Court Opinion

ID: 6616985
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:24:12.737603+00
Date Added: 2024-06-11T15:58:34.182216
License: Public Domain

G-ill, J.
{dissenting). — It seems the material facts of this controversy may be thus stated: On December 1, 1885, Hall executed to Craig a non-negotiable note of $700, due two years from date, and, to secure the same, Hall made a deed of trust on eighty acres of land. About six weeks thereafter, Craig, for value, assigned the note and security to defendant Eddy, who then was a non-resident, and who never gave any notice of the assignment to Hall. In October, 1887, Hall, behoving Craig yet the owner of the note and mortgage, paid off the same by a reconveyance of the land to Craig (or rather to one Seals for Craig). Prom Seals through several intermediate conveyances, the said eighty acres was purchased by and the title lodged in plaintiff Bartlett. The parties from whom Bartlett purchased the land had secured the same in entire good faith, and after being advised by Hall and by Craig that the old note and deed of trust of Hah to Craig had been fully satisfied. In making these representations Hall was entirely innocent, but the bad faith and villainy of Craig throughout the whole transaction is manifest.
The matter for determination then is, who of these parties must suffer; shall it be Eddy, the holder of the Hall note and mortgage, or shall it be Bartlett, the, in fact, good-faith purchaser?
I. In this discussion let us assume this controversy to rest between Hall, the payor and mortgagor, and Eddy, the assignee thereof. Hall, without notice of Eddy’s purchaser, paid Craig and took from Craig an acknowledgment of satisfaction of the debt and *49mortgage. Since the assigned note was non-negotiable, the rights of the assignee Eddy, as well' as the rights of the debtor Hall, are to be measured by the rule for the assignment of any ordinary chose in action. Now it is well-settled law, that, until the debtor receive notice of the assignment he may safely pay the debt to the original holder. R. S. 1889, sec. 8161; 1 Parsons on Contracts, 227, 229, 230; 3 Wharton on Contracts, 838, 842, 845, and numerous other authorities that might be cited. The books uniformly say that the assignee of a chose in action, in the absence of notice to the debtor, stands in the shoes of the assignor, subject to the same defenses. It was formerly required that the suit should be brought in the name of the assignor for the benefit of the assignee. But that the assignee may now sue in his own name has not, in the least, deprived the debtor of his defenses. “The assignee is still subject to the same equities as before; that is, if the defendant can show that he, in good faith, paid the debt, or a part of it, to the assignor before the assignment, or before he had any knowledge of the assignment, the defense is as effectual as if the action were in the name of the assignor. And if, after the assignment, and previous to such notice of it, the debtor pays the debt to the assignor, he shall be discharged, because he shall not suffer by the negligence or fault of the assignee.” 1 Parsons on Contracts, 350.
It is clear, then, if this was a suit on the debt by Eddy, the assignee, against Hall, the debtor, it would be a good defense that Hall, before the notice of the assignment, had paid Craig, the assignor. And it would seem equally manifest that such payment to Craig would, likewise, bar an action for the foreclosure of the mortgage. The debt and the mortgage are for this purpose, at least, inseparable. “When the note is *50paid, the mortgage expires.” 1 Jones on Mortgages, sec. 840; 2 Jones on Mortgages, sec. 1487; Carpenter v. Logan, 16 Wall. 275; Hagerman v. Sutton, 91 Mo. 531; Johnson v. Johnson, 81 Mo. 336.
II. But it is contended, on the faith óf Rice v. McFarland, 34 Mo. App. 404, that the payment of the debt by Hall to Craig after the assignment -to Eddy, but before notice of such assignment, was not, strictly speaking, a payment and satisfaction of the debt, but that the debt remained to support the mortgage security then in the hands of the assignee; that, while Eddy could not enforce the note against Hall (because of the payment to Craig before notice), yet that the mortgage security remained intact and enforceable in the hands of the assignee, Eddy. It seems to be the notion that from Hall’s payment to Craig (when he thought and had the right to conclude Craig still the owner of the note and mortgage) a sort of undefined equity arose in Hall’s favor, which would serve to defeat Eddy’s action on the note, but would not destroy a right to enforce the mortgage. After a very thorough investigation and consideration of the authorities, I feel that we ought to recede from the position thus practically taken by us in the above-cited cáse. If, when Eddy took from Craig an assignment of the debt and mortgage, it was intended to deprive] Craig of] the power and authority to receive payment thereof, it was the duty of Eddy to give notice of the assignment to Hall, so that he would not be deceived into paying to the wrong party; and, until such notice was given (or Hall was in some way informed), he [Hall] was justified in regarding Craig still the owner, or as agent of the owner, and a payment by him under such circumstances was a payment to the agent of an undisclosed principal. 2 Wharton on Cohtracts, sec. 342. By taking an assignment of the debt and mortgage from Craig, but failing *51to notify the debtor, Craig remained, under the law, the trustee or agent of the assignee to receive payment of the debt. And, when he received such payment from Hall, it was a complete and entire satisfaction of the debt to the same extent as if he had paid to Eddy •direct. The object the law has in yiew in requiring the assignee of a chose in action to warn the debtor of his purchase is to protect the debtor from double payment. "What protection would it be to the debtor, if after paying the mortgage debt to the assignor, he could be compelled to pay again on the mortgage? The very purpose of the law would be thereby nullified. The payment thus made by the unadvised debtor must of necessity result in the extinguishing of the debt. He has paid the debt, if not to the rightful owner, yet to the one authorized under the law to receive it. If Eddy did not intend to trust Craig with the collection of the debt from Hall, the way was plain; she should have notified Hall of her ownership. Failing in this, Hall could not suffer from her negligence. The debt then was paid; and, the debt being extinguished, the mortgage security on the land perished with it. In addition to the authorities, supra, see also Hodgdon v. Nagler, 5 Serg. & R. 217; Bury v. Binkley, 4 Serg. & R. 177; Brindle v. McIIvaine, 9 Serg. & R. 74; VanKenren v. Corkins, 66 N. Y. 77-80; Trustees, etc., v. Wheeler, 61 N. Y. 88-115; Howard v. Gresham, 27 Ga. 347-351; Greene v. Warnick, 64 N. Y. 220; Miller v. Bomberger, 76 Pa. St. 78.
