Iowa Loan & Trust Co. v. Schnose

• Decision Date: 04 April 1905
• Citation: 103 N.W. 22,19 S.D. 248
• Parties: IOWA LOAN & TRUST CO. v. SCHNOSE et al.
• Court: South Dakota Supreme Court

103 N.W. 22

19 S.D. 248

IOWA LOAN & TRUST CO. v. SCHNOSE et al.

Supreme Court of South Dakota

April 4, 1905

Appeal from Circuit Court, Turner County.

Action by the Iowa Loan & Trust Company against Augustus E. Schnose and others. From a judgment for defendants, plaintiff appeals. Affirmed.

Jones & Jones, for appellant.

L. L Fleeger (French & Orvis, of counsel), for respondent Schnose. Aikens & Judge, for respondents McGinn.

CORSON P. J.

This is an action to recover from the defendants $500 alleged to be due the plaintiff upon a certain promissory note executed by the defendant Schnose, and its payment assumed by the other defendants. The case was tried to the court without a jury and, the findings and judgment being in favor of the defendants, the plaintiff has appealed.

The facts as found by the court may be summarized as follows: In December, 1889, the defendant Schnose obtained a loan from the plaintiff, giving it the promissory note in controversy in this action, and, to secure its payment, executed a mortgage on 80 acres of land in Turner county. In 1891 Schnose conveyed the land so mortgaged to Mrs. Roberts, who by the terms of the deed, assumed and agreed to pay the said note and mortgage. In 1894, Mrs. Roberts having died, Alvina McGinn succeeded to her title by succession and a deed from her father to the premises so mortgaged, and, not being able to take up the mortgage, she and her husband, Christopher McGinn, in 1894 entered into a contract with the plaintiff for an extension of time for a period of five years. The plaintiff stipulated that time for payment should be so extended, and in consideration of such extension the said McGinns, in effect, covenanted and agreed to pay the said note and mortgage. The said Schnose had no knowledge or notice of this agreement extending the time until some years after the same was executed. In an action tried in the circuit court of Turner county in 1890, in which one Hunter was plaintiff, and the McGinns defendants, it was determined and adjudged by the court that the title of Alvina McGinn to the property mortgaged was invalid, and that Schnose was not the owner of the same at the time he assumed to execute the mortgage thereon to the plaintiff, and assumed to convey the same to Mrs. Roberts, although Schnose, at the time he executed the mortgage, and Alvina McGinn, at the time she acquired the property and signed the contract for the extension, and the plaintiff, at the time it made the loan and took the mortgage, honestly believed that Schnose had a good title thereto.

The McGinns would not have entered into a contract for extension of time, and in effect agreed to pay the note and mortgage, had they not believed that the title of Alvina McGinn was a good and valid title, and that, at the time they entered into the contract for the extension, they did so under a mistake of fact. Schnose paid the interest on the note and mortgage due December 1, 1890, and Alvina McGinn subsequently paid the interest on the same to about the 1st day of December, 1898.

It will thus be seen that the note was originally executed by Schnose, and secured by a mortgage on property to which he believed he had a good title; that subsequently he conveyed the property to Margaret Roberts, who assumed to pay the note and mortgage as a part of the purchase price; that Alvina McGinn acquired the legal title to the property, and, in the contract of extension of time of payment with the plaintiff, she and her husband assumed, in effect, to pay the said note and mortgage under the honest belief that she had acquired a legal title to the same, and that the plaintiff had a valid lien upon the same by its mortgage thereon; that the agreement on the part of the plaintiff extending the time was made without the knowledge or consent of Schnose, and that more than six years had elapsed after the conveyance by Schnose, the maturity of the note, and the payment of interest by him, before the commencement of this action.

From the facts found, the court concludes: "That the defendants Alvina McGinn and Christopher McGinn are neither of them liable to plaintiff in any sum whatsoever on account of the matters contained in the complaint herein, and therefore said complaint should be dismissed as to said defendants. (2) That plaintiff is indebted to defendant Alvina McGinn in the sum of two hundred forty dollars, with interest thereon from December 4, A. D. 1891, for which sum said defendant is entitled to recover as a counterclaim. (3) That the extension of the time of payment of the note and mortgage as set out in finding 6 hereof, without notice to the defendant Augustus E. Schnose, and without his knowledge or consent, released him from any liability upon the said note or mortgage. (4) That more than six years had elapsed after a cause of action accrued against the defendant Augustus E. Schnose upon said note in favor of the plaintiff before this action was commenced. (5) That the defendant Augustus E. Schnose is entitled to a judgment against the plaintiff, dismissing this action as to him, and for his costs."

The theory upon which the court's conclusions are based evidently was that the defendants McGinn entered into the contract for the extension of time with the plaintiff under the mistaken belief that Schnose was the owner of the property at the time he executed the mortgage, and that she had acquired a valid and legal title thereto by the deed from Schnose to her mother, and that, as she in fact acquired no title, and had entered into the contract by mistake, the contract for an extension had never become operative as a contract, and she and her husband were not liable thereon; and that, having paid the plaintiff $240 of interest under the mistake as to the title, Alvina McGinn was entitled to recover the same back in this action. The court further concludes that as Margaret Roberts, grantee of Schnose, had assumed to pay the note and mortgage as a part of the purchase price, with the knowledge or consent of the plaintiff, she became the principal debtor, and Schnose a surety only, and that, by the agreement for the extension made by the plaintiff with the McGinns without the knowledge or consent of Schnose, Annie McGinn became the principal debtor, his liability upon the note and mortgage was extinguished, and also that the action was barred as to him under the statute of limitations.

The correctness of these conclusions of law is challenged by the appellant, and it contends that inasmuch as the McGinns, in the agreement for extension of time, stipulated, in effect, for the payment of the note and mortgage, they were conclusively bound by that agreement; (2) that as the note was executed at Des Moines, Iowa, and made payable there, the contract, as to Schnose, is to be determined by the law of Iowa, and that by the law of that state the agreement for the extension of time would not have the effect to discharge him from his liability, and that the action, as to him, was not barred by the statute of limitations.

We are of the opinion that the court was clearly right in holding that the contract entered into by the McGinns with the plaintiff for an extension of time was made under a mutual mistake of fact by all of the parties, and that the contract, therefore, was not binding upon the McGinns. It is quite clear from the facts found that the only consideration for the stipulation made by the McGinns in the contract for the extension of time was the mistaken assumption on their part that Alvina McGinn was the owner of the legal title, and, it having been determined that she did not acquire the legal title or any title to the property, the court was right in concluding that the McGinns were not liable thereon.

The Civil Code of this state provides upon the subject of contract as follows: "It is essential to the existence of a contract that there should be (1) parties capable of contracting; (2) their consent; (3) a lawful object; and (4) sufficient cause or consideration." Section 1189,...