47 App. D.C. 296 | D.C. Cir. | 1918
Lead Opinion
delivered the opinion of the Court:
First. The declaration opens thus: “The plaintiff, (’liarles F. Murphy, guardian of Raymond F. Gheen, a minor,” and then alleges that the note was indorsed “to the plaintiff, who is now the owner and holder thereof.” In the affidavit of merit
Second. Was the defendant released by the extension of the time of payment ?
(a) We first inquire into the effect of the agreement by Re Baslmmtt to assume and pay the note. Wolfe says it made De Lashniutt the principal debtor, and him his surety. This was undoubtedly the result as between Wolfe and De Lashnutt (Union Mut. L. Ins. Co. v. Hanford, 143 U. S. 189, 36 L. ed. 118, 12 Sup. Ct. Rep. 437), but how was it with respect to the mortgagee! In some jurisdictions it is held that the change is effected as to the mortgagee also, but even there, it never takes place until the mortgagee acquires knowledges of the arrangement between the grantor and grantee. The Supreme Court of the United States in the Hanford Case, re
(b) But though it were, otherwise with respect to the necessity of knowledge on the part of the mortgagee, it would be1 immaterial so far as this ease is concerned, because, under the Federal rule, which is binding on us, the mortgagor does not, by virtue of an arrangement with his grantee according to
(c) Nevertheless, it is urged with much earnestness that by the extension Laura Green recognized the arrangement between Wolfe and !)e Lashmutt. and thereby created the former a surety. If this be true, the same act by which she transformed him from a principal into a surety released him from all liability as surety. We cannot assent to such a proposition, because it is unreasonable, and we are admonished by courts and text-writers not to adopt a construction of either conduct or documents which involves an absurdity. People v. New York C. R. Co. 24 N. Y. 485-488; Story, Const. §§ 400-405; Cooley, Const. Lim. 69—70.
Moreover, the extension was granted, not at'the time of the transfer from Wolfe to De Lashmutt, but nearly two years
(d) The Supreme Court of the United States has held in several instances that an extension of payment under circumstances similar to those in the present case did not release the maker of the note. Cucullu. v. Hernandez, supra, is a case in point. Cucullu gave his notes to Villavaso,. secured by a mortgage on a plantation. Afterwards he sold the plantation to Walker, who assumed to pay the notes to Villavaso. The' latter, without the consent of Cucullu, agreed with Walker for an extension of the time for the payment of the notes. This, Cucullu asserted, released him, because, as he averred, he became Walker’s surety by virtue of the assumption agreement between him and the latter. The court rejected his contention and said: “It cannot, we think, be reasonably claimed that a debtor is converted into a surety by his creditor’s acceptance, of an additional promise from a third person to pay the debt due him by his debtor. There is no element of suretyship in such a contract, unless it be that the additional debtor might be regarded as surety for the original debtor. The relation between the creditor and the original debtor is not changed by such an arrangement.” In Shepherd v. May, supra, Shepherd gave May his note and secured it by a trust deed on real estate. Before the maturity of the note, Shepherd conveyed the lot to Walker. May, at the request of Walker, gave three extensions, two for a year each and one for nine months, on Walker’s agreement to pay interest at the rate specified in the note. There was no evidence that Shepherd consented to these extensions. Walker having failed to pay the interest on the last extension, suit was brought by May against Shepherd upon the note. Stating Shepherd’s defense, the court said: “The first contention "of the plaintiff in error is that, by reason of the transaction stated in the bill of exceptions, Walker became
Much stress is laid by the appellant on certain expressions found in Keller v. Ashford, 133 U. S. 610, 33 L. ed. 667, 10 Sup. Ct. Rep. 494, to the effect that a payee “who has in no way acted on the faith 'of, or otherwise made himself a party to, the agreement of the mortgagor’s grantee to pay the mortgage,” is not affected thereby. It is urged that the payee in the present case did act on the faith of the agreement between 'Wolfe and lie Lashmutt, or at least made herself a party to it. We have already shown that she did neither, because she liad no knowledge of the existence of the agreement. Therefore this language does not- fit her caso. Eut if we grant she did have knowledge, there is nothing in the words quoted which warrants the argument drawn from them by the appellant. In that case Thompson gave several notes secured by mortgage's on land, which he subsequently conveyed to Ashford, who assumed payment of the debt. One of the notes not having been ¡laid when it became due, Keller, who then held it, brought action directly against Ashford upon his agreement to pay.
