Gribben v. Clement

• Decision Date: 09 February 1909
• Citation: 119 N.W. 596,141 Iowa 144
• Parties: GRIBBEN v. CLEMENT ET AL.
• Court: Iowa Supreme Court

141 Iowa 144

119 N.W. 596

GRIBBEN

v.CLEMENT ET AL.

Supreme Court of Iowa.

Feb. 9, 1909.

Appeal from District Court, Dallas County; Edmund Nichols, Judge.

This is an action to foreclose a mortgage purporting to have been given to secure a note for $500. The consideration for the note and mortgage was that the plaintiff became surety for the defendant H. O. Clement for a like amount. There was a decree for the plaintiff against both defendants, except that no personal judgment was entered against defendant M. A. Clement. The defendants appeal. Affirmed.White & Clarke, for appellants.

D. H. Miller and R. S. Barr, for appellee.

EVANS, C. J.

The note and mortgage sued on bear date July 9, 1897. They purport to have been executed by both defendants, who are husband and wife. The note was drawn in ordinary form, and by its terms became payable in 90 days from its date. The real consideration, however, for the note and mortgage was that the plaintiff became surety for the defendant H. O. Clement. At the time of this transaction Clement was engaged in the business of buying and shipping stock. He maintained an open account at the Bank of Minburn, checking thereon for the payment of stock purchased, and depositing therein the proceeds of stock sold. We infer from the record that he was operating without capital, relying upon the proceeds of his sales to meet the checks issued for his purchases. To secure itself against loss by his overdrafts the bank required him to deposit with it as security a promissory note for $500, to be signed by himself and a surety. The plaintiff became such surety, and Clement carried on his business under this arrangement. This surety note was extended from time to time until January, 1901. At this time Clement's account at the bank was overdrawn nearly to the full amount of $500, and Clement was unable to pay. For the purpose of obtaining funds to pay this overdraft a new note was executed for a like amount to the Bank of Dallas Center, and the plaintiff became surety on this note in lieu of the note originally given to the Bank of Minburn. With the proceeds of this note the overdraft account of Clement at the bank of Minburn was paid. The second note was extended from year to year until June 14, 1906. On this date another note for a like amount was executed by the same parties to the Bank of Minburn, for the purpose of obtaining money to pay the note at Dallas Center. The last note matured June 14, 1907. At this time the bank called upon the plaintiff surety to pay the same. The plaintiff at that time had an open account to his credit at such bank for more than the amount of the note. He orally directed the cashier to charge the amount thereof to his account, which the cashier orally agreed to do. This suit was begun on June 29, 1907. The plaintiff did not actually issue a check on his account for the payment of the note until September 26, 1907, nor was the note formally canceled by the bank until such date. The plaintiff first pleaded such formal payment in his reply filed September 27, 1907. A demurrer to his reply being sustained, he set up the same matter in an amended and supplemental petition filed November 18, 1907. The points relied upon by the defense may be stated briefly as follows: (1) That the suretyship indemnified by the mortgage terminated in 1901, when the overdraft account was paid at the Bank of Minburn, and that the mortgage was thereby discharged; (2) that plaintiff's only cause of action was set up in a supplemental petition, filed November 18, 1907, and that under the terms of the note and mortgage the statute of limitations had fully run before such date; (3) that no cause of action accrued to the plaintiff until September 26, 1907, being the date on which he formally paid the debt for which he became surety, and that this suit was therefore prematurely brought and could not be saved by the filing of a supplemental petition; (4) that the defendant M. A. Clement never signed either the note or the mortgage, and that her purported signatures thereto are forgeries, and that such note and mortgage were fraudulently altered by the plaintiff. The whole controversy in the case turns about these points of defense, and we will consider them seriatim.

1. In his original petition the plaintiff declared upon his note and mortgage according to their terms. The consideration for such note and mortgage was developed by the later pleadings. There is no dispute in the evidence but what they were given to the plaintiff to indemnify against loss by reason of his suretyship for Clement. Clement himself testifies: “It was for any purpose that might come up. He might sustain a loss that might be good there against me. I will admit that they were given to protect Mr. Gribben, but it was not talked or understood at the time.” The parties differ in their testimony in this respect, that the plaintiff claims that he received the note and mortgage at the time of their date and at the time he signed as surety. Clement testifies that he voluntarily gave the note and mortgage to the plaintiff some time subsequently. We think the contention of the plaintiff must be accepted in this respect. Counsel for appellants contend that when the overdraft was paid in 1901, and the $500 note upon which plaintiff was surety was surrendered, the function of the security held by the plaintiff was fully performed, that his suretyship had terminated, and that he had sustained no loss by reason thereof. This argument rests upon the letter rather than upon the spirit. If Clement had paid his overdraft at the Bank of Minburn, and thus released the plaintiff from his suretyship, then doubtless appellant's position would be sound, even though the plaintiff had afterward voluntarily entered into another suretyship for a like amount. But in this case it was not so. Plaintiff was able to terminate his liability as surety on the first note only by becoming surety on another note, the proceeds of which should pay the first note. This only changed the form of his suretyship. Its substantial identity was not changed. To hold otherwise would be exceedingly technical. We hold, therefore, that the suretyship of the plaintiff on the successive notes throughout the period of 10 years was a continuing suretyship. The mortgage, having been given as security against any loss which the plaintiff might suffer, thereby continued as long as the suretyship. It is well established in this state that no change of form of the debt originally secured by mortgage will release the mortgage so long as the identity of the debt can be traced. Chase v. Abbott, 20 Iowa, 154;Heively v. Matteson, 54 Iowa, 505, 6 N. W. 732;Port v. Robbins, 35 Iowa, 208. In the case last cited a note secured by mortgage was surrendered, and in lieu thereof a new note with surety was accepted. It was held that the surety was entitled to the security of the original mortgage. If we were to hold otherwise as to the continuance of the suretyship, it would hardly avail the defendants. In such case it would logically follow that plaintiff's cause of action accrued in January, 1901. Plaintiff's liability on the surety note at that time became absolute. The defendant was unable to pay the overdraft. The money to pay it could only be procured upon the credit of the plaintiff. The plaintiff's rights and remedy in such a case were not confined to those that are implied by the law of suretyship. In this case the mortgage and note were an express promise to pay, and it would be competent for him to show in a court of equity the liability he had incurred in order to discharge the suretyship.

2. We will consider together the second and third points of the defense. The one is that the statute of limitations had run before plaintiff set up his cause of action in a supplemental petition. The other is that his cause of action had not accrued until after he commenced his suit. These two propositions are not consistent, and one or the other, or both, must necessarily be fallacious. If plaintiff's cause of action had not accrued until September 26, 1907, then the statute of limitations did not begin to run until such time. If the statute of limitations had fully run at the expiration of 10 years after the date of the maturity of the note according to its terms, namely, October 9, 1897, it must be because the plaintiff was entitled to maintain an action upon the note and mortgage in accordance with their express terms. On that theory it would be incumbent upon the defendants to plead the facts relating to suretyship as defensive matter. This theory will not avail the defendants, because the plaintiff did commence his suit in this form on the 29th day of June, 1907. If it was necessary for the plaintiff to set up, not only his note and mortgage, but to plead...