Harvard Mortgage Co. v. Neeson

MAUCK, J.

The first question is whether the situation was such that the plea of fraud was available to the defendant. This, of course, depends on whether the plaintiff had become an innocent holder in due course. The note was complete and regular in form. The plaintiff acquired it for value and in good faith and had no actual notice of any infirmities therein. The only question, therefore, is whether the plaintiff’s acquisition of the instrument meets the second condition imposed by 8157 GC.

“That he became the holder of it before it was over due, and without notice that it had been previously dishonored, if such was the fact.”

The note was dated January 15, 1925. It was deposited with the plaintiff as collateral security for value on May 8, 1925, and on that day the equitable rights therein of the plaintiff vested.

It is clear that two installments of $75.00 each were then due. These unpaid installments alone were sufficient to attach to the instrument its character as a dishonored note. The rule is too well fixed to warrant quoting the authorities or to indulge in the refinements and distinctions of particular cases. 8 Corpus Juris 410; 3 Ruling Case Law 1048.

The Neesons were the owners of two parcels of suburban property at Cedar Point, Cuya-hoga Co. One of these was: a nine acre tract, the other a one acre tract on which the Neesons lived. • They were induced to trade the larger tract to George E. Whitehouse for some real estate on Beaver Avenue, Cleveland, and to consummate the exchange gave as additional consideration a mortgage for $6,500 on the one acre tract on which they lived. This action was predicated on that note and mortgage which were originally made payable to Whitehouse and by him transferred to a third party who in turn transferred it to the plaintiff, both transfers being subsequent to its dishonor.

In the exchange the Neesons were swindled.

The note was so saturated with the fraud of Whitehouse that he could have had no recovery thereon and as we have pointed out the plaintiff by acquiring the note after it had been dishonored is charged with all its infirmities.

It has been argued, however, that if all this be true, the Neesons are estopped from availing themselves of the defense of fraud by virtue of the facts that they took over the Beaver Avenue property, improved it, collected rents therefrom and received from the sheriff a small residue after the payment of the liens on foreclosure. These things work no estoppel. The acts charged were not wrongful and not equivocal and, therefore, form no basis for an estop-pel. Moreover, an estoppel does not arise from the acts of the party charged therewith unless the party asserting the estoppel was improperly influenced thereby to his prejudice. Nothing of the sort appeared in this case and the plea failed.

Complaint is made, however, that the court not only rendered judgment on the first cause of action but entered a cancellation of the mortgage. This relief was not granted the defendants by virtue of any prayer for rescission, nor any issue joined on the first cause of action. The mortgage was, however, before the court by reason of the second cause of action in which the mortgage was pleaded and its foreclosure prayed. The mortgage had no vitality when the note secured by it failed. The second, cause of action was addressed to a court of equity and the court sitting as a chancellor was clothed with power to do equity when jurisdiction was acquired over the instrument. When it was found that the mortgage secured nothing, why should not the cancellation be made and the record cleared? The plaintiff in error could not be prejudiced in any event by the cancellation of a mortgage that secured nothing of value.

The judgment is affirmed.

(Middleton, P.J., concurs.)