McCracken v. German Fire Insurance

Stewart, J., delivered the opinion of .the Court. There is no reason why any equities pertaining to the original note should not extend to and govern its renewal by the note, payment for which, out of the funds in Court, from the mortgaged property, is claimed by the bill in this case. Such must be taken to have been the understanding of the parties to the transaction as indicated by the endorsement of the note in question ;• and it must be treated in equity, as substituted for the former note, and entitled to the benefit of all its equities. Markell vs. Eichelberger, 12 Md., 78 .

The mortgage given by Ratcliffe to the Liberty Association purported to secure the repayment of mone}^ advanced by it, but it seems the note of the Company was, in fact, substituted in place of the money, and, of coirrse, subjecting the mortgagor to any loss occasioned by the conversion of the paper into money. It is to be- presumed that in order to give its paper greater credit, and to facilitate its exchange for the cash, the note in question was endorsed or secured by the mortgage; thus assuring and notifying the holder of the note that, besides ⁴⁷⁷ the responsibility of the Company for its payment, he had the right to resort to the mortgage given to the association and held by it as additional security. The mortgage was thus held by the Company as the fiduciary of the complainant, for the payment of this note. Nothing is better settled than that the mortgage is but an incident of the debt.

The complainant, as the holder of the note, and consequently of the debt secured by the mortgage, is, in equity, to be considered the real mortgagee, or as substituted to all the rights of indemnity secured by the mortgage upon the property. The mortgage, in truth and fairness, could not be discharged or released by the association under such circumstances, without the consent of the complainant, or payment of the note, more especially as the Company was not able to pay its debts at the time. See Boyd vs. Barker, ante page 182. Before the association undertook to release the mortgage they should have taken care, in good faith, to have seen that the note of the complainant was paid.

His debt not being paid, and the Company insolvent, he liad the right to resort to the indemnity furnished by the mortgage. The release of the mortgage by the association, as his trustee, without the payment of his debt, was a breach of trust, totally unauthorized, and did not destroy his lien on the