189 N.W. 251 | N.D. | 1922
Lead Opinion
Statement.
This is an action upon a promissory note. The plaintiff is a resident of Minneapolis; the defendants reside in the state of Washington. Jurisdiction was secured by attaching certain real estate
At the commencement of the trial, the defendants moved to amend the answer by alleging that at the time of making the note it was agreed that the defendants should not be held personally liable thereon, and that the plaintiff would rely solely upon the real estate security. Upon objection of the plaintiff the court overruled the motion. Later, at the trial, the defendants again moved to amend, as above stated, and, further, that the note was delivered conditionally upon the agreement that plaintiff would not hold the defendants personally liable, that he Would rely solely upon the real estate security, and that defendants would not have delivered such note excepting upon such representations and agreements. Again, the trial court, upon objection made, overruled the motion. The court stated that the defendants could show a conditional delivery but they could not vary the terms of a written instrument; that if the defense was a good defense the court would allow it. The court suggested that, the defendants should make an offer of proof. The defendants requested that the court permit them to introduce their testimony over objection so that they might not be compelled to again retry the case. The trial court, expressing doubt upon the questions, stated that he would allow the introduction of the testimony. Later, when testimony was offered concerning a conditional delivery, the court stated that he had allowed the first amendment offered; that the amendment concerning the conditional delivery was still another offer which the court would reject. Defendants then offered to prove that at the time of delivering the note the plaintiff knew and agreed that the defendants were signing such
Mrs. Nelson gave testimony as follows: The defendants (makers of the note) are husband and wife. She is the mother of defendant A. L. Nelson. She has had all the transactions with the plaintiff concerning this note and the property. The plaintiff never saw' the defendants. There was a farm in Polk county that stood in the name of the son. She made the arrangements to trade this land for the Minneapoils property, which was transferred by the plaintiff and the title placed in her son’s name. The note in suit-was given as a part of the purchase price. At the time of the original transaction, it was agreed between her and plaintiff that her son and daughter-in-law should not be held personally liable upon the note; that the plaintiff would rely solely upon the real estate security. In making this transaction she expressly told the plaintiff that she did not want her son and his wife to be held personally liable on the note, and the plaintiff made her understand that he would depend upon the lien. Later she made a deal with Rev. Scharf to trade her equity in the Minneapolis property for some land in St. Louis county. The Reverend wanted the money owing Leach to be paid. She went to the plaintiff and explained about her deal with the Reverend. She told him that she did not want her son and his wife to be held liable for any part of this debt. He stated that they wtmld not be held liable; that he was perfectly satisfied with the mortgage; that the property was worth $8,000 or $9,000, and he was perfectly satisfied to take the lien upon the property. She then gave the Reverend a note for $400 and one for $600. She has paid the $400 note, but not the other. She told him that the Reverend was taking over the property subject to the mortgages. She gave these notes to the Reverend instead of paying off this $1,000 mortgage, and the Reverend agreed to pay such $1,000 mortgage. That,
The jury returned a special verdict as follows:
I. “Did the parties to this action make and enter into an oral agreement to the effect that the plaintiff would release and discharge the defendants from any liability under the note in issue and look to the real estate mortgaged for payment of the note?” Answer: “Yes.”
II. “If such agreement was made, was it made at the time the note was executed or was it made some time thereafter ?” Answer: “At seme time after the execution of the note.”
III. “Was the failure of the plaintiff to redeem from the foreclosure of the first mortgage due to his own carelessness and neglect?” Answer: “Yes.”
Later, upon motion of the plaintiff, trial court ordered judgment for the plaintiff for the full amount of the note, with interest. Accordingly, judgment was entered. The defendants have, appealed therefrom.
In a memorandum opinion, the trial court based its order largely upon the ground that the defendants made an oral agreement after the execution of the note to release their personal liability thereon, and that,
The defendants contend that the trial court erred in not permitting the amendments offered, and in determining, pursuant to the evidence and the findings of the jury, that defendant’s liability upon the note was not discharged.
Decision
During the trial, for purposes of receiving evidence, the trial court, in effect, allowed the amendment to the complaint concerning the agreement not to hold personally liable the defendants, and rejected the proposed amendment concerning a conditional delivery. This court has heretofore held' that the power to amend pleadings is inherent in the courts where there is no jurisdictional defect; that the statute (§ 7482, C. D. 1913) is merely declarative of this view (Morgridge v. Stoeffer, 14 N. D. 430, 434, 104 N. W. 1112; Rae v. Railway Co., 14 N. D. 507, 510, 105 N. W. 721); that the authority vested in courts to allow amendments to pleadings is conferred to promote the ends of justice, and should be liberally exercised by the courts to that end; that the controlling principle in determining an application to amend is, or should be, whether the proposed amendment, if ahowed, would further the ends of justice, and, further, that an amendment should be allowed if it be in the interests of justice and if it does not change substantially the claim or defense. Northwestern Mut. Savings & L. Ass’n v. White, 31 N. D. 348, 359, 153 N. W. 972; Patterson Land Co. v. Lynn, 27 N. D. 391, 416, 147 N. W. 256. It is evident upon the record in this case that the interests of justice require the submission of the issue tendered concern* ing plaintiff’s agreement if such constitutes a defense. Further, it is ap* parent that the trial court would have so permitted if it had considered such issue sufficient to constitute a defense.
