was signed by but one witness, and was not acknowledged. Wallace thereupon delivered the mortgage, with the assignment, to the plaintiff, and told the plaintiff that he did not have the $1,000 note with him, but that he would send it to the plaintiff, (who lived in Madison) ; and the' plaintiff, relying upon this assurance, returned to Madison, taking the mortgage with him. Afterwards, on the 13th of October, 1897, the defendant Patrick Wallace went to Madison and applied to the plaintiff for a further loan upon the security, and a further assignment to him of the note and mortgage; and the plaintiff then loaned Wallace $200 additional, and took his note therefor, and Wallace executed a further assignment of the said mortgage and note upon the back of the mortgage as collateral for the repayment of the said $200, which assignment was signed by two witnesses, but not acknowledged. When Wallace applied to the plaintiff.for this last loan, he represented to him that he had the $1,000 note with him; ■ but, after getting the money and executing the assignment, he searched his pockets, and claimed he could not find the note, and that he had accidentally left it at home, and promised that he would send it at once. Neither of. the assignments was recorded in the registry of deeds of Richland county until the 2d day of July, 1898. Meantime, and on the 18th day of December, 1897, Wallace went to J. W. Ly-brand, produced the note, and offered to sell the same to him, and told him that the mortgage itself had been lost; and Ly- brand, after baying examined tbe record of tbe mortgage in tbe register’s office, and finding no assignment thereof, purchased tbe note and mortgage for $700; and tbe note was indorsed by Wallace and delivered to Lybrand, a certified copy of tbe mortgage secured and delivered, and a written assignment executed by Wallace to Lybrand both upon tbe page of tbe record where tbe mortgage was recorded, and upon tbe back of tbe copy of tbe mortgage. None of tbe notes held by tbe plaintiff or by Lybrand has been paid. Upon these facts the court concluded that Lybrand was not a purchaser in good faith of tbe $1,000 note, but purchased tbe same subject to tbe plaintiff’s prior rights therein, and therefore that be held possession of tbe said $1,000 note in trust for the plaintiff, and that tbe plaintiff was entitled to judgment barring tbe defendant Lybrand from any right in said lands and premises, and requiring him to deliver up tbe $1,000 note to tbe plaintiff. From judgment in accordance with these findings, defendant Lybrand appealed to this court, and he having died after such appeal was taken, testate, bis executor, IB. O. Rybrrnd, has been substituted as tbe party appellant in this court.
Ch'cmi’L. Miner, for tbe appellant.
For tbe respondent there was a brief by W. S. McOórlele and A. R. BushneU, and oral argument by Mr. BushneU.

Opinion:
Wiwslow, J.
Tbe simple question in tbe present case is, Which party has tbe better title to tbe $1,000 note? Whoever owns tbe note owns the mortgage, because the note is tbe principal thing, and tbe mortgage being an accessory. Hitchcock v. Merrick, 18 Wis. 357. Tbe note in this case was on its face a negotiable promissory note; and it is settled in this state that a negotiable promissory note secured by mortgage may be transferred before maturity, like other negotiable' paper, and tbe bolder takes it with its accompanying security, discharged of existing equities. Kelley v. Whitney, 45 Wis. 110; W. W. Kimball Co. v. Mellon, 80 Wis. 133. Tbe question is therefore purely one of the ownership of negotiable paper. The plaintiff claims under assignments indorsed on the mortgage, he never having seen qr had possession of the note. The appellant claims under a subse'quent transfer by indorsement and delivery of the note to his testator, nothing appearing thereon to indicate any previous transfer. It is very plain that the appellant's title must be the better, because the negotiable paper itself was actually transferred and delivered to his testator, unless such •testator is charged with knowledge of the previous dealings with the plaintiff. He had no actual knowledge of such •dealings, but it is said that the fact that Wallace did not have the mortgage was sufficient to charge him with such knowledge. It was long ago held by this court, quoting from the supreme court of the United States,' that in such cases, '"as with negotiable paper, mere suspicion that there may be defect of title in its holder, or knowledge of circumstances which would excite suspicion as to his title in the mind of a prudent man, is not sufficient to impair the title of the purchaser. That result will only follow where there has been bad faith on his part." Kelley v. Whitney, supra. There is .absolutely nothing in the case to show bad faith on the part of Lybrant. He purchased the note before due, for a substantially adequate compensation, and after searching the records to ascertain whether any assignment of the mortgage had been recorded. The position of the plaintiff is unfortunate, but the result has come from his neglect in allowing the note to remain in Wallace's hands. By so doing he left the apparent title with Wallace, and enabled him to do just what has been done here. If he were allowed now to defeat the subsequent innocent purchaser of the security, he would take advantage of his own inexcusable neglect.
By the Court. — Judgment reversed, and action remanded with directions to dismiss the complaint.