Lancaster v. Prussing

Mr. Presiding Justice Holdom delivered the opinion of the court. The arguments of counsel for plaintiffs in error are more ingenuous than appealing or convincing. Every proposition advanced for reversing the decree is fraught with extreme legal technicality, and much of the argument made in an attempt to solve these legal technicalities and adapt and make them applicable to the facts in the record, are sophistical, strained, and unnatural, and not at all in keeping with the conscionable administration of justice, or the application of equitable principles governing and controlling courts of conscience, akin to the forum whose jurisdiction and equitable doctrine environed the parties and the subject-matter of the contention between them. Two contentions are deducible from the errors assigned and the arguments made in support of them: First, that the time of payment of the principal note was extended without the consent of Fimrod Lancaster, whereby the lien of the trust deed was discharged; and Second, that rents of the mortgaged premises during the period of redemption were the property of the owners of the equity redemption, and not subject to be applied towards the extinguishment of the deficiency decree against Charles E. Springer. On the contrary, defendants in error argue, with some plausibility, that no extension of time of payment, was either, in fact, made or proven; that if such an extension was made as claimed, it was done under the express written authority of Lancaster; that the decree in the partition proceeding is res adjudicata as to all the claims of plaintiffs in error; that the lien of the trust deed, and all the rights and interests of all the parties here, were settled and declared by that decree, and finally that the rents of the mortgaged premises during the period of redemption are pledged by the very terms of the trust deed as security for the payment of the debt which it was made to secure. Ho objections or exceptions were filed to the master’s report. It is contended by defendants in' error that in this condition of the record it is not open to our review. This contention is not, in its broadest aspect, tenable. All parties, however, are concluded in this condition of the record from questioning the findings of fact either in the master’s report or the decree of the court. But the record is open for our review on all questions of law raised, not finding warrant or support in the facts found—and within these limitations we will confine our review and opinion. There are found upon the back of the principal note, in the same handwriting, the following indorsements written on the lines as here quoted, viz.: “July 1, 1897, Interest paid to July 5, 1897. Interest paid to Jany. 5, 1898.” We have the principal note before us, and have critically examined these indorsements, and we are of the opinion from such inspection that the last line “Interest paid to Jany. 5, 1898,” was written subsequent to the prior portion of the indorsement. It is insisted that these indorsements of interest were made, and the two installments of interest actually paid at the same time, July 7, 1897; that the first payment was four days before maturity, and the second a six months’ advance payment of interest; that an advance payment of interest, however short, operates to extend the loan and to discharge the land from the lien of the trust deed, when done without the consent of the surety owner of the land; that such presumption conclusively arises, as a matter of law, from the indorsement, without proof of the fact, or the intention of the parties; that a purchaser, subsequent to maturity and such indorsement, takes the note with notice that the lien of the security is discharged. The assumption, from the indorsement upon the note, that the time of payment was extended, is a most violent one in the face of the facts in the record. More especially is the contention that payment of interest on July 1, due July 5, would presumptively, in law, discharge the surety. While the payment of interest in advance is sufficient consideration to support an agreement of extension, yet in the absence of any evidence to support the agreement, it is not, as in the circumstances environing this ease, either prima facie proof or presumptive evidence of such an agreement. It is fairly inferable that the payment of interest due July 5, on July 1, was merely a matter of convenient anticipation, in the light of the fact that July 2 was a half holiday, and the two following days, a Sunday and “July Fourth,” dies non juridicus. New York Life Ins. Co. v. Casey, 178 N. Y., 381, is so analogous' on fact and principle as to constitute an authority of controlling effect. The court there held, reversing the decision of the Appellate Division of the Supreme Court of New York in the same case, that a valid extension of the time of payment of a bond and mortgage, such as will discharge one standing in the relation of surety for the payment of the mortgage debt, is not established as a matter of law, by the mere receipt from the grantee of the premises of interest three days in advance, -when there is no other proof of an agreement, express or implied, for such an extension, and two and a half days of the three were legal holidays. Especially is this reasoning most cogent here, in the entire absence of evidence as to who paid the interest, or of any agreement for the extension of the time of payment being granted. For can we, contrary to the only evidence