First National Bank of Lewiston v. Williams

BERRY, J.

(After Stating the Facts.) — The alleged grounds ■of error, mostly occurring on the trial in the findings of the ■court, in refusing a new trial, and in the judgment, will more fully hereafter appear. The case was. tried by the court without ■a jury. The evidence received upon the trial was introduced and given without objection. Being so given, the question of its admissibility, if objected to, does not arise. The complaint shows the note to have been past due when transferred by Shaw, the payee, to the president of the plaintiff; that on the same day he transferred it to his bank; and that both transfers were by ■“assignment.” Whatever equities existed in favor of the appellant against the note, or the right to sue upon the note in the hands of the original payee, continued to exist against it in the hands of this plaintiff. It is proper, then, in the outset, to inquire as to the rights of the appellant, as against the original payee of the note. The obligations of Shaw will be considered as equally the obligations of the plaintiff. On the trial, when the plaintiff had rested his case, the appellant, the defendant below, called John P. Vollmer, who testified that he had been president of the plaintiff corporation “ever since the bank was •organized”; identified the note; and, on being shown another paper, said: “That is a mortgage executed by defendant Leiand to A. J. Shaw, the payee named in this note. I notice there is no seal of party executing it on this mortgage. It is in the same condition, as to execution and acknowledgment, as when I received it from Mr. Shaw. It may have been at the time I had transaction with Mr. Shaw that I noticed lack of seal. I never mentioned or said anything to Williams about there being any ■defect in the mortgage.” Mortgage introduced in evidence by ■appellant. Alonzo Leiand testified: “This is the note executed by me to A. J. Shaw. This is my signature. The other signature is that of Williams. I am principal debtor on the note. Williams signed it as surety only; and it was signed by Mm on condition that I should execute, to secure the payment of the note, a valid first mortgage upon real property. That was a condition of his signing the note. That condition was known also by Mr. Shaw, the payee of that note, and the agreement was *674 assented to by him at the time. It was on those conditions, and under that agreement, that defendant Williams signed the note. That is my signature, and I executed that document, and supposed it to be a mortgage upon the land.” M. M. Williams; the appellant, testified: “I am defendant sued in this action. I signed this note as surety only. I signed it on condition and under the agreement that Leland should secure the payment of it by a first mortgage on property, and he would get the money from Mr. Shaw, and I would have only any balance to pay that the property did not bring. Mr. Shaw, the payee, knew of the agreement and condition of my signing the note. I don’t know whether the mortgage was executed or not. Mr. Shaw called right away, and told me he had the mortgage upon the land. Mr. "Vollmer, nor any officer of the bank, ever told me the mortgage was defective, or said anything about the mortgage.”

There was no evidence in any way controverting either of' these facts. Each was within the issues made by the pleadings. The judge in his findings, though specially requested by the defendant, refused to find upon either of these facts, except the-fact that the mortgage to secure the note was, at Williams’ request, given by Leland. To this refusal to find (1) as to the conditions on which the defendant Williams became a maker of the note, also as to the connection of Shaw with that agreement,, and signing of the mortgage; (2) as to the condition of the mortgage as to seal, and what lands it was upon; (3) as to the-knowledge of the plaintiff, in becoming the successor of Shaw in the ownership of the note — the appellant excepted. This raises the question of the materiality of the issues involved in the points;, or any of them, on which the judge refused to find. The description and amount of lands covered by the mortgage-are shown in that exhibit, as well as its object to secure this note. The evidence, as we have seen, will warrant findings only as-claimed by the appellant. Contrary findings on either point,, upon the evidence, could not be made. Those points are: 1. Was Williams only a surety upon that note ? 2. Did Shaw, in taking that note, know what relations Williams held to it? 3., And for what purpose the mortgage was executed ? And did he become a party thereto, by knowing the agreement between the- *675 principal and surety on the note, assenting to the agreement, and accepting the mortgage as security for the note? Of course, if he did, he was bound in good faith not to defeat the measures which the appellant had taken for his protection, and which Leland had placed in Shaw’s hands as special security for the note. The mortgage security became and was part of the contract between Shaw and the makers of this note. Besides the fact of its being the condition of appellant’s signing, the payee of the note held it as a lien on property of the principal debtor, to which it was his duty to look before resorting to the surety on the note. If this were not an elementary principle of law, it became a controlling principle in this ease, by virtue of the agreement between the makers, known and assented to hv Shaw, and by his act in accepting the mortgage, pursuant to such agreement, together with the note. It is clear that those facts are material to this defendant. The counsel for respondent contends that, where there is no material issue tendered by the pleadings, findings on such matters will not be required. But the amendment to defendant’s answer does tender these issues. The matter was material, and evidence was given upon it without objection, and was so submitted to the court as a part of the defendant’s case. The authorities are numerous and conclusive that a failure to find upon a material issue, where the same is not in effect waived, but is requested, is error, and ground for reversal. (Hayne on New Trial and Appeal, secs. 239, 240, and cases cited; Porter v. Muller, 65 Cal. 512 , 4 Pac. 531 .)

