Court Opinion

ID: 3681925
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:27:26.786386+00
Date Added: 2024-06-11T15:29:31.191489
License: Public Domain

In this case I am compelled to dissent from the views of the majority of the court upon the question of whether the note of Helen M. Andrews has ever been paid. The court holds that it has. I think it clearly appears from the record that it has not. *Page 786 
In support of my views I call attention first to certain allegations of the complaint. After setting out that the last note and mortgage were given upon an agreement made with McLaughlin that the first note and mortgage should be paid by the latter, the complaint, in paragraph numbered seven, proceeds as follows: "That said S.W. McLaughlin failed to pay the consideration agreed to be paid by him to said plaintiff for the execution and delivery of the last described note and mortgage, in this, that he failed to pay the said prior mortgage debt of five hundred dollars, or secure the release and cancellation of the said prior five hundred dollar mortgage on said lands securing said debt, and said McLaughlin concealed from said plaintiff this fact that he had not done this, and plaintiff remained ignorant of this failure until on or about the _________ day of _________ A.D. 1897, when he was called upon, through a letter sent by mail, to pay said prior mortgage and note of five hundred dollars with interest, when he learned for the first time there was then due, and is yet due and payable thereon, the sum of five hundred dollars with 12 per cent interest thereon per annum from December 1st, 1892." The prayer of the complaint reads: "Plaintiff prays that the court may take an accounting of the matters hereinbefore described, and determine the exact amount due said defendant, Helen M. Andrews, and direct this to be deducted from the amount which would otherwise be due to said defendant Brooks, and from such computation decree the amount to be due to said defendant Brooks; and permit said plaintiff to pay said amounts so to be found due into this court, and to have a decree from this court that on this being done said two mortgages shall, by its decree, be canceled and annulled, and that plaintiff may have such further and other relief in the premises as he is entitled to receive." The defendant Brooks, by his answer to the complaint, expressly alleged that the first note was paid at the time the second note was given. Plaintiff replied and denied such allegation.
Upon the issues so framed, the vital question of fact to be determined in the trial court was whether the Andrews note had or had not been paid. In my judgment, this question was one of pure fact and not many sense a question of law and fact, or of law alone. When the case was called for trial and before any evidence was offered, counsel for the respective parties entered into a stipulation which was reduced *Page 787 
to writing and brought upon the record. The stipulation is as follows: "It is hereby stipulated between the parties that the following allegations of the plaintiff are true, that is, those contained in paragraphs one (1), two (2), three (3), four (4), five (5) and six (6) and also the allegations contained in paragraph seven (7) that the five hundred (500.00) dollar note has not been paid with interest thereon since December 1st, 1892. . . . It is further stipulated between the parties that the $500 note and mortgage at the time of the assignment thereof by Helen M. Andrews to George Brooks was a valid mortgage for $500 and could have been enforced against the land in question with such interest as could have been collected thereon, it being contended by the plaintiff that the consideration in the $880 mortgage, was, in part, that the said $500 mortgage should be satisfied by the mortgagee named in said mortgage; that whatever this $500 mortgage claim amounts to, is to be deducted from whatever amount is found due on the $880 mortgage. . . . It is further stipulated that, during the pendency of this action, the said Helen M. Andrews, on September 18, 1899, sold, transferred and assigned to the defendant George Brooks, said $500 note and mortgage, together with all the interest and taxes paid, and the tax certificates set out in the counterclaim of Helen M. Andrews." The only other stipulation in the case which needs to be noticed is that which is given, in part, in the majority opinion, and which is here quoted in full: "It is stipulated by and between counsel for the respective parties that no point shall be made on the pleadings in this case, but that the case shall be tried on the facts stipulated, and such other facts as shall be proven by witnesses and documentary evidence in the case and such judgment rendered as the facts warrant, regardless of the pleadings."
