Miller v. M'Carty

• Decision Date: 10 November 1891
• Court: Minnesota Supreme Court
• Parties: JOHN MILLER <I>vs.</I> J. B. McCARTY.

47 Minn. 321

JOHN MILLER vs. J. B. McCARTY.

Supreme Court of Minnesota.

November 10, 1891.

Plaintiff brought this action in the district court for Big Stone county to recover possession of two horses, two cows, and 250 bushels of wheat, of the alleged value of $325, mortgaged to him by the defendant. In his answer the defendant alleged title in himself to the horses and cows, and that they were exempt, and asked judgment for their return and damages. At the trial, before C. L. Brown, J., the facts appearing which are stated in the opinion, a verdict was directed for plaintiff. The defendant appeals from an order refusing a new trial.

F. L. Cliff, for appellant.

E. T. Young, for respondent.

MITCHELL, J.

The defendant bought of plaintiff a quantity of seed-wheat, and, as security for the purchase price, executed a "seed-grain" note, and also a chattel mortgage on two cows and two horses. Subsequently defendant, having discovered that a mistake had been made in the description of the land upon which the grain was to be sown, executed another seed-grain note, antedated as of the date of the first one, and of the same tenor, except that it described correctly the land upon which the grain was sown. During the intervening time, and after the grain was sown, one Clark attached the crops as the property of the defendant. The plaintiff claims that the second seed-grain note was executed merely to correct the mistake in the first one, while defendant claims that it was given and accepted as absolute payment of the first, and consequently had the effect of discharging the chattel mortgage. We think the undisputed facts in the case conclusively establish that the second note was given merely to correct the mistake in the first, and consequently did not affect the lien of the mortgage. Even if plaintiff had promised to satisfy the mortgage, the agreement would not have been enforceable, because without consideration. Undoubtedly one note may be accepted as payment of another, and in such case no consideration, other than the new note, is necessary to support the contract. But here the new note, when given, was merely a fulfilment of the original contract, and was nothing more than plaintiff was entitled to, or than the law would have compelled by correcting the instrument so as to conform to the actual agreement of the parties. The debt has never been paid, the mortgage has never been actually released, and default has been made in its conditions. Consequently plaintiff is entitled to the possession of the mortgaged property, unless his acts and conduct have been such as to operate in law as a discharge of the lien of the mortgage, or to estop plaintiff from asserting that lien against the defendant. The mortgaged property was exempt, while part of the crop covered by the lien of the seed-grain note was not; and the defence of the defendant is, in substance, that he had a right to require the plaintiff to first exhaust the non-exempt grain before resorting to the exempt property covered by the mortgage; that he made this demand, but that plaintiff and Clark, the attaching creditor, combining together to deprive him of this right, so conducted matters that the non-exempt grain was all applied on Clark's claim, leaving plaintiff's claim to be satisfied wholly out of the exempt property, and therefore plaintiff is now estopped from asserting the lien of his mortgage. Of course, in this defendant assumes that Clark's attachment lien was subsequent to the lien of plaintiff's seed-grain note, for, if it was prior to it, the entire foundation falls out from under defendant's case.

The marshalling of securities between different classes of creditors, where a first mortgage covers both exempt and non-exempt property, and the subsequent lien of another creditor covers only the non-exempt property, is a subject upon which there is a conflict of decisions. The question has generally arisen where the exempt property involved was a homestead, but we see no reason for applying any different rule to homestead exemptions from that to be applied to any other exempt property. The doctrine of some courts is that the power of a court to compel a mortgagee to resort, in the first instance, to one of several estates mortgaged, is exercised only for the protection of the equities of different creditors or incumbrancers, or of sureties, and never for the benefit of the mortgagor; and that the fact that the first mortgage is on exempt as well as non-exempt property, and the second lien only on the non-exempt, does not change the general equity rule that a person having a right to resort to two funds, in one of which alone another person has a junior lien, shall be compelled to first exhaust the fund to which the other cannot resort. Searle...