Lomax v. Smyth & Co.

Day, J. I. The plaintiffs retain the acceptance of Cragin & Co., and have refused to deliver it to the defendants. Upon the part of the defendants it is claimed that the note sued on was given in purchase of the draft in question, and that, because of the refusal of the plaintiffs to surrender the draft, there is a failure of consideration for the execution of the note. Upon the other hand the plaintiffs insist that the note, and the conveyances securing it, were intended merely as collateral security for the draft; that it was never contemplated that the draft should be surrendered; that the security for the note is deemed inadequate for the amount due plaintiffs, and that they rightfully retain possession of the acceptance, hoping to be able to make something out of it if the ■security shall prove to be inadequate. This branch of the case involves the determination of a question of fact. We have carefully examined the testimony bearing upon this question, and we unite in holding that the preponderance of the evidence, taking into consideration all the surroundings and the conduct of the parties, sustains the claim of the .plantiffs. The space which would be occupied in our reports by a full review of the evidence bearing upon this branch of the case would not be compensated by the resulting benefits. notes and ^ j and notice. II. It is insisted further that, as no demand of payment was made upon the acceptors of the draft, nor notice of nonpayment given to George B. Smyth & Co., the drawees and indorsees of the draft, they were discharged from liability thereon, and the note is, therefore, without consideration and cannot be enforced. 'Upon the trial of the case the deposition of George B.’ Smyth was introduced, as follows: “Previous to the maturity of the draft Cragin & Co. became j badly embarrassed, and informed me that they could not' — 228 — meet the draft at maturity. I saw Mr. Hosmer, stated that fact to him, and, as I was going east just previous to the maturity of the draft, asked him to let me take the draft with me, and have Cragin & Co. waive protest, and I would return it to him when I returned home, which he did. Cragin & Co. waived protest, and I returned it to him. Then I commenced negotiations for the settlement of the claim, stating to him that I was unable to pay it, and asking him to take a deed for land situated in Humboldt, Pocahontas, Emmett and Plymouth counties, stating that these lands were a part of the land grant to the Des Moines Valley Railroad, by a disinterested party valued at from five dollars and-twenty cents to six and one-half dollars per acre. * * * Sometime after making this proposition, I think in September, 1874, Mr. Hosmer consented to it, and said, so far as I recollect, that Mr. Lomax attended to the legal part of the business of the Moody estate, and he would fix the matter up with me.” The evidence further shows that the note and deeds were^ executed pursuant to this proposition. There are two reasons why the want of protest and notice cannot now avail: 1. It seems to have been the understanding of both Hosmer and Smyth that protest was necessary in order to bind the acceptors, Cragin & Co. Under this impression Smyth obtained possession of the draft, a short time before its maturity, for the purpose of procuring a waiver of protest from Cragin & Co. The draft matured on the 6th day of June. The waiver of protest is dated the 5th day of June. The writing, except the signature, is shown to be that of Smyth. He then had the draft in his possession in New York, on the day before it matured, and he handed it back to Hosmer when he returned to Keokuk. He had the draft in his possession when it matured, and thus deprived the holders of the power to present it for payment on the day when it matured. “Where an indorser obtains possession of the note before maturity, and withholds it until after that time, demand and — 229 — notice are waived.” 1 Parsons on Notes and Bills, 584; Havens v. Talbot, 11 Ind., 323. 2. It very clearly appears that Smyth, with full knowledge that there had been no demand of payment, nor notice of nonpayment, after the draft matured, entered into negotiations for the settlement of the claim, which finally resulted in the execution of the note sued on. It is very clear that this constitutes a waiver of notice. In Parsons on Notes and Bills, p. 595, it is said: “The general principle seems now to be settled, in this country, at least, and by the earlier decisions in England, that, where no demand has been made or notice given, a promise to pay, after maturity, made with full knowledge of laches, is binding upon the party promising, and removes entirely the effect of any negligence in making the demand, or in giving the notice.” See numerous authorities cited in note. See, also, to the same effect, Creshire v. Taylor, 29 Iowa, 492; Hughes v. Bowen, 15 Iowa, 446; Allen v. Harrah, 30 Iowa, 363. In addition to all this the affidavit of Smyth appears in the case, filed May 8, 1876, in which he says that “Cragin & Co. did not pay the bill at maturity, and, by consent of all parties, a waiver of protest was entered upon said bill.” Under all the circumstances disclosed the want of protest cannot avail as a defense. III. On the 9th day of December, 1876, the answer of defendant was filed, which, among other things, alleges that the draft was never protested as against the said Smyth. The replication to this answer, filed on the 7th day of March, 1877, is a mere denial. On the 17th day of March, 1877, and at the term at which the cause was tried, the plaintiffs filed an amended replication, admitting that said draft on Cragin & Co. was not protested, but averring that said Smyth & Co., with full knowledge of the same and the facts, waived protest, to-wit: demand and notice, and promised to pay said draft, and that said draft was in possession of Smyth & Co. at maturity. A motion for a continuance was made upon thp — 230 — ground that this replication tendered a new issue, which the defendants were not prepared to meet. This motion was overruled. It is claimed that the defendants were thus compelled to go to trial upon an issue respecting which they had no opportunity to procure evidence, and that they have been greatly prejudiced by this action of the court. The deposition of George B. Smyth was taken and filed in the cause March 13th, before this amended replication was filed. In this deposition he distinctly admits all the facts alleged in this amendment. The amendment does no more than conform the issues to the facts already proved in the case. It is not. apparent how the defendants could possibly have sustained any real prejudice from the ruling of the court. 