rOOE. [Sup. Ct.

ave Dot been rert is' not iuoliued up from the Dissed upon by the

whether a writ mitOourt to re- 1 a case removed uch a case as the: ~e record shows the q nestions as Llings of the Dis-

ablished the rule nus, in the exere writ will lie ill 1 court to decide ,of milndamusto 1; to compel the .t or decree in a the jurisdiction ! Ex parte Bradving the opinion ;he judgment of ~ of the inferior . atter in dispute Iollars, and that a Circuit Court lowers, in a case y dismissed the

. and to proceed u1.ies.

~ht of these aulents, had they i of su.ing out a in some one of

"'_-----

United States, 12

Dec. 1872.]

CARPBNTER tJ. LONGAN.

Statement of the case in the opi~lon.

the forms i~ which a remedy is granted in sueh a case, but it is not doubted that the present decision will be in practice equally effectual to that end, as it is entirely competent for the Circuit Court, under the circumstances, to grant a re-

. - hearing aud reinstate the case, and to proceed and decide the questions presented in the bill of exceptions.

Mandamus being the proper remedy, error will not lie.·

W RIi' Oll' BRlLOR DIBMIBSED

:JOB. WANT Oll' JURISDIOTION.

CARPJ!lNTElI. V. LONGAN.

1. The usigDment of a negotiable note before Its mRtl1rity, raislll the pre. lumption of a want of notice of·any defence to itj and this prunmption stands till it Is overcome by suillcient proDf.

I.. When a mortgage given ~t the same time with the execution of a negotiable·note and to secure payment of it, is subsequenUy, but befo're the maturity of the. note, transferred bona foIs for 'Value, with the note, the holder of _the note when obliged to relort to the mortgage is unaifect.ed by any equities arising between the mortgagor and mortgagee subseqnently to the transfer, and of which he, the Msignee, had no notice a' the time it was made. He tak9l! the mortgage 811 he did the note.

APPEAL from the Supreme Court of Colorado Territory • Messrs. J. M. Carlisle and J. D. McPherson, for . the appellant; Messrs. Bartley and Casey contra.

Mr. J ustiee SWAYNE stated the case, and delivered the opinion of the court •

On the 6th of March, 1867, the appellee, Mahala Longan, andJ esse B. Longan, executed their promissory note to Jacob B. Carpenter, or order, for the sum of 8980, payable six months after' date, at the Colorado National Bank, in Denver City ,with interest at the rate of three and a half per cent. per month until paid. At the same time Mahala Longan executed to Oarpenter a mortgage upon certain real estate

4 Ayre.s e. Carvert 17 Howard,1i91.

"

-:

271

272

CARPENTER t .. LONGAN.

[Sup. Ct,

-------------.----------------------------------

Statement of the c~e in the opinion.

therein described. The mortgage was conditioned fOl" the payment of the note I1t maturity, according to its effect.

On the 24th of July, 1867, more than two months before the maturity of the note, Jacob B. Carpenter, for a valuable consideration, assigned the note and mortgage to B. Platte Carpenter, the appellant. The note not being paid at maturity, the appellant filed this bill against Mahala Longan, in the District Court of Jefferson County, Colorado 'I'erritory,

to foreclose the mortgage. .

She answered and alleged that when she executed the mortgage to Jacob B. Carpenter, she also delivered to him certain wheat and :flour, which he promised to sell, and to apply thev'proceede to the payment of the note; that at the maturity of the note she had tendered the amount due upon it, and had demanded the return of the note and mortgage and of the wheat and flour, all which wa.s refused. Subsequently she filed an amended answer, in which she charged' ,that Jacob B. Carpenter had converted-the wheat and dour

to his own use, and that when the appellant took the assignment of the note and mortgage, he had full knowledge of the facta touching the deliverj' of the wheat and flour to his assignor. Testimony wa.s taken upon both sides. It was proved that the wheat and ilour were in the bands of Miller & Williams, warehousemen, in the city of Denver, that they sold, and received payment for, a part, and that the money thus received and the residue of the wheat and :80111' were lost by their failure. The only question made in the case was, upon whom this loss should fall, whether upon the appellant or the appellee. The view which we have taken of the case renders it unnecessary to advert more fully to the facts relating to the subject. The District Court decreed in favor of the appellant for the full amount of the note aud interest. The Supreme Court of the Territory reversed the decree. holding that the value of the wheat and :tionr should be deducted. The complainant thereupon removed the case to this court by appeal.

