Court Opinion

ID: 6676393
Source: CourtListenerOpinion
Date Created: 2022-07-20 21:16:20.495367+00
Date Added: 2024-06-11T16:00:43.000419
License: Public Domain

The opinion of the court was delivered by
Mr. Justice Norton.
Rufus D. Senn is the husband of M. R. Senn and the senior member of the firm of R. 1). Senn & Son. On January 27, 1877, M. R. Senn executed to plaintiff, as cashier of the Central National Bank, her bond for $3,000, and recited therein that, “Whereas Rufus D. Senn, by overdrafts, has become indebted to the said Central National Bank to the amount of fifteen hundred dollars, and is unable to refund the same. Now the condition of this obligation is such, that if the said Rufus D. Senn * * * do and shall well and truly pay or cause to be paid unto the above named J. IT. Sawyer, cashier as aforesaid, * * * the full sum of fifteen hundred dollars, twelve months from this date,” with interest, &e., then to be null and void, and gave her mortgage of even date on real estate to secure said bond.
The actual liabilities of R. D. Senn at that date on overdrafts to the bank were, on his individual account, $40.40, of which $30 was paid July 2, 1877; andón the account of R. D. Senn & Son, $1,112.36. On March 1, 1878, M. R. Senn delivered to plaintiff her note for $1,500, endorsed by R. D. Senn & Son, to change the form of indebtedness of R. D. Senn & Son’s over*258drafts. This note was cancelled and the original bond and mortgage continued of force, about March 25, 1878, by M.' R. Senn’s written agreement. R. D. Senn & Son deposited at numerous times between January 27, 1877, and January 27, 1878, sums, which in the aggregate amounted to $15,451.71, which by agreement between R. D. Senn & Son and the said bank, made prior to any of said deposits, they were to use in their business by drafts from time to time as the deposits were made, and they did so use the whole of said deposits and became further indebted to said bank by overdrafts.
M. R. Senn executed to F. W. Wagener & Co., on May 25, 1878, a bond for $2,000, conditioned that Rufus D. Senn should pay to them $1,000, with interest, by March 20, 1883, and secured the same by a second mortgage on the real estate mortgaged to plaintiff as aforesaid.
Plaintiff on June 5, 1882, commenced this action against M. R. Senn and F. W. Wagener & Co. to foreclose his mortgage, and subsequently had leave to amend his complaint by alleging as paragraph 3a, that there was a mistake in the condition of the bond, and that it was intended to cover overdrafts by R. D. Senn & Son. Mrs. Senn answered, setting up various defences, all of which she subsequently withdrew. F. W. Wagener & Co. answered, setting up their own mortgage, admitting all of the allegations of the complaint except paragraph 3a, and alleging that plaintiff’s bond was conditioned for the payment of overdrafts by Rufus D. Senn individually made; that he was not so indebted; that R. D. Senn & Son had paid their overdrafts existing when M. R. Senn’s bond to plaintiff was executed — first, by deposits of $15,451.71 between its date and maturity; and second, by the note of M. R. Senn for $1,500, endorsed by R. D. Senn & Son.
This action has been reduced to a contest for priority between two mortgage creditors of M. R. Senn. Mrs. Senn has waived anv defence she may have had to either. F. W. Wagener & Co.’s mortgage is valid. It is, however*, junior not only to plaintiff’s mortgage, but also to the latest transaction between plaintiff and M; R. Senn. They are subsequent creditors and required to take notice only of the contract which was referred to in the rec*259ord of January 31, 1877, and not of any other or variation of this contract, whether written or oral, whether left out of the instrument referred to by mistake or otherwise. The allegations of paragraph 3a of the complaint are therefore immaterial to the case as it now stands.
What was that contract? M. R. Senn’s bond and mortgage were collateral, and it was not material to state the precise amount of the principal debt, the object being to make the collateral large enough to cover that. So the sum stated in the collateral is $1,500, to secure a then subsisting indebtedness of Rufus D. Senn to the Central National Bank by overdrafts of any person or persons, who could create an indebtedness against him by drafting ; that the principal of such indebtedness should not exceed $1,500. Rufus D. Senn was then liable to said bank on overdrafts by himself, $40, of which $30 was paid July 2, 1877, and by his firm, R. D. Senn & Son, $1,112.36. The withdrawing by R. D. Senn & Son of all of their subsequent deposits by special agreement prior to their having been made, prevents them from being applicable under the general rule to the extinguishment of their overdrafts existing on January 27, 1877, the time for the payment of which had been extended one year by the transaction on that day.
In order to make it appear to the comptroller of the currency that the form of the indebtedness to the bank had been changed from overdrafts by R. D. Senn & Son to bankable paper, M. R. Senn made her note at ninety days for $1,500 to R. D. Senn & Son, which was by them endorsed to the bank and a credit of that amount entered on their deposit account. This was not intended as, and was therefore not, a payment, and as soon as the exigency had passed, long before the note fell due and about two months before the mortgage to F. W. Wagener & Co., the transaction was annulled and the parties and their accounts restored to their previous condition by writing the following words across the face of the note, to wit: “This paper being informal is cancelled and the original bond and mortgage in possession of the 4bank to continue of force. (Signed) M. R. Senn, J. H. Sawyer, Cashier. Witness, R. D. Senn.”
