Frank W. Fowler v. Charles C. Barlow Et Ux

• Decision Date: 08 May 1929
• Citation: 146 A. 77,102 Vt. 99
• Parties: FRANK W. FOWLER v. CHARLES C. BARLOW ET UX
• Court: Vermont Supreme Court

146 A. 77

102 Vt. 99

FRANK W. FOWLER v. CHARLES C. BARLOW ET UX

Supreme Court of Vermont

May 8, 1929

February Term, 1929.

Principal and Surety---What Constitutes Surety---Alteration of Instruments---Effect on Mortgage where Material Alteration of Mortgage Note is Made without Fraudulent Intent---Fraud---Supreme Court will Not Presume Existence of Fraud---Alteration of Note by Mortgagee To Lower Rate of Interest---Limitation of Actions---Right of Entry under Mortgage---Payment---Presumtion as to Payment and Satisfaction of Mortgage---Effect of Acknowledgment of Title of Mortgagee by Owner of Equity of Redemption---Time When Obligation of Mortgage Sureties Arises and Statute Commences To Run against Mortgagee's Right of Entry---Effect of Part Payment on Note by Maker, without Knowledge of Sureties on Running of Statute so far as Mortgage Sureties Are Concerned---Sufficiency of Evidence To Show Payment on Mortgage Note as Made by Procurement of Surety for His Benefit---Effect of Payment on Mortgage Indebtedness Made by One of Several Persons Interested in Equity of Redemption---Question Not Raised below Not for Consideration by Supreme Court.

1. One who pledges or mortgages his property to secure debt of another, without becoming personally bound for the payment is, as to that debt, a surety.

2. Where a material alteration of a mortgage note is made without fraudulent intent, although note may be avoided, debt is not discharged, mortgage still remains valid security for original consideration, and recovery may be had upon such original consideration.

3. Where there is no finding of intent to defraud by material alteration of mortgage note, Supreme Court cannot supply such intent by inference, nor can it presume existence of fraud.

4. Even though material alteration of mortgage note by mortgagee were presumed to be fraudulent, such presumption would be rebutted, where change was to a lower rate of interest than that specified, and thus against interest of mortgagee and to advantage of makers.

5. Material alteration of mortgage note by mortgagee, whereby rate of interest was reduced, not having been shown to have been made with a fraudulent intent, held that validity of mortgage was not affected by such alteration.

6. Right of entry under a mortgage is barred by continued interruption and ouster for term of 15 years.

7. Courts of equity act upon analogy of statute of limitations and will presume payment and satisfaction of mortgage debt after lapse of 15 years, unless something has intervened to take case out of statute, or to repel presumption of payment resulting from lapse of time.

8. Interruption or ouster, which, if continued for term of 15 years, bars right of entry under a mortgage, ceases upon acknowledgment of title of mortgagee by owner of equity of redemption.

9. Where defendants executed mortgage to secure payment of note executed by others to whom consideration was paid defendants' obligation as sureties arose when note was unpaid at maturity, at which time 15-year period of statute of limitations, after which mortgagee's right of entry would be barred if his title should not be acknowledged by defendants, commenced to run.

10. Where defendants executed mortgage to secure payment of note executed by others to whom consideration was paid, payments upon note, whether of principal or interest, by makers, without participation of sureties, while serving to keep note alive as against former, would not affect running of time as against latter.

11. Where defendants executed mortgage to secure payment of note executed by others to whom consideration was paid, and certain payments were made on note by one of makers with money loaned to him by one of such co-sureties, under agreement that in consideration thereof certain land belonging to such co-surety, covered by said mortgage, would be released, held that, although money loaned by such co-surety to maker belonged to latter, so far as payments were concerned, evi-

dence showed that money was paid by procurement of cosurety, under his supervision, and for his benefit.

12. Where several persons are interested in equity of redemption, payment by one of them, to apply upon principal or interest of mortgage debt, keeps alive right of entry not only against him, but also against all other owners of equity, G. L. 1869, relating to payment by one of several joint contractors, not applying.

13. Where question was not made an issue below, it is not before Supreme Court for consideration.

APPEAL IN CHANCERY. Petition in equity to foreclose a mortgage. Answer by defendants alleging that they were sureties or guarantors only; that they were discharged from liability because there has been a material alteration of note without their knowledge or consent; that statute of limitations had run both as to note and mortgage; and that one of makers of note died leaving an estate sufficient to pay note in full, but that plaintiff had made no attempt to collect the amount, and estate had been disposed of. Replication, joining issue. Heard on pleadings and findings of fact in vacation after September Term, 1927, Windham County, Sherburne, Chancellor. Bill dismissed with costs to defendants. The plaintiff appealed. The opinion states the case. Decree reversed, and cause remanded with directions that decree be entered for plaintiff, amount due under mortgage ascertained, and time of redemption fixed.

