This section is from the book "The Law Of Real Property and Other Interests In Land", by Herbert Thorn Dike Tiffany. Also available from Amazon: A Treatise on the Modern Law of Real Property and Other Interests in Land .
Applying the equitable principle that the debt or other obligation secured is the principal thing, and the mortgage securing it merely an incident, it has become the established rule in courts of equity in this country, and in many states in courts of law as well, that a transfer of the debt alone has the effect of transferring the benefit of the mortgage security.3 In states
96. 5 Encyclopedia Law & Prac. 951; 5 Corpus Juris, 968.
97. Ross v. Terry, 63 N. Y. 613, Koch v. Hinkle, 35 Pa. Super. Ct. 421.
98. Waller v. Staples, 107 Iowa, 738, 77 N. W. 570.
99. See cases cited 5 Corpus Juris, 969.
1. Thomas v. Linn, 40 W. Va. 122, 20 S. E. 878.
2. French v. Turner, 15 Ind. 59; Dixon v. Clayville, 44 Md. 573; Nally v. Long, 71 Md. 585, 17 Am. St. Rep. 547, 18 Atl. 811.
3. Carpenter v. Longan, 16 Wall. (U. S.) 271, 21 L. Ed. 313; Welsh v. Phillips, 54 Ala. 309; Mack v. Wetzlar, 39 Cal. 247; Lawrence v. Knap, 1 Root (Conn.)
248, 1 Am. Dec' 42; Stewart v. Preston, 1 Fla. 11, 44 Am. Dec. 621; Clark v. Havard, 122 Ga. 273; Herring v. Woodhull, 29 111. 92, 81 Am. Dec. 296; Connecticut Mut. Life Ins. Co. v. Talbot, 113 Ind. 373, 3 Am. St. Rep. 655, 14 N. E. 586; Bank of Indiana v. Anderson, 14 Iowa, 544, 83 Am. Dec. 390; Smith v. Booth Brothers, etc., Granite Co., 112 Me. 297, 92 Atl. 103; Morris v. Bacon, 123 Mass. 58, 25 Am. Rep. 17; Mitchell v. Ladew, 36 Mo. 526, 88 Am. Dec. 156; Whittemore v. Gibbs, 24 N. H. 484; Green v. Hart, 1 Johns. (N. Y.) 580; Runyan v. Merser-eau, 11 Johns. (N. Y.) 534, 6 Am. Dec. 393; Hillman v. Young, 64 Ore. 73, 127 Pac. 793, 129 Pac. 124; in which the "lien" theory of a mortgage obtains, this must necessarily be the case, since the mortgage is merely a means of realizing the debt, and it is inconceivable that one person should be entitled to a debt and another person to the benefit of its realization. The case is the same in the states which adopt the "title" theory of a mortgage, so far as courts of equity are concerned. It is true that in those states the legal title, which passes to the mortgagee upon the execution of the mortgage, may be vested in one person while the debt is owned by another, but this legal title a court of equity will regard as held for the benefit of the owner of the debt. In other words, such security as may result from the transfer of the legal title to the mortgagee is beneficially vested in the owner of the debt, and a court of equity will under proper circumstances even order the holder of the legal title to transfer it to the owner of the debt.4 The mere transfer of the debt, however, will not usually carry with it the legal title as it does the equitable security.5 The transferor, if he held the legal title at the time of the transfer, will continue to hold it, but merely for the benefit of the transferee of the debt.6
Perkins v. Sterne, 23 Tex. 561, 76 Am. Dec. 72; Spencer v. Alki Point Transp. Co., 53 Wash. 77, 132 Am. St. Rep. 1058, 101 Pac. 509; Emmons v. Hawk, 62 W. Va. 526, 59 S. E. 519; Crosby v. Roub, 16 Wis. 616, 84 Am. Dec. 720; Milwaukee Trust Co. v.. Van Val-kenburgh, 132 Wis. 638, 112 N. W. 1083.
4. Morris v. Bacon, 123 Mass. 58.
5. Cottrell v. Adams, 2 Biss. 351, Fed. Cas. No. 3,272; Welsh v. Phillips, 54 Ala. 309; Clark v. Havard, 122 Ga. 273, 50 S. E. 108; Barrett v. Hinckley, 124 111. 32, 7
Am. St. Rep. 331, 14 N. E. 863; Smith v. Kelley, 27 Me. 237, 46 Am. Dec. 595; Young v. Miller, 6 Gray. (Mass.) 152; Bailey v. Winn, 101 Mo. 649, 12 S. W. 1045; Contra, Southerin v. Mendum, 5 N. H. 420; Whittemore v. Gibbs, 24 N. H. 185.
6. Barrett v. Hinckley, 124 111. 32, 7 Am. St. Rep. 331, 14 N. E. 863; Jordan v. Cheney, 74 Me. 359; Crane v. March, 4 Pick. (Mass.) 131, 16 Am. Dec. 329; Morris v. Bacon, 123 Mass. 58, 25 Am. Rep. 17; Keyes v. Wood, 21 Vt. 331.
The equitable doctrine above referred to, that a transfer of the debt involves a transfer of the mortgage security, has been applied even when the transferee was at the time ignorant of the existence of the mortgage.7 A contrary view would involve either a separation of the debt and of the security, which would appear, as we have just seen, to be impossible on principle, or an extinguishment of the security by reason of such ignorance, which would appear to be unjust and unreasonable.
It is sometimes said that the benefit of the security passes upon a transfer of the debt "in the absence of an agreement to the contrary."8 The exact significance of such a qualification of the general rule is not entirely clear. It does not mean that the legal title passes in the absence of an agreement to the con" trary, because, as we have just seen, it does not pass. It cannot mean that, upon the transfer of the debt, the benefit of the security may be retained by the transferor, since, as we have said above, the security is merely a means of realizing the debt, and cannot be the property of a person other than the owner of the debt. It must, it seems, if it means anything, mean that the transferor and the transferee of the debt may, by agreement at the time of the transfer, discharge the security for the debt, without affecting the debt itself. Since the transferor could, before the transfer of the debt, discharge the mortgage, and the transferee can do so thereafter, it seems clear that, at the very moment of transfer, the two together can do so. But it is obviously but seldom, if ever, that the parties to the transfer would have any object in entering into an agreement, to which the owner of the mortgaged land is not a party, for the purpose of relieving the land of the burden of the mortgage. Consequently, the suggested qualification of the general rule, as to the passing of the benefit of the security upon a transfer of the debt, may well be ignored, as being of no practical importance, and as involving, at the most, but a recognition of the right of the parties beneficially interested in the debt to discharge the mortgage security. As to the mode of transferring the debt, with the incidental right to the benefit of the mortgage lien, absolutely no formalities are required, a merely oral transfer of the debt being regarded as sufficient,9 as is, obviously, an express written transfer of the debt.10 In case a note or bond was given for the amount of the debt secured,11 a transfer of such note or bond is regarded as in effect a transfer of the debt, and incidentally of the benefit of the mortgage lien.12 Such transfer may be effected by a written assignment of the note or bond, either by indorsement or otherwise,13 or by a mere manual delivery of the note or bond into the hands of the intended transferee,14