THAYER, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
The decision of the present case Mnges mainly, if not entirely, on fhe construction which shall he placed upon the acts of the parties when the note for $2,000 was surrendered by the intervener to the Lombard Investment Company, on February 4, 1892; and the question with respect to that transaction is briefly tins; Did the inter-vener intend to sell and assign the note to the investment company, and to vest it with the right to participate in the proceeds of the sale of the mortgaged property according to Missouri laws, or did lie intend that, as between himself and the investment company, the transaction should operate as a payment? We put the first clause of the interrogatory in this form because it is the established doctrine in Missouri that, wiiere a mortgage or deed of trust is given to secure the payment of two or more notes of the same date, those which first mature are entitled to priority of payment out of the fund realized by a sale of the mortgaged property. Mitchell v. La Dew, 36 Mo. 526; Hurck v. Erskine, 45 Mo. 484; Thompson v. Field, 38 Mo. 320; Freeman v. Elliott, 48 Mo. App. 74. Therefore, if the first branch of fhe foregoing inquiry is answered in fhe affirmative, the note for $2,000 was entitled to be first paid, and the decree of the circuit court was unquestionably right.
We should have no difficulty in assenting to the decree rendered by the circuit court, if it apjieared that tvlien the note for 82,000 was indorsed, ‘Without recourse*,” and delivered to the investment company, the intervener wras aware that fhe money to fake up the note, as well as to take up the previously maturing interest coupons, had not been provided by the maker of the notes, and if it further appeared that no contract relations existed between the parties. In (hat event, inasmuch as the transaction between the intervener and ’the investment company could only be regarded as a sale or a payment of the note, it would perhaps be more reasonable to conclude, in view of the indorsement, and in view of the fact that nothing was said about payment, that a sale, rather than a payment, of the note was intended. But the supposed case is not before us for [772]*772decision. Tlie intervener did not know that tbe maker of tbe note bad defaulted in bis previous interest payments; be was not advised that the money to take up tbe note at maturity was being advanced by tbe investment company; and contract relations did exist between tbe parties which bound tbe investment company to see that the note was eventually collected from tbe maker and paid in full to the intervener. The indorsement of tbe note, “Without recourse,” when it was delivered to tbe investment company, is tbe only circumstance, so far as we can see, which furnishes a fair pretense for tbe contention that a sale of the paper was intended, and great stress is accordingly laid on that fact. It is said, in substance, that tbe indorsement of the note, without reference to other circumstances, indelibly stamps the transaction as a sale. We have not been able to concur in that view, because it either overlooks, or fails to give due weight to, the contractual relations existing between the parties when the note was indorsed and delivered to the transferee. It may be conceded that, if the indorsement was made at the request of the investment company, — as to which fact, however, the agreed statement is silent, — it was a circumstance from which the intervener might possibly have inferred that the money to take up the note was being advanced by the investment company. But it is at this point that the guaranty originally executed by the company becomes significant, and prevents us from'drawing the inference that the intervener intended to sell the note to the investment company, and to vest it with the right to demand payment of - the same out of-the proceeds of the mortgage sale, to the exclusion of the note for $9,000 which the intervener then held. By the third clause of the guaranty the investment company had agreed to collect the note at its own expense, and to pay over the principal sum within two years from the maturity of the same, if it was not paid by the maker at maturity. .In view of this guaranty, which bound the investment company to see that the note was collected and paid without cost to the intervener, what would be more natural than for the latter to infer, even though he was requested to indorse the note, that the guarantor