It is proved and not controverted that the note and mortgage we:re assigned to the appellant for a valuable Consid.

ONGAN.

[Sop. Ct.

the opinion.

was conditioned for the 3cording to its eflect, . than two mouths before

..,

lJarp~mter, for a valuable

d mortgage to B. Platte ~ not beiug paid at matuainst Mahala Longan, in nty, Colorado Territory.

when she executed the ie also delivered to him promised to sell, and to of the note; that at the ed the amount due upon .the note and mortgagee Ilch· was refused. Sub-

. er, in which she charged ted the wheat and flouripellant took the assign-

had full knowledge of e wheat and 11()ur to bis ion both sidee. It was ~ in the hands of Miller .ty of Denver, that they .rt, and that the money e wheat and flour were >n made in the case was lether upon the appel~ h we have taken of the mora fully to the facts Court decreed. in favor f the note and interest. y reversed the decree LOd 110ur should be d~

) removed the ease to

hat the note and mortfor a valuable consid-

Dec. 1872.]

CABPEBTEB v. LONGAN.

273

Opinion or the court.

eration before the 'maturity or the note. Notice of anything toaching the wheat and 1100r is not brought home to him •

The assignment of a note underdue raises. the presumption of the want of notice, and this presumption stands until it is overcome by sufficient proof. The case is a di:fi"erent one from what it would be if the mortgage stood alone, or the note wae non-negotiable, or had been assigned after rna-

. tu~ity. The question presented for our determination is, whether an assignee, under the circumstances of this case. takes the mortgage as he takes the note, free from the objections to which it was liable in the hands of the mortga

_ gee. We hold the affirmative.... The contract as regarda the note was that the maker should pay it at maturity to aDt bonafide indorsee, without reference to any defences to which ,it .. might have been liable in the hands of the payee. The mortgage was conditioned' 'to secure 'the' fulfilment- of that contract. To let in such a defence against such a bolder would be a clear departure from the agreement of the mortgagor and mortgagee, to which the assignee subsequently in good faith, became a party. If the mortgagor desired t~ reserve such an advantage, he should have given a nonnegotiable Instrument, If one of two innocent persons mast sldfer by a deceit, it is more consonant to reason that he who' "putt!l trust and confidence ill the deceiver should be a loser rather than a stranger. "t

Upon a bill of foreclosure filed by· the assignee, an account must be taken to ascertain the amount due upon the instrument secured by the mortgage. Here the amount due was the face of the note and interest, and that could have been recovered in an action at law. Equity cQuId lIotnnd that

* Powell on Mortgages, 908 i 1 Billiard on Mortgages, 672. Coot OJ! ){ortgagel, 804. Reeves~. Scully, Walker'. Chancery, 248; Fi&her". Otis, 8 Chandler, 83 i Martineau~. McCol1um, 41d. 11)8; Bloomer". HenderflOn, 8 llichfgan, 895; Potts fl. Blackwell, 4 JoneB, 58; Cicott. ". Gagoier,2:

Michigan, 381 i Pierce". Faunce, 47 MaIne, 507; Palmer". Y ateB. 3 Balldford, 187 j Taylor". Page, 6 Allen, 86; Croft", Bunatel', D WbcoDBiD, 6OB.

OOI'Dell ", RUchena, 11 ld. 868. .

tHem ". NichOls, 1 Salkeld, 289.

TOL. XTI.

18

OARPENTER V. LONGAN.

[Sup. Ot.

Oplnlon of the CDUl't.

less was due. _ It is a case in which equity must follow the law. A decree that the amount due shall be paid within a specified time, or that the mortgaged premises shall be Bold, follows necessarily. Powell, cited supra, asys: "But if the debt were on 8 negotiable security, as a bill of exchange <collaterally secured by a mortgage, and the mortgagee, after payment of part of it by the mortgagor, actually negotiated the note for the value, the indorsee or assignee would, it seems, in all events, be entitled to have his money from the mortgagor: on liquidating the account, although he had paid it before, because the indorsee or assignee has a Jegal right to the note and a legal remedy at law, which a court of equity ought not to take from him, but to allow him the benefit of on the account."

A different doctrine would involve" strange anomaliea, The assignee might file his bill and the court dismiss it. He could then sue at law, rec.Qv~r JU,dg91ent,_snd sel] the mort- .

