Mutual Benefit Life Insurance v. Huntington , 57 Kan. 744 ( 1897 )

Johnston, J.

The release executed by some of the payees of the Hill note.was ineffectual. It was executed more than six years after the note and mortgage had been transferred by them' to Huntington, and when they had no ownership in either the note or mortgage. During this period Huntington held and cwned the note, and had given evidence of his ownership of the mortgage by a number of releases, which had been duly entered on the public records. The note was negotiable ; and it is well settled that, where such a note is secured by a mortgage, the note is the principal and the mortgage is the incident, and that an assignment of the note is an assignment of the mortgage. No obligation rested upon Huntington to record his assignment in order to protect himself against the subsequent mortgagee. As the mortgage was given to secure a negotiable note, it could be assigned by the mere indorsement or delivery of the note, and there was in fact no assignment to record. It has been expressly held that the bona fide holder of negotiable paper, transferred to him by indorsement thereon before maturity and secured by a real estate mortgage, need not record the assignment of the mortgage. Burhans v. Hutcheson, 25 Kan. 625.

1. Mortgagee transferring note cannot release mortgage. After assigning the note and mortgage, the mortgagees had no interest therein, and no power to release or discharge the lien of the mortgage; and, being wholly without authority, the release executed by them cannot affect the rights of the assignee. When the plaintiffs in error found upon the record a mortgage securing a negotiable note, it was their duty to inquire whether the release was executed before or after the assignment and by persons having authority to do so. 1 Jones, Mortgages, § 814.

The statute recognizes the assignee as a proper party to release or discharge a mortgage lien, and provides that this may be done by an entry on the margin of the record, signed by him in the presence of the Register of Deeds or his deputy, who shall subscribe the same as a witness. ¶ 3889, Gen. Stat. 1889.

The transfer of the note and mortgage to Huntington appears to have been quite well known to those directly connected with the execution of the mortgages,, and, in addition to that, there was the notice imparted by the releases entered by Huntington on the margin of the record.' Five such entries were made at different times during a period of five years, the first on January 27, 1885, and the last on April 21, 1890.

2. Partial release on record by assignee, notice of assignment. These were made by one authorized by statute, and formally entered on the record as the law directs. Second mortgagees cannot shut their eyes to record evidence of this character ; and, if notice of the assignment to the second mortgagees was necessary for the protection of Huntington, there appears to be sufficient testimony in the record to show such notice.

3. Improvementssubject to prior mortgage. The attempt of the Court to limit the lien of Huntington to the unimproved land cannot be sustained. His mortgage covered the entire property described therein, and he w'as entitled to have the' whole, or as much, of the security as was necessary, to satisfy the mortgage debt. It is true that the improvements were made after the mortgage was executed, but they were structures of a permanent character which unquestionably became a part ot A u the realty. It is well settled that permanent accessions to a freehold, whether placed there by the mortgagor or one claiming under him, are regarded as a part of the mortgaged property, and become additional security for the mortgage debt. It is not claimed that anything was said or done by Huntington which would limit his lien, but the money appears to have been advanced and the mortgages taken, by the plaintiffs in error, upon the theory that Huntington’s lien had been removed by the void release. Under the circumstances, the improvements inured to the benefit of the first mortgagee, and the subsequent mortgagees can only claim the surplus, if any remains, after the first lien is satisfied. 10 Am. & Eng. Encyc. Law, 260 ; 1 Jones, Mortgages, § 147.

We think that Huntington had the right to have the whole of the mortgaged premises subjected to the satisfaction of his debt, and therefore the judgment of the Court will be ‘modified to this extent. When so modified the judgment will be affirmed.

All the Justices-concurring.