The plaintiff, however, was entitled to proper notification of the issues with which he would be confronted, and, if necessary, to an opportunity of preparing to meet such issues. The practice of tendering new issues from time to time throughout the course of the trial, of course, may not be commended. Nevertheless, amendments should be favorably considered where they serve to present the real determinative issues without prejudice to the rights of the parties and to aid in the administration of justice and the expedition of litigation.
The Negotiable Instruments Law provides that in the hands of any holder, excepting a holder in due course, the note is subject to the same defenses as if nonnegotiable. Section 6943, C. L. 1913.
Upon the record, facts might be found by a jury which would warrant the existence of legal relations between the parties other than that evidence by the contract contained in the note alone.
Concerning the mortgaged real estate, the parties occupied the relation of mortgagors and mortgagee. When the defendants, as mortgagors, sold and transferred the mortgaged property, and the purchaser assumed and agreed to pay the mortgage debt to the plaintiff, the purchaser, then, as to such debt, became the principal, and the mortgagors, the sureties. 27 Cyc. 1356; Jones on Mortgages, § 741. The mortgagors then possessed a right or claim in the mortgaged property to the extent of the plaintiff’s mortgage. If they had been compelled to pay the mortgage debt, they would have been subrogated to the mortgagee’s rights. 27 Cyc. 1359. “The grantee, as soon as the mortgagee knows of the arrangement, becomes directly and primarily liable to the mortgagee for the debt for which the mortgagor was already liable to the latter, and the relation of the grantee and the grantor, towards the mortgagee, as well as between themselves, is thenceforth that of principal and surety for the payment of the mortgage debt.” Union Mut. L. Ins. Co. v. Hanford, 143 U. S. 187, 190, 12 Sup. Ct. 437, 438 (36 L. ed. 118, 120); Johns v. Wilson, 180 U. S. 440, 21 Sup. Ct. 445, 45 L. ed. 613, 617. See 27 Cyc. 1356; Iowa Loan & Trust Co. v. Schnose, 19 S. D. 248, 103 N. W. 24, 9 Ann. Cas. 255; Herd v. Tuohy, 133 Cal. 62, 65 Pac. 139; Fanning v. Murphy, 126 Wis. 545, 105 N. W. 1056, 4 L. R. A. (N. S.) 666, 110 Am. St. Rep. 946, 5 Ann. Cas. 435; Pratt v. Conway, 148 Mo. 291, 49 S. W. 1028, 71 Am. St. Rep. 602; Jones on Mortgages, § 740.
Upon being advised that the purchaser had assumed the mortgage debt, the plaintiff knew, as a matter of law, that he might maintain an
If it be conceded that the plaintiff was not bound to recognize this relation so as to discharge the mortgagor as to the principal debtor (Jones on Mtgs. § 741), yet, upon the record, the facts are sufficient to warrant a finding that the plaintiff, by his consent and voluntary action, did so discharge the mortgagors as principal debtors, and did recognize the relation of suretyship; that voluntarily the plaintiff agreed to not hold the mortgagors personally liable for the mortgage debt; that voluntarily he agreed to look solely to the mortgage lien for the payment of such mortgage debt; that the mortgagors, through their mother, made settlement with the purchaser through notes for such mortgage debt; that one of these notes, in fact, since has been paid; that through such voluntary agreement and consent of the plaintiff the defendant mortgagors parted with title, notes, and money. Thus might the mortgagors be lulled into a sense of security that both their rights and their obligations would be protected by the action of the plaintiff, satisfied to rely wholly upon the mortgage lien. Thus might they, with full reliance upon plaintiff’s agreement, refrain from keeping guard to see that the mortgage security was enforced. Such an agreement was valid at least to the extent of recognizing the relation of the mortgagors, as sureties, upon the transí el- and the assumption of the mortgage debt. First Nat. Bank v. Watkins, 154 Mass. 385, 28 N. E. 275. It recognized and gave emphasis to this secondary liability of the sureties in equity by consenting to look solely for payment to the mortgage lien. Tripp v. Vincent, 3 Barb. Ch. (N. Y.) 613.
