Robinson v. R. J. Waddell & Co.

[404] The opinion of the court was delivered -by JOHNSTON, J.: The only contention that divides the parties is the proper application of the proceeds derived from the sale of the mortgaged property. All of the notes were of the same date and' secured by a single mortgage, but they matured at different times. The general rule which has been enforced in this state is, that in the absence of an agreement or countervailing equity, the several notes should have precedence in payment out of the mortgage fund in the order in which they mature. (Richardson v. McKim, 20 Kas. 346; Aultman-Taylor Co. v. McGeorge, 31 id. 329.) The trial court in this case determined that the understanding of the parties and the equities of the case made the general rule inapplicable. When Robinson proposed to sell the notes to Waddell & Co., they declined to take them upon the security of the mortgage alone. To induce them to purchase, Robinson agreed to furnish additional security by indorsing two of the notes. Evidently Waddell & Co. regarded the mortgage as sufficient security for three of the notes, but until the other two were indorsed by Robinson his offer was not accepted. While he indorsed the notes first maturing, and states that he only indorsed them because they, were secured by the mortgage, the testimony strongly tends to show that the purpose of the indorsement was to strengthen the security. If the indorsed notes have precedence in payment over those which are unindorsed, the indorsement is of no value or consequence. The mortgage was unquestionably more than sufficient security for the two indorsed notes, and if they must first be paid out of the mortgage fund Robinson incurred no risk by the indorsement, nor did it furnish any indemnity to Waddell & Co. If it was the understanding of the parties that the indorsement should strengthen the security, the court but carries out that intention when it provides that the unin-dorsed notes shall be first paid. This appears to have been the understanding of the parties, because, when McConnell failed to pay the debt, Robinson required him to reconvey [405] the land, as he, Robinson, would have the debt to pay, and must therefore have the land for protection. After the land had been reconveyed to Robinson, he offered to execute a new mortgage' thereon to Waddell & Co. for the full amount of the mortgage debt, providing he could have reduced rate of interest. McConnell states that there was a positive agreement, at the time the land was reconveyed, that Robinson would assume to pay the entire mortgage debt. There is conflicting testimony, but all disputed questions must be deemed to have been determined in favor of the defendants in error. There is sufficient in the testimony to take the case out of the general rule of priorities, and to sustain the rule of appropriation which the court adopted. (Parker v. Mercer, 38 Am. Dec. 438; Pom. Eq. Jur., §§1201, 1203; 2 Jones, Mortg., § 1702.) The judgment of the district court will be affirmed. All the Justices concurring.