Case Name: CHARLES J. CLARK, Appellant, v. MYLES HENDERSON, Respondent
Court: North Dakota Supreme Court
Jurisdiction: North Dakota
Decision Date: 1931-11-25
Citations: 62 N.D. 503
Docket Number: No. 5968
Parties: CHARLES J. CLARK, Appellant, v. MYLES HENDERSON, Respondent.
Judges: Christianson, Oh. J., and Burr, Birezell and Burice,' JL, concur..
Reporter: North Dakota Reports
Volume: 62
Pages: 503–517

Head Matter:
[File
No. 5968.]
CHARLES J. CLARK, Appellant, v. MYLES HENDERSON, Respondent.
(244 N. W. 314,
— A.L.R. —.)
Opinion filed November 25, 1931.
On rehearing, August 23, 1932.
Thos. O. Jepsen and T. 8. 8tuaH, for appellant.
Olaaf Braatelien, for respondent.

Opinion:
Nuessle, J.
This is an action to foreclose two mortgages on real estat.e. The complaint' was considered by us in the case of Clark v. Henderson 58 N. D. 650, 227 N. W. 185 and there held good as against demurrer. When the case was remanded the defendant answered. Tie denied the delivery of the notes and mortgages; alleged that they were without consideration; that' they had been paid and satisfied; that at the time of the alleged assignment to the Kenmare bank the Bank of Crosby was in receivership and Clark had no authority as its president to assign the same, so there was no effective transfer to the Kenmare bank; that Clark was not the owner and holder of the notes and mortgages; that there was no assumption of the mortgages sought to be enforced, and in that behalf "the defendant says that at the time of his taking of said deed from plaintiff it was understood and agreed between' plaintiff and defendant that said land was subject to certain encumbrance then talked of, specified and agreed upon between the parties hereto, and which encumbrance so agreed upon and specified the defendant agreed to assume and pay, but defendant says that the mortgage now sought to be enforced herein was not included among the encumbrances against said land which defendant assumed and agreed to pay. The defendant says that plaintiff and defendant at the time had a conversation and fully discussed the encumbrances to which said land was to be subject, and which en .eumbranee tlio defendant was to assume, and that it was then specifically understood and agreed that defendant was not to pay the mortgage now sought to be enforced. . . . Defendant says further that he 'did not under the terms of the-deed referred to in the complaint, and given him to said land, agree to pay any and all the encumbrances of record against said land, and as alleged in the complaint, but that the agreement made and the terms of said deed are that defendant was to assume the payment of the encumbrance of record which was at the time specifically mentioned and agreed upon between the parties hereto as the encumbrance to be assumed by defendant, and which agreement so made did not embrace the payment by plaintiff of the mortgage now sought to be enforced herein and defendant wholly denies any assumption of said mortgage. . . ." The case was tried on the issues as made by these pleadings. The trial court found for the defendant. Judgment was entered accordingly and the plaintiff perfected this appeal.
The undisputed facts as shown by the record may be stated briefly as follows: In 1918 and thereafter the plaintiff Clark-was the president and actively in charge of the First State Bank of Crosby. He at that time owned the two quarter sections of land involved herein. In 1918, through the agency of the bank, he negotiated a loan with an eastern lender and gave as security a first mortgage on one of these quarter sections. In 1919 he did likewise with the other tract. In each instance these loans,ran for five years and he executed five so-called commission notes payable to the bank and secured the same by second mortgages on the land. These mortgages were recorded at once upon execution. The notes were indorsed by the bank through Clark acting as its president. No assignments of the mortgages were then executed. In 1923 the bank was closed as insolvent and a receiver was appointed. Prior to the time of the closing of the bank, Clark, individually, had possession of the commission notes and mortgages. His brother was the president of the First National Bank of Kenmare. Clark negotiated a personal loan from the Kenmare bank, and among other collateral security he gave the Kenmare bank the commission notes and mortgages here involved. In 1926, Clark and defendant .Henderson were jointly indebted on account of certain notes given to the Agricultural Credit Corporation. The corporation had pressed them for payment. Clark made a partial payment and arranged with Henderson to pay the remainder. In consideration of Henderson doing so, Clark conveyed to Henderson by warranty deed the land which he had mortgaged as above set forth. The deed recited a consideration of "One dollar and other valuable consideration." It further recited that the tracts thereby conveyed were "free from all encumbrances except those of record which the party of the second part (Henderson) hereby assumes and agrees to pay as a part of the purchase price of the land herein transferred and sold." Henderson accepted these deeds. They were recorded and Henderson went into possession under them.. In August, 1924, Clark, purporting to act as president of the First State Bank of Crosby, executed and delivered assignments of the. commission mortgages to the First National Bank of Kenmare, the notes secured thereby having been delivered to the Kenmare bank prior thereto. These assignments were not recorded until December 11, 1928. On December 10, 1928, Clark's obligation to it having been discharged, theKenmare bank reassigned the mortgages to Clark and surrendered the notes and mortgages to him. Thereafter Clark demanded of Henderson the payment of the obligation secured by the mortgages and payment being refused he began foreclosure by advertisement. Henderson enjoined the foreclosures. Thereupon Clark began the instant action.
