Leach v. Nelson

• Decision Date: 23 May 1922
• Parties: LEACH v. NELSON et ux.
• Court: North Dakota Supreme Court

48 N.D. 1046

189 N.W. 251

LEACH

v.NELSON et ux.

Supreme Court of North Dakota.

May 23, 1922.

Syllabus by the Court.

Amendments to pleadings that serve to present, upon the merits, the real determinative issues, should be liberally allowed in the interests of justice and the expedition and termination of litigation.

Where, during the course of a trial, amendments to an answer have been tendered, and in part have been allowed by the trial court for the purposes of receiving evidence, and thereafter the trial court erroneously determines that the proposed amendment allowed constitutes no defense, a new trial will be ordered.

Where a mortgagee, knowing that the mortgaged premises are about to be transferred to a purchaser who has assumed and agreed to pay the mortgage debt, agrees that he will look wholly to the mortgage lien for payment, it is held:

(a) That the mortgagors become sureties for the payment of the mortgage debt.

(b) That it is the duty of the mortgagee to preserve and protect the mortgage lien.

(c) That the failure of the mortgagee to preserve and protect the mortgage lien was a defense to the liability of the mortgagors upon their note which evidences the mortgage debt.

(d) That section 7007, C. L. 1913 (section 122, Neg. Inst. Law), requiring a renunciation to be in writing to exempt personal liability, does not apply.

(e) That the consequent duty imposed upon the mortgagee, through his agreement, arises upon equitable considerations, and is not within the statute of frauds.

Appeal from District Court, Ramsey County; Burr, Judge.

Action by H. H. Leach against A. L. Nelson and wife. Judgment for the plaintiff, and defendants appeal. Reversed, and new trial granted.

Birdzell, C. J., and Christianson, J., dissenting in part.

Flynn, Traynor & Traynor, of Devils Lake, for appellants.

A. E. Wheeler, of Devils Lake, and Middaugh. Cuthbert & Smythe, of Duluth, Minn., for respondent.

Statement.

BRONSON, J.

This is an action upon a promissory note. The plaintiff is a resident of Minneapolis; the defendants reside in the state of Washington. Jurisdiction was secured by attaching certain real estate owned by the defendant A. L. Nelson. The complaint alleges the making of a promissory note for $1,000, secured by a mortgage upon realty in Minneapolis; that at the time of making the note there was a prior mortgage upon such realty; that such mortgage has been foreclosed and absolute title has ripened in the holder thereof, through failure of the defendants to redeem, by reason whereof the plaintiff has no security for the payment of the note. The answer admits the making and the nonpayment of the note. It alleges that the mortgaged real estate was deeded to the defendant A. L. Nelson; that he gave a mortgage to the plaintiff; that thereafter the defendants obtained the plaintiff's permission to sell the mortgaged property, and his release and discharge of any further liability upon the note; that upon obtaining such release and discharge they transferred such property; that, if plaintiff has suffered any loss through the foreclosure of the mortgage, it has occurred through his carelessness and neglect in failing to make redemption.

At the commencement of the trial, the defendants moved to amend the answer by alleging that at the time of making the note it was agreed that the defendants should not be held personally liable thereon, and that the plaintiff would rely solely upon the real estate security. Upon objection of the plaintiff the court overruled the motion. Later, at the trial, the defendants again moved to amend, as above stated, and, further, that the note was delivered conditionally upon the agreement that plaintiff would not hold the defendants personally liable, that he would rely solely upon the real estate security, and that defendants would not have delivered such note excepting upon such representations and agreements. Again, the trial court, upon objection made, overruled the motion. The court stated that the defendants could show a conditional delivery but they could not vary the terms of a written instrument; that if the defense was a good defense the court would allow it. The court suggested that the defendants should make an offer of proof. The defendants requested that the court permit them to introduce their testimony over objection so that they might not be compelled to again retry the case. The trial court, expressing doubt upon the questions, stated that he would allow the introduction of the testimony. Later, when testimony was offered concerning a conditional delivery, the court stated that he had allowed the first amendment offered; that the amendment concerning the conditional delivery was still another offer which the court would reject. Defendants then offered to prove that at the time of delivering the note the plaintiff knew and agreed that the defendants were signing such note upon the understanding that they would not be held personally liable, that the plaintiff would look solely to the real estate security for the payment thereof, and that the note should not be delivered unless he so consented. This offer was rejected. At the conclusion of the evidence the defendants again renewed their motion to amend the answer as requested, upon the ground that the evidence introduced justified such proposed amendments, and that same would not operate to the prejudicial disadvantage of the plaintiff. The court overruled the motion so far as conditional delivery was concerned and reserved ruling upon the other. Accordingly upon such issues and proposed issues there appears in the record evidence to the following effect: The promissory note was made payable at Minneapolis; it was delivered to the plaintiff at Minneapolis.

