Court Opinion

ID: 5512176
Source: CourtListenerOpinion
Date Created: 2022-01-10 04:20:00.799422+00
Date Added: 2024-06-11T08:34:11.412469
License: Public Domain

E. Darwin Smith, J.
By the express terms of the statute the defendant’s mortgage, before it was filed, was absolutely void as against the creditors of the mortgagor, and as against subsequent purchasers and mortgagees in good faith. The notice to Morton of the defendant’s mortgage, and his fraud in keeping possession of it and not putting it upon file, according to his agreement and the trust confided to him, till after the mortgage to himself was taken and filed, precludes him from the rights of a subsequent mortgagee or purchaser in good faith.
The single question remains, whether the plaintiff, as the assignee of this second mortgage, acquired any higher rights from Morton than he possessed by the transfer of the promissory notes, which such second mortgage was given, to secure.
If the said mortgage was regarded by itself or as a security for a bond, or any other non-negotiable chose in action, no question would remain open to discussion on this point, since the decision of Bush v. Lathrop, 22 N. Y. 535, affirmed as it has been in Schafer v. Rielley, 50 id. 66, and Shelden v. Edwards, 35 id. 279; Thompson v. Van Vechten, 27 id. 568, and other cases.
Butin the case of Schafer v. Rielley, supra, Judge Alheh (as does Judge Dbhio, in Bush v. Lathrop) recognizes the fact “that a purchaser of a chose in action must abide by the case of the person from whom he bought.” The rule admits of exceptions adopted from motives of policy, as Judge Alleít stated it, either to promote the negotiability of commercial instruments, or to prevent fraud. Within'this exception, I think the plaintiff is entitled to the rights of a bona fide purchaser in respect to said mortgage, as the holder of the promissory note for $666.68, dated May 10th and due January 1st, 1871, discounted and received by him at his bank, in the ordinary course of business, in the month of June, 1870, and before the defendant’s mortgage was placed on file. The transfer of said note was in law and equity an assignment or transfer of the mortgage, given to secure it to the extent of the amount of said note. The notes which said mortgage was given to secure constituted the debt, and the mortgage was the incident, and by presumption of law passed with the transfer of -the debt.
A mortgagee is, pro tanto, a purchaser, and the assignee of a mortgage without notice is on the same footing with a bona fide mortgagee. Pierce v. Faance, 47 Me. 514. In such cases the purchaser looks to and has a right to rely upon the record, and if that shows *131no lien or incumbrances prior to the mortgage he has a right to trust to the protection of the statute.
The referee asserted these views in accordance with the decision of the supreme court of the United States, in Carpenter v. Logan, 16 Wall. 271, where the rights in respect to mortgages given to secure negotiable instruments is fully discussed and very carefully considered, and the doctrine asserted that the purchaser of a negotiable security before its maturity, secured by a mortgage, takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortgagee; that the note and mortgage are inseparable — the former as essential, the latter as the incident. This view seems to me eminently sound, and I think unanswerable. The referee held in accordance with this case and his judgment should be affirmed.

Judgment affirmed.