Court Opinion

ID: 9299095
Source: CourtListenerOpinion
Date Created: 2022-12-02 17:05:41.866693+00
Date Added: 2024-06-11T17:13:36.710483
License: Public Domain

DILLON, Circuit Judge.
The mortgage of which a foreclosure is sought, was made by the bankrupt for the double purpose of securing a debt to the plaintiff previously contracted. and to secure future advances, which are alleged to have been subsequently made. The mortgage is upon real estate. The bill alleges a mistake in the description of the property, and asks that this mistake be corrected and the mortgage foreclosed. The assignee files a general demurrer, and insists that under the national banking act of June 3, 18G4 (sections 8 and 28), the plaintiff, as a corporation organized under that enactment, has no right to take, hold, or foreclose a mortgage upon real estate, except as a security for a debt contracted before the taking of such mortgage; that the mortgage here in question was made upon but one consideration, part of which, to-wit, that part which related to future advances, is illegal, and being so, the mortgage is wholly void.
Upon the averments of the bill it is my opinion that the mortgage was made for the two purposes above mentioned, namely, to secure a precedent debt to the bank, and also to secure future advances to be made by the bank. I am also of the opinion (under sections 8 and 28 of the national banking act), that a mortgage upon real estate is clearly authorized as “a security for debts previously contracted,” and as clearly unauthorized when made as a security for money to be thereafter advanced by the bank, on the strength of such security.
The mortgage in question rests upon a valid consideration, and is authorized by the law, so far as it secures a debt previously due to the bank, by the mortgagor; and it is invalid so far as it undertook to secure a debt then or thereafter to be created. The line which separates that which is good from that which is bad. is plain; and I am of opinion that the defendant’s counsel are mistaken in supposing this to be a case in which the consideration is indivisible and the whole mortgage void. The two parts of the security are easily separable, and the result is that the good stands, and the bad must fall.
It follows that the court may correct the mistaken description in the mortgage in suit and enforce the same, so far, and so far only, as it was given to secure a debt to the bank previously contracted. The demurrer being general, it is overruled. Judgment accordingly.
See, on subject of foregoing opinion. Fowler v. Scully [72 Pa. St. 456]: Baird v. Bank of Washington, 11 Serg. & R. 411: Blunt v. Walker, 11 Wis. 347: Silver Lake Bank v. North. 4 Johns. Ch. 372. Mortgages to national banks are valid for previous debts. Allen v. First Nat Bank of Xenia (Sup. Ct. Ohio, 1872) [23 Ohio St. 97].