"gaged premises under execution. It is not pretended that equity would interpose against him. So, if the aid of equity were properly invoked to give effect to the lien of the judgment upon the same premises for the full amount, it could not be refused. Surely such an excrescence ought not to be permitted to disfigure any system of enlightened jurisprudence. It is the policy of the- law to avoid Q~rcu~tY_9iJL~.!!on, and parties ought not to be driven.from one forum to obt~in :a remedy which cannot be denied in another.

The mortgaged premises are pledged as aecurity for the debt. In proportion as a remedy is denied the contract i~ violated, and the rights of the assignee are Bet at naught. In other words, the mortgage ceases to be security for a part or the whole of the debt, its express provisions to the eontrary notwithstanding.

The note and mortgage are inseparable; the former as essential, the latter as an incident. An assignment of the note carries the mortgage with it, while an assignment of the latter alone is a nnllity."

* Jackson •• )llodget, I; Cowan, 205; Jacbou •• Willard, 4 JohnsoD,4a.

v. LONGAN.

[Sup. Ot.

the court.

vhich equity must follow the ut due shall be paid within a tgaged premises shall be sold, ited supra, says: "But if the curity, as a bill of exchange 'age, and the mortgagee, after iortgagor, actually negotiated dorsee or assignee would, it I to have his money from the ccount, although he had paid or assignee has a legal right dyat law, which a court of 1 him, but to allow bimthe

involve strange anomalies. and the court dismiss it. He j~dgment, aud.sell.tha mortm. It is not pretended that him. So, if the aid of equity effect to the lien of the judgfor the full amount, it could l excrescence ought not to be .em of enlightened jurieprnlW to avoid <lj_rcu~tY_91_l!.CJ:!~>n, reno froin one forum to obtain led in another,

e pledged as security for the edy is denied the contract i~

assignee are set at naught. ssses to be security for 8 part [press provisions to the con-

inseparable; the former 88 ent. An assignment of the 1 it, while an assignment of

'ackBontr. Willard,' Johnaon,48.

Dec. 1872.]

C4RPBNTBB v. LONGAN.

216

Opinion of the com.

It must .be admitted that there is considerable discrepancy in the authorities upon the question under consideration.

In Baily v. Smith et al.*-a case marked by great ability and fulness of research-the Supreme Court of Ohio came to a conclusion different from that at which we have arrived The judgment was put chiefly upon the. ground that notes, negotiable, are made so by statute, while there i\ no such statutory provision as to mortgages, and tbat hence tbe 8Ssignee takes the latter as he would any other chose in action; subject to all the equities which subsisted against it while in the hands of the· origina] holder. To this view of the sub-

ject th~re are .several answers. _

The transf~r of the note carries with it the security,.witli.; out any fortt1~l·~signment or delivery, or even mention of the latter. . If not. assignable at law, itls.cleaely so in eqllity. When the amount due on the Dote ·is ascertained in the fore.tlosar~ .proeeeding, eqllity reeogniaea it as concluslve, and·'" decrees· accordingly. Whether the title of the aesignee is legal or equitable .is immaterial. The result follows irrespective of that question. The processie only a mode of enforcing a lien.

All the authorities agree that the debt .is the principal thing and the mortgage an accessory. Eqnity puts the principal and accessory upon a footing of equality, and ~ves to the assignee of the evidence of the debt the same rtghts in regard to both. There is no departure from any principle of law or equity in reaching this conclusion. There is no analogy between tbis case and one where ~ .~.bose in action stan4ipg alone is sought to be enfor_ced. T~e fallacy which Iies ·in - overlooking this distinction has misled many able minds, and is the source of all the confusion that exists. The mortgage ean have no separate existence. When the note is paid-the .mortgage expires. It cannot snrvive for a trioment the debt which the note represents. ·This dependent and- Incidental-relation is the controlling consideration, and takes the .case ~ut of the rule applied to choses in action,

• 14 Ohio State, 898.

276

CARPENTER V. LONGAN.

[Sop. Ct.

Opinion of the I!oart.

where no such relation of dependence exiata. Acce8sorium non ducit, sequitur principale.

