Alexander v. Young

• Citation: 65 F.2d 752
• Decision Date: 10 July 1933
• Docket Number: No. 813.,813.
• Parties: ALEXANDER v. YOUNG.
• Court: United States Courts of Appeals. United States Court of Appeals (10th Circuit)

65 F.2d 752 (1933)

ALEXANDER v. YOUNG.

No. 813.

Circuit Court of Appeals, Tenth Circuit.

June 7, 1933.

Rehearing Denied July 10, 1933.

A. V. Roberts and C. G. Yankey, both of Wichita, Kan. (Earl Blake, Austin M. Cowan, Harold L. Blake, and J. E. Alexander, all of Wichita, Kan., on the brief), for appellant.

F. Dumont Smith, of Hutchinson, Kan. (Eustace Smith and Claude E. Chalfant, both of Hutchinson, Kan., on the brief), for appellee.

Before PHILLIPS and McDERMOTT, Circuit Judges.

PHILLIPS, Circuit Judge.

Young brought this action at law against J. E. Alexander to recover upon nine promissory notes. Trial by jury was duly waived and the cause tried by the court. The material facts are not in dispute, and are these.

Young owned a ranch in Comanche county, Kansas, subject to a first mortgage of $25,000 held by the Illinois Life Insurance Company. On March 12, 1919, he conveyed such ranch to L. D. Alexander, a brother of J. E. Alexander, for two cash payments aggregating $40,000, and deferred payments aggregating $44,800 evidenced by nine promissory notes, secured by a second mortgage on the ranch. J. E. Alexander furnished the money for the cash payments and was to receive a one-half interest in the ranch. On March 25, 1919, L. D. Alexander executed a warranty deed to such ranch to J. E. Alexander. In the fall of 1920 it developed that L. D. Alexander would be unable to carry his interest in the ranch, and J. E. Alexander agreed to take over the whole interest, and on October 1, 1920, this deed was placed of record.

On June 13, 1919, Young transferred the second mortgage notes and second mortgage to Stillwell and Allen, who prior to February 17, 1920, transferred them to J. E. Stillwell.

Default was made in the payment of the interest due in September, 1919, on the second mortgage notes and on account thereof Stillwell declared due the entire indebtedness evidenced by such notes, and on February 17, 1920, commenced a suit to foreclose the second mortgage.

On November 1, 1920, J. E. Alexander and Stillwell entered into an extension agreement which recited the execution of the second mortgage notes, the second mortgage, the transfer thereof to Stillwell, the default therein, the conveyance to J. E. Alexander, that there was then due on such notes $49,403 with interest at 10% from November 1, 1920, and that J. E. Alexander desired an extension of time for the payment thereof. It further provided as follows:

"J. E. Alexander agrees to pay to said J. E. Stillwell or his assigns as follows:

"Forty-four hundred three no/100 dollars on or before ninety days from this date, with interest at ten per cent per annum, and forty-five thousand dollars on or before one year from this date, with interest at ten per cent per annum, payable semi-annually, all payable at First National Bank, Seneca, Kansas, with privilege of making partial payments any time.

"For the convenience of said J. E. Stillwell, the said J. E. Alexander has executed his collateral notes evidencing the deferred payments, 9 notes of $5000.00 each, due Nov. 1st, 1921, and one note for $4403.00 due on or before ninety days after date, and all payments made on said collateral notes shall be credited on the mortgage notes described in said mortgage.

"The said mortgage notes to be deposited with Sunflower State Bank, Wichita, Kansas, and held by it until default be made in said collateral notes or the same are paid. When L. D. Alexander notes are returned to J. E. Stillwell, the J. E. Alexander notes are to be returned to J. E. Alexander."

J. E. Alexander executed and delivered to Stillwell the ten collateral notes referred to in such extension agreement, and Young endorsed such notes. Young had no knowledge of the extension agreement until after he had endorsed such notes. Stillwell dismissed the foreclosure proceeding. The collateral notes were dated November 1, 1920. One was for $4,403 and was due 90 days after date. The other nine were for $5,000 each and were due one year after date.

Thereafter Stillwell endorsed and delivered such collateral notes to various persons, who endorsed and delivered them to Fred E. Graham.