III. The rule in this state that, though an action on the debt be barred by the statute of limitations, yet a suit on the mortgage may be maintained (Wood v. Augustine, 61 Mo. 51; Booker v. Armstrong, 93 Mo. 58) does not impair the position taken in this case. The barring of an action by the statute of limitation is not payment of the debt. It only affects the remedy, the *52debt -still remains. 2 Hill on Mortgages, sec. 29; 2 Jones on Mortgages, sec. 1203; Thayer v. Mann, 19 Pick. 535, 537.
IY. Some reference is made to section 2390 (E. S. 1889) as denying to Oraig, before notice to Hall of the assignment, power to accept payment or satisfaction of the debt. Said section reads: “ It shall not’be in the power of the assignor of a demand, after the assignment, to release any part of it,” etc. It would seem that this section of the statute was not intended to reach a case like this, where, though there was an assignment of the demand as between the assignor and assignee, yet it-was not effective as against the debtor without notice. However, any doubt must be put at rest when section 8161, Eevised Statutes, is considered. That statute reads: “ In actions on assigned accounts and non-negotiable instruments, the defendant shall be allowed every just set-off or other defense which existed in his favor at the time of his being notified of such assignment..”
As opposed to this view some-reference is made to the case of Bates v. Martin (3 Mo. 367) and St. Louis Perp. Ins. Co. v. Cohen (9 Mo. 421). These cases are correctly quoted as holding that payment of a nonnegotiable note by the debtor to the payee, but after an assignment to a third party (of which the debtor had no notice), is no defense to the maker of the note in- a suit by the assignee. But, as to what weight should be given these cases, it must be remembered that they were decided on the peculiar condition of the statute law at that time. The then statute law of Missouri in express words took the matter of assigned bonds and notes out. of the general rule applicable to the assignment of other choses in action, and only left the obligor or maker the right to set up the defenses he had- when the assignment was made. R. S. 1825, p. 143; R. S. *531835, p. 105; R. S. 1845, p. 190. But, incited thereto probably by these decisions, the common-law rule was soon thereafter restored by our law-makers; and the obligor or maker of an assigned non-negotiable note was permitted every set-off or other defense which he had when he received notice of the assignment. Acts, 1849, sec. 3, p. 75. This section first appeared in the act establishing our code of practice. It was then carried down into the revision of 1855, under title of “bonds, notes and accounts” (R. S. 1855, p.322); and then in the revision of 1865 appears in the chapter on set-offs (G-en. Stat. 1865, p. 602), and is found in the present revision under the same title. E. S. 1889, sec. 8161.
As I read these cases and this legislation, the law, as it was under the old statutes, has been changed, and the common law as it was before the act of 1825 practically restored. And we have it now as expressed by Judge Scott in Ins. Co. v. Cohen, supra (9 Mo. 442): “ As to choses in action or paper non-negotiable the assignee takes it subject to all the defenses the maker may have against it before notice of the assignment. To the assignee of the chose in action, the rule caveat emptor applies. * * * An assignment operates per se as an equitable transfer of the debt. Notice is indispensable to charge the debtor with the duty of payment to the assignee, so that if without due notice he pay the debt to the assignor he will be discharged from the debt.” Murdoch v. Finney, 21 Mo. 139.
It, therefore, results from the foregoing considerations that Hall’s payment to Craig had the effect not only to satisfy the debt, but as well to extinguish the mortgage security on the land now held by Bartlett. In thus deciding we are not forced to concede this defense as available to Craig, when he subsequently procured the title. Eor it may be well said that he, *54because of his fraud, would be estopped to set up a discharge procured by his own bad faith. But, as to the subsequent purchasers of the land, who acted in entire good faith, and with knowledge of Hall’s payment, etc., they occupy the same advantageous grounds, and are entitled to like consideration in law and equity as if the land yet remained with Hah.
In my opinion, then, the judgment, on the agreed statement of facts should have been for plaintiff, and not for defendants; and, therefore, I must dissent from the opinion of my associates.