found in the record that the interest paid to January 5, 1898, was paid from rents collected by the bank on July 20,1898, adopt the fallacious reasoning of counsel for plaintiffs in error, that the same was paid July 1, 1891, because that date is the only one appearing over the two indorsements of interest pay-' ments. After the payment of the last interest, defendant in error, Illinois Trust & Savings Bank, bought the note. It logically follows, from what we have heretofore said, that the record does not disclose any evidence of an extension of the time of payment of the Springer note. But, were we wrong in this holding, there is sufficient evidence in the record authorizing an extension of the time of payment by Lancaster, the surety. That authority is contained in the agreement indorsed on the back of the trust deed, executed under seal at the same time the.trust deed was acknowledged before Johnson, the notary, at San Diego, California, and in his presence, as his attestation thereof undisputably establishes. But it is said because this indorsement on the trust deed was not separately offered in evidence, it has no place in the record as proof. We are unable to agree with this contention. To so hold would necessitate, by parity of reasoning, the exclusion of the indorsements of payments of interest'on the principal note, relying upon which plaintiffs in error contend the lien of the trust deed was presumptively released. To do so would automatically operate to take from under plaintiffs in error the foundation stone upon which they have builded a very insecure structure of defense. It is next insisted that the death of Lancaster revoked the agreement of consent, if such it may be termed. The agreement was set up in the bill in hcec verba, and its legal effect as a consent to an extension of payment declared. The instrument being before the court, the court would declare its legal effect. Hone of the answering plaintiffs in error denied the making of the agreement, or sought by any averment to avoid it. They called for proof, and that proof was forthcoming and passed unchallenged. Ho direct issue was made as to the legal effect of this agreement contradictory of the aver-meats of the bill. If the question was material as raised, which we are inclined to doubt, still the authority of Benneson v. Savage, 130 Ill., 352, is decisive against the contention here made. The court there held that the power was coupled with an interest and was not revoked by the death of the party making it; so the agreement here was coupled with an interest and is binding on the heirs and devisees of Lancaster. Before leaving this branch of the case, we wish to point out that the statement of counsel for plaintiffs in error that in Beuter v. Dillon, 63 Ill. App., 517, the indorsement on the note, “Received interest to July 1, 1891, and $20 on interest due July 1, 1892,” was held sufficient evidence of extension to discharge 'a surety, belies the facts. There was ample evidence of an extension without the sanction of the surety, resting in oral proof and letters between the parties and the payment of a bonus of $5 for the extension. And so it will be found in nearly all of the cases, and certainly in those well considered cited by counsel for plaintiffs in error, that an indorsement in itself was not relied upon as presumptive proof, but was aided and supported by other evidence of a confirmatory character. The burden of proving a release of the surety primarily rests upon him. Stearns v. Sweet, 78 Ill., 446. In Shepherd v. May, 115 U. S., 505, the Federal Supreme Court said on this subject: “But even if it had been shown that Shepherd had become the surety of Walker, it was incumbent upon the former to show, as a part of his defense, that the indulgence given by May to Walker was without his assent,” citing in support thereof Sprigg v. Bank of Mt. Pleasant, 14 Pit., 201; Bangs v. Strong, 7 Hill, 250; Cox v. Mobile, etc., Railroad, 37 Ala., 320. “There was no proof of want of assent. The defense therefore failed.” No issue was made as to the validity of the lien claimed in virtue of the trust deed by any answer filed by any of the parties now seeking to avoid the decree. Heither the ownership of the notes nor the indebtedness was disputed by the answers. The extremity of the defense was the call for strict proof of these matters by defendants in error. Such proof was made and is not challenged. ¡Nowhere was there a denial of the affirmative averment that the rights and interests of all the plaintiffs in error were subject and subordinate to the lien of the trust deed. ¡Nor did the answers, by any denials of charges, claim that the note had been extended without the consent of Lancaster and the lien of the trust deed thereby released. As said in Mehan v. Mehan, 203 Ill., 180, “it is a well recognized principle of chancery that a defendant by his answer must set up the defense he relies upon.” The defense set up was not of an affirmative kind in any. particular. ¡Reliance seemed to have been rested in the ability of defendants in error to make proof of the material averments of their bill. This they did. More, the state of thé pleadings did not require of them. It was held in Amberg v. Natchtway, 92 Ill. App., 608, that where the proof showed an extension of the loan, a failure to set that fact up affirmatively as a defense precluded advantage being taken of it on appeal. Likewise, in Cole v. Shetterly, 13 Ill. App., 420, proof of failure of consideration was held