CONNECTICUT MUTUAL LIFE INS. Co. v. TALBOT.

[113 INDIANA, 373.]

INDORSEMENT Of Note Secured By Mortgage OPERATES as an equitable assignment of the mortgage.

ASSIGNEE OF MORTGAGE WHO FAILS TO RECORD HIS ASSIGNMENT will be estopped from asserting the priority of his mortgage over that of a subsequent mortgagee who took upon the faith of a release executed by the administratrix of the original mortgagee and entered of record. FINDING THAT AGENT OF CORPORATION ACTED IN RELIANCE upon a record of release of a mortgage, without knowledge that it had been paid, is a sufficient finding that the corporation had no notice of the fact that the mortgage had not been paid.

STATUTES WILL BE CONSTRUED SO AS TO EFFECT PURPOSES for which they were enacted, and if necessary to that end, they will be held to be retroactive, although they do not in terms so direct, unless this would result in the impairment of some vested right or the violation of some constitutional guaranty.

IN CONSTRUING STATUTES, COURTS, IN ORDER TO ASCERTAIN the intention of the legislature, will judicially notice such contemporaneous history as led to and probably induced the passage of the laws.

THE facts are stated in the opinion.

S. J. Peelle and W. L. Taylor, for the appellant.

J. S. Duncan, C. W. Smith, and J. R. Wilson, for the appellees.

By Court, MITCHELL, C. J. The questions for decision arise upon facts specially found by the court. Those facts, so far as they are material, are as follows: On May 3, 1871, Talbot and wife executed a mortgage, which was afterwards duly recorded, to the Thames Loan and Trust Company to secure a loan of three thousand dollars, payable on the third day of May, 1876. On the thirty-first day of January, 1874, the same mortgagors executed another mortgage conveying the same property to William H. Morrison to secure another debt of three thousand dollars. This last debt was evidenced by a promissory note payable to Morrison or order, one year after date. The mortgage recited that it was given as a security for the debt evidenced by the above-mentioned note, and also to secure any renewal of the note therein described. This mortgage was also duly recorded. Before the note matured, Morrison assigned it to Tomlinson by a written indorsement on the back thereof. There was no assignment of the mortgage, otherwise than as it was carried by the indorsement written upon the note, and there was hence nothing upon the record to indicate. that the note and mortgage were not held and owned by the

mortgagee. The note thus secured and assigned was renewed annually, the maker giving a new note at the end of each year, of like tenor as the first, payable to Tomlinson. The renewal notes were indorsed by Morrison. On the fifteenth day of March, 1881, Morrison died, and, shortly thereafter, his widow, Mary Morrison, became the duly qualified administratrix of his estate.

The debt to the trust company had become due. It had been renewed, and had fallen due a second time.

Talbot negotiated a loan of three thousand dollars with the Connecticut Mutual Life Insurance Company. The loan was negotiated with Mr. Moore as agent of the insurance company. The money so negotiated for was designed to be used in paying off the debt due to the trust company, and secured by the trust company mortgage above mentioned. Mrs. Morrison, as administratrix of the estate of William H. Morrison, executed a release of the Morrison mortgage. This release was executed and recorded on the eleventh day of October, 1881. Tomlinson had no knowledge of the release, nor had he given authority to any one to release the mortgage. The debt held by him had not been paid. On the same day that the Morrison mortgage was released, Talbot and wife conveyed the same real estate to the insurance company as a security for the loan of three thousand dollars, negotiated from it through its agent, Moore. The money thus borrowed was paid over to the trust company in satisfaction of the debt due it from Talbot, which indebtedness was secured by a renewal of the first mortgage taken by it on the real estate in question. Moore, who acted as the agent for the insurance company in making the loan to Talbot, had been furnished with an abstract of title to the land mortgaged some time prior to the loan, and thereby he knew of the Morrison mortgage; but at the time the loan was made to Talbot the release executed by the administratrix had been put on record. The release recited that the mortgage had been fully paid and satisfied, and Moore had no knowledge that it was not paid. The court, in its finding, draws the inference that Moore did not demand the production of the Morrison note and mortgage, nor make any inquiry as to the authority of the administratrix to execute the release.

It should be observed that at the time the trust company took its second or renewal mortgage, in 1876, William H. Morrison, by an entry on the mortgage record, waived the

priority of the Morrison mortgage over that last taken by the trust company. This was done without authority from Tomlinson.

Upon the facts found, the superior court was of opinion that the release and satisfaction piece executed by Mrs. Morrison, and placed of record, was not effectual as against Tomlinson, the assignee of the Morrison note and mortgage, and it was accordingly decreed that the Morrison mortgage have priority over that of the insurance company, notwithstanding the release.

That the indorsee of a promissory note secured by mortgage succeeds to the benefits of the mortgage security, even though the latter be not formally assigned, is a familiar proposition.

The written indorsement of the payee on the note carries the legal title therein to the indorsee, and the mortgage being a mere incident to and security for the debt, the assignee of the note becomes equitably entitled to participate in the security to the extent of his interest or ownership in the debt. The right of such an assignee to participate in the mortgage is wholly equitable, and grows out of the fact that equity regards the mortgage as being merely accessory.

