Lynds v. Van Valkenburgh

The opinion of 'the court was delivered by Burch, J.: Many assignments of error are made and argued. Much testimony is quoted by both parties in support of their respective, positions upon which neither the referee nor the court made findings.. This court can consider the written instruments executed by the parties, other written documents, the pleadings, admissions and stipulations, and findings of fact. It can also consider the evidence upon any branch of the case which is all in depositions, as that procured by — 34 — the plaintiff to explain his inability to produce the notes and mortgages which Carolus had assumed. But it cannot found its judgment upon oral testimony not reduced to findings of fact by the trial court. If the parties desired findings in respect to the matters covered by such testimony a request for further findings should have been made. (Shuler v. Lashhorn, 67 Kan. 694, 74 Pac. 264.) Therefore many matters debated in the briefs are not open to consideration. Of those properly reviewable only two need be discussed to dispose of the controversy. The obligation, placed upon the plaintiff to procure a quitclaim deed from Margaret Over before he could have judgment on the second and third notes was wholly unwarranted. The contracts between the parties did not include the subject of the substitution of the tree claim for the Margaret Over tract within the consideration of any of the notes. The answer did not plead the failure of Carolus to deliver a quitclaim deed from Margaret Over as a failure of consideration .for the second and third notes, but, on the contrary, pleaded that circumstance in connection with the defense to the first note and then pleaded the omission to pay the Nebraska mortgages as the sole failure of the consideration for the other two notes. There is no finding that any feature of the tree-claim transaction, whereby Carolus became bound to procure a quitclaim deed from Margaret Over, affected any portion of the consideration of the notes, but, on the other hand, the finding quoted at length above is to the effect that the only consideration for the mill-property mortgage was the promise of Carolus to pay the Nebraska notes' and have the Nebraska mortgages released of record. The same finding is explicit upon the proposition that the plaintiff’s knowledge, when he bought the notes, extended to claimed defenses on account of the failure of Carolus to pay the several notes secured by the Nebraska mortgages. There being no finding that the plaintiff, when he bought the notes, knew of any de — 35 — fense on account of the Over quitclaim-deed matter, this court can imply none; and upon the record as it stands the plaintiff was an innocent purchaser so far as that defense is concerned. Besides all this, in order to secure a credit on the first note for $1000, the difference in price between the tree claim and the Margaret Over tract, Van Valkenburgh waived his right to a quitclaim deed from Margaret Over and tendered the Johnson deeds unconditionally. The credit was allowed, Carolus had accepted one of the Johnson deeds, and that transaction was closed before the district court made its additional findings of fact. The judgment in favor of Margaret Over against Van Valkenburgh had no bearing upon any issue in the case determinable and undetermined at the time it was offered in evidence, and the plaintiff is entitled to judgment without procuring a quitclaim deed from Margaret Over. The requirement that the plaintiff procure and deliver to Tremain R. Van Valkenburgh the Nebraska notes paid and canceled and the Nebraska mortgages satisfied of record was unwarranted. It may be premised that Carolus assumed the payment of the Nebraska mortgage indebtedness, although the writings into which the preliminary contract merged did not so provide; and it may be taken for granted that a contract to assume a mortgage indebtedness is a contract to pay it. But when Carolus agreed to pay the Nebraska notes and satisfy the Nebraska mortgages he became the principal obligor so far as the individuals of the Van Valkenburgh party were concerned, and upon payment of the notes was himself entitled to possession of the evidences of indebtedness. Any payment or payment through any means which would relieve the parties liable upon the notes of their obligations would satisfy the promise which Carolus gave, and if some grantee of one of the tracts of land should pay the mortgage indebtedness against it he would be entitled to possession of the paper. (Stiger et al. v. — 36 — Bent, 111 Ill. 328.) In any event the contract of Carolus was to pay, not to produce evidence of payment, and the plaintiff could not be defeated because he did not bring into court paper which Carolus was not bound to turn over. The burden was upon the defendants to prove failure of consideration. Proof by. them that they rested under an existing liability upon the Nebraska paper was indispensable to the defense. The plaintiff was not obliged to prove that anybody had paid the Nebraska notes and mortgages. When the court found that those notes and mortgages had been paid, but that there was no evidence to show who paid them, the defendants- had not sustained the burden they assumed by their pleadings. They had not shown they were still liable upon the paper, and the plaintiff was entitled to judgment. It only remains to inquire if the plaintiff aided the defendants’ proof in his effort to show what had become of the paid notes and satisfied mortgages. Clearly he did not. The Lewis note and mortgage and a release of that mortgage were produced and tendered in court. In every other instance the nature of the transaction and the conduct of the parties were such as to indicate a positive purpose completely to extinguish both the debt and the lien. Any intention on. the part of the holders to assign, and of the persons paying to take, title to the securities is clearly negatived. After clearing his land and then selling it Conrad burned up the canceled notes and mortgages. Harrington is the only person who could claim any right against the defendants because of the payment he made, but he passed the instruments on to his grantee as'mere muniments of title. The Seymore note and mortgage were surrendered, canceled and filed for the very purpose of making a public record of the fact that the last spark of vitality in them had been quenched and to prevent them from being used again as live obligations. If one person, not a mere interloper, but having an — 37 — interest in the matter, pay the note and satisfy the mortgage of another the question whether he becomes an assignee of the note and mortgage is one of fact ánd intention of the parties. (Binford, Administrator, v. Adams, Administrator, et al., 104 Ind. 41, 3 N. E. 753, and authorities cited in the opinion.) If, however, overriding equities so require, one who satisfies an encumbrance upon his land may be subrogated to the rights of the lien-holder, or may be entitled to an equitable assignment of such rights. Subrogation and equitable assignment are acts of the law as distinguished from assignment by acts of parties. “We must be careful to distinguish between an assignment of the mortgage debt, and a mere right of