The plaintiff contends that his consent and agreement, if so made, amounted to a renunciation of the mortgagors’ personal liability upon the note, and as such it must be in writing, pursuant to § 7007, C. D. 1913; that principles of novation apply, to the transaction, and that a novation of the debt could not occur except by a contract in writing, since the note did not become due until two years after its execution. These contentions overlook the legal relations established between the parties
Concurrence in Part
(concurring in part and dissenting in part). I concur in the order of reversal and remand, and in a portion of the reasoning upon which the conclusion is based in the principal opinion. There are two propositions, however, upon which I am not in accord with the views of the majority of the court as expressed in that opinion. It is held that the trial court should have permitted an amendment to the answer, submitting an issue as to a conditional delivery of the note. The first amendment offered was to the effect that it was agreed at the time of the giving of the note that the defendants were not to be held personally liable thereon, and that plaintiff would rely solely upon the real estate security referred to in said note to make payment of the indebtedness thereby represented. The court, while denying this motion to amend in the first instance,, afterwards permitted evidence to be introduced as though the amendment had been allowed. Later, during the progress of the trial, the defendants’ attorney sought to show that the defendants sent the note in suit to Mary A. Nelson, mother of the defendant A. J. Nelson, to be by her delivered to the plaintiff on condition that the plaintiff would agree to look solely to the real estate security for payment. This evidence was objected to and the objection sustained on the ground that neither the answer nor. the amendment, which the court had in effect allowed, submitted any issue as to conditional delivery. Whereupon the defendants’ attorney made an offer of proof to the effect that the defendants authorized Mary Nelson to deliver the note to Leach if he wiould agree to rely solely on the real estate security, that this condition was communciated to Leach, and he agreed thereto.
The original answer submitted as defenses a release from personal liability on the note through the sale of the equity of redemption in reliance upon a release and discharge from further liability on the note. Also that plaintiff’s loss, if any, was due to his own carelessness and neglect in allowing the property to be foreclosed without making redemption. I can see no error in the refusal of the trial court to permit the amendments offered at the trial, in so far as there was a refusal. In my opinion, neither of the amendments presents a defense; the first, because the evidence in support of it would contradict the terms of a written instrument. The written promise of the defendants is a promise to pay money, and of course evidences a personal obligation to that effect.
The nature of the question is not altered, in my opinion, by the statement of substantially the same defense in terms of conditional delivery, as was done in the second amendment offered. The defendants offered to show that the condition was assented to. Hence, at the time the note was in fact delivered, it was delivered to become .as effective as it ever would be at any subsequent time, and it would never become effective as an obligation to pay money. Nothing could happen in the future that would enlarge or restrict its effect under the agreement sought to be shown. The agreement, being inadmissible because repugnant to the contract contained in the note, does not become any the less repugnant by being stated in terms of conditions. To illustrate: If a contemporaneous agreement between A, and B. that a certain note delivered by A. to B. might be dischárged by the delivery of a cow cannot be shown because repugnant to the note, neither could it be shown that, at the time the note was delivered, A. stated that he would not deliver it unless B. would agree to accept a cow in lieu of the money. The note being in fact delivered, the agreement in the second instance is just as repugnant to the note as in the first. The essence of the whole matter is that the so-called parol evidence rule is supposed to prevent encroachment upon the definite terms of written agreements by showing that wholly different terms were in fact agreed upon. • It seems to me to be clear that the trial court did not err in denying the amendments.
There is another holding in the principal opinion with which I am not in accord. It is said that it was the plaintiff’s duty to preserve and protect the security so that the sureties might not suffer loss, and that if through his neglect there was loss, the plaintiff might be held ac
I am of the opinion, however, that the note in suit was legally discharged as the personal obligation of the makers if, at the time the property was sold, it was agreed between the parties that the payee would look to the property alone, and this was followed by a settlement on the basis of such contract. Under facts somewhat similar to those in the instant case, the Supreme Court of Massachusetts said (First National Bank v. Watkins, 154 Mass. 385—387, 28 N. E. 275, 276:
“An agreement to ‘look to the mortgaged property alone for the payment of the note’ would be, in effect, an agreement to discharge the defendant from all liability upon it, which if made upon a valuable consideration, would be a good defense to a suit for payment of it; although a new and independent contract, it would be unreasonable to permit a plaintiff who has made such an agreement to collect his note of the maker, and to compel the maker to seek his remedy by a suit to recover back from the payee as damages the sum which was paid. * * *
“If there was an agreement purporting to be made in reference to the defendant’s sale of the equity of redemption in the mortgaged property in the form of an offer that the defendant might, if he chose, refrain from paying the note, and from taking measures to secure payment of it out of the proceeds of the mortgaged property, and that the plaintiff would look to the property alone for the payment of it, and the defendant, relying upon the offer, did refrain from making any effort to have the property applied to the payment of the note when it became due, and thereby suffered detriment, there would be a sufficient consideration for the agreement.”
I agree that § 7007, C. T. 1913 (§ 122, Negotiable Instruments Taw), requiring renunciation to be in writing, does not apply. In my opinion, however, § 7004 (§ 119, Negotiable Instruments Taw), which provides that a negotiable instrument may be discharged “by any other act which will discharge a simple contract for the payment of money” does apply.