The defendant's principal contention, and this is the one on which the trial court predicated his order for judgment in defendant's favor, is that notwithstanding the assumption clause in the deed whereby he-assumed and agreed to pay all the mortgages of record, he can, nevertheless, show the true consideration and thus establish that in fact the-understanding and agreement between the plaintiff and defendant then was that the only mortgages of record defendant assumed and agreed to pay were the first mortgages. This contention cannot be sustained. The rule is that a party to a Avritten contract may show that the consideration therefor is different from that recited in the writing. First State Bank v. Kelly, 30 N. D. 84, 152 N. W. 125, Ann. Cas. 1917D, 1044; Beiseker v. Svendsgaard, 28 N. D. 366, 149 N. W. 352; Erickson v. Wiper, 33 N. D. 193, 157 N. W. 592; Pattee v. Prall, 45 N. D. 107, 176 N. W. 659. But this rule is simply, that in so far as the writing is a receipt, a statement of a fact, it is-subject to modification, explanation, or contradiction. It does not.go so far as to abrogate the 'rule that a written, contract supersedes all oral negotiations or stipulations concerning its matter which preceded or accompanied its execution, embodied in § 5889, Comp. Laws 1913. It is never applied to the extent of permitting a party to show that the agreement was other than that set forth in the writing. If this were permitted the parol evidence rule would be wholly abrogated. No writing would be safe from challenge and defeat by parol. Always by the subterfuge of showing a different consideration from that recited, the party would be able to establish that the agreement was different from that set forth in the written instrument. See Williston, Confer. § 115b. As was said in the case of Howe v. Walker, 4 Gray, 318, quoted with approval by this court in Alsterberg v. Bennett, 14 N. D. 596, 106 N. W. 49: "Nor can you, under the guise of proving by parol the consideration of a written contract, add to or take from the other provisions of the written instrument. This would practically dispense with the statute of frauds and with that sound rule of the common law which finds in the written contract the exclusive and conclusive evidence of the intent and agreement of the parties, and will not suffer such written contract to be varied or affected by any contemporaneous parol agreement." See also Komp v. Raymond, 175 N. Y. 102, 67 N. E. 113. "The statement in a'deed of the consideration for the conveyance thereby made is a reference to a fact, not the statement of a contract. So far as a deed states the terms of the conveyance it is as binding as any other written contract." Farquhar v. Farquhar, 194 Mass. 400, 80 N. E. 654. See also Edison Electric Illuminating Co. v. Gibby Foundry Co. 194 Mass. 258, 80 N. E. 479, and cases Cited. The contract by which a grantee assumes the payment of existing encumbrances is separate and distinct from the conveyance. It may be embodied in the deed, it may be by separate writing, or it may rest entirely in parol. Leach v. Nelson, 50 N. D. 538, 196 N. W. 755, and cases cited; Union Cent. L. Ins. Co. v. Alford, 61 N. D. 446, 238 N. W. 646. And where it is embodied in the deed the acceptance of the deed by the grantee makes it a contract in writing binding upon him. Schmucker v. Sibert, 18 Kan. 104, 26 Am. Rep. 765. Accordingly where it is thus evidenced by a contract in writing, as in the instant case,, -the parol evidence rule applies the same as to any other written instrument.
