Hollinshead v. John Stuart & Co.

Corliss, C. J.

The plaintiff, having once paid the mortgage upon his land, claims by this action a right to have the same discharged of record, and the note and mortgage surrendered to him. The fact of payment is undisputed. So is the fact that the payment was not made to the one who at the time thereof was the owner of the note and mortgage. Plaintiff therefore cannot justify the payment, as to the defendant, unless he can make out a case of estoppel as against such defendant. The note and mortgage were given by William Glass to the Globe Investment Company on the 21st of December, 1891. On the 14th of March, 1892, plaintiff purchased the mortgaged premises from Glass, and in his deed he assumed the payment of such mortgage. On the 26th of December, 1894, plaintiff paid the mortgage to the Globe Investment Company, the original mortgagee; but at this time such company was'not the owner thereof, the note and mortgage having been previously transferred to the defendant, John Stuart & Co. Were there no other facts in this case, the payment would not protect the plaintiff against liability to pay the same debt to the defendant. It is true that with respect to ordinary dioses in action the rule is that the assignee thereof, if he would prevent payment to the assignor by the debtor, must notify the debtor of the assignment. Any payment made by such debtor in ignorance of the assignment is a good payment of the claim. Van Keuren v. Corkins, 66 N. Y. 77; Insurance Co. v. Smith, 2 Barb. Ch. 82; Reed v. Marble, 10 Paige, 409; Wanzer v. Cary, 12 Hun. 403; Bury v. Hartman, 4 Serg. & R. 175; Brindle v. McIlvaine, 9 Serg. & R. 74; Hodgdon v. Naglee, 5 Watts & S. 217, 219; Trustees v. Wheeler, 61 N. Y. 88, 111; Mitchell v. Burnham, 44 Me. 286, 303, 304. This appears to be the law even in cases where the debt is evidenced by a written instrument. Van Keuren v. Corkins, 66 N. Y. 77; Bury v. Hartman, 4 Serg. & R. 175; Brindle v. McIlvaine, 9 Serg. & R. 74. But see Brown v. Blydenburgh, 7 N. Y. 141. On this latter point we do not, however, wish to express any opinion. With respect to negotiable paper the rule is different. The maker must, at his peril, ascertain at the time of payment whether the payee is still owner thereof. Although the purchaser of such paper does not notify the debtor of the fact of such purchase, and although the latter is ignorant thereof, still he is, in law, chargeable with notice of the rights of the purchaser, and therefore he pays the original creditor at his own risk. Porter v. Ourada (Neb.) 71 *39 N. W. Rep. 52; Eggert v. Beyer (Neb.) 62 N. W. Rep. 57; Brayley v. Ellis (Iowa) 32 N. W. Rep. 254; Windle v. Bonebroke, 23 Fed. Rep. 165; Burnhans v. Hutcheson, 25 Kan. 625.

That the note in question was negotiable, we have no doubt. Its negotiability is attacked on two grounds: First, because it provides for a different rate of interest after maturity; second, because it contains a elapse that, in case of default for ten days in the payment of interest, the whole of the principal may, at the option of the holder, become clue. We regard it as settled law that the fact that the date of payment may be accelerated by the default of the debtor does not effect the negotiability of the paper. Chicago Ry. Equipment Co. v. Merchants’ Bank, 136 U. S. 268; 10 Sup. Ct. 999; Merrill v. Hurley (S. D.) 62 N. W. Rep. 958; Wilson v. Campbell (Mich.) 68 N. W. Rep. 278; Ernst v. Steckman, 74 Pa. St. 13; Cisne v. Chidester, 85 Ill. 523 ; Walker v. Woolen, 54 Ind. 164; De Hass v. Roberts, 59 Fed. Rep. 853; 1 Daniel, Neg. Inst. § 48; Roberts v. Snow, 27 Neb. 425, 43 N. W. Rep. 241.

It is also clear that the fact that the rate of interest was, after maturity of the note, to be higher, did not render the same nonnegotiable. Merrill v. Hurley (S. D.) 62 N. W. Rep. 958; Towne v. Rice, 122 Mass. 67; Parker v. Plymell, 23 Kan. 402; Hope v. Barker, 43 Mo. App. 632; Crump v. Berdan, 97 Mich. 293, 56 N. W. Rep. 559.

The note and mortgage appear to have been transferred to the defendant on the 2d of February, 1892. Plaintiff purchased the land, subject to the mortgage, on the 14th of March, 1892. Thereafter he paid the interest each year to the. mortgagee, the Globe Investment Company, undoubtedly believing that it was still the owner of the security. He had no knowledge of the transfer thereof to the defendant, and after he had made his first payment of interest, and had obtained the .interest coupon, he naturally assumed that he was correct in his belief. Each year’s payment of interest could have only one effect; i. e. to strengthen this conviction. Who was responsible for this belief ? The facts admit of only one answer to this inquiry. The defendant knew that it had not notified the plaintiff of the purchase by it of the note and mortgage. It plainly saw that plaintiff was dealing with the assignor as though it were still the owner of these papers. Each time it delivered to the assignor the interest coupons, on receipt of the money, and suffered the latter to surrender them to the plaintiff. Instead of sending such coupons directly to him itself, and thus dealing with him personally, it did an act which was, to its knowledge, tantamount to a representaron by it to the plaintiff that it was not, but that the assignor was, the owner of the obligation. So long as it failed to disabuse his mind of this false impression for which it was responsible, he was justified, as against the defendent, in continuing to deal with the assignor as the real owner. And it follows *40 that the payment of the principal made by him to the assignor constitutes a good payment of the note and mortgage. Were there no element of estoppel in this case, the plaintiff would have to suffer the consequences of his own carelessness in paying a written instrument without demanding the production thereof at the time of payment; he being chargeable with knowledge of the fact that it might have been previously transferred. But while a purchaser of negotiable paper, and perhaps of any other written instrument, may safely remain silent, and can, despite the silence, insist that payments to the assignor shall not be charged against him, he cannot by his conduct create a belief in the mind of the debtor that the former owner is still the real owner, without being bound by all' payments made by the debtor to such former owner while such belief remains unchanged. Our decision - rests upon the elementary principle of equitable estoppel. We reach the same conclusion as the learned District Judge, but on a different ground. We are unable to discover in the case any question of ostensible agency. Before the plaintiff can claim that the defendant held the Globe Investment Company out to him as its agent, and therefore is estopped from denying such agency, he must be.. able to satisfy us that he dealt with such company believing it to be such agent because of the conduct of the defendant. Now, it is obvious from the facts of this case that plaintiff has at no time ever regarded the Globe Investment Company as defendant’s agent at all. He has never known the defendant as the principal in the transaction.. He has all the time proceeded on the theory, not that defendant was the owner of the securities, and the Globe Investment Company its agent, but that the latter was itself the owner thereof, and the only party interested in the matter, aside from himself.

November 9, 1898.

The judgment of the District Court is affirmed.

All concur.