intended to discharge its guaranty by paying the note? It is true that the contract existing between the parties gave the investment company two years within which.to collect the note and to pay over the proceeds, but it was optional with it to make good its guaranty at any time within the two years; and no inference can fairly be drawn, from the fact that it took up the note as soon as it matured, that it intended to purchase the paper from the in-tervener as an. investment, rather than to pay it. At all events, the intervener was not bound to infer that a purchase of the paper was intended. He had the right to suppose that, as between himself and the investment company, the note was paid and extinguished, and that it would not thereafter be interposed against him as an unpaid obligation. If we assume, then, that the intervener was requested to indorse the note, “Without recourse,” and that he had some reason to suppose from such request that the maker had not provided the funds wherewith to pay it, still, in view of the circumstance that the investment company was bound to collect and to pay the note [773]*773.witliout cost to the intervener, he had the right to presume, unless he was advised to the contrary, that it intended to discharge that obligation without delay. By reason of the relations which existed between the parties at (hat time, this was both a natural and a reasonable presumption, upon which the intervener was entitled to act and to rely. In our opinion, therefore, the facts disclosed by the agreed case do not warrant the conclusion that the intervener intended to sell the note, and thereby enable the transferee to par-ticipa te, as against, him, in the distribution of the proceeds of the mortgage sale, if such a proposition had been made by the investment company to the intervener when it took up the note, we have no doubt that it would have been forthwith declined. It is conceded that, when the note was presented to the investment company for payment, no express agreement to sell the same was machí; and, in view of all the circumstances of the case, we think that an agreement of that nature cannot be implied. The doctrine is well established that when a note is presented for payment at maturity by the owner thereof, and the amount due thereon is received, the transaction will not be regarded as a sale, unless both-parties so agree in express ter-ms or by necessary intendment. As the rule is sometimes expressed, the owner' of such paper cannot be made a seller without Ms knowledge or consent. Lancey v. Clark, 64 N. Y. 209, 212; Collins v. Adam’s Ex’rs, 53 Vt. 433; Bank v. Lay, 80 Va. 436; Moran v. Abbey, 63 Cal. 56; Fidelity Insurance, Trust & Safe-Deposit Co. v. West Penn. & S. C. R. Co., 138 Pa. St. 494, 21 Atl. 21; Martin v. Trust Co. (Tenn. Sup.) 28 S. W. 1097. And, in the absence of an express agreement to sell, it is always a question of intent whether, in a given case, the transaction amounted to a sale or to a payment. Wood v. Safe-Deposit Co., 128 U. S. 416, 424, 9 Sup. Ct. 131.
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THAYER, Circuit Judge,
after stating the case as above, delivered the opinion of the court.
The decision of the present case Mnges mainly, if not entirely, on fhe construction which shall he placed upon the acts of the parties when the note for $2,000 was surrendered by the intervener to the Lombard Investment Company, on February 4, 1892; and the question with respect to that transaction is briefly tins; Did the inter-vener intend to sell and assign the note to the investment company, and to vest it with the right to participate in the proceeds of the sale of the mortgaged property according to Missouri laws, or did lie intend that, as between himself and the investment company, the transaction should operate as a payment? We put the first clause of the interrogatory in this form because it is the established doctrine in Missouri that, wiiere a mortgage or deed of trust is given to secure the payment of two or more notes of the same date, those which first mature are entitled to priority of payment out of the fund realized by a sale of the mortgaged property. Mitchell v. La Dew, 36 Mo. 526; Hurck v. Erskine, 45 Mo. 484; Thompson v. Field, 38 Mo. 320; Freeman v. Elliott, 48 Mo. App. 74. Therefore, if the first branch of fhe foregoing inquiry is answered in fhe affirmative, the note for $2,000 was entitled to be first paid, and the decree of the circuit court was unquestionably right.
