Dillaway v. Peterson

Decision Date18 October 1898
Citation11 S.D. 210,76 N.W. 925
PartiesMELISSA J. DILLAWAY, Plaintiff and appellant, v. GEORGE R. PETERSON, John A. Spalding, et al., Defendants and respondents, John H. Chapman, Defendant.
CourtSouth Dakota Supreme Court

Appeal from Circuit Court, Minnehaha County, SD

Hon. Joseph W. Jones, Judge

Affirmed

U. S. G. Cherry, Sioux Falls, SD

Attorneys for appellant.

A. B. Kittredge, Davis, Lyon & Gates, Sioux Falls, SD

Attorneys for respondent, Peterson, Gibert, Fulford and Ramsey.

A. B. Kittredge

Attorneys for respondent, Spalding.

Opinion filed October 18, 1898.

FULLER, J.

In this action to foreclose a mortgage on certain church property, executed to plaintiff by a corporation, the Board of Trustees of the First Methodist Episcopal Church of Sioux Falls, in their official capacity, to secure their joint promissory note for $8,000, given for the exclusive benefit of said corporation, plaintiff sought to obtain a deficiency judgment against each of them, and also against the defendants John H. Chapman, one of the joint obligors, and John A. Spalding, who, it is alleged, subsequently purchased the property with Chapman as a co-partner, and, as a part of the consideration, expressly assumed and agreed to pay the entire mortgage indebtedness. At the close of plaintiff’s evidence, on motion of counsel for defendant Spalding, the action was dismissed as to him; and, at the conclusion of the case, upon a finding that plaintiff, for a valuable consideration, and since the execution of the deed to Chapman, had granted him an extension of the time of payment, without their knowledge or consent, all the other defendants were absolved from liability, and a decree was entered foreclosing the mortgage, and adjudging said Chapman to be the only defendant against whom execution might issue for any deficiency arising from a sale of the mortgaged premises. From that part of the judgment decreeing said Chapman to be the only defendant personally liable for the mortgage indebtedness, or any part thereof, and from an order overruling a motion for a new trial, plaintiff appeals to this court.

The evidence upon which appellant relies to justify a deficiency judgment against, the trustees as makers of the $8,000 note and mortgage, and to hold Spalding liable under Chapman’s assumption of the payment thereof, as a part of the purchase price of the property, will be considered in connection with the law found to be applicable thereto. Subject to appellant’s mortgage, which had not yet matured, Chapman, it appears, purchased the property from the Board of Trustees for $15,000, by assuming this mortgage, and by paying $7,000 in cash, obtained at the time from the respondent Spalding. It was shown that Chapman was a real-estate broker. and, as the agent of the church organization for the sale of the property, had full authority to dispose of the same on the terms above mentioned, and to retain $1,000 as his commission. In the spring of 1891, while visiting in the East, Chapman called upon Spalding, whom he had personally known for many years, and in the course of conversation mentioned the mortgaged premises, and described the improvements thereon, when it was suggested by Spalding that Chapman purchase the property himself for $15,000, by assuming the incumbrance thereon, and by paying the $7,000 balance in cash, which, it was agreed, Spalding should loan for that purpose, taking a second mortgage upon the property as part security. It was found at the trial that immediately, and before the note matured according to its terms, appellant was advised that Chapman had purchased the property, assuming, as part consideration therefor, the payment of the mortgage given to secure the same; and, from numerous letters passing between said parties thereafter it clearly appears that, at her suggestion, they entered into an agreement, upon a valuable consideration, extending the time of payment for one year, without the knowledge or consent of the makers of such note and mortgage, whose relation thereto had become that of sureties, while Chapman was bound as the principal debtor. Appellant looked wholly and always to Chapman for the interest as the same matured, and, near the expiration of the time to which she had extended the note, expressed a willingness to grant further time at the same rate, as shown by the following letter:

“Bath, Feb. 24-93. Mr. J. H. Chapman, Esq.—Dear Sir: I write to see what your wishes or intentions are in regard to the $8,000 loan on the old meeting house. It will be due next April 19th. Would you like to keep the money longer at the same rate of interest? If so, can you give me an idea of how long? Could you manage to give me say, three months, or so, notice before you wish to pay it? I do not need the money, and, if you are arranging to pay it, would like to loan it again at the same rate of interest, with good security, and would like for you to see what you can do for me when you get ready to pay it.”

In consideration of the continued payment of interest, and without the knowledge or consent of the sureties, this offer of a second extension was also accepted by Chapman in writing, under date of March 6th, as follows:

“In regard to the $8,000, I should like to keep it right along at the same rate of interest as long as I hold the property. Should I sell to a party wishing to pay all cash, will give you ample notice that you may have time to invest the money in some other securities. …”

After the next installment of interest matured according to the terms of the extended note, and on the 20th day of November, 1893, appellant’s authorized agent wrote Chapman as follows:

“I believe the old church property is now in your hands, and we are to look to you for the interest on the $8,000 note to Melissa J. Dillaway. The interest was due October 18th, and, as we are at present short of money, it would be very acceptable.”

Chapman continued to remit to appellant the interest maturing semi-annually, up to and including the $280 installment due April 18, 1895; and, in all their extensive correspondence relating to the loan, neither of the other signers of the note and mortgage were ever mentioned until August of that year, when, advised that her security had greatly depreciated in value, she authorized her son to inquire of Chapman by letter “if the signers of the note, Ramsey, Peterson, Gilbert, etc., are still responsible for its payment.”

As the note was made exclusively for the benefit of the church, and the signers thereof received none of its proceeds, a court of equity cannot ignore a contract for an extension clearly gatherable from the letters properly offered and received in evidence. Referring to the matter in her letter to Chapman written three days before the note became due for the first time, she inquires: “Would you like to keep the money at the same rate of interest? If so, please state some time.” Promptly answering, Chapman expressed thanks for the kindness in proposing an extension of the note and accepted the proposition as follows: “I should like to keep the money for another year on the same terms.” In addition to the foregoing, the record contains numerous letters passing between Chapman and appellant which conclusively...

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