Lowry v. Milwaukee National Bank

BabdeeN, J. Plaintiff’s contention tbat tbe mortgage upon her homestead bad been paid is based largely upon tbe manner in which tbe defendant and her husband conducted their business. Tbe potential facts necessary to be considered may be stated as follows: At tbe date tbe mortgage was given, Lowry owed tbe bank $10,0.00 on a note due July 25th thereafter. Fie bad also overdrawn bis account to tbe amount of $22,632.27. The account remained tbe same until June 24th, except tbat from day to day Lowry made deposits and drew checks thereon, so tbat tbe ultimate balance on tbat day was about $100 less than it was on tbe day tbe mortgage was given. On June 24th, Lowry gave tbe bank a note for $15,000, which was carried to bis credit and reduced bis overdraft. Thereafter, and until July 25th following, Lowry made deposits almost daily and drew checks on bis account, and tbe difference between tbe amounts deposited and tbe checks drawn was deducted from or added to tbe balance of bis overdraft.. On July 25th tbe $10,000 note in existence at tbe time tbe mortgage was given became due. Lowry then gave a new note for $10,355.83, [315] which included interest for six months. He also drew his check for the amount of the old note, and both the checks and-the new note were carried into his account. As these notes became due thereafter, the same transaction occurred, except that in one or two instances, instead of giving his new note for the principal and interest, he would give a note for the principal and his check for the amount of the interest. This plan continued from year to year until 1893. In the meantime Lowry continued making deposits and giving cheeks, and from time to time his bank book would be written up and balanced and his vouchers returned. Other notes were given as his overdraft increased, and were taken up, renewed, and carried into his account in about the same way. The theory of plaintiff is .that, as deposits were made from time to time by Lowry, the same should be applied on the oldest items of the account, and thus the overdraft existing at the time the mortgage was given would be completely wiped out and paid within a few months thereafter. The $10,000 note would also become fully paid in the same way after it had been carried into the account. We have followed with considerable interest the elaborate argument of plaintiff’s counsel, and have consulted the various authorities cited to support his contention. His whole argument is based upon the assumption that the transactions mentioned, and the system of bookkeeping used, indicate that. the debt existing at the time the mortgage was given has been discharged, and that as the mortgage was given to secure a present indebtedness, which is no more, the mortgage must be deemed as paid. As we view the situation, it becomes unnecessary to decide whether the mortgage was given as collateral to the debt then due to the bank from Lowry, or as security for future advances. The plaintiff must remember that she is in a court of equity seeking equitable relief; that equity goes beneath the surface of things, and grasps at and avails itself of the substantial facts disclosed. In line with [316] that principle it becomes our duty to look at and consider the substance of the transactions mentioned, rather than tbeir mere form; to put ourselves, as near as may be, in the attitude of the parties to them, and ascertain the purpose and intention of their various acts. The evidence is not in dispute. It offers some circumstances explanatory of the transactions, and gives some aid in interpreting the situation. We have then a creditor and a debtor. One part of the debt is evidenced by a note, and the other by an open account. At a later date the debtor transforms a portion of the account into a note. These notes become due from time to time. The debtor has no money to pay them. Iiis bank account still remains overdrawn. He makes a new note including interest for the time of the extended credit. ITe gives a check on his overdrawn account to cover the amount of the note. Thus his term of credit is extended year after year-. From the circumstance that these notes were carried into the debtor’s general account, and balances were struck in his book from time to time, the plaintiff insists that the original indebtedness has been paid. There are certainly some cases cited supporting this view. But this court stands committed to a somewhat different rule. In the first place, the acceptance by the bank of a note from Lowry in place of the old one was not a payment of the old one unless expressly so agreed. The long line of cases cited in Willow River L. Co. v. Luger F. Co. 102 Wis. 636, 78 N. W. 762, settle that as a proposition of law prevailing in this state. The fact that, when a new note was given, the old one was delivered to Lowry, stamped “Paid,” was explained as being in accordance with the practice of the bank. It was not intended as a payment and discharge of the debt. As the bank officials say, it was intended merely as a renewal of the old note. This purpose seems so much in harmony with good business management, and is so evident from all the circumstances in the case, that it cannot be overcome except by evidence clearly indicat [317] ing a contrary intent. This evidence was not produced. Certainly, tbe mere circumstances of carrying tbe new note into tbe overdrawn account, and tbe giving of a check by Lowry for tbe ámount of tbe old one, are not sufficient. Tbebalancing of tbe account and the surrender of tbe old note and vouchers was a proceeding according to tbe custom of tbe bank. Looking at tire entire transaction, and dealing 'with tbe substance of tbe affair, it amounts to nothing more than a “gift of time” to Lowry. There was no testimony of any understanding or agreement whatever that any of tbe several notes should be received, or were received, except as renewal notes. Tbe evidence seems conclusive that tbe bank never accepted any one of tbe renewed notes in payment or satisfaction of tbe original debt. It was never in fact paid, but was carried along from time to time until about tbe time of tbe final settlement. Tbe case of First Nat. Bank v. Case, 63 Wis. 504, 22 N. W. 833, is closely parallel in all its facts. Tbe case and briefs show that tbe practice of tbe bank was very similar to tbe case at bar. In tbe discussion of tbe case, Chief Justice Cole says: “Of course, tbe onus was upon tbe defendant to show by direct and positive proof that tbe plaintiff bad agreed to receive some one of the renewed notes as a payment and discharge of the original loan. Tbe surrender of tbe old note upon a new one being given does not raise any presumption of tbe extinguishment of tbe debt, but an agreement must be shown that it should have that effect. Tbe defense of payment is attempted to be established here by facts and circumstances not conclusive in their probative force, even when not met by countervailing evidence. But in tbe light of other explanatory testimony they have but little effect to prove tbe defense. They certainly fall far short of proving an agreement or understanding on tbe part of the bank that any renewed note should pay tbe debt.” Applying this language to the facts in this case leaves nothing more to be said. It touches it upon all its four corners. [318] Tbe original debt not having been discharged, the mortgage was a binding obligation. We approve the findings of the trial court, and must sustain the judgment. By the Oouri. — The judgment is affirmed.