Heaton v. Ainley

• Decision Date: 07 April 1898
• Parties: HEATON v. AINLEY ET AL.
• Court: Iowa Supreme Court

74 N.W. 766

HEATON

v.AINLEY ET AL.

Supreme Court of Iowa.

April 7, 1898.

Appeal from district court, Dallas county; John A. Story, Judge.

Action in equity for an accounting as to certain matters between the defendants Ainley and Heaton, and for the cancellation of two promissory notes and mortgages on real estate given to secure the same, and as indemnity to the defendant Ainley on account of certain liabilities for the defendant Heaton. Judgment was rendered in favor of the defendant Ainley against the defendant Heaton for $621.40, and decree entered foreclosing said mortgages. Judgment was also rendered in favor of the plaintiff for $5 costs, being for certain witness fees. Defendant Ainley appeals. Affirmed.Shortley & Harpell, for Jennie W. Heaton.

White & Clark, for George Heaton.

Read & Read, for C. H. Ainley.

GIVEN, J.

1. The plaintiff and the defendant George Heaton are husband and wife, and join in the relief asked against the defendant Ainley. The transactions involved are varied, numerous, and complicated, and the complication is somewhat increased by admitted errors in statements in the abstracts, five of which are submitted for our consideration. There is some controversy as to the correctness of the abstracts, but as to this we will only say that we think they are sufficient to entitle the parties to a consideration of the case on its merits. To state the pleadings and facts in detail would extend this opinion to an unwarranted length; therefore we will only point out the controlling issues and facts in a general way. During the time of the transactions under investigation the defendant Ainley was engaged in the sale of hardware and jewelry, and the defendant Heaton in the coal, grain, and elevator business in the town of Perry, Iowa, and they had mutual accounts running from 1885, the state of which was being continually changed by their frequent dealings. Prior to May 10, 1889, Mr. Ainley had become liable, as surety for Mr. Heaton, upon two promissory notes to the First National Bank of Perry, dated December 19, 1888, one for $1,000 and one for $600, each payable March 19, 1889. He was also liable as surety upon two promissory notes dated June 20, 1889, for $500 each, payable to Chandler-Brown Company. There was then a balance due to defendant Ainley from defendant Heaton on the account between them. At that time the only indemnity held by Ainley against his liability as such surety was a bill of sale from Mr. Heaton upon his elevator property, which was subject to a prior mortgage. On said 10th day of May, 1889, Mr. Heaton executed to Ainley his promissory note for $1,000, due June 1st after date, and a mortgage on 10 lots in the town of Perry, owned by Mr. Heaton, to secure the same; the plaintiff, his wife, joining in the execution of said mortgage. On the same day the plaintiff, Mrs. Heaton, executed her promissory note for $1,000, payable to C. H. Ainley or order, on June 1st after date, and her mortgage on 42 lots in Perry, to which she held the record title, to secure the payment of said note, her husband joining in the execution of said mortgage. Said promissory notes were indorsed at the time of their execution as follows: On the note of Mr. Heaton is this indorsement: “It is hereby agreed that this note is not transferable, and that it is given, together with the mtg. securing the same, only for the purpose of securing the said C. H. Ainley against any and all losses by indorsements or signing notes or bonds with or for said George Heaton.” The indorsement upon the note of the plaintiff is as follows: “It is hereby agreed that this note is not transferable, and that is given, together with the mortgage securing the same, for the purpose of securing C. H. Ainley against any and all loss the said Ainley sustains by reason of any act, indorsement, or signing of any notes, bonds, or other papers.” On September 13, 1889, as further indemnity to Ainley, George Heaton executed to him other promissory notes secured by a mortgage on his one-half interest in two stallions. On October 13, 1890, the bill of sale on the elevator was canceled, and Mr. Heaton executed to Mr. Ainley other promissory notes secured by a second mortgage on the elevator as indemnity in lieu of said bill of sale. The promissory notes upon which appellant was surety were paid, and certain sums realized from the securities which he held as indemnity were used in making payments. One contention is whether the sums realized from these securities must be credited on account of the payment of the surety debts, or whether appellant has a right to have them applied as credits upon the account or upon the general balance of Mr. Heaton's indebtedness to him.

2. Plaintiff contends that said real-estate mortgages and the two notes secured thereby were given to indemnify the defendant Ainley against his liability as surety only, while defendant Ainley contends that they were given, not only to indemnify him as such surety, but also to secure the payment of any balance that might be due to him from George Heaton on account. If the circumstances attending the execution and indorsement of these notes may be considered, we think they tend to show that said notes and mortgages were only intended as indemnity to Ainley for his liability as surety. The mutual accounts were being changed by each day's transactions, and the balance on account does not appear to have been included in the bill of sale or mortgage on the elevator property, or in the mortgage upon the horses. Plaintiff pledged her separate property as indemnity for her husband. True, defendant Ainley claims that her title to the 42 lots was derived from her husband, without consideration, and in fraud of his creditors, but this contention is not sustained, and we have seen that in executing and receiving plaintiff's mortgage all parties treated her as the owner of the 42 lots. The indorsements made upon the notes at the time of their execution were evidently intended to express the agreement of the parties as to what the indemnity was to apply. There is no dispute but that plaintiff's note and mortgage were intended to apply as indemnity against liabilities of some kind for George Heaton, and therefore it is clear that his name...