Abernathy v. Hunt , 40 S.D. 240 ( 1918 )

POLLEY, J.

This action is brought for the .purpose of -compelling the defendant Ethel Hunt . 'to -convey the title to a quarter section oif land] in Brookings county to plaintiff, and also to Cancel two mortgages placed 00 said land by tibe -defendants Ethel .Hunt and Lawiis Hunt.

Tire defendant Eltihel H-uinit is the daughter -of plaintiff and the wife of ,the defendant Lewis Hunt. Plaintiff owned real property in Iowa which she desired to exchange for farm property in South Dakota. Defendants Louis Henkin and' Lewi's Hunt undertook to- effect such exchange, anld, in cinder Ito facilitate the transaction-, hlad pMtatliff (who- is a nonresident) execute a deed conveying title to- her property toi her daughter, Ethel Hunt, who resides in Ithis state. Louis Hen-kin anld- Lewis Hunt negotiated a trade of pfaintifFs! Iow>a property for a quarter is-ectiion of land in Brookings couinty, owned 'by one H. PI. Mao-re. In -aonsumm'ation -of -said transaction: defendant Ethel Hunt -deeded plaintiff’s property to tine isali-d Mioore and took a deed, from M-oiore conveying -th-e Brookings -co-unity property to herself. The deed from Mioore to Ethel Hunt was executed on the 4th day of March, 1915. Oh thle following day, Match 5th, Eithel Hunt and Lewis Hunt executed1 andl delivered to defendant Loui's H'en-bin a mortgage o-m thle Brookings county land1 for $2,000. This mortgage wias filled for -record on the 9th day of Marcih, 1915. On the 15th day of April, 1915, Ethel Hunt and Lewis Hunt executed a second mortgage to- Louis Hen-ki-n on the Bro-oki-ngs county land for $150, which mortgage Was filed- for record inBriclofciogS County on- /the 19th day of April, 1915. On tine 17th day oif M-ar-ch, 1915, defendant Louis Henkin assigned the $2,000 mortgage to tire intervener First’ National Bank -of Elk Point, and -o-n the ns-t day -of 'M-ay, 19x5, h-e- -assigned -the $150 mortgage to thle intervener Ona J. Henkin.

The -trial -oouirlfc found that plaintiff is tire o-wn-er in fee -o.f the, Said land, anld' that the said mortgages were procured by the defendant Loiuii-s Plenfcin -by and tbreiugh fraud and deceit, and therefore ware Void, and entered -a decrete -canceling the sam-e. From this decree tine defendant Louis Hen-kin and- the interveners, Ona J. Htenikiin ¡and the First National Bank, appeal.

[1] Appellants make no claim that merits consideration that there was any warrant or authority for the execution of either oif the said mortgages, or ¡that, in the (hands of the mortgagee, Louis Henkin, they wiere of any binding force or validity whatever. The $150 mortgage was not assigned to Ona J. Hlenkin until ¡after the notice of the pendency of this action 'had been filed fbr record, and therefore he tobk the sarnie subject to all the infirmities oif tine said mortgage that existed while it was in the hand's of the original mortgagee. This was conceded1 by counsel on 'the .argument, and said mortgage will receive no further notice.

[2] The situation relative -to the mortgage assigned1 to the bank is 'siotaewhat different, but not more .difficult. It is claimed on behalf Of the bank that ¡the assignment of said -mortgage was taken anld i'S field as security for an indebtedness of $2,500. But it ¡appears from the evidence that this wlas a preexisting debt; that it was 'amply secured by oither ■security; that ilt was secured to tile satisfaction of the bank; that ¡the 'assignment was not solicited .by tine bank, but was made Voluntarily and without any consideration whatever -passing from the bank to Louis Henkin. Moreover, ¡the $2,500 indebtedness to the bank was not a debt Owed !by Louis Henkin, but one that was 'Owed by Henry Henkin and Ona J.-. Henkin. This dobs not make the bank a good-faith, purchaser for valúe 'in due bourse of -business noir free the mortgage from the defenses that existed against it 'while in the haodsi of the original mortgagee. The manner in which ¡the assignment to the bank wlas made wds1 such as to put it upon inquiry as to -the genuineness of the mortgage, and it is charged with constructive notice of .the facts thlat such- inquiry would have disclosed. Section 2452, Rev. Civ. Code.

Appellants cite and rely upon Bank v. Empey, 34 S. D. 361, 148 N. W. 606, in support of their contention that the bank is an indorsee of the mortgage in due course of business, but the facts in this case do not bring it within tibie rule ¡announced in that case. Neither does it come within that portion of section 25, c. 279, Laws of 1913 (the Negotiable Instrument Law), which provides that an antecedent or pre-existing debt constitutes value.

The mortgage having been void in the hands- oif the original mortgagee, and thie bank having failed to shtow itsielf a bona fide fielder thereof, it was properly ¡canceled by-the trial court.

Th'e judgment appealed from is affirmed.