Reineman v. Robb

Mr; Justice Paxson

delivered the opinion of the court,

The Pittsburgh Bank for Savings, the equitable plaintiff below, purchased the mortgage in controversy from A. S. Bell, who was assignee of the mortgagee, without inquiry of the mortgagor, and without obtaining from him a certifícate that he had no defence to the mortgage. In thus taking the mortgage without inquiry the bank took the risk of a defence by the mortgagor. This principle has been so frequently ruled that it is needless to cite the cases. It is equally well settled, however, that the assignee of a mortgage takes it subject only to the equities between the mortgagor and the mortgagee, and not to equities between the mortgagor and a prior assignee of the mortgage: Blair v. Mathiott, 10 Wright 262; Downey v. Tharp, 13 P. F. Smith 322.

Had the bank made inquiry of Reineman, the mortgagor, prior to taking the assignment from Bell, it would have learned that the mortgage was given by Reineman in part payment of a tract of coal which he had bought from the estate of Benjamin Morrow, deceased; that subsequently he entered into an arrangement with the said A. S. Bell and one John M. Tiernan, by which the said coal was to be held by Reineman for the joint benefit of the three, the agreement reciting that “ one-half is to be owned by Adam Reineman, and the other half by John M. Tiernan and A. S. Bell; but the deed for it is made to Adam Reinemanthat he, Reineman had paid the entire purchase money, one-half $4,500 in cash, and the other half by giving the mortgage in controversy; that Bell and Tiernan had covenanted to pay the mortgage as soon as it became due ; that Bell did pay the money to the mortgagee, but instead of having the mortgage satisfied of record, procured an assignment of it, and subsequently assigned it to the bank.

We are of opinion that these facts amount to payment by the- mortgagor. Of course the mere covenant by which Bell and Tiernan bound themselves to -pay. the mortgage, standing alone, would not be sufficient. But we have the additional fact that Bell actually paid the mortgagee, and paid him with the money of the mortgagor; that is to say, with the unpaid purchase-money left by Reineman in the hands of Bell and Tiernan for that very purpose, and which they had jointly covenanted to so apply. It was, therefore, a payment by Reineman by the hands of Bell. The act of Bell in taking an assignment of the mortgage to himself was a fraud. His covenant bound him to pay the whole of the mortgage, and he had no equity which would justify him in keeping it alive to compel contribution from Tiernan, or for any other purpose.

Tiie foregoing facts were in the direct line of the title of the bank, and inquiry of the mortgagor would have disclosed them. They were equities between the mortgagor and the mortgagee, and the principle ruled in Blair v. Mathiott and Downey v. Tharp does not apply.

The judgment is reversed and judgment is now entered for the defendant below upon the point reserved.