An extract from a decision of Chief Justice Alvey, when on the Maryland court of appeals, in Chilton v. Brooks, 72 Md. 554, 20 Atl. 125, is pointed to with much confidence as showing conclusively that the Keller Case is not- open to the construction which we have placed upon it. The learned jurist in that decision gave a quotation from another case, to the effect that where the mortgagor, after giving the mortgage, conveyed the land and later paid the debt, voluntarily or by compulsion, he was thereby “substituted to the mortgaged security as it originally existed, with the- right to proceed immediately against the land for his indemnity;” and then- added that the
Whether, therefore, we consider the first class of authorities, or the second, — the Federal, — the outcome must be the same. Under the former’, the failure by the appellant to show that Groen knew of the assumption of the debt by De Lashmutt at the time she granted the extension renders unavailable his claim that, because he ivas a surety of I)e Lashmutt, she released him by the extension. And according to the latter, which are controlling, even though he had shown such knowledge on her part, he could not succeed, because he was not as to her a surety.
Third. Finally it is urged as an equitable defense, under the Act of Congress of .March 3, 1915, that because of the extension, and the consequent failure to foreclose when the note became due by its original terms, the defendant was damaged, and is entitled to have his damages considered in determining the amount due upon the note. But he, not being a surety, has no right to complain on that score. The holder of the note was not obliged to .foreclose. He could, as he did, pursue his remedy at law. Jones, Mortg. (itli ed. sec. 1220. When the note became due, defendant could have paid it and then looked for reimbursement to J)e Lashmutt upon his agreement of assumption. The extension, to which defendant ivas not a party, did not bind him, and could not in any way affect his rights against. I)e Lashmutt. He had precisely the same rights after the extension as he had before. Denison University v. Manning, 65 Ohio St. 138-151, 61 N. E. 706. If, therefore, he
The judgment of the court below is right and it is affirmed, with costs. A firmed.
Dissenting Opinion
dissenting:
Plaintiff, appellee here, declared upon a promissory note under seal, dated March 10, 1910, signed by the defendant Richard S. Wolfe, appellant here, and payable two years after date to the order of one Harold L. Johnson. The declaration further set forth that “on the 1st day of March, 1932, one Laura Green, then the holder of said note, agreed in writing with the defendant Thomas J. De Lashmutt, then the owner of the property upon which said note was secured, to extend the time of the payment of said note to March 10, 1915.” The note was attached to and made a part of the affidavit, of merit. It is headed, “Coupon Rond Secured by Deed of Trust on Real Estate,” and on the margin thereof is, “Secured by Deed of Trust (rec. deed book No. 123, p. 177) on brick dwelling, and lot 70x100 ft. on Columbia turnpike situated in Arlington district, Alexandria county, Virginia.” In addition to indorsements of interest payments, there appears the following indorsement :
Washington, D. C., March 3, 393 2.
The time of payment of this note is extended to March 10, 1915, with interest thereon at the rate of (5 per centum per annum, payable semiannually. Said note and deed of trust securing the same are to remain otherwise unqualified and in
(Signed) Tlios. J. Do Laslmmtt,
Present Owner of 1’roperty.
Airs. Laura Green,
Holder of Note.
.Defendant demurred to the declaration upon the ground that upon its face plaintiff had .stated no cause of action. The demurrer was overruled, whereupon plaintiff filed .four pleas, in 1lie second of which it is averred that De .Lashmutt purchased the mortgaged property and agreed to pay the indebtedness secured by said deed of trust; that rvitli full knowledge of these facts Laura Green, the then holder and owner of the mortgage note, without the knowledge or consent, of the defendant and for a valuable consideration, extended the time of payment of said note, and that plaintiff took the note subsequent to the extension and with full knowledge.
