## Facts

- William Peckham executed promissory notes secured by a mortgage on real property in favor of Thomas Hughes.
- Hughes assigned the notes and mortgage to Alexander Montgomery; the assignment was duly executed and recorded.
- Peckham did not receive actual notice of the assignment and later moved out of state.
- After the assignment, Hughes (mistakenly acting as if still mortgagee) agreed with Peckham that if Peckham conveyed the mortgaged property to Hughes, Hughes would cancel the notes and mortgage.
- Peckham deeded the property to Hughes and stopped making payments; Montgomery neither knew of nor consented to the arrangement.
- About a year later, Hughes sold the property for cash to Josephine Leidig.
- Montgomery filed a foreclosure action when payments ceased; the trial court entered judgment of foreclosure for Montgomery.
- Peckham and Leidig appealed, arguing discharge of the debt and bona fide purchaser status, respectively.

## Issues

1. Whether a mortgagor’s reconveyance of the mortgaged property to the original mortgagee, in exchange for the mortgagee’s promise to cancel the notes and mortgage, binds a prior assignee who did not consent and lacked knowledge of the arrangement.
2. Whether a subsequent purchaser from the original mortgagee takes free of the mortgage lien where the assignment to the assignee was recorded before the purchase.

## Decision

- The California Supreme Court affirmed the foreclosure judgment for Montgomery.
- The agreement between Peckham and Hughes did not discharge Peckham’s obligation as against Montgomery, the prior assignee.
- Hughes, having assigned the notes and mortgage, lacked authority to release, cancel, or compromise the debt or security to Montgomery’s detriment.
- Leidig took title subject to Montgomery’s recorded interest and could not claim bona fide purchaser protection against the mortgage lien.

## Legal Principles

- A completed assignment of a note and mortgage transfers the assignor’s interest to the assignee; the assignor cannot later release or cancel the obligation or security in a way that binds the assignee without consent.
- Recording an assignment affecting real property provides constructive notice to parties dealing with the property, including the mortgagor and later purchasers.
- A mortgagor who settles with, or reconveys to, the original mortgagee after a recorded assignment does so at the risk that the assignee remains the true holder of the debt and security.
- A purchaser for value cannot take free of a mortgage interest that appears of record through a properly recorded assignment.

## Conclusion

Because the mortgage and notes had been assigned and the assignment recorded, Hughes could not extinguish the debt or lien by a later private arrangement with Peckham, and Leidig’s purchase from Hughes remained subject to Montgomery’s mortgage; foreclosure was properly upheld.


Rodgers v. Peckham, 120 Cal. 238, 52 P. 483 (Cal. 1898)