Court Opinion

ID: 8848473
Source: CourtListenerOpinion
Date Created: 2022-11-26 17:05:45.276316+00
Date Added: 2024-06-11T17:05:25.009967
License: Public Domain

SEYEBEHS, District Judge,
(dissenting.) I regret my inability to concur in the proposed disposition of this case. In my opinion, the result is wrong, and the reasoning upon which the result is reached is not founded upon sound principle or warranted by authority.
Upon a careful examination of all the cases cited, the text-books referred to, and the cases cited by them, and some otlxer authorities not referred to, I cannot see that they sustain the positions assumed in regard to this case. In the case of Flynt v. Arnold, quoted from 2 Metc. (Mass.) 619, 622, the illustration entirely fails to support the proposition for which it is cited, if there be inserted in the case there supposed what was the fact here, namely, that C. conveys to D. before B. puts his deed on record. That changes entirely the whole line of consequences. The same observation is true of the discussion in Fallas v. Pierce, 30 Wis. 443. The application of the remarks in that case to the facts in this as ground for the conclusion sought to be deduced ignores the controlling fact that the towboat company, by its purchase, became the absolute owner of the boat, and the lien was lost. Having ascertained this from an inspection of the registry, and on inquiry into the fact of the payment of valuable consideration in good faith by the towboat company, the purchaser could take' axxd stand on that title, and he was not bound to look further, for he would not be affected by the defective status of a prior party, even if he knew of it
The x*ecording of a conveyance after the-grantee has lost all title by reason of tlie prior record of the deed of a bona fide purchaser is not constructive notice to a subseqxxent purchaser from that bona fide purchaser of anything except that, whatever his pretensions, they have been cut off. Surely, such subsequent purchaser is not thereby bound to pursue an inquiry which would end in axx immaterial' discovery.
Then, secondly, assuming that Wright stood in the place of absolute owner of the property, he had the privileges which belong to *189that character, one of which was to convey it to anybody in security for his obligation, and thus give his note commercial value. His right to do this was not restricted to the privilege of mortgaging it to such persons as might, not be affected with equities with which he had nothing tó do, any more than any bona fide holder is prevented from communicating his rights to another, even though the latter may he the only one, or is one of a few, who has or have notice of equities which are obsolete as to tbe bona tide holder.
Thirdly. But it is said that Bradley, on becoming mortgagee, was charged with an equity in favor of Pate in his (Bradley’s) relation to the boat, because Bradley sold the boat to the towboat company without disclosing Pate’s lien, and thus cut the latter out. It is held by the majority of the court" that it was fraudulent in Bradley not to inform the purchaser of the unrecorded mortgage.
Talcing this to be so, for tbe purpose of the discussion, it raised an equity which was collateral to the (itle. The lien had become dissociated from the title, and the equity survived only by reason of Bradley’s demerit. He was not charged with it simply, or at all, because he had notice of the equity of Pate when he took the mortgage from Wright, or because of anything in the recording laws. It was a general equity at taehing to him personally. The lien had been detached, but Bradley had come into such a situation' that equity acted upon his conscience. That is the theory of the equitable doctrine of the revival of the trust.
Lastly. The mortgage is a mere incident of the note given hv Wright. It is not to be treated as an independent thing. It is urged that O’Connell knew he was buying the mortgage from Bradley. This seems to me to indicate a misapprehension. What he knew was that he was buying the no re of which the mortgage was the security, given by Wright to communicate value to the note, and thus enable Wright to get money on his note. It is also said that “the original equities which are barred by the transfer of the securing mortgage in such a case are the equities between the mortgagor and mortgagee,” as if equities of that kind were the only equities which are barred. This ignores the relation of the mortgage to the note. It is impossible to hold that the rule above stated is the one (as thus limited) which applies to the transfer of negotiable paper before due. In such case the transfer cuts off all equities of third persons. To illustrate, if Bradley had taken the note as a mere agent or trustee for another, his negotiation of the note to a bona fide holder would give a perfect title to the latter, discharged of such equities as attached to him, and the mortgage would go with it, even though he did not transfer it at all. What Wright did was not merely to promise to pay Bradley the note, but it was also a direct promise to pay it to the indorsee, and the mortgage secured this pi*omise. The indorsee did not take an assignment from Bradley of Wright’s pi-omise to pay the note to Bradley, ne passed by Bradley, and is independent of his merits. The security passed and inured in the same way.
*190Says Jones on Chattel Mortgages, (3d Ed. § 503;)
“If the debt be in the form of a negotiable promissory note, the assignee by indorsement takes the mortgage as lie takes the note, free from any equities which existed in favor of third persons while it was held by the mort.gagee.” • -
And this, in effect, is what was supposed to have been decided in Carpenter v. Longan, 16 Wall. 271. See Kenicott v. Supervisors, Id., at top of page 469; and Sawyer v. Prickett, 19 Wall., near bottom of page 166; Sweet v. Stark, 31 Fed. 858.
If O’Connell were to have foreclosed his mortgage, the purchaser at the sale would acquire the title which Wright had when he.gave the mortgage; otherwise, every indorsee of negotiable paper secured by mortgage is at the peril of any intervening equities whiqh may have attached to parties while it was in their hands, — a result utterly destructive of the object of the rule which ties the security to the noté, and attributes to the former the color and character of the latter.