to be abortive as a defense, it not being set up by way of answer. To a similar effect are Crone v. Crone, 180 Ill., 599; Home Ins. Co. v. Myer, 93 ibid., 271; Westlake v. Horton, 85 ibid., 230. By reference to the statement preceding this opinion it will be seen from the covenants of the trust deed there set out, that the rents, issues and profits were pledged for the payment of the indebtedness secured thereby, and that the grantors waived all right and interest to the rents during the period of redemption. The decree of March 20, 1902, ordering the receiver to pay the rent in hand to the bank to apply upon the amount found due by that decree upon the indebtedness secured by the trust deed and the order of April 24, 1902, continuing the receiver in possession during the time of redemption, and directing the income from the mortgaged premises to be applied to the extinguishment of the deficiency judgment against Springer, were warranted by the terms and conditions of the trust deed. We deem it a'sufficient expression of our opinion in this branch of the case to quote the language of Mr. Justice Adams in Krumwiede v. Riedel, Gen. No. 12,345 (not to be reported), and adopt it as decisive: “Counsel for appellees urge that the trust deed does not expressly pledge the rents and profits as security for the indebtedness, and therefore appellant has no lien on them. In the absence of a provision in the trust deed pledging the rents and profits as security for the debt, and where there is a deficiency of the proceeds of the sale to discharge the debt, a court of equity has power, in a proper case, to appoint a receiver of the mortgaged premises and apply the rents and profits thereof in payment of the deficiency. Haas v. Chicago B’g Society, 89 Ill., 498; First Nat’l Bank of Joliet v. Ill. Steel Co., 174 ib., 140; Boruff v. Hinkley, 66 Ill. App., 274; Christie v. Burns, 83 ib., 514; White v. Mackey, 85 ib., 282. “In-this case the makers of the note and grantors in the trust deed, Gustav R. and Katherina Riedel, are both dead. Their heirs, Oscar and William E. Riedel, are not personally liable for the debt secured by the trust deed, and therefore no judgment could be rendered against them for the deficiency, and it is averred in appellant’s answer to Oscar Riedel’s petition, and not denied, that Gustav R. and Katherina Riedel left no estate from which the deficiency can be satisfied. “Under these circumstances, we think this an eminently proper case in which to apply the rents and profits accruing during the period for redemption to the payment of the deficiency.” Lancaster pledged the real estate for the payment of the Springer indebtedness, and to the liquidation of that indebtedness the property should be held to the full measure of the contract covenants securing it. All rights having been waived and relinquished during the time of redemption, this is also an eminently appropriate case where equity should interpose by a receiver for the application of the income of the .security to the payment of the deficiency decree. Haigh v. Carroll, 209 Ill., 576; Ball v. Harske, 202 ibid., 31. The rents were pledged by the terms of the trust deed, and the receiver was properly appointed before decree, and afterwards continued in possession for the purpose of providing a means whereby the deficiency decree might be satisfied. At the time of the appointment of the receiver, after the filing o'f the bill to foreclose, the defendant in error, the Illinois Trust & Savings Bank, was virtually in possession as mortgagee and rightfully so. Its surrender of such possession was predicated on the court’s appointing a receiver, to which action of the court the parties appearing consented, and those who were defaulted and against whom the bill was taken as confessed are likewise bound; and all are now precluded from objecting to the action of the court, which received their assent actually or in contemplation of law by suffering a default. The money loaned under the security of the trust deed the record shows was used toward defraying the cost of the erection of thirteen dwelling houses on the land conveyed by the trust deed, which was under lease to Springer, the maker of the note evidencing the debt. Springer disbursed the total sum of $83,000 in the making of the improvements. The money was loaned from trust funds of the defendant in error, the Illinois Trust & Savings Bank. The benefit of these improvements inured to Lancaster, the fee owner, and on his death descended to his heirs and devisees, subject to the lien of the trust deed. Springer defaulted in the payment of ground rent and in the payment of his note. The heirs and devisees, by a legal proceeding, forfeited Lancaster’s lease to Springer for his default to them. The Savings Bank foreclosed the trust deed for non-payment of the debt which it owed. They were both within their legal rights in the steps which they each took. Springer afterwards conveyed, by quit-claim deed, his wife joining in its execution, his interest in the land and improvements. In equity and good conscience, in law and in morals, plaintiffs in error took whatever title they had, whether under Lancaster’s will, the forfeiture proceeding, or the Springer deed, or all three of them, subject to and burdened with the payment of the debt owing by Springer to the Savings Bank, secured by Lancaster’s trust deed, the money thus secured having been used by Springer in the improvement of the mortgaged land. Such is the covenant of the trust deed, and