The defendant further contends that the notes and' mortgages here involved were without consideration and were never in fact delivered to the First State Bank of Crosby; that if they were delivered for a consideration they were discharged and satisfied when they were surrendered to Clark by the bank. It seems to us that it is here immaterial whether there was a consideration for the notes and mortgages in the first instance or whether they were ever delivered to the bank and effective as obligations in its favor against Clark. The fact remains that the notes were indorsed by Clark as president of the bank before its closing in 1923, and that thereafter Clark had and retained them and the mortgages in his possession. Prior to the closing of the Crosby bank he delivered the notes and mortgages securing them over to the First National Bank of Kenmare as collateral. Thtfse facts are wholly undisputed in the record. The mortgages in question were record liens-against the property conveyed by Clark to Henderson at the time of' the conveyance. Whether Clark had ever delivered them and the notes secured by them to the Crosby bank, could make no difference to Henderson. The notes were properly indorsed by the bank and prior to the closing of the bank and prior to the transfer to Henderson, Clark had delivered them over to the Kenmare bank as collateral. So far as the Kenmare bank was concerned, there was a consideration for the-transfer of the notes to it by this delivery. As between Clark and the Kenmare bank, Clark was obligated by the notes axxd the Kexxmare bank could have enforced their collection by foreclosixre of the mortgagessecurixxg them. Ixx axxy event, since the defexxdaxxt accepted the deeds-with the assuxnptioxx clauses, he had no right to questioxx Clark's liability oxx account of the xxotes and mortgages so assumed. McDonald v. Finseth, 32 N. D. 400, 155 N. W. 863, L.R.A.1916D, 149; see also note in 21 A.L.R. 490.
Whexx Clark coxxveyed the laxxds to Ilendersoxx the mortgages were-of record, apparexxtly valid lieixs against the lands thus coxxveyed. Theobligatioxxs secxxred by the mortgages were assumed by Ilendersoxx as part of the consideratioxx. ITpoix thus assumixxg these mortgages Henderson became the principal debtor and Clark the surety. This coxxtract was xxot merely oxxe to ixxdemnify but also to pay the debt axxd rendered Henderson personally liable for its paymexxt. See Clark v. Henderson, 58 N. D. 660, 227 N. W. 185, supra; Union Cent. L. Ins. Co. v. Alford, 61 N. D. 446, 238 N. W. 646, supra. If these notes and mortgages; had remained in the Kenmare bank and Henderson had refused to> pay them, Clark might have done so and recovered the amount so paid from Henderson. See White v. Schader, 185 Cal. 606, 198 Pac. 19, 21 A.L.R. 499, and note. But Clark also -had the right to do as he did — discharge his obligation to the Kenmare bank, take assignments of the mortgages to himself, and bring action to foreclose. See Clark v. Henderson, supra. The fact that the notes were past due at the time that Clark conveyed to Henderson, can make no difference. The effect of the assumption contract was that Henderson should pay and discharge the obligations within a reasonable time thereafter. See note in 21 A.L.R. pp. 513, et seq.
It is true that the assignments of the mortgages to the Kenmare hank wore executed by Clark as president of the Crosby bank in 1924 after the bank had been closed as insolvent and while it was in the hands of a receiver. It may be conceded that Clark then had no authority to execute the assignments. Even so, this also is immaterial under the facts as disclosed here. It is clear that Clark had possession of the notes and mortgages prior to the closing of the Crosby bank, and that prior to its closing he delivered them to the Kenmare bank. Though the mortgages were not assigned by the Crosby bank, nevertheless the notes were properly indorsed so as to pass the title to them on delivery. No formal assignments of the mortgages were necessary. When the indorsed notes were delivered to the Kenmare bank they carried with them their security. See Brynjolfson v. Osthus, 12 N. D. 42, 96 N. W. 261; Thompson v. State Bank, 58 N. D. 236, 225 N. W. 788. And likewise when they were re-delivered by the Kenmare bank to Clark.
It follows that the judgment of the district court must be reversed and judgment in favor of the plaintiff for the foreclosure of the mortgages be entered. The case will therefore be remanded to the district court with directions that judgment be entered in accordance with this opinion.
Christianson, Oh. J., and Burr, Birezell and Burice,' JL, concur..