It is, of course, certain that, as between the mortgagee and his assignee, and all others having notice of their respective rights, the former can do nothing to prejudice the rights of the latter after the debt has been assigned.

Whether the assignment of a mortgage was such an instrument as was entitled to be recorded prior to the act which came in force July 2, 1877, or whether prior to that act an assignment could be so made on the record as that in either case the record would operate as notice of the assignment, and to what extent innocent purchasers and subsequent mortgagees, who advanced money on the faith of a release entered of record by a prior mortgagee, might rely upon such release, have heretofore been subjects of more or less extended discussion and consideration by this court: Reeves v. Hayes, 95 Ind. 521. Whatever conclusion we might arrive at, as at present advised, in respect to whether or not assignments of mortgages were within the recording acts prior to July 2, 1877, there is no room to doubt but that such assignments are affected by the act last above named. Whether or not the questions considered in Reeves v. Hayes, supra, are longer of any general

AM. ST. REP., VOL. III.—42

importance, it is clear that they are of no practical moment as applied to the present case.

It is assumed everywhere that, if the recording acts afford the assignee of a mortgage the opportunity of giving notice of his rights by procuring and putting of record an assignment of the mortgage, neglect on his part to do so will estop him from asserting the invalidity of a duly recorded release executed by his assignor, after an innocent purchaser has paid his money on the faith of the public records. It is settled everywhere that unrecorded assignments of mortgages are void as against subsequent purchasers whose interests may be affected thereby, and whose conveyances are duly recorded, provided such assignments are embraced by the recording acts: Bacon v. Van Schoonhoven, 87 N. Y. 446; Decker v. Boice, 83 Id. 215; Swartz v. Leist, 13 Ohio St. 419; Yerger v. Barz, 56 Iowa, 77; Henderson v. Pilgrim, 22 Tex. 464; Boone on Mortgages, sec. 92; 1 Jones on Mortgages, sec. 472; Reeves v. Hayes, supra, and authorities there cited.

The effect of the act of 1877, construed in connection with section 2931, was to postpone or render assignments of mortgages void as against any subsequent purchaser or mortgagee in good faith, for a valuable consideration, unless such assignments were recorded as therein provided.

It follows that, when assignments of mortgages are within the recording acts, a release executed by the person who appears by the records to be the owner of the mortgage is sufficient to protect a purchaser who has in good faith parted with his money on the faith of such a release, and without other notice than that afforded by the record: Blunt v. Norris, 123 Mass. 55.

The act which went into force July 2, 1877 (R. S. 1881, secs. 1093, 1094), provides that "any mortgage of record, or any part thereof, may be assigned by the mortgagee, or any assignee thereof, either by an assignment entered on the margin of such record, signed by the person making the assignment and attested by the recorder, or by a separate instrument executed and acknowledged," etc. It also provides that the assignment, if by a separate instrument, may be recorded on the margin of the record where the mortgage is recorded, or in the mortgage record of the county. And it provides further that, after the assignment is so made or entered of record, the mortgagor and all other persons shall be bound thereby. It also authorizes any assignee, or his per

sonal representative, to release or enter satisfaction of the mortgage of record.

It is argued that because the debt secured by the Morrison mortgage was assigned to Tomlinson before the act of 1877 took effect the assignee was not affected by the provisions of that act, notwithstanding he accepted renewals of the note, and allowed the mortgage to stand on the record in the, name of his assignor for some four years after the act referred to came into force.

It is assumed that, where an equitable assignment of a mortgage had been effected prior to the enactment above mentioned, the assignee might, nevertheless, permit the legal title to the mortgage to remain of record in the original mortgagee, and that an unauthorized release by such mortgagee would be at the risk of an innocent purchaser, who relied upon the record.

This argument is supported upon the general proposition that statutes are to be construed and applied prospectively, unless a contrary intent is manifested in clear and unambiguous terms. This is undoubtedly the general rule; and it is sometimes held that, to work an exception, the intent favoring retrospective application must affirmatively appear in the words of the statute. The better rule of construction, and the rule peculiarly applicable to remedial statutes, however, is, that a statute must be so construed as to make it effect the evident purpose for which it was enacted; and if the reason of the statute extends to past transactions as well as to those in the future, then it will be so applied, although the statute does not in terms so direct, unless to do so would impair some vested right, or violate some constitutional guaranty: People v. Spicer, 99 N. Y. 225; Larkin v. Saffarans, 15 Fed. Rep. 147; Excelsior Mfg. Co. v. Keyser, 62 Miss. 155; Baldwin v. City of Newark, 38 N. J. L. 158; People v. Clark, 7 N. Y. 385; Bishop on Written Laws, sec. 84.

Limitation laws which operate on subsisting contracts, and laws which regulate the registration of existing conveyances or instruments affecting titles to lands, are within the operation of this rule when a reasonable time is given within which the effect of such a statute, as applied to existing conveyances, may be avoided and rendered harmless in respect to vested rights: Tucker v. Harris, 13 Ga. 1; 58 Am. Dec. 488; Boston v. Cummins, 16 Ga. 102; 60 Am. Dec. 717; Jackson v. Lamphire,