All of these stipulations are clear and explicit in their language and from my point of view they appear to have been made advisedly and with an intelligent understanding of their full import and effect. As I apprehend the case, there existed good reasons which impelled counsel for both sides to enter into the stipulations, which were made at the threshold of the trial and before any evidence was offered. Plaintiff's theory of his case, as developed by the complaint, was that the second note, which was non-negotiable and was the property of the defendant *Page 788 
Brooks, was without consideration except as to the amount actually paid over to the plaintiff by McLaughlin, at the time the second note was made and delivered; and the cornerstone of this theory was the fact as alleged in paragraph seven of the complaint, to the effect that while the note last given was a consideration on which McLaughlin agreed to pay the Andrews note and procure a cancellation of the mortgage given to secure the same, yet the Andrews note had not been paid in fact and therefore the second note, upon plaintiff's theory, failed for want of consideration except as to the amount actually received by plaintiff when he executed and delivered the second note. It was therefore vitally important in sustaining the complaint that the plaintiff should establish the foundation fact upon which his case rested, viz.: the fact that the Andrews note, except as to certain interest not in dispute, had never been paid. To establish this fact by competent evidence was, probably, somewhat difficult, in view of the fact that McLaughlin had, after becoming insolvent, left the state and the further fact that Helen M. Andrews was also a non-resident and when the stipulation was made was no longer interested in the result of this litigation, she having sold and transferred her note and mortgage to the defendant Brooks after issue had been joined and before the trial commenced. Under the circumstances it was manifestly to the plaintiff's interest to definitely settle the question of payment and to accomplish this object the plaintiff's counsel made the stipulation. But the interests of the defendant Brooks likewise demanded that the question of the payment of the first mortgage should be settled in the negative. True, the answer of Brooks had put the plaintiff's allegation of non-payment in issue, but it seems that after joining issue Brooks and his attorneys had investigated the question of payment more carefully and when the case was called for trial had reached the conclusion that except as to certain interest, the Andrews note had not been paid in fact either by Prescott or by McLaughlin, or at all. This view of the question of payment, which I submit is the true view, was strongly reinforced, of course, by the verified complaint by which plaintiff, with full knowledge of the facts, had alleged in plain terms that the Andrews note had not been paid. Therefore to place the question beyond doubt or controversy the stipulation was made at the outset of the trial to the *Page 789 
effect that the Andrews' note had not been paid. Defendant Brooks and his attorneys, in entering into the stipulation as to payment, had vital interests to protect. Investigation had satisfied them that the plaintiff's averment of non-payment was true and that the fact would probably be established by the testimony offered in support of the complaint that the first note and mortgage were outstanding and unpaid obligations.
Under the circumstances, Brooks, as the holder of a second mortgage, deemed it to be very necessary for his protection to secure the prior lien and to do so he obtained a transfer of the Andrews' note and mortgage to himself, and Brooks has ever since been the holder and owner of the same. It is clear to my mind, at least, that both plaintiff and defendant, in entering into this stipulation were acting advisedly and as sensible men and were dealing in a practical way with a matter of fact and business, and that the theory entertained by the court below, and by a majority of this court, viz.: that in making such stipulation the parties were thinking only of payment as a mere legal conclusion, or were contemplating some abstract matter, is, in my opinion, fallacious and without substantial foundation in the record or in reason. If this preliminary stipulation of fact had been adhered to in the trial court, the question left for determination would have been whether the Brooks note could be recovered upon in accordance with its terms, or, on the other hand, whether it was open to the defense of partial failure of consideration, under the existing facts. In disregarding a stipulation which settles a material question of fact in issue, a court assumes a grave responsibility. A stipulated fact brings such fact upon the record and calls upon the court to apply the law to the fact. Such fact stands on a par with any fact alleged in a complaint and admitted by the answer thereto. True, courts in furtherance of justice, will vacate a stipulation entered into under a mistake, or when the same has been obtained by deceit or fraud; but this case involves neither mistake nor fraud, and, furthermore, the counsel who made the stipulation are men of exceptional learning and of great experience in the practice of the law. From my standpoint, I cannot see that even a tactical mistake was made by counsel when the stipulation was entered into. After *Page 790 
making it, the plaintiff still had the right in reserve to urge a partial failure of consideration as to the second note.