This amounted to a recognition by M. R. Senn of the continu*260ing validity of her bond and mortgage to plaintiff for the original purpose. The record having remained intact, was notice to F. W. Wagener & Co. of the exact status quo at the time he took his mortgage. If the plaintiff had appealed, he might have had, in addition to the amount adjudged to him by the master and Circuit Judge, the amount of Rufus D. Senn’s individual account, but riot, having appealed, the Circuit decree cannot be disturbed in that respect.
Having announced our conclusion on the law and facts, let us turn aside to review the exceptions and able argument for F. W. Wagener & Co., which militate against our decision.
The first three exceptions do not raise any issue of substance, were not argued, and need not be considered. The next seven relate to the construction of the condition of M. R. Senn’s bond to plaintiff and what parol proof is admissible. If the written words of that were construed to mean that Rufus D. Senn had become indebted to the-bank by overdrafts drawn by himself on his individual account, then the authorities cited by counsel seem decisive that no parol proof con Id be adduced to reform it, or give a different effect as to F. W. Wagener & Co., subsequent encumbrancers. But having construed that to mean that Rufus D. Senn had become indebted by overdrafts by whomsoever drawn, so only the drawer or drawers had power to create an indebtedness against him by drawing, it was competent to prove by parol who had made such drafts and for how much. It was proven that he was a general partner in the firm of R. D. Senn & Son, and it follows that their overdrafts created an indebtedness against him and were within the contemplation of that bond, and unless discharged, retained their priority under the mortgage over F. W. Wagener & Co.’s debt under his mortgage.
The next four exceptions relate to the admissibility .of the evidence to prove the agreement as to deposits by R. D. Senn & Son subsequent to M. R. Senn’s bond and mortgage to plaintiff, and as to the effect of such agreement on F. W. Wagener & Co. In addition to the authorities cited by plaintiff, it is clear upon reason that R. D. Senn & Son might make such»a contract without consulting M. R. Senn or her subsequent creditors. By her bond she contemplated that no payments were during the *261ensuing twelve months to be made on the overdrafts to which 'it was collateral. They were to be paid twelve months from that date — not within one year, nor by, nor on or before, a particular day. The contract was with reference to funds not only upon which she had no lien, but which she could not consistently with her undertaking have requested to be applied to the overdrafts. It would not have been a fraud upon her rights if R. D. Senn & Son had had exactly the same transactions with another bank without agreement and without notice to her, and it cannot be that siich an agreement might not be made, so as to allow R. D. Senn & Son to continue to bank with the bank of their choice.
If these deposits did not relieve her, they cannot be considered with reference to F. W. Wagener & Co. They were then utter strangers and only became creditors of M. R. Senn on May 25, 1878, when she became surety for her husband, Rufus D. Senn’s debt to them. The deposits had then all been made and all withdrawn, and their equities are only what hers then were. She had waived her right to insist upon the deposits as payment by her conduct in reference to her $1,500 note. There was no writing in reference to the deposits, and we know of no rule which excludes parol testimony as to the terms on which they were received.
The 15th exception is “that the note of March 1, 1878, and accompanying agreement, even if not payment of the overdrafts of R. D. Senn & Son, were a release of Mrs. Senn’s mortgage to plaintiff.” It is probable from the argument that this exception is intended to cover the position that M. R. Senn was a surety ; that as such the extension of time given by taking a note at ninety days was a release of her bond and therefore of her mortgage. But an extension of time with the consent of the surety does not release him ; here the extension was to the surety herself. Besides, she afterwards agreed to cancel the transaction and restore matters to their original status, and this while she owed neither F. W. Wagener & Co. nor any one else.
The 16th exception asserts that the delivery of the mortgage to Mrs. Senn was a release of its original lien. It does not appear that there was in fact any delivery to M. R. Senn of her mortgage, but the recital of the accompanying paper: “I have *262this clay deposited” the bond (which was already in the possession of the bank), imports that it was to continue in the bank’s possession for the new purpose. The instantaneous transfer for the purpose of the deposit, being similar to that of a deed where there is instantaneous reconveyance by way of mortgage for the purchase money, could not operate except for the purpose of the transfer, and not by way of extinguishment. Were it otherwise, then there was a mutual mistake as to the validity of the substituted paper, which would be a good consideration and reason for cancelling the whole transaction, including the delivery of the mortgage; and then the delivery would not work a satisfaction of the mortgage; but the fact being as we adjudge, that there never was an actual delivery, and never was intended by any party to the papers to be a constructive delivery, there was no delivery, and the mortgage retains its original vitality as against any supposed redelivery thereof to M. R. Senn. The transaction was with M. R. Senn herself, and she could not take any undue advantage of plaintiff therein, nor does she seek to do so, nor can F. W. Wagener & Co. compel her to do so. They must be content with the situation as they found it May 25, 1878.
The last four exceptions are general and have been disposed of in the discussion of the other sixteen.
F. W. Wagener & Co. argue that the judge erred in holding that M. R. Senn’s bond was a continuing guaranty. We do not understand him to have so held, and we adjudge that it was only a guaranty of the amount due on January 27, 1877, with interest as stipulated.
The judgment of this court is, that the judgment of the Circuit Court be affirmed.