Boice v. Coffeen

138 N.W. 857, 158 Iowa 705

• Court: Supreme Court of Iowa
• Decided: December 11, 1912
• Status: Published

Opinion

Evans, J.

The amount of the mortgage in question was originally $1,000. Its principal was reduced by payment to $880. The mortgagee was the Winneshiek County Bank. The plaintiff acquired the note and mortgage by assignment and indorsement "without recourse.” The validity of this assignment is assailed by defendant Jensen. We pass that question to a later stage of the discussion; and we will first consider the case as though the plaintiff were the original payee of the note and mortgage. In his cross-bill Coffeen asked that his liability be deemed secondary to that of Mullaney and to that of the mortgaged property. The defendant Jensen asked that the liability of the mortgaged property be deemed secondary to the personal liability both of Mullaney and Coffeen. He also asked relief, as already suggested, on the theory that the plaintiff was not a party in interest, and that the mortgage should be deemed paid.

It will be noticed that all of the defendants appear in the chain of title from Steele to Jensen. Coffeen, as grantee of Steele, assumed to pay the mortgage. Instead of paying it, he conveyed to Mullaney, and Mullaney assumed to pay the mortgage. Loomis, as grantee of Mullaney, did not assume the mortgage. Neither did Jensen as grantee of Loomis. -In its essential elements the case would be very simple, were it not that the parties to the appeal have filed seven abstracts and amendments and five briefs.

l. Mortgages : conveyance of property : liability of grantor and grantee. • I. As between Steele, the mortgagor, and Coffeen, his grantee, who assumed the' mortgage, Coffeen became the principal debtor ; and the liability of Steele to pay the debt became secondary. Malanaphey v. Manufacturing Co. 125 Iowa, 719, and cases there cited, The liability of the mortgaged property remained the same in the hands of said grantee as it did in the hands of the first mortgagor. In an equitable sense Coffeen became the mortgagor of his newly acquired property. The existence of the mortgage operated to the protection of Steele on his secondary liability. Upon the conveyance of tbe property by Coffeen to Mnllaney and the assumption of the mortgage by Mullaney, then, as between Coffeen and Mullaney, the latter became the principal debtor, and the liability of Coffeen became secondary.

2. Same. The liability of the mortgaged property was not affected by either conveyance. By the conveyance to Mullaney and his assumption of the mortgage, Mullaney stepped into the shoes of Coffeen. The existence of the mortgage then operated to protect Coffeen upon his secondary liability in like manner as it operated to protect Steele upon his. If this foreclosure had been brought while the mortgaged property remained in Mullaney, there could be no question but that the payee of the note and mortgage could have taken personal judgment against Mullaney, and could have taken foreclosure and special execution against the property. It would be clear, also, that Coffeen, as between himself and Mullaney, would have been entitled to protection as against primary liability. This right was not lost by Mullaney’s subsequent conveyance. Jensen holds his title under Mullaney. As against the mortgagee and Coffeen, his rights can rise no higher than Mullaney’s. We find him entitled to equitable relief, but only as against Mullaney, his warrantor. Such equitable relief must be awarded to him, but without prejudice to the pre-existing equities of the mortgagee and Coffeen.

These general propositions will suffice as a basis for further discussion of the details of the case as presented by the appeals. The decree entered below awarded the plaintiff a foreclosure of the' mortgage and a special execution against the property and a general execution against Mullaney. The decree also awarded judgment in favor of Jensen, with general execution against Mullaney, for the full amount of the incumbrance upon his property. It is made to appear that after the decree was entered the plaintiff sold the mortgaged property under special execution and bid $800 therefor and took a general execution .against Mullaney for the balance of the debt, amounting to over $300. The defendant Jensen also obtained a general execution under the decree for the full amount of the incumbrance, viz., $1,091, and levied the same upon the property of Mullaney. Thereupon Mullaney appealed to this court and filed supersedeas bond. Thereupon Jensen appealed also. The plaintiff has moved to dismiss Jensen’s appeal, on the ground that he waived his right to appeal by issuing execution.

3. same : appeal : right; to object. We may as well say here that we do not think that plaintiff is in a position to raise this question. The defendant Jensen may have been satisfied to abide the decree as entered an<^ to Procee<I accordingly. But when Mulianey appealed he was threatened with the loss of the only relief which the decree gave him. That he should have determined then to appeal also is not inconsistent with his previous attitude. In the exercise of fair caution he may well have deemed it necessary, after the taking of Mullaney’s appeal, that he should appeal, in order that he might obtain a trial de novo here upon the merits of his whole case as made by his cross-petition. He could properly assume the possibility that this court might find that he was not entitled to the relief actually granted in the lower court, and yet was entitled to other relief which had been refused. The question herb raised, however, is rendered of no consequence because of the conclusions we reach upon the' merits of the case.