Adverting to the stipulation referred to in the majority opinion and which I have set out in full, I deem it necessary only to say that the same, which was made at a late stage of the trial, does not, in my judgment, either modify or purport to modify the stipulation made before any testimony was offered in the case. The last stipulation has two features: (1) The parties agreed to make "no point" on the pleadings. Counsel seem to have adhered to this agreement strictly. The pleadings are not attacked in any way and no question is raised based on the pleadings or as to the admission of evidence under the pleadings. (2) The second feature deals with the facts upon which the case was agreed to be tried and they are divided into two classes, viz.: (a) "Facts stipulated" and, (b) "such other facts as shall be proven by witnesses and documentary evidence in the case." To my mind it would be quite superfluous to argue that the last stipulation operated to destroy or modify the first much less to abrogate the same. On the contrary, it distinctly recognizes the probative force of the facts "stipulated" and declares that the case shall be decided on such facts, together with such other facts as are established by the evidence.
Turning to the evidence, meager as it is, I discover enough to satisfy my own mind, at least, that counsel were well advised and stipulated only the truth when they, in open court, agreed to put the fact on the record that the Andrews note had never been paid. The majority opinion concedes that the owner of the note, Helen M. Andrews, never received payment in fact, except certain interest payments which were sent to her by her collection agent, and for which she surrendered to her agent interest coupons and concerning which there is no dispute. But the majority hold, upon some theory which I fail to understand, that, in contemplation of law, the Helen M. Andrews' note was paid in some mysterious manner on account of an oral agreement made between plaintiff on the one side and McLaughlin on the other, at the time the second note and mortgage were given by plaintiff as mortgagor to McLaughlin as mortgagee. The agreement was oral to the effect that McLaughlin, in consideration of the execution and delivery to him of the last note and mortgage, agreed that he would pay the Andrews' *Page 791 
note and procure a cancellation of the mortgage securing the same. This agreement, it is conceded, was entered into without the knowledge or consent of Helen M. Andrews, and further, that McLaughlin has not complied with its terms by paying the principal sum due on the note to Helen M. Andrews. It appears that when the last three interest coupons matured they were sent by Helen M. Andrews to McLaughlin for collection and that he paid the same out of his own funds, but there is not a vestige of evidence that this fact was ever communicated to Helen M. Andrews. Much less is there evidence that she, in any way, ratified or knew of the oral agreement to pay her note, as made by McLaughlin. In what way could she do so? If she had, by chance, learned the fact that McLaughlin had agreed to pay her note at some time not stated, but presumably not before her note matured, I am unable to see how that fact could operate to her disadvantage. She had a note secured by a first mortgage and if any agreement was made without her consent or authority, between outside parties, to pay the note, how is it possible that such extraneous agreement could operate to defeat her vested rights as a creditor? But, as I have said, there is no evidence whatever that she knew of the outside agreement until long after her paper matured. But the majority of the court have classified the various transactions involved as a "novation." A novation is defined by § 3829, Revised Codes of 1899, as follows: "Novation is made: 1. By the substitution of a new obligation between the same parties with intent to extinguish the old obligation. 2. By the substitution of a new debtor in place of the old one, with intent to release the latter; or, 3. By the substitution of a new creditor in place of the old one with intent to transfer the rights of the latter to the former."
Section 3830 is as follows: "Novation is made by contract and is subject to all the rules concerning contracts in general." Subdivisions One and Three may be excluded, as they are manifestly without application to the facts of this case. Nor, from my viewpoint, has there been any novation under subdivision 2, above set out. The theory fails because there is no evidence that Helen M. Andrews ever, at any time or in any manner, agreed orally or in writing, or at all, to release the plaintiff from the obligations evidenced by the first note and mortgage. The record contains not a scintilla of testimony looking in that *Page 792 
direction. McLaughlin had acted as her agent. He had collected her interest and when McLaughlin paid the coupons out of his personal funds, he suppressed the fact, or at least so far as appears, did not tell the fact to Helen M. Andrews. When the principal note fell due, she sent the same to her agent for collection, and with it a release of the mortgage. I discover in this only a transaction in the usual course of business and fail to see in it any novation. I fail especially to see any contract to release the plaintiff, nor do I see a single peg on which to hang the theory that she intended by any act or word of hers to accept McLaughlin as a new debtor. A novation is a contract. See § 3830, Revised Codes of 1899.
