Payne v. Bensley

Burnett, J., delivered the opinion of the Court—Terry, C. J., concurring. The only question in this case is, whether a negotiable premissary note not yet due, and bona fide taken as collateral security for a pre-existing debt, is subject, in the hands of the endorsee, to any defence existing at the date of the assignment, between the original parties.

■ The authorities on this point have been conflicting; and the research and industry of counsel have brought b'efore us the leading decisions on both sides of .this question. It will not be necessary to attempt a review of the numerous authorities to which we have been referred. The greater number of decisions would seem to support the position taken by the counsel of defendant, while the more recent decisions sustain that of the plaintiff, without giving any decided opinion upon the point. I must say, with Chancellor Kent, alluding to the decision in Swift v. Tyson, 16 Peters, 1, that “ I am inclined to concur in that decision, as the plainer and better doctrine.” 3 Kent, 80; note A. But all the authorities agree in one position, that if there be any new consideration for the assignment, then the assignee is a holder for value, and the maker is precluded from resorting to defences that he might make against the payee, were the suit brought by him.

It is insisted by the counsel for the plaintiff, that before he took the note of Bensley as collateral security for the pre-existing debt, Payne had a remedy,, by attachment, against his debtor, but that by taking the collateral security the plaintiff lost that remedy, and that the loss of this remedy constituted a new consideration moving from Payne to his debtor, the assignee of the note.

[267]‘ By the provisions of the one hundred and twentieth section of the Practice Act, the remedy, by attachment, does not,exist where the contract is “ secured by a mortgage upon real or personal property."

It is conceived that the force of this point made by the counsel of plaintiff, will depend upon the construction of the phrase “ mortgage upon personal property," as used in our statutes.

■ In strictness, the assignment of this note to Payne was not a mortgage, but a mere pledge, of the note. Dewey v. Bowman, July, 1857.

Under the' old decisions, the legal ownership of mortgaged real estate was vested in the mortgagee. 4 Kent, 138. But by repeated decisions of this Court, it has been settled that under our statute, a mortgage is a mere security for the debt, and the legal title remains in the mortgagor until foreclosure and sale. 2 Cal. Rep., 387, 492; 5 Cal. Rep., 334; Guy and Angier v. Ide, January, 1856; Practice Act, §§ 260, 266.