Willows v. Rosenstien

HUSTON, J.

This is an appeal from judgment and from order denying motion for a new trial. On August 11, 1894, the plaintiff and one Hedrick, then being partners, engaged in farming in Nez Perces county, state of Idaho, were indebted to the defendant in the sum of $341.97. To secure said indebtedness, the plaintiff executed and delivered to the defendant on said date his individual note for said sum; and also, as security for the payment of said note and the interest thereon, executed and delivered to said defendant a chattel mortgage upon the crop of wheat to be sown and grown during the season of 1895 upon a tract of land then in the possession and occu- • pancy of said plaintiff in said Nez Perces county, and which was at the time the individual property of said plaintiff. In the spring of 1895, plaintiff and his said partner, Hedrick, having secured a lease of certain lands upon the Nez Perces Indian reservation with intent to crop the same for that season, and desiring the pecuniary aid of defendant in carrjdng out such arrangement, on the 6th of March, 1895, jointly executed and *309 delivered to the defendant their note for the sum of $632.03, in which sum was included the said sum of $341.97, for which plaintiff had theretofore, on the eleventh day of August, 1894, given his note and mortgage as above stated. Other complications having arisen which called for further advances, and further security on the part of the defendant, for the benefit of the plaintiff and his said partner, Hedrick, on the thirteenth day of May, 1895, plaintiff and his said partner, Hedrick, executed and delivered to the defendant their note for the sum of $1,215, and to secure the same executed and delivered to defendant on the same date a chattel mortgage upon the crop to be sown and grown on said land on the reservation for the season of 1895. This last-mentioned note and mortgage included the amount due on the note of March 6, 1895, which latter included the first note and mortgage given by plaintiff for the sum of $341.97, and certain other items of indebtedness due from plaintiff and his said partner to the defendant. It •was agreed between plaintiff and defendant that upon the putting in of the crop on the reservation by plaintiff and his said partner, Hedrick, the defendant would cancel and deliver up to plaintiff his said note and mortgage executed and delivered by plaintiff to defendant on the eleventh day of August, 1894, the same having been included in the note and mortgage for $1,215 given by plaintiff and his partner, Hedrick, May 13, 1895, and defendant gave to the plaintiff his written agreement to that effect. Subsequently, however, it seems there was a small indebtedness due from the plaintiff to the defendant, amounting to some seventeen dollars, and, as plaintiff desired some further credit for merchandise during the season, it was agreed between him and the defendant that the latter should hold the note and mortgage for $341.97 as security for such indebtedness and future advances. It seems from the record that there was due from the plaintiff to the defendant at the time the crop on the plaintiff’s individual land was put up, and which crop was covered by the said mortgage for $341.97 from the plaintiff to defendant, the sum of $201.99; but in this amount is included a bill of $133.20 for threshing, which defendant had charged to the firm of Willows & Hedrick, so that there was only due from plaintiff to the defendant, upon the agreement between them that the mortgage of August 11, 1894, *310 should be held for the individual indebtedness of plaintiff to defendant, accrued and accruing, the sum of sixty-eight dollars and seventy-nine cents. In October, 1895, and prior to the alleged taking and conversion by the defendant of the wheat in question, the plaintiff had delivered to the defendant one hundred and eighty-five sacks of wheat, of the value of $137.90. On the eleventh day of October, 1895, while the plaintiff was attending the district court at Moscow, the defendant took possession of and converted to his own use the entire crop of wheat >on said ranch of plaintiff, being about two thousand bushels. It is claimed by plaintiff that the taking and conversion of the wheat by the defendant was unlawful and malicious, for the reason that at the time of the taking the mortgage under and by virtue of which the defendant acted and seeks to justify was fully paid. The taking of new or additional security for the same debt does not always operate as a release or cancellation of the original security. “A new mortgage and note are payment of the old security when such is the agreement or understanding of the parties.” (Jones on Mortgages, sec. 645; Brown v. Dunckel, 46 Mich. 29 , 8 N. W. 537 ; 2 Jones on Mortgages, sec. 926.) Defendant agreed, as above stated, to surrender the original note and. mortgage to plaintiff when plaintiff and his partner should have put in the crop on the land on the Indian reservation! This would seem to indicate an understanding on the part of both the plaintiff and defendant that the including of the amount of the first mortgage in that given by the plaintiff and his partner for the sum of $652 on the 6th of March, 1895, and also in that given by the same parties to defendant for the sum of $1,215 on the 13th of May following, should not operate as an extinguishment of the first mortgage. But the mortgage of the 13th of May for $1,215, •and which included the first mortgage, was paid, as testified to by Babold, the bookkeeper of defendant. “Payment of the debt,- by whomsoever made, discharges the lien of the mortgage held as security for it, and the holder of such security has afterward no authority to transfer the security.” (Jones on Mortgages, sec. 646, and cases cited.) We think the payment -of the $1,215 mortgage paid the first mortgage, which was» included therein, unless the first mortgage was kept alive or continued by the agreement between plaintiff and defendant *311 that tbe latter should continue to bold the same as security for the seventeen dollars owing to defendant by plaintiff and future advances in merchandise to be made by defendant to plaintiff. The facts in this case as presented by the record involve a legal proposition, in the solution of which we have not been able to find much assistance from decisions attributable ■doubtless to the fact that similar circumstances have not arisen. We think it may justly be concluded from the weight of authority, that a prior mortgage is not canceled or released by the giving of a new mortgage for the same indebtedness, unless there is an agreement between the parties that it shall so be. The first mortgage in this case was fully paid by the payment ■of the $1,215 mortgage, in which this first mortgage was included. This would seem to be conclusive, and would be so, but for the agreement between the plaintiff and defendant, that said first mortgage should be held by the defendant as security for an already existing indebtedness of plaintiff to defendant, •and such indebtedness as might afterward accrue. It might be ■questionable whether such manipulation of securities could be recognized were the rights of third parties to intervene, and even between the parties themselves we think the question is not entirely clear. But giving the defendant the benefit of all doubts, what is his position? He held the first mortgage as a security, for the individual indebtedness of the plaintiff and nothing more. How, as is clearly shown by the record, at the time of the alleged taking and conversion of the wheat in question, there was nothing due or owing from the plaintiff to the defendant, for which the said first mortgage could be considered as security, although perhaps the firm of Willows and Hedrick might, ■and perhaps were at that time indebted to defendant. And we .think “therein lies the heart of the mystery” of this whole matter. The defendant was.seeking to hold the property of Willows, for a debt due from the firm, through and by virtue of an individual mortgage of Willows.

While, of course, the property of each member of a firm is liable for all the debts of the firm, its subjection to such purpose must be reached in the methods prescribed by law. “In at the window, or else o’er the hatch,” will not answer. If the firm of Willows and Hedrick were indebted to defendant, the defendant must seek recovery through means provided by law. *312 There is still another view of this ease arising upon the provisions of oui Revised Statutes which would seem to negative the defendant's claim under the mortgage of August 11, 1894. Section 3351 of the Revised Statutes provides that “a mortgage can be created, renewed or extended only by writing, executed with the formalities required in the case of a grant or conveyance of real property,” and this applies to all mortgages, whether real or chattel.

It would seem conclusive that any verbal agreement' between the plaintiff and defendant that the mortgage which had been included first in the mortgage of March 6, 1895, for $652, and then in the mortgage of $1,215, given May 13, 1895, and which latter mortgage was subsequently paid in full, should be held by the defendant as security for future advances, was in contravention of this provision of the statutes. The judgment and order of the district court is affirmed, with costs.

Sullivan, C. J., and Quarles, J., concur.