Merchants' National Bank of St. Paul v. Hanson. them by indorsement before their maturity, with the indorsements uncanceled upon them to the defendant in payment of a prece dent debt. The defendant noticed the indorsements when he received the notes, but asked no questions and appears to have had no notice of the plaintiff's rights respecting the notes, except as it is to be inferred from what has been stated. The defendant having refused to restore the notes to the plaintiff, this action is prosecuted to recover their value. In First Nat. Bank of Rochester v. Pierson, 24 Minn. 140; 31 Am. Rep. 341; ante 506, this court decided that National banks were not authorized to purchase promissory notes in the ordinary sense of the word "purchase," the transaction not being a discounting of the paper, or a lending of money upon the credit of it; and the defense of ultra vires was sustained in an action upon a note so purchased. Since that decision was rendered the act of Congress upon which it was based has come before the Supreme Court of the United States for construction. National Bank v. Matthews, 98 U. S. 621; 2 Nat. Bank Cas. 12; National Bank v. Whitney, 103 U. S. 99; ante 5. The decisions of that court are to the effect that the enforcement in favor of a bank of securities upon real property, which securities the bank had acquired without authority, could not be opposed by the plea of ultra vires, but that it was intended by Congress that the.consequences of such violations of law should be only such as might be imposed in proceedings instituted against the bank by the government. This construction of the law of Congress is authoritative and it is our duty to follow it. In doing so we necessarily overrule Bank v. Pierson, supra, as to the effect of the plea of ultra vires in such cases. Applying the principle established by these decisions to the case before us, it is not material whether the transaction through which the plaintiff acquired the notes was a purchase of the notes in the ordinary sense of the word "purchase," or a discount of the notes as a loan to the payee. In either case the plaintiff's right as against this defendant would be the same. That the plaintiff acquired the notes either as its absolute property or as security is conclusively shown by the evidence. The defendant claims that the case shows a simple purchase of the notes by the Merchants' National Bank of St. Paul v. Hanson. plaintiff. This may be conceded for the purposes of the case. The special verdict of the jury, to the effect that the plaintiff discounted the notes for the benefit of the Bank of Breckenridge, is not inconsistent with their general verdict in favor of the plaintiff, and may be disregarded without affecting the result. The plaintiff was entitled to recover unless the defendant is to be deemed as having taken the notes unaffected with notice of the plaintiff's rights. The court declared the indorsements sufficient to charge the defendant with notice of whatever interest the Merchants' National Bank had in the notes, and refused to submit the question of the defendant's bona fides to the jury. Whether this was error is the only remaining question to be considered. It is well established that negligence on the part of an indorsee of negotiable paper for value and before maturity, respecting infirmities in the paper or the title to it, will not defeat the title of the purchaser or his right of recovery unless the circumstances are such as to convict him of mala fides. Goodman v. Harvey, 4 Ad. & E. 870; Goodman v. Simonds, 20 How. 343; Freeman's Nat. Bank v. Savery, 127 Mass. 75, 79; 34 Am. Rep. 345; Magee v. Badger, 34 N. Y. 237; 90 Am. Dec. 691; Hamilton v. Vought, 34 N. J. L. 187. We are of the opinion that the case conclusively shows the defendant to have acquired the notes, not merely negligently, but in bad faith. The indorsements to the Bank of Breckenridge "for collection, account of Merchants' National Bank, St. Paul," upon their face indicated that the latter bank had, or at least claimed to have, the title to the notes, and that the Bank of Breckenridge (Luce) was its agent, with authority merely to collect. Rock Co. Nat. Bank v. Hollister, 21 Minn. 385; Third Nat. Bank v. Clark, 23 id. 263. This assertion of title, as borne upon the notes themselves, was so placed as to show that it was presumably the last indorsement made. It is true the prior indorsement by the payee to Power being restrictive, did not show that the payee had parted with his title; but it was not necessary that the payee should have indorsed the notes in order to transfer his title. Pease v. Rush, 2 Minn. 89 (107); Foster v. Berkey, 8 id. 310 (351); Cassidy v. First Nat. Bank, 30 id. 86. 512 MINNESOTA SUPREME COURT, 1884. Merchants' National Bank of St. Paul v. Hanson. If Luce had presented to the defendant notes not thus indorsed and had stated to him that a St. Paul bank claimed to own the notes and had assumed to constitute him, Luce, its agent to collect them, a purchase of the property from Luce without further explanation and without inquiry would, if unaffected by other circumstances, be palpably inconsistent with good faith. The case before us not less conclusively charges the defendant with mala fides. Luce, assuming to transfer the notes in payment of his own pre-existing debt, presented them to the defendant, bearing indorsements uncanceled and unexplained, which upon their face indicated that Luce had no right to dispose of the property, but that it belonged to another. Such was the unmistakable import of the indorsements. It was not to be presumed that the indorsements had been wrongfully or surreptitiously placed upon the notes. It was an extraordinary circumstance that Luce, if he was the owner of the paper, should when assuming to dispose of it as his own, suffer such indorsements, impugning