We should have no difficulty in assenting to the decree rendered by the circuit court, if it apjieared that tvlien the note for 82,000 was indorsed, ‘Without recourse*,” and delivered to the investment company, the intervener wras aware that fhe money to fake up the note, as well as to take up the previously maturing interest coupons, had not been provided by the maker of the notes, and if it further appeared that no contract relations existed between the parties. In (hat event, inasmuch as the transaction between the intervener and ’the investment company could only be regarded as a sale or a payment of the note, it would perhaps be more reasonable to conclude, in view of the indorsement, and in view of the fact that nothing was said about payment, that a sale, rather than a payment, of the note was intended. But the supposed case is not before us for [772]*772decision. Tlie intervener did not know that tbe maker of tbe note bad defaulted in bis previous interest payments; be was not advised that the money to take up tbe note at maturity was being advanced by tbe investment company; and contract relations did exist between tbe parties which bound tbe investment company to see that the note was eventually collected from tbe maker and paid in full to the intervener. The indorsement of tbe note, “Without recourse,” when it was delivered to tbe investment company, is tbe only circumstance, so far as we can see, which furnishes a fair pretense for tbe contention that a sale of the paper was intended, and great stress is accordingly laid on that fact. It is said, in substance, that tbe indorsement of the note, without reference to other circumstances, indelibly stamps the transaction as a sale. We have not been able to concur in that view, because it either overlooks, or fails to give due weight to, the contractual relations existing between the parties when the note was indorsed and delivered to the transferee. It may be conceded that, if the indorsement was made at the request of the investment company, — as to which fact, however, the agreed statement is silent, — it was a circumstance from which the intervener might possibly have inferred that the money to take up the note was being advanced by the investment company. But it is at this point that the guaranty originally executed by the company becomes significant, and prevents us from'drawing the inference that the intervener intended to sell the note to the investment company, and to vest it with the right to demand payment of - the same out of-the proceeds of the mortgage sale, to the exclusion of the note for $9,000 which the intervener then held. By the third clause of the guaranty the investment company had agreed to collect the note at its own expense, and to pay over the principal sum within two years from the maturity of the same, if it was not paid by the maker at maturity. .In view of this guaranty, which bound the investment company to see that the note was collected and paid without cost to the intervener, what would be more natural than for the latter to infer, even though he was requested to indorse the note, that the guarantor intended to discharge its guaranty by paying the note? It is true that the contract existing between the parties gave the investment company two years within which.to collect the note and to pay over the proceeds, but it was optional with it to make good its guaranty at any time within the two years; and no inference can fairly be drawn, from the fact that it took up the note as soon as it matured, that it intended to purchase the paper from the in-tervener as an. investment, rather than to pay it. At all events, the intervener was not bound to infer that a purchase of the paper was intended. He had the right to suppose that, as between himself and the investment company, the note was paid and extinguished, and that it would not thereafter be interposed against him as an unpaid obligation. If we assume, then, that the intervener was requested to indorse the note, “Without recourse,” and that he had some reason to suppose from such request that the maker had not provided the funds wherewith to pay it, still, in view of the circumstance that the investment company was bound to collect and to pay the note [773]*773.witliout cost to the intervener, he had the right to presume, unless he was advised to the contrary, that it intended to discharge that obligation without delay. By reason of the relations which existed between the parties at (hat time, this was both a natural and a reasonable presumption, upon which the intervener was entitled to act and to rely. In our opinion, therefore, the facts disclosed by the agreed case do not warrant the conclusion that the intervener intended to sell the note, and thereby enable the transferee to par-ticipa te, as against, him, in the distribution of the proceeds of the mortgage sale, if such a proposition had been made by the investment company to the intervener when it took up the note, we have no doubt that it would have been forthwith declined. It is conceded that, when the note was presented to the investment company for payment, no express agreement to sell the same was machí; and, in view of all the circumstances of the case, we think that an agreement of that nature cannot be implied. The doctrine is well established that when a note is presented for payment at maturity by the owner thereof, and the amount due thereon is received, the transaction will not be regarded as a sale, unless both-parties so agree in express ter-ms or by necessary intendment. As the rule is sometimes expressed, the owner' of such paper cannot be made a seller without Ms knowledge or consent. Lancey v. Clark, 64 N. Y. 209, 212; Collins v. Adam’s Ex’rs, 53 Vt. 433; Bank v. Lay, 80 Va. 436; Moran v. Abbey, 63 Cal. 56; Fidelity Insurance, Trust & Safe-Deposit Co. v. West Penn. & S. C. R. Co., 138 Pa. St. 494, 21 Atl. 21; Martin v. Trust Co. (Tenn. Sup.) 28 S. W. 1097. And, in the absence of an express agreement to sell, it is always a question of intent whether, in a given case, the transaction amounted to a sale or to a payment. Wood v. Safe-Deposit Co., 128 U. S. 416, 424, 9 Sup. Ct. 131. We conclude, therefore, as above stated, that the only fact upon which the appellees do or can rely to establish a sale of the note in question, to wit, the fact that the intervener indorsed the paper when lie delivered it to the investment company, is insufficient for that purpose, and that (he transaction, as between those parties, must be regarded as'a payment of the note, rather ¡han as a sale.
