Mitchell v. Cook, 29 Barb. 243 (N.Y. Sup. Ct. 1859)
The Comptroller of New York’s authority to re-assign mortgages, originally pledged as security for circulating notes under the General Banking Law, is strictly limited to re-assignment to the original transferor (the bank or individual banker), except in cases of failure to redeem the notes.
Summary
Mitchell sought to foreclose on a mortgage he claimed to own through a series of transactions involving the White Plains Bank and the state comptroller. The mortgage had originally been assigned to the comptroller as security for the bank’s circulating notes, then re-assigned to the bank’s president Crawford, who then handed it to Mitchell. The court held that Mitchell did not have valid title to the mortgage because the comptroller only had the authority to re-assign the mortgage to the bank itself, not to a third party like Mitchell. The attempted indirect purchase was deemed invalid, and the foreclosure action failed. The court emphasized strict adherence to the banking law to protect banks and mortgagors.
Facts
Elisha Crawford, president of White Plains Bank, assigned a bond and mortgage to the state comptroller to secure the bank’s circulating notes.
The comptroller issued circulating notes to the bank based on the security of the bond and mortgage.
Crawford later delivered circulating notes (owned by Mitchell) to the comptroller, equal to the mortgage amount, and received a re-assignment of the bond and mortgage.
Crawford obtained the re-assignment for Mitchell’s benefit and then handed the bond and mortgage to Mitchell.
Procedural History
Mitchell, claiming ownership of the bond and mortgage, sued to foreclose on it.
The Supreme Court initially ruled in favor of Mitchell.
This appeal followed, challenging Mitchell’s claim of ownership and right to foreclosure.
Issue(s)
Whether the comptroller had the legal authority to re-assign the bond and mortgage to Crawford (acting as Mitchell’s agent) instead of directly to the White Plains Bank, thereby vesting valid title in Mitchell.
Holding
No, because the comptroller’s authority to re-assign mortgages under the General Banking Law is limited to re-assignment to the original transferor (the bank) or sale upon failure to redeem the circulating notes; therefore, Mitchell did not obtain valid title.
Court’s Reasoning
The court strictly interpreted the General Banking Law of 1838, emphasizing that the comptroller’s power to re-assign mortgages is limited. The statute only allows re-assignment to the original transferor (the bank) upon redemption of the circulating notes, or sale in case of default. The court stated, “The act nowhere authorizes him to transfer or assign bonds and mortgages pledged with him as such security, otherwise than to the person or association by whom they were transferred, excepting in the case of failure to redeem the notes, by the persons or associations who issued them.”
The court reasoned that allowing the comptroller to assign directly to a third party like Mitchell would be “an act on the part of the comptroller, utterly destitute of authority, and a plain violation, not only of the letter, but of the spirit, of the law.” It also noted that such a practice could harm both banks and mortgagors. The court dismissed the idea that handing the documents to Mitchell by Crawford constituted a valid sale by the bank, as it was merely an attempt to indirectly circumvent the comptroller’s limited authority. Because Mitchell’s claim rested solely on the invalid re-assignment, his foreclosure action failed. The subsequent assignment to Mitchell by Crawford and the bank was the basis of a later successful suit.