The appellant further contends that the court below erred in striking out a part of the answer, in effect as follows: “That since the execution and delivery of the mortgage by which the note herein sued upon is secured, and since the recording of said mortgage, that two mortgages, still valid and existing, have been executed and delivered by the defendant Leland — one of said mortgages to John P. Yollmer, president of the First National Bank of Lewiston, plaintiff herein; and the other of said last-named mortgages to the plaintiff herein,” aggregating $1,600 in amount, and “covering the lands herein described” (the lands in the Leland mortgage), “both of which were recorded prior to the commencement of this action”; and that said lands are not *676 worth more than sufficient to pay said last two mortgages, etc.; and claiming such act was to the damage of the defendant. It appears by the evidence that the plaintiff claimed the Leland mortgage to be defective, in not having been sealed; that such supposed defect was discovered by the president of the plaintiff when taking the note .and mortgage from Shaw, and before taking the subsequent mortgages from Leland, upon the same property; but that the fact of such supposed defect was not communicated to Williams by any holder of these papers. It is only in view of the invalidity of this first mortgage that any injury to Williams could arise from those other mortgages. By the statute in force when the Leland mortgage was made, no seal was necessary. (Section 1, “Act Concerning Conveyances,” approved January 12, 1875.) In effect, this statute was the same, as to the seal, as section 2920 of the Revised Statutes. Hence the mortgage was not invalid on that account, and it did in fact have precedence of the other two mortgages. This part of the 'answer was then immaterial to the issue, and was properly stricken out.

But the plaintiff was the holder of the note, and of a valid mortgage on real property to secure the same; yet instead of bringing an action to foreclose the mortgage, and for any balance that might remain after applying the proceeds of sale upon the sum due on the note, as he might have done, he filed his complaint against both of the defendants on the note alone, but had summoned only the surety on the note, and proceeded for a money judgment against him alone. This he had no right to do, not only because it was his duty to exhaust the securities of the principal debtor in his hands, placed there specially as a prior security, to protect the defendant, but also because the statute denies another action, by any party, for the foreclosure of the mortgage.

Section 4520 of the Revised Statutes of Idaho provides: “There can be but one action for the recovery of any debt, or the enforcement of any right secured by mortgage upon real estate or personal property, which action must be in accordance with the provisions of this chapter. In such action the court may, by its judgment, direct a sale of the encumbered property, and the application of the proceeds of the sale to the payment of the costs of the court, and the expenses of the sale, and the *677 amount due to the plaintiff; .... and if it appear from the sheriff’s return that the proceeds are insufficient, and a balance still remains due, judgment can then be docketed for such balance against the defendant or defendants personally liable for the debt,” etc.

There are no other provisions in that chapter affecting this case. As we have seen, the mortgage was valid, and it is not pretended that the security is valueless. The appellant claims that, upon a note so secured, an action ignoring the mortgage cannot be sustained; and cites Bartlett v. Cottle, 63 Cal. 366 . In that case the court holds “that, in such case as the one at bar, an action cannot be maintained on the note alone, unless the security is valueless.” In that ease also the value of the security appears to have been in issue, and it was not shown to be without value. This was decided under section 726 of the California Code of Civil Procedure, which substantially eorre-i sponds with the Idaho statute above quoted. Vandewater v. McRae, 27 Cal. 596 , was an action by the holder of a note, secured by a mortgage on real estate, against indorsers of the note. Commenting upon the statute in question, the court in that ease say: “The words [in the statute] ‘'secured by mortgage’ are descriptive of the right or personal liability contemplated by the section, and any personal liability not so secured is manifestly without its purview.A mortgage which, by its terms, is made applicable to the promise of the maker only, can in no just sense be regarded as collateral either to the personal liability or to the ‘right’ of which the contract of indorsement is the source.” The judgment in that case, for the reason that the defendants’ contract was not that of makers of the note so secured, but was that of indorsers only, and so was not secured, was against the indorsers. But the doctrine of Bartlett v. Cottle, supra, is fully recognized.

There can be no question in the case at bar, that the mortgage was given to secure the note, for the safety of the- appellant. So, in Ould v. Stoddard, 54 Cal. 613 , it was held that where a mortgagee had prosecuted an action in Ohio to final judgment, upon a note secured by a mortgage on lands in California, he could not maintain, in the latter state, an action for foreclosure, for the reason that under this statute there can *678 be but one action for the recovery of any debt secured by mortgage. But the respondent’s counsel contends that as the note was several as well as joint, under section 4106 of the Statutes, the plaintiff, at his option, might sue either or both of the defendants; and if he chose to sue only the surety on the note, as he was not the maker of the mortgage, foreclosure of the mortgage, in that suit, was impossible; also that it is optional with the plaintiff to abandon the mortgage security altogether; and cites Ladd v. Ruggles, 23 Cal. 233 . On that question, if there be any doubt about it, we do not decide. But this joint and several note was the debt secured by this mortgage; and a judgment against either, upon the note, equally precluded a judgment of foreclosure of the mortgage, and in effect canceled it. Subrogation of the defendant, to the rights of the plaintiff in said mortgage, even had it been made, as there was a mere pretense of doing (but which was not done), would be of no use or value to him. He could no more foreclose it than could the plaintiff. The plaintiff had no right, by prosecuting this action, thus to deprive the defendant of the benefit of his original stipulation, for security to be given for the note, for his own protection, on his becoming a co-maker of it. He had a right to plead this statute, and the several decisions of the court on that question, and the judgment rendered, were each and all erroneous. There are other points of error assigned, but, from the conclusions reached in the foregoing, they need not be considered.

The judgment in the court below, and the order overruling motion for a new trial, must be reversed. Judgment reversed, and new trial ordered.

All concur.