Fanning v. Murphy

• Decision Date: 16 January 1906
• Citation: 126 Wis. 538,105 N.W. 1056
• Parties: FANNING v. MURPHY.
• Court: Wisconsin Supreme Court

126 Wis. 538

105 N.W. 1056

FANNING

v.MURPHY.

Supreme Court of Wisconsin.

Jan. 9, 1906.

Separate Opinion, Jan. 16, 1906.

Syllabus by the Judge.

If a person for a consideration moving to him from another agrees to pay that or any other's debt to a third person, the law, at once, operating upon the acts of the immediate parties to the transaction, supplies the essentials of privity between such person and such third person, establishing binding contractual relations between them even though such third party was a stranger to, and had no knowledge of, the transaction.

In case of the establishment of contractual relations in the manner indicated in the foregoing rule, they cannot be subsequently varied by any agreement between the immediate parties to the transaction not consented to by the third party.

The rule last above stated applies to a case where one takes a conveyance of real estate, agreeing as part consideration therefor to pay the debt of his grantor or that of some other person to a third party.

In case of such an agreement as is indicated in the last foregoing rule, the new promisor is the principal debtor as regards both his immediate promisee and the third party as well, so that any agreement made between the second promisor and the original promisee, prejudicial to the original promisor, operates to discharge the latter the same as in any case of an agreement between the principal debtor and the creditor where there is a surety.

Findings of fact and conclusions of law should be confined strictly to performance of the duty imposed by section 2863, Rev. St. 1898. Such findings should cover singly and in concise language the pleaded facts without any addition by way of argument or recitation of evidence.

It is essential to the preservation of a surety's rights against his co-surety that he should pay the indebtedness under compulsion.

In case of a principal debtor, a surety, the debt being in default, and of the latter paying the same for his protection, without being coerced into doing so, such payment is compulsory within the rule last aforesaid.

If a surety for his protection pays off the debt for which he is liable, but does so in the form of a purchase, taking an assignment of the securities to himself, or to some third person for his use, having in mind, however, only the better protection of his rights of subrogation and contribution, the transaction amounts to a payment as to such rights.

A creditor entitled to resort to a principal debtor and a surety for the discharge of his claim, owes no duty to the latter of active vigilance to collect the debt of the principal. The law imposes the duty of activity in such circumstances on the surety rather than on the creditor.

At all times after the maturity of an indebtedness, for the payment of which there is a principal and sureties, any one of the latter may pay off the same for his protection and enforce his rights of subrogation and contribution.

In case of a principal debtor and surety, any valid extension of the time of payment of the debt at the request of the former, without the consent of the latter, discharges the surety.

It is essential to a valid extension of the time of payment of an indebtedness under the foregoing rule, that the transaction should involve all the essentials of a binding contract, effectually tying the hands of the creditor as regards enforcing payment of the debt until the expiration of the agreed time. There must be a reasonably definite time agreed upon and an agreed equivalent rendered for the extension, and that equivalent must be a real consideration,--something more than the payee would be entitled to in case of a mere indebtedness of the payor by allowing the debt to run past due.

A mere request for the extension of the due date of a debt at the contract rate of interest and consent thereto, does not satisfy the essentials of a binding contract for an extension within the rules above indicated.

Appeal from Circuit Court, Douglas County; A. J. Vinje, Judge.

Action by W. R. Fanning against J. T. Murphy. Judgment for plaintiff and defendant appeals. Affirmed.

A consolidated action to foreclose a mortgage and obtain a judgment enforcing the personal liability of one claimed to be liable for the mortgage indebtedness to the plaintiff as a co-promisor upon the note secured by the mortgage and in the mortgage as well.