no legal quibbles or fine-spun hair-splitting legal technicalities will suffice to overcome the contract rights of the parties, or defeat a meritorious claim by an attempt to make callous the conscience of a court of equity. All parties to this writ of error were joined in the partition suit of the mortgaged premises, with other property, under a bill filed August 1, 1898, by ¡Robert ¡H. Lancaster against his co-heirs and devisees and defendants in error. A decree of partition was entered December 22, 1900, fifteen months prior to the entry of the foreclosure decree. The partition decree was entered without objection on the part of plaintiffs in error, or any other party in interest. That decree found in direct terms that the interest of all the parties was subject to and charged with the lien of the trust deed here foreclosed. By the Partition Act it is made the duty of the court to ascertain and declare the interest of all the parties to the cause, and in pursuance of such statutory requirement, the court found and declared the interest of defendants in error under the trust deed as prior and paramount to that of all the other parties. In the partition suit a subdivision and plat of the land was made by the commissioners in partition and the foreclosure sale made in accordance with such subdivision at the request of certain defendants in error, who filed a supplemental answer so requesting the court to order. It seems to us, beyond dispute, that the doctrine of res adjudicata- is an impregnable wall of defense against any attack upon the valid and binding force of the lien created by the trust deed. The lien of the trust deed was pertinent to the inquiry in the partition suit, made so by statute. The decree in this, as in all other respects, bound the parties to it.' Among those parties are the plaintiffs in error, and as to them it stands fast and firm, alike immune from either direct or collateral attack. The partition decree is in evidence and works an estoppel on plaintiffs in error either to attack, impeach or disturb its verities. Plaintiffs in error contend that this writ of error being a new suit, defendants in error, in order to avail of the doctrine of res adjudicata as a defense to this present attack, must plead that fact in bar of the errors assigned. We cannot assent to such a doctrine as applicable to this cause. Such pleading, in our opinion, is unnecessary and would serve no useful purpose. The record is here for review. We find that the decree in partition is a part of that record. Its legal purport and bearing upon the rights of the parties are subjects for our determination on such review. The finding that the partition decree was entered of record is a finding of fact which, failing of objection and exception, stands admitted. Furthermore the decree was a record of the Superior Court, of which that court could take judicial notice. Again it is contended that the lien of the trust deed had been discharged pending an adjudication in the partition cause and prior to the decree making partition and establishing the priority of lien of the trust deed, and that the decree in partition found and determined the rights of the parties as they existed at the date of the commencement of the partition suit, and not as of the date of the decree. It will be observed that more than three years had elapsed between the time it is claimed the lien was released by an extension of the time of payment of the Springer note without the consent of Lancaster, and the entry of the decree in partition. In these circumstances it was incumbent upon plaintiffs in error to set up that fact by supplemental answer in the nature of a plea puis darrien continuance. Failing so to do, the decree concludes them from now availing of that defense, which we have clearly shown is without legal force or merit. We do not regard it as necessary to our disposition of this cause to pass upon the question as to whether or not plaintiffs in error are in the position of a surety who has been indemnified. Whatever may have been the effect in law of their acceptance of the Springer deed, it certainly did not operate to relieve the mortgaged property from the lien of the trust deed given to secure Springer’s debt, the proceeds of which, with other money, was expended in improving the land and enhancing its value. The learned counsel, the usee of certain plaintiffs in error in whose name, but for the counsel’s own use, this writ of error is prosecuted, not only seeks a reversal of the decree, but in his zeal, prompted, it may be, from the dual role in which he appears before us, as an advocate and the sole party beneficially interested, asks for a money decree of $74,143.06 with interest on the items entering into that gross sum at five per cent per annum, without offering to do equity or to abide by any order which this court might deem proper to make, based upon the legal rights and equities of defendants in error, if any, appearing from the record, and without any offer to pay any part of the money of the Savings Bank invested by Springer in building improvements upon the land mortgaged by the trust deed. We cannot but voice our astonishment, in view of the record, of this apparently unconscionable demand. The courts conserve rights; they do not piratically destroy them. Eight and justice has been attained by the decree of the Superior Court. It is therefore affirmed. The cost of the additional abstract of record will be taxed against plaintiffs in error. Affirmed.