But the court apparently place greatest stress upon the postulate that plaintiff provided the fund with which to pay the Andrews' note and placed the fund in the hands of McLaughlin, and that, at that time, the latter was the collecting agent of Helen M. Andrews, and therefore she was bound by such payment or such delivery of the fund. The court say: "The funds required to pay the debt, as we have seen, had been provided and were in his hands as a result of the negotiation of the $880 note." To my mind, the case shows most clearly that plaintiff never provided a fund for the payment of the first note. It is conceded that he furnished no fund in cash. He did, for a sufficient consideration, paid by him, enter into a contract with McLaughlin, whereby the latter agreed to pay the first note and procure a cancellation of the mortgage securing the same. This agreement, from its nature, the note having been sold, could not be carried out by McLaughlin until the paper matured. The wording of the complaint shows and the conceded facts show that plaintiff did not suppose that McLaughlin would release the mortgage and surrender the note then and there when the oral agreement was made. McLaughlin agreed to pay the note in future. Plaintiff did not then demand the Andrews note, nor did he demand a release of the mortgage securing it. In fact the plaintiff, as the complaint shows, fully relying on McLaughlin's promise, never learned until 1897, which date was about five years after the Andrews note matured, that McLaughlin had failed to pay the note and procure a release of the mortgage. The $880 note was, by its terms, payable to McLaughlin, or to his order, and he was named *Page 793 
as mortgagee in the mortgage given to secure the same. By every principle of law, therefore, McLaughlin was the owner of said note and in no sense did he hold the same in trust for the use of Helen M. Andrews. It follows that when the note was sold, the proceeds thereof was the property of McLaughlin. Besides, there is no evidence in the case that at the date of the sale McLaughlin was the agent of Helen M. Andrews. At that time, two coupon notes had been sent to McLaughlin for collection and on presentation to the plaintiff the interest due had been paid over to McLaughlin, who accounted for the collections. But, at the time of the sale of the $880 note, these transactions were closed and the law will not, in such case, presume a continuation of the agency. There was nothing at that time which prevented Helen M. Andrews from selling her paper or from employing some other collecting agent, or from collecting the same herself when it fell due. On what principle, then, can it be assumed that when McLaughlin sold his $880 note, he was the agent of Helen M. Andrews? Besides, there is no evidence that Helen M. Andrews knew either of the existence of the $880 note or of the agreement that was made when it was given, or of the fact of the sale of the same by McLaughlin. There certainly can be no presumption that McLaughlin could, at the time of the sale of the $880 note, compel Helen M. Andrews to accept payment of her claims against the plaintiff. Under such conditions, I am at a loss to understand how the plaintiff can be said to have provided a fund out of which McLaughlin was bound to pay the claim of Helen M. Andrews, or a fund from which the latter could demand payment. The plain fact is that McLaughlin agreed, without authority from Andrews, to pay the Andrews note, and, in consideration for such agreement, received a note of $880 from plaintiff. There is no evidence that McLaughlin agreed at any time to sell the last note and from its proceeds pay the first note; and when he sold the last note I submit that the law will presume, in the absence of evidence to the contrary, that McLaughlin could not have paid the Andrews note, the same not being then due in whole or in part. How, then, is it possible, under these facts, to spell out the theory that plaintiff provided a fund which McLaughlin was obliged to turn over to Helen M. Andrews? There is in the case no evidence whatever that plaintiff ever considered the $880 note a fund *Page 794 
in any sense. He had given the note and had accepted the payee's oral agreement to pay the Andrews note, but plaintiff's testimony contains no allusion to any trust fund, nor does the complaint refer to any trust fund.
I therefore respectfully protest against any disposition of this case which wipes out the vested rights and the property of the defendant Brooks. He purchased the Andrews note upon the faith of the sworn allegations of the complaint, stating that the same had not been paid, and the fact of non-payment was later confessed by plaintiff's counsel and brought upon the record in open court and in the most deliberate manner. Moreover, under the evidence, the fact of non-payment was truly alleged in the complaint and truly declared by the stipulations. The Andrews note has never been paid at any time or in any manner.
                  (On Petition for Rehearing.)