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 .
68. See Payne v. Burnham, 62 N. Y. 69; Smyth v. Munroe, 84 N. Y. 354; Ashton's Appeal, 75 Pa. 153; Griffiths v. Sears, 112 Pa. 523, 4 Atl. 492; Nixon v. Haslett, 74 N. J. Eq. 789, 70 Atl. 987.
69. Barnett v Zacharias, 24 Hun (N. Y.) 304, 89 N. Y. 637; Woodruff v. Morristown Sav. Inst., 34 N. J. Eq. 174; Nixon v. Haslett, 74 N. J.
Eq. 789, 70 Atl. 987; Melendy v. Keen, 89 111. 395; See Magie v. Reynolds, 51 N. J. Eq. .113, 26 Atl. 150.
70. Moffett v. Parker, 71 Minn. 139, 70 Am. Rep. 319. 73 N. W. 850; See Bloomer v. Henderson, 8 Mich. 395, 77 Am. Dec. 453; Sleeper v. Chapman, 121 Mass. 404.
In most jurisdictions, the general rule that the transferee of the mortgagee's rights takes subject to equities and defenses in favor of the debtor is subject to an important exception in case the debt is represented by a note negotiable in character, it being held that a bona fide purchaser for value of such a note before maturity, since he takes the note free, for the most part, from equities and defenses thereto in favor of the maker, is entitled likewise to enforce the security to the same extent, free from such equities and defenses to the claim.72 This is merely an application of the general rule that the debt is the principal thing and the mortgage an accessory. The debt being enforcible to a certain amount in the hands of a bona fide purchaser of the note representing the debt, the security for the debt is enforcible to the same amount.
71. Mclntire v. Yates, 104, 111. 491; Davis v. Welch, 128 La. 785, 55 So. 372; Bogart v. Stevens, 69 N. J. Eq. 800, 115 Am. St. Rep. 627, 63 At. 246; Ferdon v. Miller, 34 N. J. Eq. 10; Guatelli v. Brown, 84 N. J. Eq. 33, 92 Atl. 904; Riggs v. Pursell, 89 N. Y. 608; Com. v. City of Pittsburg, 34 Pa. St. 496, 520. See Medlin v. Buford, 115 N. Car. 260; Volk v. Shoemaker, 229 Pa. 407, 78 Atl. 933.
72. Carpenter v. Longan, 16 Wall. (U. S.) 271, 21 L. Ed. 313; Thompson v. Maddux, 117 Ala. 468, 23 So. 157; Lewis v. Kirk, 28 Kan. 497, 42 Am. Rep. 173, Burhans v. Hutcheson, 25 Kan. 625, 37 Am. Rep. 274; Duncan v. City of Louisville, 13 Bush (Ky.) 378, 26 Am..Rep. 201; Davis v. Welch, 128 La. 785, 55 So. 372; Pierce v. Faunce, 47 Me. 507; Taylor v. Page, 6 Allen (Mass.) 86; Bon v. Graves, 216 Mass. 440, 103 N. E. 1023; Barnum v. Phenix, 60 Mich. 388; Borgess Inv. Co. v. Vette, 142 Mo. 560, 64 Am. St. Rep. 567; Webb v. Hoselton, 4 Neb. 308, 19 Am. Rep. 638; Magie v. Reynolds, 51 N. J. Eq. 113, 26 Atl. 150; Paige v. Chapman, 58 N. H. 333; First Nat. Bank of St. Thomas v. Flath, 10 N. D. 281, 86 N. W. 867; Talbert v. Talbert, 97 S. C. 136, 81 S. E. 640; Keyes v. Wood, 21 Vt. 331; American Sav. Bank & Trust Co. v. Helgesen, 64 Wash. 54, Ann. Cas. 1913 A., 390, 116 Par. 837; Mack v. Prang. 104 Wis. 1, 45 L. R. A. 407, 76 Am. St. Rep. 848, 79 N. W. 770.
