Court Opinion

ID: 7051807
Source: CourtListenerOpinion
Date Created: 2022-07-24 07:01:25.634817+00
Date Added: 2024-06-11T16:11:46.587497
License: Public Domain

*165On Petition for a Rehearing.
Dailey, J.
In the petition for a rehearing in this ease, the appellant does not challenge or question the doctrine declared in State Bank v. Tweedy, 8 Blackf. 447, that a mortgage given to secure the payment of two or more notes, maturing at different times, must be considered as if there were as many successive mortgages as there are notes secured, and that the holder of the note first due has priorty, and each note has preference in the order of its maturity, but she urges that there is more than this involved in the controversy because the mortgage, securing the notes, contains this stipulation: “It is agreed and understood by the parties hereto upon the failure to pay any one of said notes at maturity then all of said notes shall become due and payable, and this mortgage may be foreclosed,” takes the case out of the operation of the rule, places it within the exception, and entitles the holders to participate ratably in the funds derived from the security, if there be not enough to pay all. Under this doctrine, the proceeds would be applied pro rata in part payment of the several notes, irrespective of the dates of maturity or assignment. Upon this question there are two lines of decision, the one declaring that there is a preference in the distribution of the proceeds, in favor of the holders of the pre-existing priorities, the other that the parties must share the proceeds pro rata. The latter position is not supported by an Indiana authority, and we can not adopt appellant’s contention.
We think the policy of this State, as to the point involved, has been long since settled — that is, that the assignment of the note first maturing carries with it a pro tanto interest in the mortgage security. Pro tanto, and *166not pro rata. ' For so ranch, in other words, and not in proportion.
When the notes, first maturing, were assigned to the appellee, Bennett, such act constituted a contract between him and the mortgagee Landis, which may be formulated in these words: “I herewith transfer to you so much of this mortgage as is sufficient to pay the five notes which I have sold you. If it require all, you shall have it; but if not, then what remains shall be applied to the other notes secured thereby.”
Such an assignment is not a transfer of the undivided five-sevenths of the mortgage security. After such an, assignment, what is left in the mortgagee to sell and transfer to the appellant is measured by what remains after deducting what he sold appellee, Bennett, from all he had originally. When he sold the remaining two notes to the appellant, the contract arising from the transfer may be thus stated: “I herewith assign to you whatever is left of this mortgage after the notes assigned to Bennett have been fully paid out of it.”
If the pro rata rule obtained, this last would be a transfer of two-sevenths of the mortgage security. The rule in this State is not affected by a previous transfer of the notes last due. When Landis had completed the last assignment, and appellee Bennett became the owner of the first five notes of the series, and the appellant of the last two of the notes so secured, the rights of the assignees were fixed and vested as between themselves, and the parties are presumed to have contracted with a knowledge of the law governing such transactions. Bennett, then, had a right, as against appellant, to use just as much of the mortgage security as might be required to pay his notes in full. This correctly defines the rights of the parties during the whole of the period between the completed assignment of the notes and the maker’s de*167fault in paying the note first due. We do not think the maker’s default could change the rights of the assignees as between themselves and divest the right of Bennett to priority of payment out of the property pledged. The legal presumption is that contracts will be performed, not violated. Bennett will be presumed to have purchased his notes and paid more for them than he otherwise would have done, because of the priority which he would obtain. The appellant may be presumed to have purchased her notes and paid less for them on account of that priority. Under such presumptions, it would be inequitable to hold that the maker’s default, over which Bennett had no control, destroyed the priority and placed all the notes on an equality, thus substituting pro rata for pro tanto rights.
The appellant’s contention that, if the parties agree upon a contingency upon which a debt shall become due, then, when the event happens, the debt is due, is recognized law, but the rule can not be carried to the extent of defeating the vested rights of the parties. The priority of payments is fixed and governed by the notes themselves, upon their face, and not by a contingency.
This precise question is considered and determined in the case of Leavitt v. Goodwin, by the Supreme Court of Iowa. It was decided February 5th, 1890, and will be found in Book 7 Lawyers’ Rep. Annotated, page 365.
The same doctrine is adhered to in Humphreys v. Morton, 100 Ill. 592; Koester v. Burke, 81 Ill. 436.
The case of the People’s Savings Bank v. Finney, 63 Ind. 460, settles the principle as stated by us, and Doss v. Ditmars, 70 Ind. 451, disposes of the case.
Appellant’s suggestion that the evidence is insufficient to sustain the finding of the court was presented by assignment of error and argument on the original hearing. The allegations of the complaint, with respect to *168the rights of the appellee Bennett, on the notes in suit, are: “That since the execution of the notes and mortgage described, said five notes, marked exhibits ‘A,’ ‘B,’ 'O,’ ‘D’ and ‘E’ had been sold, transferred and indorsed to plaintiff, who is now the owner thereof.”
Filed Oct. 11, 1893.
The evidence offered and appearing in the record of the case is a blank indorsement on each of the notes, “B. F. Landis.” Appellant insists that this was not only a failure of the evidence to sustain the finding of the court, but an absolute failure of proof upon a material issue in the case. There was no answer in general denial putting in issue the execution of the indorsements, and hence no issue tendered requiring Bennett to put the indorsements in evidence.
Petition for a rehearing overruled.