On December 2, 1921, Graham brought an action against Young upon the collateral notes in the Superior Court of Los Angeles County, California. During the progress of the trial in that action, Graham received from Stillwell and tendered into court the second mortgage notes, the second mortgage, and an assignment of such mortgage to Young to be delivered to the latter when he responded to the relief demanded in that action. Young defended the action on the ground that his endorsement was secured through misrepresentations made by Stillwell, and that Graham took with notice thereof. Young prevailed except as to one note, as to which the court held that Graham was a bona fide holder for value. Judgment for $5,819.44 was entered in favor of Graham upon such note (being the note sued on in the second cause of action herein), and for Young on the remaining notes.

Young tendered the amount of such judgment to the clerk of the court, and brought an action in the superior court of Los Angeles county, California, to require the clerk to deliver to him such second mortgage notes, second mortgage, and assignment. On October 22, 1923, judgment was rendered in the last mentioned action directing the clerk to receive the sum of $6,396.40, the amount due on such judgment against Young, and to deliver to Young the second mortgage notes, second mortgage, and assignment. The amount was paid and the clerk delivered to Young the second mortgage notes, second mortgage, and assignment, and also the ten collateral notes.

Thereafter on December 2, 1922, the Life Insurance Company brought suit in the district court of Comanche county against Young, Stillwell, L. D. Alexander, and J. E. Alexander to foreclose the first mortgage. On December 22, 1922, Stillwell filed a cross-petition therein seeking judgment against L. D. Alexander as the maker and Young as the endorser of the second mortgage notes, and for the foreclosure of the second mortgage. Young filed an answer and cross-petition in which he alleged the judgments in the actions in the California court as a bar to the action against him upon the second mortgage notes, and further alleged that, by virtue of his payment of the Graham judgment, he was an equitable assignee of one of the second mortgage notes, and sought a judgment in his favor upon one of such notes, and for a foreclosure of the second mortgage for the satisfaction thereof. Neither Stillwell nor Young sought a personal judgment on his cross-petition against J. E. Alexander.

Judgment of foreclosure was entered on the first mortgage, and on July 16, 1923, the ranch was sold in two parcels to satisfy the first mortgage indebtedness.

On May 20, 1924, judgment was rendered in favor of Stillwell on his cross-petition against L. D. Alexander as principal and Young as endorser of the second mortgage notes for $66,579.77, less $6,396.40 paid by Young on the Graham judgment. Young was denied relief on his cross-petition. At the close of the trial on the cross-petition, counsel for Young challenged the right of the court to enter such judgment until the collateral notes had been surrendered and canceled. Counsel for Young then had such notes in his personal possession. Stillwell stated in the presence of counsel for Young that he was making no claim on such notes, and would secure a statement from J. E. Alexander that they had been canceled. The court directed that entry of the judgment be withheld until such statement was secured. On May 21, 1924, Stillwell wrote a letter to J. E. Alexander in which he stated the result of the proceedings on the cross-petitions, the direction of the court as to withholding entry of judgment, and further said,

"I assure you that neither myself nor my assignees will ever claim anything on account of those notes, and I hereby release you from all liability thereon; kindly write Judge Day that you are satisfied that your liability on those notes has terminated and that you consent that the judgment be entered."

Young learned of such release one year after it was given. J. E. Alexander wrote to the judge of the district court of Comanche county as requested.

Young appealed from the judgment on the cross-petitions, and on April 11, 1925, it was affirmed by the Supreme Court of Kansas. Illinois Life Ins. Co. v. Young, 118 Kan. 308, 235 P. 104.

Thereafter Stillwell secured a judgment in a California court against Young on the judgment recovered by Stillwell in the foreclosure suit. On June 15, 1926, Young paid Stillwell the amount of the judgment recovered by the latter in the California court, and Stillwell assigned such judgment and the collateral notes to Young.

About July 1, 1922, after the trial in the case of Graham v. Young in the California court, Stillwell informed J. E. Alexander of the result of such trial, and requested Alexander to give him new notes in full satisfaction of J. E. Alexander's liability under the extension agreement. Stillwell stated that the collateral notes had been introduced in the trial of Graham v. Young and were then in the hands of the clerk of the California court, and that he would endorse such new notes to the persons then owning the collateral notes.

J. E. Alexander accepted Stillwell's proposition and executed and delivered to Stillwell new notes dated July 1, 1922, due in one year aggregating $57,653, being the amount due on the old notes with accrued interest. At the same time Stillwell executed and delivered to J. E. Alexander a memorandum which described the old notes and the new notes, the persons to whom the new notes were to be transferred, and further read as follows:

"The above notes (except the last 2) (interest) are given as renewal notes for the first series mentioned and represent the amount due J. E. Stillwell and his assigns on the L. D. Alexander...