Decree reversed, and cause remanded, with directions that a decree be entered for the plaintiff, and the amount due under the mortgage ascertained, and the time of redemption fixed.

Frank E. Barber for the plaintiff.

Carpenter & Clawson and Richard E. Gale, of counsel, for the defendants.

Present: WATSON, C. J., POWERS, SLACK, MOULTON, and WILLCOX, JJ.

OPINION

MOULTON

This is a petition in equity to foreclose a mortgage on real estate. The defendants have filed an answer in which they say that they were sureties or guarantors only, and that they are discharged from liability because there has been a material alteration of the note without their knowledge or consent; because the statute of limitations has run on the note and mortgage; and because Leray Fowler, one of the makers of the note, died leaving an estate sufficient to pay the note in full, but the plaintiff made no attempt to collect the amount, and the estate has been disposed of. A hearing was had before the chancellor, who has found the following facts: The mortgage originally covered several different parcels of land, some of which were owned by Charles Barlow, and some by his wife, Alice Barlow. The mortgage is dated January 4, 1909, and is conditioned for the payment of a promissory note for $ 1,000 payable to the order of the plaintiff, and signed by Leray J. Fowler and John S. Fowler. The defendants are not signers or indorsers of the note. They gave the mortgage for the sole purpose of enabling the makers to procure the amount from the plaintiff, and no part of the money accrued to their benefit.

Payments on the note were made from time to time by the makers. The last payment was made by John S. Fowler, one of the makers, on August 16, 1927, and was in the sum of $ 25. It was made in the presence of defendant Charles C. Barlow. On January 10, 1912, Charles Barlow loaned $ 200 to John Fowler, so that the latter might pay the same on the note, on an agreement between Barlow and the plaintiff that upon such payment the plaintiff would release from the mortgage a certain piece of real estate, belonging to Barlow. The release was accomplished by a quitclaim deed. In the same manner, on May 1, 1914, Barlow loaned $ 250 to John Fowler, which was paid on the note, to release another piece of real estate belonging to Barlow. This left the property owned by Alice Barlow the only real estate covered by the mortgage. All belonging to Charles Barlow had been released. Alice Barlow had nothing to do with the release.

In 1927 the plaintiff began pressing for payment of the note, and verbal negotiations took place, with the approval of Alice Barlow, between Charles Barlow and the plaintiff, whereby a new mortgage and note should be substituted for these already in existence. But these negotiations came to nothing.

On March 25, 1914, the plaintiff wrote across the end of the note words to the effect that from that time on interest should be at the rate of 5%, but the chancellor is unable to find on the evidence whether, as the plaintiff claims, this was at the suggestion of Charles Barlow.

Leray Fowler deceased in June, 1921, leaving an estate not exceeding the amount necessary to pay the expenses of his last sickness and funeral.

A decree was entered for the defendant, and the plaintiff has appealed.

Since the note was made and delivered before the Negotiable Instruments Act took effect, its provisions do not apply. G. L. 3059.

One who pledges or mortgages his property to secure the debt of another, without becoming personally bound for the payment, is, as to that debt, a surety. Jangraw v. Perkins, 79 Vt. 107, 109, 110, 64 A. 449; Cross v. Allen, 141 U.S. 528, 534, 35 L.Ed. 843, 12 S.Ct. 67; Eberhart v. Eyre-Shoemaker, Inc., 78 Ind.App. 658, 134 N.E. 227, 229; Gahn v. Niemcewicz, 11 Wend. 312, 328; Bank of Albion v. Burns, 46 N.Y. 170, 174, 175; Fleming v. Barden, 126 N.C. 450, 36 S.E. 17, 53 L.R.A. 316, 78 Am. St. Rep. 671; Id., 127 N.C. 214, 37 S.E. 219, 53 L.R.A. 316, 326; 21 R. C. L. 949. It is sometimes said that, in such a situation, it is the property pledged or mortgaged that stands in the position of a surety. Mechanics' Bank v. Comins, 72 N.H. 12, 55 A. 191, 196, 101 Am. St. Rep. 650; Price v. Reed, 124 Ill. 317, 15 N.E. 754, 7 Am. St. Rep. 367; In re Blanchard (C.C.A.), 253 F. 758, 765.

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