We will now proceed to consider more in detail the questions presented by the appeals.

II. We turn first to the appeal of Mullaney. This presents two branches: (1) An appeal from the decree ,as entered in favor of the plaintiff; (2) an appeal from the decree as entered in favor of Jensen.

4. Evidence : best and secondary : availability. We will give our first attention to the first branch. The plaintiff offered in evidence a certified copy of the record of Coffeen to Mullaney. This was objected to by the deed from Mullaney, on the ground that the evidence was secondary, >and that the plaintiff had not sufficiently accounted for the original, under the provisions of section 4630 of the Code. The argument is that the plaintiff should have first testified that he did not have possession or control of the original, as a foundation for the offer of the record in lieu of the original. The trial being had on the equity side, the trial court made no rulings on the admission of evidence. Later Coffeen was examined as; a witness in the case. He testified to the circumstances of the execution of the deed in question to Mullaney. The transaction was had with Mullaney personally. Coffeen also testified that it was the only transaction of the kind that he had had with him, and that he executed only one deed. Coffeen thereupon offered in evidence the same certified copy of the record as had been offered by the plaintiff. This testimony was offered in support of Coffeen’s cross-bill.

It is quite manifest that if the plaintiff failed in a showing of foundation there was sufficient foundation in the testimony of Coffeen for the introduction of the same certified copy. The original instrument was thereby traced into the hands of Mullaney himself. The original instrument was not one to which the plaintiff, or those under whom he claimed, were parties. On' the face of the instrument Mullaney, and no one else, was entitled to possession of it. It is at least doubtful whether such a showing was not a sufficient foundation for the introduction of the record without the testimony of Coffeen. See Bixby v. Carskaddon, 55 Iowa, 537. Be that as it may, the certified record was properly introduced under the testimony of Coffeen.

It is argued for appellant Mullaney at this point that the defects of plaintiff’s case could not be supplied by the testimony of Coffeen on his cross-bill. But if the evidence was properly in the record on behalf of Coffeen it could not be eliminated, even though the plaintiff had failed to introduce it at all. Coffeen was entitled to its consideration, and was entitled to equitable relief because thereof. The right of plaintiff at this point was merely incidental to that of Coffeen, and was consonant with it. The evidence could not be in for Coffeen and out for the plaintiff. The relief sought by Coffeen was that Mullaney should be held primarily liable for the debt to plaintiff. We find no merit, therefore, in this branch of the appeal.

5. Conveyances: covenants against incumbrance : breach: measure of damages. III. In the second branch of Mullaney’s appeal, he complains of the measure of damages assumed in behalf of Jensen. It will be noted from what has already been said that Jensen took title under special warranty deed from Loomis. Loomis took title under warranty deed from Mullaney, containing full covenants, including a covenant against incumbrances. The cross-petition of Jensen asked to recover from Mullaney upon his covenant against incumbrances, in case the court should find the mortgage to be a subsisting lien. The trial court allowed the recovery, and fixed the amount thereof at the amount of the mortgage incumbrance. It is urged for Mullaney that this was an erroneous measure of damage, and that the recovery should not have exceeded the amount of consideration received by Mullaney. No evidence was offered on that question by either party. It is therefore urged that only nominal damages could be allowed.

It is the general rule in this state'that where there is a failure of title recovery upon a covenant of warranty cannot exceed the consideration received by the warrantor. Mischke v. Baughn, 52 Iowa, 528; Royer v. Foster, 62 Iowa, 321.

It is also the general rule that where a covenant against incumbrances is breached, and the warrantee is compelled to pay an incumbrance in order to protect his title, the amount so paid is presumptively the measure of damages in such a case. Newburn v. Lucas, 126 Iowa, 88; Knadler v. Sharp, 36 Iowa, 234.

Whether in such a ease the warrantor may show that the amount claimed exceeds tbe amount of consideration received by him, we need not determine. The record herein contains no evidence or pleading to that effect. In the ease before us Mullaney had assumed to pay the particular incumbrance. Later, by his conveyance to Loomis, he covenanted that he had paid it. All that we hold now is that in such a case as here made, in the absence of any claim that the amount of the incumbrance exceeded the amount of the consideration received, the trial court was justified in adopting the amount necessary to be paid in discharge of the incumbrance as the presumptive measure of damage.

Other objection is urged which goes to the form of the decree. We will consider this in a later paragraph and in another connection.