2. convexáderatíom" estoppel. IY. The main question in this case remains to be considered. It is this: Was there any consideration for the conveyance by Martha M. Smyth of her lands as security for her husband’s antecedent debt? It -g maintained by appellant that, “where one person owes another a sum of money, and afterward a third person is induced to secure or guarantee the payment of the debt, either by promising to pay it, or by pledging or mortgaging his property therefor, in order to support such subsequent undertaking of such third person there must be some further consideration shown than the original debt, for the consideration of the original debt will not attach to such subsequent contract.” Appellee’s counsel admit the correctness of this proposition of law. They contend, however, that there was a valid agreement to extend the time of payment of the debt owing by George B. Smyth, which would, as appellant admits, if established by the evidence, constitute a sufficient consideration to support the conveyances of Martha M. Smyth. Does the evidence, then, establish a valid and enforceable agreement for such extension? The draft matured on the 6th day of June, 1874. It was long past due when the note and deeds were executed, on the 3d day of September, 1874. The note on that day was exe — 231 — cutecl, bearing date February 3,1874, and payable four months after date, or three months before the day it was in fact executed. It was impossible that the note should be paid upon the day upon which, by its terms, it appeared to be due. The parties could not have intended such payment. The stipulation as to time of payment is entirely nugatory, because impossible of performance, and must be eliminated from the note. See Hall v. Cazenove, 4 East. R., 477. The note, then, in effect becomes one payable on demand at any time after its actual execution, September 3,1874: . The note, the deeds and the defeasance constitute parts of one transaction, and must be construed together as forming one contract. The plaintiff demanded security. The defendants proposed to give security. This was effected by the execution of absolute deeds and a defeasance. Having incurred the inconvenience and expense of executing the security, the defendants were entitled to whatever benefits resulted to them on account of the security. The defeasance recites: “Upon the payment of the interest which has accrued upon the said note, at the rate of ten per cent per annum, to the 3d day of September, 1874, and the payment thereafter of the interest accruing at the same rate, and at the end of every six months from the 3d of September, 1874, and the payment in full of said note, principal and interest, at twelve months from and after the 3d day of September, 1874, * * * then and thereafter the said Lomax agrees to convey,” etc. It is clear that this gives the defendants the privilege of paying the principal of said note within twelve months from the 3d day of September, 1874, or within one year from the time of its actual execution. It is true Lomax does not expressly agree that he will not proceed to collect the note at once, but he does, in consideration of the deeds executed to him, agree in effect that payment of the note may be made at any time within twelve months from its execution. By the acceptance of these deeds and the execution of the defeasance Lomax estopped himself — 232 — and the plaintiffs from the right to proceed at once to the enforcement of the note; and if they had undertaken to enforce it they might have been prevented by injunction. There was, as we think, at the time the security was given, a valid agreement for the extension of the time of the payment of the debt. Y. It is claimed that, because the deeds are distinct, the court had no jurisdiction to foreclose except as to the lands situated in Humboldt county, where the action was commenced. The deeds, in connection with the defeasance, constitute one mortgage to secure the note sued on. The action to foreclose was properly brought in the county where some of the property was situated. Code, § 2518. YI. The court decreed that for any balance of the judgment on account of the payment of taxes, which should remain unsatisfied after exhausting the lands deeded as security, a general execution should issue against Martha M. Smyth. The defeasance, respecting the taxes upon the land, contains the following provision: “And it is further agreed between the said P. Thornton Lomax and the said Martha M. Smyth, and it is the express condition, that in event the said Martha M. Smyth shall fail to pay or cause to be paid the annual taxes, dues and charges now due or to become due in and upon the lands above described, and in event that the said taxes, dues and charges are paid by the said Lomax, then that the sum or sums of money so paid by him to discharge and satisfy said taxes, dues and charges shall bear interest at the rate of ten per cent per annum from the date of such payment, and shall, both principal and interest, be secured to be paid to the said Lomax from the proceeds of lands herein conveyed, in all respects as the principal debt herein first described and secured”. It is urged by appellee that the taxes constituted a debt chargeable against Martha M. Smyth; that this recital in the defeasance operates as a mortgage upon the lands in ques — 233 — tion to secure this debt; and, as there is no stipulation to the contrary, after exhausting the mortgaged property a general execution may issue. It is true that, as'respects the county, Martha M. Smyth may be liable to answer for these taxes out of her general property; but, we think, she assumed to the plaintiffs no obligation to do so. The taxes upon her real estate constitute a lien paramount to any lien which the plaintiffs acquired. By pledging her lands for the payment of her husband’s debts she assumed no personal obligation to keep the lands free from liens which might attach from delinquent taxes. The defeasance goes no further than to provide that taxes paid by Lomax should be secured from the proceeds of the lands, in all respects as the principal debt was secured. We think the court erred in awarding a general execution against Martha M. Smyth. In this respect the decree will be corrected in the court below or in this court, as plaintiffs may elect. As thus modified the judgment is Affirmed.