Yaple v. Stephens

The opinion of the court was delivered by Horton, C. J.: On October 7, 1884, J. C. Dowd, of the firm of J. C. Dowd & Co., executed two promissory notes to Hiram Yaple, one for $720, and the other for $700, each bearing interest at ten per cent, per annum from date. At the same time he executed to Hiram Yaple a chattel mortgage upon the plauing-mill property operated by J. C. Dowd & Co., to secure these notes. At the time of the execution of the chattel mortgage, James Nesbit, Albert Bracke and L. F. Bird, respectively, held claims secured by mortgages upon the planing-mill property, amounting in all to the sum of $720, [687] The mortgages to Nes.bit and Bracke had been given by J. C. Dowd upon property subsequently acquired by the firm of J. C. Dowd & Co. prior to the formation of the partnership. The mortgage of Bird was given by J. C. Dowd after the formation of the partnership, with the consent of his partners, for money for the use and benefit of the firm. Hiram Yaple paid off the mortgages of Nesbit, Bracke and Birá, and executed to Norman E. Yaple his promissory note of $700, but three hundred and seventy-five dollars of this was entered as a credit upon the note for certain indebtedness from Norman E. to Hiram Yaple. It appears from the findings that although the firm, consisting of J. C. Dowd, Norman E. Yaple and Myron L. Stephens, was known as “ J. C. Dowd & Go./’ the business was conducted principally in the name of “J. G. Dowd.” Before J. C. Dowd executed the mortgage of October 7, he consulted with his partners, Norman E. Yaple and Myron L. Stephens, about the payment of the mortgages of Nesbit, Bracke and Bird, and all of the partners agreed that the prior chattel mortgages should be satisfied, and a new mortgage given to Hiram Yaple therefor. Although the mortgages executed to Nesbit and Bracke by J. C. Dowd were executed prior to the formation of the firm of J. C. Dowd & Co., they were prior liens upon the property in which the partners were interested. Norman E. Yaple and Myron L. Stephens never assumed any part of this indebtedness, and were not personally responsible therefor, but these mortgages covered the planing-mill property operated by the firm. It is conceded that Hiram Yaple furnished the money to pay off the chattel mortgages of Nesbit, Bracke and Bird, and that he did so at the request and with the knowledge and consent of all the members of the firm, and with the understanding and agreement that he should have a new mortgage on the firm property to secure him. He cannot therefore be said to have been a stranger, or a mere volunteer, in paying the mortgages of Nesbit, Bracke and Bird. ■ Generally, where it is equitable that a person furnishing money to pay a debt should be substituted for the creditor, [688] or in place of the creditor, such person will be so substituted. (Crippen v. Chappel, 35 Kas. 495.) Under the general doctrine of subrogation or of equitable assignment, this case comes within this doctrine, and as the new mortgage of October 7, 1884, has been set aside, Hiram Yaple should be subrogated to the rights of Nesbit and Bracke, as well as of Bird. The learned trial court decided that the claim of Hiram Yaple under his mortgage of October 7, 1884, was a first lien upon the fund in the hands of the receiver to the extent of the firm indebtedness to L. F. Bird for $200, with interest from July 15,1884, at 12 per cent, per annum. The indebtedness of J. C. Dowd to Nesbit and Bracke should also have been included as a first lien upon the fund in the hands of the receiver. The payment of the prior mortgages of Nesbit- and Bracke by Hiram Yaple was 'not in fraud of the rights of the creditors, or of any of the partners, and Yaple is entitled to be substituted in the place of Nesbit and Bracke. The judgment of the district court will be reversed, and the cause remanded with direction that judgment be entered upon the findings of fact that Hiram Yaple have a first lien upon the fund in the hands of the receiver for all sums due him upon the chattel mortgages of Nesbit, Bracke, and Bird. All the Justices concurring.