6. Mortgages: collaretal security : surrender : effect. IV. We turn now to the appeal of Jensen. It is the theory of Jensen that when Coffeen became primarily liable for the debt, Steele and the mortgaged property became secondarily liable. This assumption runs through the entire argument. The further assumption runs through the argument that Coffeen continued at all times primarily liable. The argument is not sound at this point, as we have indicated by the general propositions stated at the outset of this opinion. The fact that Coffeen became primarily liable under his conveyance from Steelé, ¡and that Steele became thereby secondarily liable only, did not relieve the mortgaged property from its liability to any extent. Steele was not interested to relieve the mortgaged property from its liability. It was to his interest that the liability should remain for his protection. The same argument will apply in a consideration of the relative rights of Coffeen and Mullaney under the conveyance from the former to the latter.

It is made to appear that when Coffeen became the purchaser of the property and assumed the mortgage the payee bank recognized him as a debtor. They received interest from him, and additional security. It is claimed for Jensen thia,t the payee 'afterwards released to Colfeen this security, and that thereby all sureties were released, and that the mortgaged property was thereby released as being only secondarily liable and in the nature of a surety. This argument is not well taken. No one but Steele stood in the relation of surety to Colfeen. As between Colfeen and Mullaney, Colfeen wias the surety. If he put up security and received it back again, surely Mullaney was in no position to complain. And this is so whether the security was released before or after Mullaney acquired the property. The liability of the mortgaged property was not in the nature of suretyship. It was as much bound to the payment of the debt in the hands of Mullaney as in the hands of Colfeen or Steele. If Mullaney could not complain of the reliquishment of securities to Colfeen, we see no door open to Jensen to complain, because he holds under Mullaney.

7. Same : transfer of mortgage collusionextinguishment of debt. Y. The plaintiff, Boice, is the assignee and indorsee of the original payee of the note and mortgage. It is urged by Jensen that he is not a holder in due course, and that his Purchase of the note and mortgage was eolorable only, and that it was invalid and ineffective to confer any title upon him. It is urged that the plaintiff, in obtaining such assignment, was acting in the interest of Colfeen, and that his pretended purchase was in fact a payment of the debt by Colfeen, and that by such payment the liability of all parties were discharged in fact, and that the plaintiff took a formal assignment for the purpose of defrauding the other defendants in the case.

It is practicaly conceded that plaintiff’s alleged purchase of the note and mortgage was made for the protection of Colfeen. The payee so understood it and assented to it. Coffeen so understood it and signed an accommodation note to the plaintiff, which the plaintiff indorsed and used in the purchase of the note and mortgage in question. If this purchase operated as a fraud upon the other defendants; if it deprived them, or either of them, of any right which they would otherwise have had, then they are entitled to relief against such purchase.

Granting that the purchase was collusive in the sense that Coffeen and the payee and the plaintiff all agreed to it in advance, ;and for the purpose of enabling Coffeen to be protected as a debtor who was only secondarily liable, it yet remained for Jensen to show wherein such collusion operated as a fraud upon him. No right of his was violated. His liability was in no manner enlarged by the transfer of the cause of action. The original payee could lawfully have proceeded in precisely the same manner in which the plaintiff proceeded. Coffeen could have obtained the same equitable relief, as against the original payee, which he has obtained in this suit. Of course, if he had actually paid the debt without protecting his equities, he might have put himself at a disadvantage, and such disadvantage might have operated to the benefit of the other defendants. But he vigilantly chose not to pay the debt without guarding his equities. That he should seek to have the papers transferred to a friendly holder was not in itself a fraud upon any one. He was entitled to- the relief awarded to him as against any holder. The alleged scheme, therefore, of which Jensen complains renders it plain that the parties thereto intended a transfer of the paper, and not a satisfaction of it. As between them, therefore, it was not satisfied. As against Jensen, he had no right to demand its satisfaction in such manner. He is therefore in no position to deny the title of the plaintiff, or to assail the same as fraudulent.

8. Same : indorsment without recourse. VI. As already indicated, the form of the transfer of the paper to the plaintiff was that the note was indorsed to him “without recourse,” and a further formal written assignment of both note and mortgage was executed, acknowledged, and recorded.

It is urged by Jensen that such assignment carried to the plaintiff nothing but the note and mortgage, land that it carried to plaintiff no right to sue Mullaney on his undertaking. Jensen concedes the general rule that the transfer of such paper as is here involved carries with it presumptively all securities held therefor by the assignor. He urges, however, that such rule is not applicable in this case, because the note was indorsed “without recourse.” Mullaney himself set up no such defense. It would seem, on the face of it, that no interest of Jensen could be subserved by. sustaining such a proposition. The theory of his argument, however, is that, if the plaintiff did not acquire the right' to recover from Mullaney, then the transfer to the plaintiff of the note and mortgage must have operated to release Mullaney as principal debtor, and that such release would further operate to release all those who were secondarily liable.

