Hays v. Plummer

McFARLAND, J.

—Action upon a note and mortgage made and executed August 5, 1896, by the defendants Eugene R. Plummer and his wife, Maria A. Plummer, to the defendant John P. McCormick, and assigned hy him August 14, 1896, to plaintiff. Judgment was rendered in favor of the Plummers, and from this judgment and from an order denying a new trial, and also from an order denying plaintiff’s motion to vacate the judgment and to enter a judgment for plaintiff under section 663 of the Code of Civil Procedure, plaintiff appeals.

On the said fifth day of August, 1896, the defendant Eugene R. Plummer entered into a written contract with the defendant McCormick, hy which the latter agreed to construct and complete certain buildings on a lot owned by the former for a

[109]

certain sum of money—the buildings to be commenced within ten days and finished within fifty days. It was recited in the contract that Plummer had given a note secured by a mortgage on the lot for the amount to be paid for the buildings, and he did give such note and mortgage on said day in consideration of McCormick’s promise to construct the buildings. McCormick agreed to give a bond for his performance of the contract. The note was on its face negotiable in form—being payable to McCormick or order; hut the mortgage referred to the note and contained some stipulations which, if expressed on the face of the note, would, perhaps, have made the latter non-negotiable. On the 14th of the month, plaintiff loaned McCormick five hundred dollars, for which he took the latter’s note, and to secure the loan McCormick assigned to' plaintiff the note and mortgage above mentioned, and upon which this suit is brought. At the time of the assignment plaintiff knew all the facts as above stated, and knew that the consideration for the note and mortgage was the promise of McCormick to construct the buildings. McCormick did not construct the buildings within the time mentioned, or at any time. There was no indorsement of the note by McCormick; but the assignment of the note and mortgage was made by means of a separate written instrument. The Plummers set up a failure of consideration as a defense to the action.

The first question is, whether plaintiff is in the position of one who has taken in due course a negotiable instrument before maturity freed from any equities between the original parties, or whether he merely stands in the shoes of McCormick. Counsel for respondent contends that, even if the note be considered negotiable, as plaintiff knew its consideration when he took it, he is liable to defendants’ claim of want of consideration, and, moreover, that under our peculiar statutory provision (Code Civ. Proe., sec. 726) that there shall be only one action for the recovery of a debt secured by mortgage in which the mortgage must be foreclosed before there can be a personal judgment, a note, though in form negotiable, is in law not negotiable if secured by a mortgage of even date, which makes it payable primarily out of a peculiar fund—at least as against one having knowledge of the mortgage; but we need not ex