In a few states, however, it is held that, as regards the enforcement of the mortgage security, as distinct from liability for the mortgage debt, the bona fide purchaser of a negotiable note given for the debt is in the same position as any other transferee of a debt secured by mortgage, and can consequently enforce the mortgage only to the extent to which the mortgagee could have done so, that is, for the purpose of enforcing the mortgage, he acquires the debt subject to the defenses to which it was subject in the hands of his transferor.73 This latter view, though recognized in but a small minority of the states, appears, on principle, to be entitled to respectful consideration.73a
A note accompanying a mortgage is obviously negotiable to no greater extent than a note not so secured. Consequently, if the note is overdue, a purchaser thereof, though bona fide and for value, takes it for the most part subject to equities and defenses in favor of the maker.74 And he must necessarily take the mortgage security also so subject, since security for a debt cannot be enforced to a greater amount than the debt itself.75 And likewise, defenses sufficient even as
73. Olds v. Cummings, 31 111. 188; Bartholf v. Bensley, 234 121. 336, 84 N. E. 928; Buehler v. Mc-Cormick, 169 111. 269, 48 N. E. 287; Layman v. Vicknair, 47 La. Ann. 679, 17 So. 265; Johnson v. Carpenter, 7 Minn. 176 (Gil. 120); Watkins v. Goessler, 65 Minn. 118, 67 N. W. 796; Bailey v. Smith, 14 Ohio St. 396, 84 Am. Dec. 385. See Miller v. Lamed, 103 111. 562; Peoria Etc., R. Co. v. Thompson 103 111. 187, for asserted exceptions to this rule adopted in that state.
73a. See article by William E. Britton, Esq. 10 111. Law Rev. 337, for an excellent review of the decisions. In California, apparently, that the note is secured by a mortgage made at the time of the excu-tion of the note renders it non negotiable as regards one taking with notice that it is so secured. Meyer v. Weber, 133 Cal. 681, 65 Pac. 1110; Metropolis Trust & Savings Bank v. Monnier, 169 Cal. 592, 147 Pac. 265.
74. Norton, Bills and Notes. 207, Daniel, Negotiable Instruments (6th Ed), Sec. 724 A.
75. Kerby v. Wade. 101 Ark. 543, 142 S. W. 1121; Howard v. Gresham, 27 Ga. 347; McMillan v. Gardner, 88 Kan. 279, 128 Pac. 391; Piersol v. Shelley, 3 Kan. App. 386, against a bona fide purchaser for value of a negotiable note, "real defenses,"76 are no doubt effective as against a purchaser of such a note seeking to enforce the mortgage security.77 Moreover, the transfer of a negotiable note, not payable to bearer, must, in order to enable the transferee to take free from equities, be by endorsement, that is, by writing on the note itself,78 and consequently a transfer of the note and mortgage security, written on a separate paper, even on the mortgage instrument itself, will not enable the transferee to take free from equities and defenses in favor of the maker of the note.79
Though the bona fide holder for value of a negotiable note takes it free from defenses to the claim on the note, and is, if the note is secured by a valid mortgage, entitled to enforce the mortgage as security to the amount of the note, it does not seem that he is in any better position than the purchaser of a non negotiable note, to assert that the note is secured by a valid mortgage when as a matter of fact it is not so secured. If what purports to be a valid mortgage is not such when sought to be enforced by the original payee of the note, it cannot become such in favor of a bona fide purchaser of the note. This has perhaps been recognized in two or three cases,80 while others, without dis42 Pac. 922; Willcox v. Foster, 132 Mass. 320; Robeson v. Robeson. 50 N. J. Eq. 465; Northampton Nat. Bank v. Kidder, 106 N. Y. 221. 50 Am. Rep. 443, 12 N. E. 577; Kerno-han v. Durham 48 Ohio, St. 1, 12 L. R. A. 41, 26 N. E. 982; British American Mortgage Co. v. Smith, 45 S. C. 83, 22 S. E. 747; Miller v. Bingham, 29 Vt. 82.