Defiance Machine Works v. Gill
175 N.W. 940
Wis.
1920
Check Treatment
Owen, J.

The defendant’s first position, as we understand it, is this: It appears upon the face of the notes that they were given by the Mobile Ploe Company as a part of the purchase price for certain machinery sold by the plaintiff to it, the title to which was reserved in the plaintiff until the full amount of the notes should be paid; the defendant, being the indorser of the notes, is entitled fo be subrogated *481to all security which the plaintiff had; that by bringing this action plaintiff has placed it beyond its power to deliver the security which it had, to wit, the сontract of conditional sale, because the commencement of this action constituted an election on the part of the plaintiff to treat,the conditional sale as an absolute one, and amounted to a waiver of the seсurity "which it had in and by virtue of the contract of conditional sale. We pause here simply to refer to the fact that this defense was not pleaded by the defendant in his answer, lest an inference may be drawn from our silence upon the subject that the plеadings as framed present the defense urged by the defendant. However, we will not consider the question of pleading, but pass directly to the merits of the defendant's claim.

An analysis of his position amounts to this: he admits that he indorsed the notes, but claims that the institution of a suit against him to enforce his liability as an indorser releases him. That is the sum and substance of his claim, his contention being that a vendor of goods, upon a contract of a conditional sale, must elect whether he will retake the goods or sue for the purсhase price, and that when he resorts to one of these remedies he waives his right to resort to the other; in this case the plaintiff, having brought an action to recover against the indorser of the note, waived all security which the contract of conditional sale afforded him, and that by such waiver the indorser is released, because he cannot be subrogated to the security which was in the hands of the creditor. This argument leads to an absurdity which scarcely calls for elucidation, and makes the undertaking оf an indorser under such circumstances a rather innocuous formality. We think a court should hesitate in adopting a course of reasoning which leads to such.a farcical conclusion. However, we do not deem it necessary to pursue the subject furthеr, because of the faulty premise upon which the conclusion must rest, and that is, that a vendor of goods upon a contract of conditional sale waives *482the right to retake the goods in an attempt to enforce collection of the ‍​​‌‌‌​‌​‌‌‌​​​‌‌‌​‌​‌​​​​​​​‌‌​​​​​​​‌‌​​‌‌​​‌‌‌‍purсhase price. This is not the law of this state. It was held in Wiedenbeck-Dobelin Co. v. Anderson, 168 Wis. 212, 169 N. W. 615, that the two remedies were not inconsistent, and that by pursuing one the vendor did not waive his right to the other. This principle is now embodied in statute law by the provisions of the uniform conditional sales act, sec. 1684-u. — 24, Stats, (ch. 672, Laws 1919). Whether the law of this state is controlling as to the rights of the parties to these notes, we must presume that the law of whatever state is controlling is the same as ours, in the absence of allegation and proof to the contrary. It will thus be seen that the defendant’s claim that the commencement of this action constituted a waiver of plaintiff’s right to retake the machinery sold to the principal debtor, Mobile Hoe Company, is not well founded, and that no basis exists for the conclusion for which he contends.