It is further contended by the appellees that the note for 82,000, by them held in trust, is entitled to priority of payment, on the ground that the intervener, by indorsing the note when he delivered ’{ to the investment company, thereby enabled the latter company to transfer it to the trustees of the debenture holders as an unpaid note. The equitable rubí is accordingly invoked, that, where one of two innocent persons must suffer for the fraud of a third party, the loss should fall on that one by whose neglect or default, if any, the fraud was rendered possible. We perceive no just ground for the application of that principle to the case at bar. Under its agreement with the debenture holders, the investment company had authority to withdraw any of the securities that might be in the hands of the trustees, at any time, and to deposit other securities in their place which it deemed of equal value. The trustees appear to have had no right to select the securities, or to determine their [774]*774value, which, were to be substituted in lieu of other securities that the investment company withdrew from the trust. That right, it seems, belonged exclusively to the investment company, and it was privileged to exercise it as it thought proper. Moreover, when the note for $2,000, now in question, was placed in the hands of the trustees for the debenture holders, in lieu of other securities that were at the time withdrawn, the board of trustees consisted of the president, vice president, and secretary of the investment company. Possibly this latter circumstance did not affect the trustees with knowledge that, as between the intervener and the investment company, the note was paid, and as to that point we do not deem it necessary to express an ojjinion. But the fact remains that the investment company had the right to determine what securities it would deposit with the trustees in lieu of other securities that had been withdrawn, and if it chose to assume the position that the deposit of the note for $2,000 with the trustees would vest the debenture holders with whatever rights it had as against the maker of the note, who had not paid it, it is not obvious that the trustees were so situated that they could rightfully object to the exchange. The debenture holders, therefore, are not in the position of persons who have voluntarily advanced money' on the note in question in the belief that it was an existing lien on the mortgaged property, and as such entitled to priority of payment. On the contrary, the trustees appear to have acquired the note because they had previously armed the investment company with authority to exchange it for other securities in their hands, either with or without their consent. But a more conclusive reason why the rule invoked by the trustees cannot be applied is that they did not acquire the note until after it was overdue and dishonored. They took it with knowledge that it was subject to all equities and defenses which existed as between the original parties, and, as we think, with the full understanding that they could claim no greater rights, as against any one, by reason of the transfer to themselves, than the investment company then had. We are aware of the rule which has sometimes been enforced, that where the’owner of nonnegotiable securities, which are nevertheless assignable, before their maturity, clothes another with all the indicia of a title thereto, and thereby enables him to sell the same to, or obtain money or credit thereon from, a third party, the latter will be allowed to retain and hold the same, even as against the true owner. International Bank v. German Bank, 71 Mo. 183, and cases there cited. But we are unwilling to extend that doctrine to the case at bar. The application of that rule to the facts of the present case would, in effect, require us to. hold that -when a person accepts payment of a negotiable note, at maturity, from one -who is under an obligation to pay it, he is so far guilty of negligence, if he fails to have it marked or stamped “Paid,” that it may be asserted against him, as an unpaid obligation, by any one who subsequently purchases it from the person who thus paid it, and to whom it was surrendered. It is very certain that none of the cases to which we have been referred go to that length. We think it is altogether the better view that one who purchases a note, [775]*775after maturity, from oik» who is obligated to pay it, like a surety or guarantor, can in no event claim any greater rights, as a holder of the paper, than the person from whom he acquired it. The result is that the decree of the circuit court must be, and it is hereby, reversed. The case is accordingly remanded to the circuit court, with directions to enter a decree in favor of the intervener, directing that the proceeds of the sale of the mortgaged property be appropriated — • First, to paying the necessary costs of foreclosure, including the fees of the trustee; second, to paying the taxes and insurance upon the mortgaged property that have been advanced and paid by the intervener; and, lastly, to paying the note for $9,000 which is now held by the intervener.