Welbon v. Webster

BROWN, J.

Action to cancel, set aside, and annul of record a real-estate mortgage on tbe. ground that it was without consideration. Defendant bad judgment, and plaintiff appealed therefrom.

Tbe facts are as follows: On November 1, 1889, one Wickham was tbe owner of tbe land in question, and, to secure tbe payment of a promissory note for the sum of $500, payable to tbe Globe Investment Company, a Massachusetts corporation, executed to that company a mortgage thereon, which mortgage was duly recorded. On December 26, 1889, tbe investment company,' for value, and in tbe usual course of business, indorsed and transferred tbe note to one Cooper, and at tbe same time assigned to him tbe mortgage. Tbe assignment was not recorded. On October 29, 1891, before tbe promissory note secured by that mortgage became due, but after tbe assignment thereof to Cooper, for tbe purpose of renewing and obtaining an extension of time of payment of tbe same, Wickham made another promissory note and mortgage upon tbe same land to tbe investment company. Tbe mortgage was duly recorded. On July 15, 1895, tbe investment company sold and assigned this note and mortgage to defendant Webster; tbe assignment being duly recorded. At tbe time of the transfer of this note and mortgage to defendant, she bad notice of tbe existence of tbe prior mortgage, but not of tbe fact that tbe mortgage assigned to her was executed to tbe investment company to renew or obtain an extension of tbe prior mortgage. On September 20, 1898, Wickham sold and conveyed tbe mortgaged land to tbe plaintiff in this action, and plaintiff expressly assumed and agreed to pay tbe first mortgage. As already stated, no consideration was given by tbe investment company for tbe second note and mortgage, other than an extension of tbe time of tbe payment of tbe first mortgage, which tbe investment company did not then own. On tbe claim that tbe second mort *179 gage was void for want of consideration, this action was brought to cancel and set it aside.

Respondent did not appear in this court, or submit any brief in support of the judgment appealed from, and the cause was submitted by appellant’s counsel upon his brief, without applying for a reversal under the rule. To avoid the necessity of another trial of the action, and to dispose finally of the case, we consider it upon the merits. We are of opinion that the learned court below applied the wrong principle of law to the undisputed facts, and that the judgment should be reversed. The evidence is conclusive that there was no consideration for the second mortgage. It has always been the law in this state that a promissory note, and a mortgage securing its payment, though one transaction, constitute separate and independent contracts. McManaman v. Hinchley, 82 Minn. 296 , 84 N. W. 1018 , where cases on this point are cited. Promissory notes are negotiable, and pass to a bona fide purchaser free from all equities and defenses, but not so as to mortgages which secure the payment of such notes. They are not negotiable, and an assignee thereof takes them subject to all defenses and all equities existing between the original parties. As it appears without dispute in the case at bar that the second mortgage which plaintiff seeks to have cancelled was without consideration, and given to obtain an extension of the time of payment of the first mortgage, which the investment company did not own, it should be cancelled and set aside. Had the second mortgage and note been given and received in payment of the first, the latter being then owned by the mortgagee, a different case would be presented. In that case the execution and delivery of the second would extinguish the first, and the second, and not the first, would be operative. Plaintiff is not precluded by her knowledge of the existence of the second mortgage from asserting its invalidity. She did not assume or agree to pay or discharge it. Calkins v. Copley, 29 Minn. 471 , 13 N. W. 904 .

As these facts appear from the findings of the trial court, and are not disputed, plaintiff should have judgment cancelling and setting aside the second mortgage. The judgment appealed from is therefore reversed, with directions to the court below to enter judgment accordingly. >