Neither the premise nor the argument can be sustained. That the indorsement to plaintiff should be “without recourse” served only to protect the indorser against liability for the debt. There is nothing contrary to be found in Watson v. Chesire, 18 Iowa, 206, or Leach v. Hill, 106 Iowa, 171, which are relied upon by Jensen in support of his major premise at this point. The assumption of Mullaney was not an independent contract or cause of action in the sense urged. It was incidental to the particular mortgage debt, and was measured by it. It operated, of necessity, to the benefit of the holder of the mortgage, whoever it might be. The right to sue thereon followed the note and mortgage as a part of the security. And, even though we should hold otherwise as to the liability of Mullaney, it would not affect the validity of the mortgage or the liability of the mortgaged property in the hands of Jensen.

9. Same: collateral security : surrender : effect. It is also urged that Coffeen .put up some collateral security which was released by the original payee at the time of the transfer to the plaintiff. The evidence shows that the payee bank did hold some collateral of which r J 110 account .was taken at the time of the transfer to the plaintiff. The collateral was still in the hands of the bank at the time of the trial. There was never any actual release or surrender to Coffeen. It seems to have been forgotten or overlooked at the time of the transfer. Necessarily the payee bank has no further interest in it. Its cashier, testifying as a witness, expressed his willingness to surrender it to Coffeen. Assuming, without holding, that these facts constituted a surrender of security, they furnish no basis of complaint to Jensen.

If plaintiff had successfully asserted a claim to such securities in this suit, it could not operate to the advantage of Jensen or Mullaney or the mortgaged property. The liability of such securities would be co-ordinate with that of Coffeen only, and would therefore be secondary to the liability of Mullaney and of the mortgaged property.

10. Conveyances : covenants against incumbrances : damages. VII. Lastly, we turn again to Mullaney’s appeal. It is clamed for Mullaney that, inasmuch as Jensen had not discharged his -incumbrance, he was entitled only to nominal damages, and that he was-not entitled to recover substantial damages, based upon the of incumbrance, or the amount necessary to be paid in discharge thereof, until after he had paid the same. As a legal proposition, this statement of the rule is usually applied in an action at law. In a suit in equity, however, this rule is not controlling. Duroe v. Stephens, 101 Iowa, 358. This is so because a court of equity has larger powers in adapting the remedy to the particular conditions of the case. Provision may therefore be properly made in a decree, for the awarding of damages, even in advance of actual payment, subject always to such proper conditions as shall protect the warrantor against double liability, or any greater liability than the amount which the warrantee must necessarily pay in discharge of the incumbrance.

Complaint is made of the form of the decree, in that it holds Mullaney doubly liable for the amount of the mortgage, first to plaintiff, and, second, to Jensen. The decree is not free from ambiguity. It awarded to plaintiff (1) a special execution against the mortgaged property, (2) a general execution against Mullaney, and (3) a general execution against Coffeen. It also awarded to Jensen a judgment against Mullaney for the full amount of the incumbrance. It provided, however, that all collections from Mullaney, whether by execution or performance, should operate as a credit upon the judgment in favor of Jensen. It appears from the record of proceedings subsequent to the decree, and before the taking of appeal, that the mortgaged property was. sold under special execution for $800, and that a general execution was issued for the balance in favor of the plaintiff against Mullaney, and that another general execution was issued in favor of Jensen against Mullaney for the full amount of the incumbrance, $1,091, and that the same was levied upon Mullaney’s property.

It is manifest that there ought to be some modification in the decree, or some control of the process issued thereunder. It is manifest that Jensen ought not to be permitted to collect from Mullaney in greater sum than the amount necessary to be paid to redeem, his property, from the incumbrance. If by judicial sale Jensen’s property is relieved from all liability above the amount of the bid therefor, there is no reason why he should be permitted to recover more. Mullaney’s liability for the balance is to the plaintiff and not to Jensen in such case.

In view of the complication which has arisen by the use of process subsequent to the decree, we do not feel warranted in undertaking to formulate a decree here, unless the parties can agree thereto. It will be ordered, however, that the decree be modified to this extent, that jurisdiction will be reserved to the district court to make such further orders, in the light of subsequent proceedings under the process of the court, as shall conform to the views herein expressed. This may be done either by a supplemental decree, or by proper order controlling the process to. be issued under the decree. In all other respects the decree entered is Affirmed.