his own title, to remain upon the paper unexplained. The defendant noticed the indorsements, but asked no questions. He testified in his own behalf, but no explanation or fact is presented going to oppose the conclusion which should be drawn from the circumstances which we have stated. The defendant's purpose in acquiring the notes from Luce was of course to make collection from the maker for his own benefit. Having express notice by the indorsements that Luce probably did not own the property but that this plaintiff was the owner, he could not willfully disregard the apparent rights of the plaintiff and by carefully abstaining from such inquiry as the circumstances suggested, assert the right to defeat plaintiff's title under the claim of being an indorsee in good faith. His conduct in disregarding the notice, and forbearing to make inquiries, is inexplicable except upon the assumption that he was regardless of the plaintiff's apparent rights, and willfully abstained from inquiry lest it should confirm the fact of which the indorsements notified him, and he should thus be unable to so acquire the notes that he might protect himself against the plaintiff's superior right. This was not merely negligence concerning his own interests or the rights of others, but mala fides. The proof of such mala fides, Thornton v. National Exchange Bank. resting in the circumstances detailed, is unopposed by any fact going to support a contrary conclusion, and the court did not err in determining the matter as a conclusion of the law. Jones v. Gordon, 2 App. Cas. 616; National Security Bank v. McDonald, 127 Mass. 82; National Bank of Com. v. Law, id. 72; Fowler v. Brantly, 14 Pet. 318. Order affirmed. THORNTON V. NATIONAL EXCHANGE BANK. (71 Mo. 221.) Mortgage - taking as security effect. Contract - assumption of another's obligation-failure of consideration. Deed-husband and wife — acknowledgment. Principal and surety securities taken by surety — tender of debt dis charges lien. If a National bank discounts a note secured by deed of trust on real estate, the security passes to and may be enforced by the bank, subject only to forfeit ure of its charter, which penalty can be invoked only by the United States. On foreclosure of a deed of trust upon a leasehold interest executed by an association to secure its debts, B. & T. became the purchasers. As payment of the purchase-money they assumed the debt, and by way of indemnity to certain sureties of the association, they executed a mortgage in their favor. At this time the leased property was subject, to a deed of trust which was subsequently foreclosed, whereby the leasehold interest was extinguished. B. & T. bought with knowledge of this deed of trust and without warranty of title to the leasehold, and no fraud or deceit was practiced on them. Held, that as between them and the sureties whom they had indemnified, the liability of the latter had not been revived, and they had a right to claim the benefit of the mortgage B. & T. had given them. Where husband and wife are named at the commencement of a deed as parties of the first part, and afterward the parties of the first part are named as grantors, the instrument is the deed of both husband and wife. Where a certificate of acknowledgment of a deed executed by husband and wife to convey lands of the wife, states that the wife, upon separate examination, acknowledged that she executed the deed and relinquished her dower in the lands, the deed will pass her fee-simple interest. Securities taken by sureties for their indemnity, inure to the benefit of the creditor. Where two deeds of trust were given to secure several notes, all held by different persons, and it was provided in each deed that if the grantor should pay one-half of the debt and interest expressed in the notes, the VOL. III-65. Thornton v. National Exchange Bank. deed should become void, and the grantor in one of the deeds tendered to the holder one-half of his note and interest, and the holder refused the tender; held, that as to that note the lien of the deed of trust was discharged. ERROR RROR to Callaway Circuit Court, Hon. G. H. BURCKHARTT, Judge. Mary O. Thornton and Amos B. Thornton sued Bragg by attachment and garnished the National Exchange Bank as the holder of a note for $4,744.50 made by Lamkin. Lamkin had bought a property known as "Bragg's Hall," at trustee's sale, and in payment of his bid had made this note to the trustee, Miller, who had assigned it to the National Exchange Bank, who claimed to hold, as to the $1,000 of the amount, for the benefit of the First National Bank, and as to the remainder, for itself, and interpleaded this claim. "Bragg's Hall" had been the joint property of Bragg and Mary O. Thornton, and plaintiff's attachment was on the theory that the deed of trust to Miller was given to secure a National bank for a present advance of money, and was void under the National Banking Act, and hence one-half of the proceeds of the sale by Miller belonged to Bragg, and was liable to attachment for his debt. As to the other half for the same reason they claimed it as the property of Mary O. Thornton. Plaintiffs obtained judgment against Bragg, but upon a trial of the interplea there was a judgment for the interpleader, to reverse which plaintiffs took this writ of error. Other facts appear in the opinion. Nathan C. Kouns, for plaintiffs in error. Ewing & Pope, for respondents. PER CURIAM. This was a suit by attachment instituted in the Cole Circuit Court against Charles G. Guenther, administrator of the estate of Henry Bragg, deceased, in which the National Exchange Bank and the other parties to the cause were summoned as garnishees. A change of venue was taken to the Callaway Circuit Court. On the 21st day of March, 1874, said Bragg executed and delivered to H. Clay Ewing two promissory notes, one for $2,300 |