Foster v. Paine

Reed, J. 1. CONTRACT novation: facts constituting. I. The evidence very satisfactorily establishes that there was an understanding between plaintiff and Risk and Draper, that the latter, in consideration of "** the sale of the farm to him by Risk, should be- ^ come responsible to plaintiff -for the amount of Risk’s debt to him. Plaintiff testifies that when Draper bought the farm of Risk he wrote to him, asking him whether he would consent to such an arrangement; and both Draper and Risk swear that plaintiff wrote to Draper in answer to this letter, giving his consent to the arrangement. Plaintiff has not denied this. He testifies, however, that, at the request of Draper, he gave Peden the power of attorney, and that that was the only instrument of writing he ever gave to any one, authorizing the cancelling of the mortgage. This, however, does not amount to a denial of the statement of the other witnesses, that he wrote the letter to Draper, consenting that he might be substituted in place of Risk as his debtor. [88] Nor is it inconsistent with that statement. Before he purchased the farm from Fisk, Draper was the agent of plaintiff in Davis county, and, as such agent, had in his possession the notes and mortgage from Fisk to plaintiff. When he made the purchase of the farm, and the arrangement was made that he should become responsible to plaintiff for the price, he delivered up to Fisk his notes and mortgage, and executed his own notes to plaintiff for the same amount as the Fisk notes, and delivered the same to Peden, who, in the mean time, had received plaintiff’s power of attorney. In December, 1876, Draper paid plaintiff six hundred and sixty dollars to be applied on the indebtedness, and, the notes still being in Peden’s hands, plaintiff wrote him, giving directions as to the manner in which the amount should be credited on the notes, also advising him that he had made arrangements with Draper to send directly to him (plaintiff) any payments which he might make in the future on the notes, and that he would advise him (Peden) of any such payments, so that he could make the proper credits on the notes. We are satisfied that plaintiff knew, when he received this payment from Draper, and made the arrangement with him, that the Fisk notes had been surrendered up to Fisk. The facts with reference to this transaction, then, briefly, are these: Fisk was indebted to plaintiff in the sum of $1,300, and this was secured by mortgage on the farm; Draper, in the purchase of the farm from Fisk, became indebted to him in the same amount. It was agreed between the parties that Draper should become responsible to plaintiff for the amount, and that plaintiff should accept him as his debtor instead of Fisk; and, in pursuance of this agreement, Draper executed and delivered to plaintiff his notes for the amount, and Fisk’s notes were surrendered to him, and plaintiff, with knowledge of that fact, received from Draper the six hundred and sixty dollars, and otherwise recognized him as his debtor. The effect of this is undoubtedly to discharge Fisk from all liability to plaintiff for the debt. Draper, having con [89] traeted with Fisk’s consent to pay the debt to plaintiff, is discharged from his former liability to Fisk and is substituted in Fisk’s stead as plaintiff’s debtor. "We think, therefore, that the district court erred in rendering a personal judgment against Fisk. 1. MORTGAGE: not dischraged by contract of novation as to the debt. II. The next question to be determined is, whether the mortgage given by Fisk continued to have effect as a security for the debt, after Fisk was discharged from per- ° A sonal liability for the debt, and Draper was substituted as the debtor to plaintiff. The claim of defendants is that the discharge of Fisk from personal responsibility for the debt, and the surrender to him of the notes, have the effect to extinguish the debt which the mortgage secured, and that, as the debt is the life of the mortgage, its extinguishment operates necessarily to discharge the mortgage. It is undoubtedly true that any act which amounts to a payment of the debt also discharges the mortgage. But in this case we think the debt which was secured by the mortgage has not been extinguished. The debt from Draper to Fisk was satisfied by the arrangement between the parties, but the only effect of the arrangement as to the debt from Fisk to plaintiff was to substitute Draper for Fisk as the party personally liable therefor. The undertaking of Draper was, not that he wpuld pay to plaintiff the debt which he owed Fisk, but that, in consideration of being discharged from that debt, he would pay to plaintiff the debt which Fisk owed him. So that the debt now due the plaintiff is the same debt that Fisk secured by the mortgage. And the rule is well settled that the mortgage continues in force until the debt is satisfied. No mere change in the form of the debt, nor (as we think) in the personnel of the debtor, has the effect to discharge it. Sloan v. Rice, 41 Iowa, 465; Packard v. Kingman, 11 Id., 219; Hendershott v. Ping, 24 Id., 134; Watkins v. Hill, 8 Pick., 522; Pomroy v. Rice, 16 Id., 22. [90] 3.--:cancellation ofby attorney without authority: priority: priority of liens: record notice. [89] III. It is undoubtedly true that the intention of the par [90] ties, when they entered into the arrangement, was that the Fisk mortgage should be surrendered,-and satisf’acfi°n of it entered of record. -The power of at-torn ey given by plaintiff to Peden empowered him to enter such satisfaction for plaintiff. But we think it equally true that the intention was that Draper should secure the debt by a mortgage on the same premises. We are satisfied that the plaintiff never consented to relinquish the security which he had in the mortgage for the debt. And, when the case was here on a former appeal, we held that the power of attorney gave Peden authority to cancel the Fisk mortgage only on the giving of a new mortgage by Draper. 56 Iowa, 622. If this purpose of the parties had been carried out, the mortgage by Draper would not have created a new lien or security. Its effect would have been simply to continue the security created by the Fisk mortgage, so that the question of the effect of the Fisk mortgage, up to the time of the entry of satisfaction by Peden, is not affected by the agreement of the parties that it should be surrendered, and satisfaction of it entered of record. But it is claimed by defendants that the satisfaction of the mortgage, entered of record by Peden under plaintiff’s power of attorney, has the effect to terminate all rights of plaintiff under it. This claim, however, is disposed of by our holding in the former appeal that the power of attorney authorized the. cancellation of the Fisk mortgage only upon the execution by Draper of a mortgage which would preserve and continue the security created by the former mortgage; and to that holding we are content to adhere. The entry of satisfaction, then, was unauthorized, and plaintiff’s rights are not affected by it. We do not overlook the fact that the mortgage was delivered to Fisk by Peden at the same time that he surrendered Fisk’s notes to him. But as plaintiff had not consented to relinquish his mortgage security, this surrender of the instrument would not have the effect to extinguish it. At the -time Paine .took his mortgage from Draper, the [91] Fisk mortgage was of record, and he was charged with notice of it. The fact that Fisk had been discharged, and Draper substituted as the debtor, does not affect the question. The record if the mortgage which, as we have seen, continues as a security for the debt, was sufficient to advise him of the existence of an encumbrance on the land, and he was bound to take notice of it. IY. We do not find any evidence that plaintiff ever ratified or approved the act of Peden in entering satisfaction of the mortgage of record. But, on the contrary, it appears that he repudiated the act as soon as he was informed that Peden had entered the satisfaction without taking a new mortgage from Draper. Y. Some negotiations took place between him and Draper for the purchase by plaintiff of the farm, in satisfaction of the debt in question, but it is clear from the evidence that they never entered into a contract with reference to this matter that either could enforce. The evidence of the negotiation is entirely in parol; and, if an agreement was ever arrived at, it was made on a Sunday, and was consequently unlawful. It has never been executed, and could not now be enforced. The personal judgment against defendant, Fisk, will be reversed, and the case will be remanded to the district court for the entry of judgment even against Draper for the amount of the debt and for the foreclosure of the mortgage, or, if plaintiff elects, such judgment will be entered here. Be VERSED,