It is defendant’s second contention that it was incumbent upon the plaintiff to plead in its complaint its ability and readiness to turn its security over to the defendant upon the payment of the notes in question. In other words, that its ability and readiness in that behalf was a cоndition precedent to its maintenance of this action, and that, not having pleaded in this respect, the complaint fails to state a cause of action, and that the judgment finds no support in the record. The law unquestionably is that a surety who pays the dеbt of his principal is entitled to be subrogated to the security held by the creditor against the principal debtor. Plankinton v. Gorman, 93 Wis. 560, 67 N. W. 1128; Lowe v. Reddan, 123 Wis. 90, 100 N. W. 1038; State Bank v. Michel, 152 Wis. 88, 139 N. W. 748, 1131. It is also the law that the voluntary surrender on the part of the creditor ‍​​‌‌‌​‌​‌‌‌​​​‌‌‌​‌​‌​​​​​​​‌‌​​​​​​​‌‌​​‌‌​​‌‌‌‍of security which he holds against the prim cipal debtor discharges the surety pro tanto. Ibid. But in order to state a cause of action аgainst the surety it is not necessary to allege that the security originally taken is still *483retained by him and that he is ready, able, and willing to transfer such security to the indorser upon the payment by the surety of the amount of the indebtedness. In other words, it is not necessary for him to make a tender of the security in court-in order to entitle him to maintain an action and recover judgment against the surety. Subrogation is an equitable right in favor of the surety which does not arise until payment has been made. One of the very first essentials to the enforcеment of the right of subrogation is proof of the payment of the debt. Until that is done the right of subrogation is a mere inchoate right and cannot be enforced. Furthermore, it is a right which may be, and often is, waived and not insisted upon by the surety. An action to enforce the right of subrogation is a well known equitable action. It contemplates a bill or complaint in which the facts entitling plaintiff to subrogation are set forth, and the making up of an issue, either of law or of fact, the same as in other actions.

In Knoblauch v. Foglesong, 37 Minn. 320, 33 N. W. 865, in an action upоn a promissory note, where the answer admitted the note and alleged that the note was secured by a mortgage executed to plaintiff by defendants upon real estate belonging to them, and that after the execution of the note and mortgage they conveyed the real estate to another, who, in consideration thereof and as a part payment of the purchase price, thereupon assumed the payment of the note and agreed to pay and discharge the same; and the answer alleged defendants’ willingness to pay, and offer to pay, the note upon the assignment by plaintiff to them of the mortgage and the indorsement and delivery to them of the note, and demanded that plaintiff have no judgment until he shall have deposited in the court, to be delivered to defendants upon payment by them of the judgment, the mortgage duly assigned to them, and the note duly indorsed to them, it was held that the judgment might properly so provide. But it ■ was held to the contrary in Barton v. Moore, 45 Minn. 98, *48447 N. W. 460, in the absence of all allegations in the answer showing defendants to be entitled to subrogation ‍​​‌‌‌​‌​‌‌‌​​​‌‌‌​‌​‌​​​​​​​‌‌​​​​​​​‌‌​​‌‌​​‌‌‌‍and a prayer for such relief. While we do not find any other authority holding to the doctrine of Knoblauch v. Foglesong, supra, we may say, in passing, that it seems to us to be proper and appropriate practice and in the interest of speedy termination of litigation and the disposition of all rights in a single action. The right of subrogation presents a justiciable issue which should be made up and brought to the attention of the court by proper and orderly pleading. In no other way can the court know that the surety insists upon the right. More than this, all parties.' interested should be before the court, and if there are other parties to the security claimed by the surety, especially if their interests would be prejudicially affected by transference thereof to the surety, they should be given an opportunity to be heard. 37 Cyc. 388. In the present case the pleadings tendered no issue whatever as to the right of the defendant to be subrogated to the rights of the vendor under, the contract of conditional sale. He hаs seen fit to rest upon an answer which practically amounts to a general denial. He has set forth no facts entitling him to subrogation and has done nothing to raise1 the issue or to bring it to the attention of the court. The information concerning this security, if such it may bе called, disclosed by the record is exceedingly meager. That it exists at all is to be implied only from the recital in the notes, and we are wholly uninformed concerning the nature of its provisions. It may be seriously questioned whether a contract of conditional sale is security to which an indorser such as the defendant is entitled upon payment of the note. That it is not a pledge or lien in the nature of a chattel mortgage is well settled. W. W. Kimball Co. v. Mellon, 80 Wis. 133, 48 N. W. 1100; Winton M. C. Co. v. Broadway A. Co. 65 Wash. 650, 118 Pac. 817, 37 L. R. A. n. s. 71; Harkness v. Russell, 118 U. S. 663, 7 Sup. Ct. 51. It iá an executory contract of sale, by the *485terms of which the right of possession vests in the vendee but the title remains in the vendor until the fulfilment of conditions imposed upon the vendee (generally the payment of the-purchase price), when the title ipso facto passes to the vendee by virtue of the original agreement, performance of which on the part of the vendee the surety has guaranteed. We do not think it entirely clear that when the contract itself, performance of which on the part of the vendee has been guaranteed by the surety, provides that upon payment of the purchase price, for instance, title shall immediately vest in the vendee, the surety can succeed' to the rights of the vendor under the contract. . Is not the surety, by reason of his relation with the contract, which provides that upon payment of the purchase price the title shall pass to the vendee, estopped from claiming otherwise? No doubt persuasive arguments ‍​​‌‌‌​‌​‌‌‌​​​‌‌‌​‌​‌​​​​​​​‌‌​​​​​​​‌‌​​‌‌​​‌‌‌‍may be made upon either side of the question. Its decision will not here be attempted. At any rate, whether the surety is entitled to subrogation under such circumstances is certainly a matter of considerable importance to the 'principal debtor, who should be given an opportunity to be heard, and he is not a party to this litigation. It seems clear that the question of the defendant’s right to succeed to the interests of the plaintiff under the contract of conditional sale has not been raised in this case, and the defendant is in no position to urge error on the part of the trial court for its failure to render the conditional judgmеnt for which appellant contends.