subrogation to the lien of the mortgage creditor. Assignment is the act of the parties, and depends generally upon intention. Where the nature of the transaction is such as imports a payment of the debt, and a consequent discharge of the mortgage, there can of course be no assignment, for the lien of the mortgage is extinguished by the payment. A mortgage creditor cannot be compelled to assign the debt and mortgage upon receiving payment. All that he can be required to do is to give an acquittance and release. “The exception to this rule, if it can be so termed, is found in those cases where the party making the payment occupies the position of surety to the debt, or is in some way personally bound for its payment. “Such a person may, in equity, require an assignment or transfer not only of the mortgage itself, but of all the securities held by the creditor, for his protection and indemnity; and although no such assignment or transfer is actually made, a court of equity will treat it as having been done. “But if the party making the payment does not occupy the position of surety for the debt, as a general rule he cannot claim to be entitled as assignee unless by agreement with the creditor. “Subrogation is, however, a very different thing from an assignment. It is the act of the law1, and the creature of a court of equity, depending not upon contract, but upon the principles of equity and justice. It presupposes an actual payment and satisfaction of the debt secured by the mortgage. — 38 — “But although the debt is paid and satisfied, a court of equity will keep alive the lien for the benefit of the party who made the payment, provided he as security for the debt ‘has such an interest in the land’ as entitles him to the benefit of the security given for its payment.” (Gatewood by, &c. v. Gatewood and Als., 75 Va. 407, 410.) In this case all the evidence is opposed to the idea of an assignment or that liability on the part of the persons primarily bound was preserved. It imports payment of the debt and extinguishment of the lien, and the depositions are barren of any evidence that any occasion exists or may arise for the application of the doctrine of subrogation, or of equitable assignment, in favor of the persons who paid the Nebraska mortgages. In the case of Crippen v. Chappel, 35 Kan. 495, 11 Pac. 453, 57 Am. Rep. 187, it was said: “It always requires something more than the mere payment of the debt in order to entitle the person paying the same to be substituted in the place of the original creditor. It requires an assignment, legal or equitable, from the original creditor, or an agreement or understanding on the part of the party liable to pay the debt, that the person furnishing the money to pay the same shall in effect become the creditor, or the person furnishing the money must furnish the same either because he is liable as surety or liable in some other secondary character, or for the purpose of saving or protecting some right or interest, or supposed right or interest, of his own.” (Page 499.) Here we have the fact of payment by landowners, circumstances indicating that no substituted equitable rights exist, and no circumstances indicating that .subrogation, or equitable assignment, may ever need to be invoked. The court cannot speculate upon the subject. It cannot conjure up imaginary states of fact to aid an unproved defense of failure of consideration. One or two matters urged in the defendants’ brief may be noticed. It is said that the referee found there had been a failure of consideration for the notes in suit and that his finding and conclusion upon the sub — 39 — jeet were not disturbed. There is no finding by the referee that Carolus agreed to pay the Nebraska notes at once upon the conclusion of the trade or before they fell due. Nor is there any such finding by the court. Oral testimony to that effect is quoted, but for reasons already stated it cannot be considered. The referee found expressly that at the time of the trial before him it did not appear whether the notes were due or not. He further found that the plaintiff took the first note after maturity, and hence subject to the defense of failure of consideration. But he found that, after allowing the credit of $1000, the plaintiff was entitled to recover on the first note the sum of $35, being six months’ interest to July 1,1894, when the credit should have been made. Therefore the referee decided that the defense of failure of consideration had not been established at all. Otherwise he would have allowed no recovery on the first note, which the plaintiff took subject to the defense, if proved. It is urged that both Lynds and Carolus were witnesses in the case, that both testified, and that neither of them offered evidence to show that either of them had paid the Nebraska obligations. They were not required to furnish any such evidence. On the face of the documents set up in the petition the plaintiff was entitled to judgment. He continued to be entitled to judgment unless the defendants proved a state of.facts destroying the right. At the time of the trial before the referee it was not shown that Carolus was in default. At the time of the trial before the court it was found that the notes were paid. Prima facie the word “paid” indicates that the obligation has been satisfied and the demand extinguished. “But payment of a promissory note is not a contract; it is performance of the obligation arising out of the promise to pay. Any one of the several parties to a joint contract, or any one in his behalf and at his request, or with his consent, may perform the obligation ; and when' performance has been offered or made, and the money accepted, the obligation becomes ex — 40 — tinguished. The parties to the contract are no longer bound to each other by the vinculum legis of right and duty. The duty being discharged the right ceases to exist.” (Moran v. Abbey, 63 Cal. 56, 61.) The finding was entirely sufficient for the plaintiff. If the circumstances were such that the defendants were still liable in any way they were bound to prove the fact. It is suggested that the plaintiff accepted the court’s conclusion and undertook to comply with the requirement which it virtually imposed. Conceding, but not deciding, that the plaintiff’s conduct is to be so construed, it is plain the purpose of the court was to be assured that defendant Van Valkenburgh and his associates were no longer subject to liability upon the Nebraska indebtedness. The plaintiff, perhaps, in the face of some obstruction, has fairly complied with the spirit of the order. The only object which the court could have had in view having been substantially attained, the plaintiff is entitled to judgment. The plaintiff should recover the principal and interest of the second and third notes and a decree should be entered for the foreclosure of his mortgage as a first lien on the mill property. He should also recover the unpaid interest on the first note and the costs of the action. On the. findings of the referee defendant Van Valkenburgh is entitled to an offset, which should be allowed him, with interest. The judgment of the district court is reversed, and the cause is remanded with instruction to enter judgment according to the foregoing views.