Mrs. Nelson gave testimony as follows: The defendants (makers of the note) are husband and wife. She is the mother of defendant A. L. Nelson. She has had all the transactions with the plaintiff concerning this note and the property. The plaintiff never saw the defendants. There was a farm in Polk county that stood in the name of the son. She made the arrangements to trade this land for the Minneapolis property, which was transferred by the plaintiff and the title placed in her son's name. The note in suit was given as a part of the purchase price. At the time of the original transaction, it was agreed between her and plaintiff that her son and daughter-in-law should not be held personally liable upon the note; that the plaintiff would rely solely upon the real estate security. In making this transaction she expressly told the plaintiff that she did not want her son and his wife to be held personally liable on the note, and the plaintiff made her understand that he would depend upon the lien. Later she made a deal with Rev. Scharf to trade her equity in the Minneapolis property for some land in St. Louis county. The Reverend wanted the money owing Leach to be paid. She went to the plaintiff and explained about her deal with the Reverend. She told him that she did not want her son and his wife to be held liable for any part of this debt. He stated that they would not be held liable; that he was perfectly satisfied with the mortgage; that the property was worth $8,000 or $9,000, and he was perfectly satisfied to take the lien upon the property. She then gave the Reverend a note for $400 and one for $600. She has paid the $400 note, but not the other. She told him that the Reverend was taking over the property subject to the mortgages. She gave these notes to the Reverend instead of paying off this $1,000 mortgage, and the Reverend agreed to pay such $1,000 mortgage. That, furthermore, she owed one Rogers $2,000. He wanted a second mortgage on this Minneapolis property. He and Mrs. Nelson saw plaintiff. In their presence, plaintiff again stated that he would not hold her son and daughter-in-law personally liable. She further testified that she was not aware of the foreclosure upon the property until she was advised by Rogers after sheriff's deed was issued. Mr. Rogers testified: That in his presence the plaintiff stated to, and promised, Mrs. Nelson that he would not hold her son or his wife personally liable upon the note. That he took a mortgage upon the Minneapolis property for $2,000. That this was subject to a mortgage for $2,500 and the plaintiff's mortgage. The mortgage for $2,500 was foreclosed. He had redeemed from the foreclosure within the period of time allowed after the plaintiff's period of redemption expired. That he was ready to pay plaintiff's mortgage if the plaintiff had redeemed from the foreclosure. The plaintiff testified that the note signed by the defendants was delivered to him by Mrs. Nelson. He denied all conversations and agreements to the effect that he would not hold the defendants personally liable or that he would look solely to the real estate security. He filed a notice of intention to redeem from the foreclosure. He expected to redeem. He had a client in Wisconsin whom he expected to furnish the money, but this client arrived a day too late.

The jury returned a special verdict as follows:

I. “Did the parties to this action make and enter into an oral agreement to the effect that the plaintiff would release and discharge the defendants from any liability under the note in issue and look to the real estate mortgaged for payment of the note?” Answer: “Yes.”

II. “If such agreement was made, was it made at the time the note was executed or was it made some time thereafter?” Answer: “At some time after the execution of the note.”

III. “Was the failure of the plaintiff to redeem from the foreclosure of the first mortgage due to his own carelessness and neglect?” Answer: “Yes.”

Later, upon motion of the plaintiff, trial court ordered judgment for the plaintiff for the full amount of the note, with interest. Accordingly, judgment was entered. The defendants have appealed therefrom.

In a memorandum opinion, the trial court based...