Merriam v. Miles

• Decision Date: 08 April 1898
• Citation: 74 N.W. 861,54 Neb. 566
• Parties: MERRIAM v. MILES ET AL.
• Court: Nebraska Supreme Court

54 Neb. 566

74 N.W. 861

MERRIAM

v.MILES ET AL.

Supreme Court of Nebraska.

April 8, 1898.

Syllabus by the Court.

1. One of several co-tenants of land incumbered by mortgage, who buys the interest of his co-tenants, and as a part of the consideration assumes and agrees to pay the mortgage debt, becomes, as among the parties to that contract, the principal debtor, and the vendors become his sureties.

2. While, by such a transaction, the rights or duties of the mortgagee cannot be changed without his consent, and he may enforce his original contract according to its terms, still, if he makes new contracts with the parties to the agreement, with knowledge thereof, he must do so with regard to the rights of those who are, among the mortgagors, sureties.

3. Therefore, if, with knowledge of the changed relationship of the mortgagors, as among themselves, one purchases the notes secured by the mortgage, and at the same time enters into a contract, on valid consideration, to definitely extend the time of payment by him who has become the principal debtor, and this without the consent of the sureties, he thereby releases the sureties.

4. Evidence examined, and held insufficient to show that the creditor in such a case had not notice of the relationship of the debtors to one another.

Error to district court, Douglas county; Ambrose, Judge.

Action by Andrew Miles and James W. Vinton, executors of the will of John L. Miles, deceased, and another, against Nathan Merriam and others. From a judgment against him, defendant Merriam brings error. Reversed.Wharton & Baird, for plaintiff in error.

F. B. Tiffany and W. T. Nelson, for defendants in error.

IRVINE, C.

Andrew Miles and James W. Vinton, executors of the will of John L. Miles, deceased, and James Thompson, brought this action against Nathan Merriam, Charles T. Brown, Patrick Egan, and H. J. Cosgrove, to recover on eight promissory notes for $1,000 each, executed by the defendants to William M. Clark, and transferred to John L. Miles and James Thompson. Of the defendants, Merriam alone was served with process. As a defense, he pleaded that the notes were made to Clark in part payment for a tract of land purchased jointly by the makers, and were secured by mortgage on the land purchased, which was afterwards platted into lots as an addition to Lincoln; that before the notes were sold to Miles and Thompson, Merriam, Egan, and Cosgrove sold their respective interests in the land to Brown, their co-tenant, and co-maker of the notes, who, in the deed of conveyance, and as a part of the consideration, assumed and agreed to pay these notes; that afterwards, for a valuable consideration, Miles and Thompson entered into a written agreement with Brown, whereby they extended the time of payment for four years, and agreed to accept partial payments on certain designated terms, and also agreed to and did release from the lien of said mortgage 28 of the lots included therein; that Merriam was not a party to such agreement; and that, “as between said Brown and this defendant, this defendant was and remained only a surety upon said notes, which was well and fully understood by the said Miles and Thompson at the date of the execution and delivery of said agreement.”The reply contains a peculiar negative pregnant in meeting the last averment quoted from the answer. It is as follows: “Plaintiffs deny that as to the payment of the notes set out in plaintiffs' petition, Charles T. Brown became the principal and the defendant Merriam surety thereon, with the full understanding of the said John L. Miles and James Thompson, at the date of the purchase of said notes.” This is followed by averments that at the time of the purchase of the notes five of them were overdue, and the time of payment had been extended by the then holder, and that the written agreement made by Miles and Thompson was merely in ratification of the agreement for an extension theretofore in force. The court, the case having been tried without a jury, found specially the facts almost as the defendant asserted them, but on the issue of notice to Miles and Thompson of the changed relationship between Brown and the other makers found that they had no notice thereof, and did not consent thereto. On these findings it was held that Merriam was not discharged, but that he was entitled to a deduction from the amount of the notes of the value of the 28 lots released by Miles and Thompson from the lien of the mortgage. Judgment was entered against Merriam for the amount thus ascertained, and Merriam has brought the case here for review. There can be no doubt of the correctness of the findings of fact, except with regard to notice. Indeed, defendants in error concede that the facts are not open to dispute, except as to the change in relationship between Brown and his co-makers, and with regard to notice; and on the former issue the ultimate facts are not open to controversy. It is shown beyond peradventure that Brown bought the property, and as a part of the consideration agreed to pay the debt. It is not shown that the holder of the note was a party to that contract. The only question here is as to the legal effect of those facts on the duties of the holder.

It is asserted on behalf of the plaintiffs that, unless the holder was a party to the agreement, or afterwards ratified it, and accepted the new liabilities thereby created, he was not bound in any respect thereby, and could, for all purposes, continue to treat all the parties to the instruments as principals, and deal with them on that basis. We do not think that so broad a statement of the law is warranted by reason of the authorities, although some cases are found which go to that extent. The doctrine has been frequently recognized by this court that, where one buys land incumbered by a mortgage, and covenants to pay the mortgage debt, or as part of the consideration assumes the payment thereof, his promise creates a principal obligation which the mortgagee may enforce against him. Cooper v. Foss, 15 Neb. 515, 19 N. W. 506;Keedle v. Flack, 27 Neb. 836, 44 N. W. 34;Rockwell v. Bank, 31 Neb. 128, 47 N. W. 641;Reynolds v. Dietz, 39 Neb. 180, 58 N. W. 89;Association v. Moore, 40 Neb. 686, 59 N. W. 115;Meehan v. Bank, 44 Neb. 213, 62 N. W. 490;Green v. Hall, ...