In Pierce v. Faunce, * the coort say: "A mortgage is pro tanto a purchase, and a bema fide mortgagee is equally entitled. to protection as the bona fide grantee. So the assignee of a mortgage is on the same footing with the bonafide mort. gagee. In all cases the reliance ot' the purchaser is upon the record, and when that discloses an unimpeachable title he receives the protection of the law as against unknown and latent defects."

. Matthews v. Wallwynt is usually much relied upon by those who maintain the infirmity of the assignee's title. In that" case the mortgage was given to secure the payment of a non-negotiable bond. The mortgagee assigned the bond and mortgage fl-audulently and thereafter received largo sums which should have beeu credited upon the debt. The assignee sought tq ~forc.eJh~ 1l).Qrtgig~"fQr. "tpe. fI,lUar:nO.unt.. specified in the bond. The Lord Chancellor was at first troubled by the consideration that the mortgage deed .purported to convey the legal title, and seemed inclined to think that might take the case out of the rule of liability which would be applied to the bond if standing alone. He finally came to a different conclusion, holding the mortgage to be a mere security. He said, fin any : "The debt,. therefore, is the principal thing; and it is obvious toot if an action was brought on the bond in the name of the mortgagee, as it must be, the mortgagor shall pay no more tlian what is really due upon the bond; if all action of covenant was brought by the covenautee, the account must be 8ettled in that aetion. In this court the condition of the assignee cannot be better than it would be at law in any mode he could take to recover what was due upon the assignment." The principle is distincdy recognized that the measure of lia-" bility upon the instrument secured is the measnre of the liability chargeable upon the security. The condition of the assignee' cannot be better in law than it is in equity.

"If " llAine, 618.

t 4: Vesey, 126.

[Sop. ct.

iete. .Acce8sorium

, mortgage is pro se is equally enti-

So the assignee fbe bontl.foLe mort?urchaeer is upon .impeachable title againet unknown

ted upon by those. e's title. In that :he payment of a signed the bond ,r received largo ,n the debt.. The rtbe full amount sllor was at nrst rtgage deed, pursmed inclined to I rule of liabiJity iding aloue. He ing the mortgage 'The debt, thereOU8 that if an 00- )f the mortgagee, nore than what is of covenant was :st be settled in that

assignee cannot , mode he could signment," The I measure of lia.-, I measure of the rhe condition of 1 it is in equity.

t 4. Veaey, 126.

Dec. 1812.)

BUCHANAN V. SMITH.

Statement of the cae.

So neither can it be worse. Upon this ground we place our judgment.

We think the doctrine we have laid down is sustained by , reason, principle, and the greater weight of authority.

Di:oREE RRVERSED, and the' case remanded with directions to enter a decree

IN OONFORMITY WITH THIS OPINION •

BUOHANAN tI. SMITH.

1. A credi~r hal reasonable cause to believe his debtor u insolvent .. in the lense of the'Bankrupt Act, when lIuch a state of facta is brought to his notice respecting the Idl'ail'll and pecuniary condition of his debtor, a wOQld lead.~ pruden~~IlI~nes~ ma~ ~ .th.~ c01!~I?B~On.th~~he! th~ debtor, is unable to meet hlll oblIgationi as they mature in tlie OMU'lary course

of DUlinal'. .

2. . A debtor U lIuit"ers " or co proctires" his property to be seized on execution, when, knowing himaelf to be insQlvent, an admitted creditor who has brought snit against him-and who he knows will, unless he applies for the benefit of the Bankrupt Act, secure a preference over all other credi~proceeds in the eit"ort to get. a judgment until one has been actually got by the perseverance of him the creditor and the default of him the debtor.

, SUch e1l'ort by the. creditor to get a judgment; lind such omission by the debtor to •• io'voke the protecting shield of the Bankrupt Act" in favor of 1111 his creditors, is II fraud on the Bankrupt Act, and invalidates any judgments obtained.

4. The fact. that the. debt.or, just before the judgments were reeovered, may - have made a general al!llignment which he meant for the bendt of all his creditorseqnally, does not. change the ease. Such al!llignmBnt is a nullity.

ApPEAL from the Circuit Court for the Northern District of New York, where the proofs, as conceived by the reo .porter, made a case 'essentially thus:

Th~ Cascade Paper Manufacturing Company of Penn Yan, New York, had for n long time purchased things used in the ma~ufacture of paper, of Buchanan & 00., merchants in the -oity of New York, and had ha.bitually given notes, in pay·

277