As above stated, defendant has also appealed from the order of the circuit court denying his motion that the civil court of Milwaukee county be ordered to grant a new trial in said action. Clearly the motion wаs properly denied. The circuit court for Milwaukee county is vested with no authority to make such an order. The power of the circuit court in the premises was to affirm, or modify and affirm, the judgment of the civil court, .unless by reason of manifest prejudicial error in the trial of the action in which such *486judgment was rendered any party thereto has not had a fair trial thereof in the civil court, in which case the judgment should be reversed and a new trial had in the circuit court. Sec. 28, ch. 549, Laws 1909.

The most liberal power possessed by trial courts to grant a new trial is that conferred by the provisions of sec. 2879, Stats., to grant a new trial upon newly discovered evidence when a motion therefor is made within one year from the verdict or findings. This motion was not made until nearly two years had expired аfter the date of the findings. Neither was it made in the court that tried the case. We know of no statutory provision that can be stretched into anything like a sanction of such procedure.

It is urged that under the provisions of sec. 2405m, Stats., this court has power to revеrse the judgment and remand the case with instructions to grant the motion. That section authorizes this court, where it appears from the record that the real controversy has not been fully tried, or it is probable that justice has for any reason miscarried, to reverse the judgment ‍​​‌‌‌​‌​‌‌‌​​​‌‌‌​‌​‌​​​​​​​‌‌​​​​​​​‌‌​​‌‌​​‌‌‌‍or order appealed from regardless of the question whether proper motions or objections or exceptions appear in the record or not, and in case of a reversal direct the entry of the proper judgment, or remand the case to the trial court for a new trial, and direct the making of such amendments in the pleadings and the adoption of such procedure in that court not inconsistent with the statutes governing legal procedure as shall be deemed nеcessary to accomplish the ends of justice. It would be a perversion of the purpose of that statute and a clear abuse of the power granted this court to give it the construction tirged. This court has no power to confer power uрon inferior courts. Their power must be derived from the constitution and the statutes. True, sec. 2405m confers upon this court broad discretion in the matter of making disposition of cases pending before it, but tha,t section does not authorize this court to vest inferior сourts with additional powers, nor can *487this court authorize or compel inferior courts to exercise jurisdiction outside of the powers conferred upon them. This motion not having been made in the proper court, nor within the time required by statute, was properly denied. It follows that the judgment and order appealed from must be affirmed.

By the Court. — Judgment and order affirmed.