Phelan v. Olney

A mortgage being merely the incident to the note secured by it, it follows that where two notes are secured by a single mortgage, the endorsement and delivery of one of the notes carries with it a pro rata portion of the security. A purchaser of the second note, taking therewith an assignment of the mortgage, takes with notice of the equity of the holder of the first note, as he was informed of its existence by the mortgage itself. When the holder of the second note, and assignee of the mortgage entered a discharge of the mortgage and took a new security, the discharge was valid, as to him, and divested his lien under the mortgage, though void as to the holder of the first note.

Appeal from the Superior Court of the City of San Francisco. The.plaintiff filed his bill of foreclosure against J. N. Olney, J. B. Roberts, J. E. Brown, and Rebecca F. Gregory. The bill sets. forth the following averments : That on September 1st, 1853, the defendant, Olney, made two promissory notes of even tenor and date, to W. C. Jewett, for $2,000 each, payable in one year, with interest at one per cent, per month, and to secure the same, executed a mortgage on certain property in San Francisco. That Jewett assigned one of said notes to D. Brigham, who assigned the same to plaintiff, who is still the owner and holder thereof. That Jewett assigned the other note, as well as the mortgage, to J. C. Hambly, who assigned the same to defendant Roberts, who subsequently, without plaintiffs’ knowledge or consent, entered a discharge of said mortgage on record, and that the other defendants as well as Roberts, have or claim some interest in the mortgaged premises; and that the whole amount of principal and interest secured to be paid by the note held by plaintiff is due and unpaid. The defendants, Olney and Roberts, demurred. The demurrer was overruled, and Olney and Roberts filed separate answers. Gluey’s answer averring that Jewett and Brigham were jointly interested with him in the lot, and Roberts’ answer averring representations by Jewett, Brigham and Olney to Hambly, when the latter took an assignment of the note and mortgage; that the note now held by plaintiff was paid : and that Olney, not paying Roberts’ note, the latter had discharged the mortgage and taken a new note and mortgage bearing a higher rate of interest. The answers also aver the actual payment to Jewett of the note now held by plaintiff, although the note was not surrendered. The complaint and the answer of Olney are verified. The agreed statement of the facts shows that Jewett endorsed the note, held by plaintiff, to Brigham at about its date; that Brigham endorsed it to plaintiff June 9th, 1855; that Jewett endorsed the other note and assigned the mortgage to Hambly, November 14th, 1853, and that the assignment of mortgage was • recorded on the next day; that Hambly assigned the mortgage to Roberts, June 21st, 1854, and that the assignment was recorded July 22d; that on the 30th August, 1854, Roberts executed and recorded the discharge of the mortgage and canceled the note held by him; that neither he nor Hambly had any actual notice of the transfer of the other note from J ewett to Brigham before the discharge of the mortgage by Roberts. The Court below rendered judgment for plaintiff. Defendants moved for a new trial, which was overruled, and defendants appealed.