In the fourth plea, interposed “by way of equitable defense as provided by statute,’’ (see sec. 274b, Act of A! arch 3, 1915, 38 Staff at L. 950, chap. 90, Comp. Staff 3910, sec. 1253b) the facts set forth in the second plea are reiterated, and it is further alleged that in equity and good conscience defendant is entitled to have, the real estate security exhausted before attempt is made to enforce any liability against him; “that said real estate has never been sold under said deed of timst, but on the contrary, although said note originally fell due March 10. 1912, the said deed of trust securing the same was never foreclosed, hut the said real (‘state has been allowed to remain in the possession of the said De Lashmutt, who has been allowed to receive the rents and profits thereof, or to have the beneficial use and occupation thereof; and this defendant further says that, during the period of delay aforesaid in the enforcement of said security, the value of said real estate lias very greatly diminished, and he says that, had said real estate been sold under said deed of trust when the same first became due and payable, such sale would have produced a sum sufficient to pay said indebtedness: whereas now, after a lapse of about four
In the affidavit of defense the facts set forth in these pleas are substantially incorporated. That such was the understanding of the parties at the hearing before the trial court is apparent from the opinion of that court, which is appended to and made a part of appellee’s brief; for it therein is assumed that, when the extension of the note was made by Laura Green, she knew that its payment had been assumed “in the granting deed” by Do Laslnnutt, the grantee of the mortgagor. That this is so is further apparent from the briefs and arguments in this court; for in the brief of appellee arc the following statements: “The defense sought to bo made in defendant’s affidavit is bid an elaboration of the points made in Ike several pleo.s. * * * It appears that Wolfe, the maker of the note, had sold the property upon which it- was secured to De Laslnnutt-, who, as part consideration, assumed payment thereof.” Moreover, the argument at bar proceeded upon the assumption that the extension of the note by Laura Green was with full knowledge that De Lashmutt had assumed and agreed to pay it. And yet this court now apparently questions the technical sufficiency of the affidavit of defense, — a point not suggested by the trial court, by counsel in the briefs, or in the argument at bar. Had such a contention been made below it would have required but a moment for defendant to have made his affidavit conform literally to his pleas. We have said repeatedly that affidavits of defense should be liberally construed, to the end that no real defense be foreclosed summarily. It is my view, therefore, that this court should now squarely meet- the real issue here, which is whether the giving of time by the mortgagee to the purchaser of the equity of redemption, who has agreed with his grantor to pay the mortgage debt., the mortgagee having knowledge of that fact and the extension being given without the knowledge or consent of the mortgagor, releases the mortgagor.
As I view tlio question it is a very simple one. AVlien the grantee of the mortgagor assumes and agrees to pay the mortgage debt he becomes, as between the parties, the principal and' his grantor the surety. But- the mortgagee is under no obligation to change the relationship between the mortgagor and himself. If, however, the mortgagee acts on the faith of, or otherwise makes .himself a party to, the agreement between the mortgagor and his grantee (Keller v. Ashford, 133 U. S. 610, 625, 33 L. ed. 667, 673, 10 Sup. Ct. Rep. 494), or assents to the agreement, or does or omits any act on the faith of it ( Willard v. Wood, 135 U. S. 309, 314, 34 L. ed. 210, 213, 10 Sup. Ct. Rep. 831), the mortgagor’s grantee becomes the principal as to the mortgagee as well as to the mortgagor, and the giving of time to the grantee without the assent of the grantor releases the latter from personal liability. In the present case the mortgagee not only recognized the agreement between the mortgagor and his grantee, but indorsed on the note itself, for a valuable consideration, an extension for three years. But one interpretation can be placed upon the words of this indorsement, that “said note and deed of trust securing the same are to remain otherwise unqualified and in full force,” and that is that the debt and the mortgage have been extended for the period named. And yet the majority opinion holds that the mortgagor, appellant here, could have paid the note at the time it originally was to mature, and then immediately have instituted foreclosure proceedings against his grantee. My view is that the rule is' directly to the contrary. There was but one debt, evidenced by this one mortgage note, and when the mortgagee extended the time of payment of that debt he thereby
Believing that the rule announced in the majority opinion is inequitable and opposed to the decisions of the Supreme Court, of the United States, I respectfully dissent.
.Mr. Chief Justice Covington, of the Supreme Court of the District of Columbia, sat with the Court in the hearing and determination of this appeal, in the place of Mr. Justice Van Oes dei„