Court Opinion

ID: 6690805
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:37:37.356623+00
Date Added: 2024-06-11T16:01:06.249539
License: Public Domain

POLLE.Y, J.
(dissenting). There is but one question to be determined in this case, and that is, Was the defendant an innocent 'purchaser of the. note and mortgage, or did it have such! knowledge as would put a prudent person upon inquiry as to the! extent of Wood’s authority to dispose of said note and mortgage? The note upon its face is negotiable, and' had it not been accom*34pañied by t-he- mortgage and -the blank assignment thereof, there is’ nothing that' would- have given rise to- a suspicion that Wood was'exceeding-his authority in disposing of the note and mortgage-. ■ His possession arid apparent ownership gave him-, prima facie at-least, authority to- fill up the blank name of the indorsee of the note either with'-his owin name or the name'of the party to whom) he sold’ it, or 'hé could leave it blank and the party to whom he sol'd-it -could fill up such blank. Code 1919-,. § 1739. But the assignment of the mortgage presents an entirely different situation. A mbrtgage is not a negotiable instrument, neither is the assignment of the mortgage, and1 in the technical sense in which that term- is used in the statute there is no such thing as a holder in due course of a"mortgage.
The transfer of the note alone would haye -carried with it the security of the'' mortgage. -Codé 1919, § 155.1;. And the transferee'could: hpon default ‘have gone into. a.-court of equity and foreclosed the mortgage and had the .-mortgaged property subjected to the payment of the note, but he could not have foreclosed by advertisement. Kenny et al. v. McKenzie, 23 S. D. 111, 120 N. W. 781, 49 L. R A. (N. S.) 775.
. But .the defendant-was not dealing for the note alone. In addition to the note was the - mortgage, the' assignment thereof, and an abstract of title to the real estate -described in the -mortgage. It was shown- by the evidence in the -case that the defendant looked to the security rather than to- the note, for its protection. ' It was apparent.-from- the instruments accompanying the note --that-the mortgage was still the property of .Gold Bros., or at-least-it would take.-som-e a-ct by them/'or-by-anragent authorized thereto in writing,- to fill -up the assignment of the mortgage. Code 1919, .§ 1249. ~ This condition of the security was sufficient to- put defendant upon inquiry. ' - Ordinary prudence required that it call upon> Wood for -his authority- to .negotiate the -mortgage, o-r upon Gold Bros, to complete the assignment. -Such- inquiry would at once have disclosed the fact 'that Wood had no- authority to transfer or deliver the note or mortgage to any one'whatever: Defendant'knew)-as a matter of law that it had no authority do insert its name ’in' the assignment -of the fnortgage 'arid that' such áct conferred rio" rights-upon it. Defendant did not'act in- good faith under' the provisions of either -section 1610 or section 1760, and *35in Oschenreiter v. Block, 42 S. D. 154, 173 N. W. 736, the note involved was not accompanied 'by any instrument or circumstance to suggest inquiry as to the holder’s title to the note.
The principle, involved fn this case is the same as that in Ellis v. Wait, 4 S. D. 454, 57 N. W. 229. In- that case the defendant executed and acknowledged a mortgage with the amount to be secured thereby left blank, but with the understanding with the agent of the plaintiff that the amount should not exceed $1,000. -After the mortgage had been so executed and acknowledged, and without the knowledge of the defendant, the amount was inserted at $1,500 instead of $1,000. In regard! to the effect of such act this court said:
“Such mortgagee, taking the mortgage with notice that it was so executed in blank, and is filled up by an agent, takes it with full knowledge that it was an imperfect mortgage as it came from1 the hands of the maker, and that, unless the same is filled up by the agent strictly in pursuance of the authority conferred, the maker is not bound by it, and that it is not his mortgage. If, having notice of the defect in the mortgage, the mortgagee .chooses to take it and rely upon the good faith of the agent in filling the blank, without requiring the mortgage to be reacknowledged after the blank is filled up, he assumes the risk that it is filled up in accordance .with the authority conferred upon the agent, and, if it is not so done, the mortgage will be void as to the party whose instructions have pot -been followed. We think there is no injustice in requiring a mlortgagee dealing with an agent, under the circumstances disclosed in the case at bar, to ascertain the extent of the agent’s authority to fill the blank, and requiring him to assume the risk of the agent exceeding his authority.”
It is true that the -defendant in this case did not have actual knowledge of Wood’s lack of authority to- dispo-se of the note and mortgage in the manner in whi-ch he did, but such inquiry as -was reasonably suggested by an inspection- of the papers accompanying the note would at once have disclosed such knowledge.
From this it follows necessarily that defendant was not an innocent purchaser and acquired no interest, as against plaintiff, in the note and mortgage involved.
The judgment and order appéaled from ought to be reversed-.
*36Note. — Reported in 195 N. W. 830. See, Headnote, American Key-Numbered Digest, Bills and notes, Key-No. 337, 8 C. J. Sec. 710.
On question of what circumstances are sufficient to put purchaser of negotiable .paper on inquiry, in order to secure rights of a bona fide holder, see notes, in 29 L. R. A. (N. S.) 351, 44 L. R. A. (N. S.) 395, and L. R. A. 1918F, 1148.
For Uniform. Negotiable Instruments Act, see Rev. Code 1919, Secs. 1705 et seq., 8 U. L. A. 7.
On Rev. Code 1919, Sec. 1760, see annotations, Kerr’s Cyc. Codes, 1920, Civ. Code, Sec. 3137.