Taylor v. Buckner

HARRIS, J. The question for decision is whether the defendants can rely upon the judgment against Dillon as a counterclaim to the note in the hands of Taylor. Recapitulating the happenings in their chronological order they were as follows: On November 18, 1916, Dillon conveyed a tract of land to W. C. Buckner, and the latter, together with his wife, gave a note and mortgage to Dillon. The interest which became due on the note on November 18, 1917, was not paid. On December 6, 1917, "W. C. Buckner commenced an action at law against Dillon for damages because of the failure of Dillon to oust Yan Noy. On January 5, 1918, Dillon assigned the note and mortgage to Taylor, and the latter promptly notified W. C. Buckner of the assignment. On January 12, 1918, Buckner obtained his judgment against Dillon. ,0n May 2, 1918, Taylor commenced the instant suit. [82] It is appropriate at this point to say that the evidence shows that Taylor purchased the note and mortgage in good faith for value. 1. The note, it mil he remembered, does not contain an acceleration clause, but the mortgage does contain such a clause. If the note had not matured because of the failure to pay accrued interest, then Taylor was a purchaser before maturity, for value, and without notice, and consequently took the instruments free from any equities or counterclaims that the Buckners might have had as against Dillon. For the purposes of the instant case, and in order that the controversy may be viewed in a light most favorable to the defendants, we shall assume, without deciding, that the acceleration clause in the mortgage is self executing, and that upon failure of the Buckners to pay the interest the acceleration clause in the mortgage automatically and of its own force matured the note on November 19, 1917: See 19 R. C. L. 495, 496. It is not necessary to decide whether all or any of the items upon which the action at law was based were or are properly allowable as damages; but we shall assume, without deciding, that each of those items is and was properly allowable against Dillon because of his failure to oust Van Noy. Nor shall we attempt to decide whether, if this foreclosure suit were prosecuted by Dillon, any or all of these eight items of damages could be pleaded as counterclaims within the meaning of the term “counterclaim” as used in Section 401, Or. L., and as defined by our judicial precedents; but in order that the cause may be placed in a light most favorable to the defendants we shall assume, without deciding, that each of the eight items could be pleaded as a counterclaim, if [83] Dillon were prosecuting this suit as plaintiff: See, however, Dove v. Hayden, 5 Or. 501, 502; Burrage v. Bonanza G. & Q. M. Co., 12 Or. 169, 173 (6 Pac. 766); Conn v. Conn, 22 Or. 452, 455 (30 Pac. 230); Maffett v. Thompson, 32 Or. 546, 551 (52 Pac. 565, 53 Pac. 854); Le Clare v. Thibault, 41 Or. 601, 606 (69 Pac. 552); Templeton v. Cook, 69 Or. 313, 317 (138 Pac. 230); First National Bank v. Seaweard, 78 Or. 567, 580 (152 Pac. 883); Hanna v. Hope, 86 Or. 303, 309 (168 Pac. 618); Title I. & T. Co. v. Northwestern L. D. Tel. Co., 88 Or. 666, 674 (173 Pac. 251); Gabel v. Armstrong, 88 Or. 84, 90 (171 Pac. 190). 2. Proceeding, as we do for the purpose of this discussion, on the theory that the failure to pay interest automatically matured the note, the conclusion must then be that, when Taylor purchased the note and mortgage, he took a note which was overdue; and it may be added that he knew that the note was overdue, for he admits that at the time of the transfer of the instrument he knew that the interest had not been paid. In this situation all and the most that the Buckners can claim is that they can interpose against Taylor only such defenses, equities, and counterclaims as existed in their favor against Dillon before notice of the assignment: Section 28, Or. L.; Chung v. Stephenson, 50 Or. 244, 245 (80 Pac. 386); 5 C. J. 962, 963, 978. As already stated, we have assumed, without deciding, that each of the eight items of damages is pleadable as a counterclaim against Taylor as the assignee of the note and mortgage; but this assumption is not equivalent to saying that the counterclaim pleaded by the defendants is available to them. 3. What have the Buckners pleaded as a counterclaim? They have pleaded a judgment against [84] Dillon. Although the Buckners have explained in their answer that the eight items of damages constituted the basis of the judgment rendered against Dillon, it is manifest that the judgment as such, and not the items of damages, is relied upon as the counterclaim. The claim for damages as to each of the eight items, although unliquidated, was existing at the time of the assignment of the note and mortgage. But this unliquidated claim was made definite and certain when the judgment was rendered against Dillon on January 12, 1918, and when that judgment was rendered the claim for damages was merged, was swallowed up, was drowned and extinguished in the judgment, and lost its vitality, so that'it could not thereafter be used either as a cause of action or counterclaim: 23 Cyc. 1108. Moreover, even where the claim before judgment possesses peculiar qualities such peculiar qualities are ofttimes held to disappear when judgment is rendered, and consequently in such instances the judgment stands on the same footing as other judgments: 23 Cyc. 1109. Taylor was not a party to the judgment rendered against Dillon; and therefore the judgment is not binding upon Taylor. Although there may be sporadic adjudications to the contrary, the rule sustained, not only by reason and established legal principles, but also by the overwhelming weight of judicial authority, is that where a claim made by a debtor against an assignor is reduced to a judgment against the assignor pending a suit brought by the assignee against the debtor, neither the claim against the assignor nor the judgment rendered against him is available to the debtor as a counterclaim against the assignee in the absence of some element, legal or equitable, not found in the instant case: Lowell v. Lane, 33 Barb. (N. Y.) [85] 292; Rosenfeld & Co. v. Solomon, 61 Misc. Rep. 238 (113 N. T. Supp. 723); Lucas v. East Stroudsburg Glass Co., 38 Hun, 581; Silver v. Krellman, 89 App. Div. 363 (85 N. Y. Supp. 945); Knight v. Rothschild, 132 App. Div. 274 (117 N. Y. Supp. 26); Harpstrite v. Vasel, 3 Bradw. Rep. (Ill. App.) 121; Mizell v. Moore, 29 N. C. 255; Andrews v. Varrell, 46 N. H. 17; Runamaker v. Cordray, 54 Ill. 303; see, also, 23 Cyc. 1110; Redden v. First Nat. Bank, 66 Kan. 747 (71 Pac. 578). When W. C. Buclmer obtained his judgment against Dillon on January 12, 1918, at that moment the claim for damages ceased to exist, because it was merged in the judgment: Williams v. Wilson, 42 Or. 299 (70 Pac. 1031, 95 Am. St. Rep. 745); Ryckman v. Manerud, 68 Or. 350, 361 (136 Pac. 826, Ann. Cas. 1915C, 522); 15 R. C. L. 782, 786, 792. Inasmuch as Taylor was not a party to the judgment, it does not bind him. Moreover, the judgment as such did not exist until after the Buckners had knowledge of the assignment. If Taylor had been a party to the judgment, or if the judgment were binding upon him in this suit, a different situation might be presented. The decree is affirmed. Aeeirmed. Burnett, 0. J., and McBride and Benson, JJ., concur.