The endorsee of "a promissory note negotiable by the law
merchant," which the maker secured by a mortgage of land to the
payee, is not precluded from maintaining a foreclosure suit in a
court of the United States by the fact that the maker and payee are
citizens of the same state.
Tredway and Kettelman, citizens of California, having made two
negotiable promissory notes to McLaughlin, a citizen of that state,
executed, to secure the payment of them, to him a mortgage upon
lands there situate. The notes were assigned to Sanger, a citizen
of Pennsylvania, who filed in the court below his bill of
foreclosure against Tredway and Kettelman. They set up by plea that
the assignment of the notes was merely colorable in order to give
that court jurisdiction. The court found that the plea was untrue
and insufficient. A decree was rendered in favor of the complainant
reciting that there was due to him the amount of the note, ordering
a sale of the mortgaged premises to satisfy the same, and providing
that if the proceeds of the sale be insufficient to pay the debt,
interest, and
Page 107 U. S. 324
costs, that "the clerk should docket a judgment for the amount
of such deficiency," and execution be issued against the defendants
therefor. They thereupon appealed.
MR. CHIEF JUSTICE WAITE delivered the opinion of the Court.
There is but a single question presented by this appeal, to-wit,
whether, if a promissory note, negotiable by the law merchant, is
made by a citizen of one state to a citizen of the same state, and
secured by a mortgage from the maker to the payee, an endorsee of
the note can, since the Act of March 3, 1875, c. 137 , sue in the
courts of the United States to foreclose the mortgage, and obtain a
sale of the mortgaged property.
It was held in
Sheldon v.
Sill, 8 How. 441, that such a suit could not be
maintained under the eleventh section of the Judiciary Act of 1789,
because in equity the mortgage was but an incident of the debt, and
as the endorsee could not sue on the note, he could not sue to
enforce the mortgage. The language of Mr. Justice Grier, speaking
for the Court in that case, is this:
"The complainant in this case is the purchaser and assignee of a
sum of money, a debt, a chose in action, not of a tract of land. He
seeks to recover by this action a debt assigned to him. He is
therefore the 'assignee of a chose in action,' within the letter
and spirit of the act of Congress
Page 107 U. S. 325
under consideration, and cannot support this action in the
circuit court of the United States where his assignor could
not."
P.
49 U. S. 450.
This clearly implies that if a suit could be brought on the note,
it could for the foreclosure of the mortgage, should there be no
other objection to the jurisdiction than the citizenship of the
payee and maker.
In the Judiciary Act of 1789, it was expressly provided that the
circuit courts could not take cognizance of a suit to recover the
contents of any promissory note or other chose in action in favor
of an assignee, unless a suit might have been prosecuted in such
court to recover the contents if no assignment had been made,
except in cases of foreign bills of exchange. The act of 1875,
however, removes this restriction in suits on "promissory notes
negotiable by the law merchant," and now the jurisdiction in such
suits is made to depend on the citizenship of the parties as in
other cases.
Since, therefore, the endorsee could have sued in the circuit
court on the note now in question, it follows that as there is no
objection to the jurisdiction other than the citizenship of the
original payee, the suit to foreclose the mortgage was properly
brought.
Decree affirmed.