April 15, 1890, J. T. Murphy, D. C. Sullivan, M. Murphy and W. R. Fanning mortgaged lands owned by them to the Superior & Duluth Loan & Debenture Company to secure the payment, three years after the date of such mortgage, of a $5,000, note of the mortgagees with interest thereon at the rate of 8 per cent per annum, payable semi-annually. The mortgage contained all the provisions common to such instruments, and also this: “And the said parties of the first part, for themselves and their heirs, executors, administrators and assigns, hereby covenant and agree to and with the said party of the second part, its successors and assigns, as follows, to-wit: that they will pay to the said party of the second part, its successors and assigns, the sum of money above specified, with interest accruing thereon, at the times and in the manner stated in said note and coupons, together with all costs and expenses, if any there be.” September 18, 1893, the mortgage and note were for value assigned to the Northern Trust Company. October 14, 1896, such company for value paid by the plaintiff and at his request assigned the note and mortgage to Mary A. McNealy, and on October 19th she assigned the same to him. The assignments were recorded, except the last. The one to Mary A. McNealy was made solely for the benefit of plaintiff. She was used as a convenient instrument to better preserve, as he supposed, his rights as against his co-sureties. April 16, 1890, the mortgagors conveyed the mortgaged premises to W. R. O'Hearn, he assuming and agreeing to pay as part consideration for the property the mortgage indebtedness. April 18, 1890, he conveyed a two-thirds interest in the premises to R. C. Jones and Edgar A. Le Clair, they as part consideration therefor assuming and agreeing to pay a corresponding proportion of the mortgage indebtedness. June 5, 1890, said Le Clair conveyed his interest in the premises to said O'Hearn and Jones, they assuming and agreeing as a part consideration therefor to pay one-third of said indebtedness. Subsequent to O'Hearn's taking an interest in the property he, acting for himself and Jones, April 16, 1890, paid and took up some past due interest coupons. April 11, 1893, O'Hearn on behalf of himself and Jones, they being then sole owners of the mortgaged premises, applied to the holder of the note and mortgage for an extension of the time of payment for one year, which application was granted. The transaction in respect thereto consisted of a mere request for an extension and consent thereto, the agent of the holder of the note, assuming to act pursuant to such request and consent, endorsing on the back of the note these words: “This note, by mutual agreement, is extended for one year from April 15th, 1893, at per cent, payable semiannual. Interest having been paid to April 15th, 1893, and all coupons surrendered.” Later, after the Northern Trust Company became the owner of the securities, default was made in respect to both principal and interest, whereupon under threat of collection thereof against the property of the plaintiff being forced, and upon the promise of J. T. Murphy to pay his proper proportion as soon as he was able to do so, plaintiff paid the amount due on the note and caused the securities to be assigned to Mary A. McNealy, he being advised by counsel to that course as the one best calculated to protect his rights against other parties liable upon the paper. On May 28, 1902, he commenced an action against J. T. Murphy to recover the proportion it was supposed he should bear of the burden of discharging the mortgage indebtedness, alleging that plaintiff's other co-makers on the note were non-residents or insolvent. July 28, 1902, plaintiff commenced an action against all persons interested in the real estate and all those who were supposed by the plaintiff to be personally liable for the mortgage indebtedness or any part thereof, to foreclose the mortgage and enforce such personal liability. The two actions were consolidated and tried as one. The court, upon the evidence, found facts as above indicated, and also all facts necessary to a judgment of foreclosure in the action, and the following: The only party appearing and defending in the action was J. T. Murphy. Interest was paid upon the note to September 1, 1895. After plaintiff purchased the note and mortgage J. T. Murphy on several occasions promised to pay his proper proportion but neglected to do so. That resulted in the commencement of the two actions. The parties liable, or that were liable, for the payment of the mortgage indebtedness in addition to the plaintiff are J. T. Murphy, D. C. Sullivan, M. Murphy, W. R. O'Hearn, R. C. Jones and Edward Le Clair. D. C. Sullivan and M. Murphy are non-residents of the state and have been for five or six years. Defendants O'Hearn and Le Clair are insolvent and have been since 1893. Said Jones was insolvent from the year 1893 to the time of his death, which occurred prior to the commencement of this action. On April 18, 1904, there was due on the note and mortgage, including back taxes, $9,272.07. The amount which plaintiff paid for the note and mortgage, with interest thereon from the time of such payment to the filing of the finding, less $100, paid to him for interest, was $7,571.17. O'Hearn and Jones gave no consideration for the extension of the note granted at their request. The summons and complaint against J. T. Murphy, in the action for contribution, was served upon him within six years after Fanning paid or purchased the note. The summons and complaint...