Prudential Insurance Co. of America v. Folsom

• Citation: 283 P. 609,48 Idaho 538
• Decision Date: 24 December 1929
• Docket Number: 5173
• Parties: PRUDENTIAL INSURANCE COMPANY OF AMERICA, a Corporation, Appellant, v. LEWIS L. FOLSOM, CHARLOTTE A. FOLSOM, His Wife, and THE FIRST NATIONAL BANK OF IDAHO, a Corporation, Respondents
• Court: Idaho Supreme Court

283 P. 609

48 Idaho 538

PRUDENTIAL INSURANCE COMPANY OF AMERICA, a Corporation, Appellant, v. LEWIS L. FOLSOM, CHARLOTTE A. FOLSOM, His Wife, and THE FIRST NATIONAL BANK OF IDAHO, a Corporation, Respondents

No. 5173

Supreme Court of Idaho

December 24, 1929

BILLS AND NOTES-NOTE AND MORTGAGE PART OF SAME TRANSACTION-NEGOTIABILITY-HOLDER IN DUE COURSE-EVIDENCE-BOOK OF ACCOUNTS.

1. Where note and mortgage were executed at same time, each being part of same transaction, and note was indorsed and mortgage assigned prior to amendment of C. S., sec. 5872 par. 5, as added by Laws 1925, chap. 67, providing that instrument otherwise negotiable is not affected by fact that it is secured by mortgage, assignee was not holder in due course of note, and note was not negotiable instrument in assignee's hands.

2. Record-book of mortgage company, consisting of original entries made in ordinary course of business as the transactions occurred, under direction of company's agent, by various clerks, and kept for the convenience of the company alone, held not an account-book, and inadmissible in action to foreclose mortgage to establish by means of entry therein that release of property from lien of mortgage was without consideration.

3. Record-book of mortgagee, giving number of loans, name and postoffice address of mortgagor, name of agent, rate of interest, and ruled to show date, principal interest principal credit, interest credit, date of credit, note, and in addition containing general description of instrument names of makers, when and where recorded, and other information, including description of property, held inadmissible in evidence as an accountbook, in action for foreclosure of mortgage.

4. Burden was upon respondent, in action for foreclosure of mortgage, not only to show that portion of debt was paid to agent of mortgagee, but also that agent was authorized to receive it on behalf of mortgagee.

5. Fact that agent of mortgagee had theretofore collected interest on loan evidenced by mortgage, and that principal, and interest by terms of note were made payable at agent's office would not constitute him agent for mortgagee for purpose of receiving payment on principal.

6. In action for foreclosure of mortgage, evidence of payment to mortgagee's agent and release of mortgage as to part of property mortgaged held to establish that debt had been paid in part, justifying judgment of foreclosure for the balance due.

APPEAL from the District Court of the Third Judicial District, for Ada County. Hon. Clinton H. Hartson, Judge.

Action for foreclosure of mortgage. Judgment for plaintiff. Affirmed.

Judgment affirmed. Costs to respondent.

Clarence T. Ward and Alex M. Winston, for Appellant.

A purchaser for value of a note negotiable on its face obtains rights not affected by non-negotiable provisions of a mortgage securing the payment of the note. (City National Bank v. Goodloe-McClelland Commission Co., 93 Mo.App. 123; Bright v. Offield, 81 Wash. 442, 143 P. 159; Farmers' Nat. Bank v. McCall, 25 Okla. 600, 106 P. 866, 26 L. R. A., N. S., 217; Thorp v. Mindeman, 123 Wis. 149, 107 Am. St. 1003, 101 N.W. 417, 68 L. R. A. 146; Barker v. Sartori, 66 Wash. 260, 119 P. 611; Lundean v. Hamilton, (Iowa) 159 N.W. 163; Moore & Co. v. Burling, 93 Wash. 217, 160 P. 420.)

Martin & Martin, for Respondents.

Under the statutes of Idaho a note secured by a mortgage executed prior to the enactment of chap. 67, 1925 Sess. Laws, p. 97, approved February 25, 1925, was not negotiable. (C. S., sec. 6949; Buhler v. Loftus, 53 Mont. 546, 165 P. 601; Moody v. Morris-Roberts Co., 38 Idaho 414, 226 P. 278; Clark v. Paddock, 24 Idaho 142, 132 P. 795, 46 L. R. A., N. S., 475; Meyer v. Weber, 133 Cal. 681, 65 P. 1110.)

A note and a mortgage given to secure it will be considered and construed together as one contract or one instrument. (Clark v. Paddock, supra; Dighton v. First Exchange Nat. Bank, 33 Idaho 273, 192 P. 832; McKinney v. Merritt, 35 Idaho 600, 208 P. 244; First Nat. Bank of Idaho v. Reins, 42 Idaho 720, 248 P. 9.)

Books of account are not admissible to establish a negative proposition nor are they competent or relative to show that a payment fails to appear on the book. (22 C. J., p. 186, sec. 6; Hyde v. Lookabill, 66 Iowa 453, 23 N.W. 920; 4 Jones on Evidence, 2d ed., p. 3288.)

WM. A. BABCOCK, Commissioner. Budge, C. J., and Wm. E. Lee and Varian, JJ., concur. T. Bailey Lee, J., dissents. Givens, J., did not sit.

OPINION

WM. A. BABCOCK, Commissioner.

This is a suit brought by appellant, Prudential Insurance Company of America, a corporation, in the district court of Ada county, against Lewis L. Folsom, and others, to foreclose a mortgage given March 1, 1917, by said Lewis L. Folsom and his wife, to the American Freehold Land Mortgage Company, of London, Ltd., hereinafter designated as the Mortgage Company on 260 acres of land in Ada county, to secure payment of a promissory note signed by the mortgagors payable to said mortgage company, or order at the office of W. Scott Neal, Boise, Idaho, for the sum of $ 15,000, due and payable ten years after date, with interest at seven per cent per annum, payable on the first day of April each year, with a provision in the note and mortgage to the effect that if default be made in payment of interest when due, or taxes and water assessments levied against the land, the mortgagee, at its option, might declare the principal of the note due and payable, and enforce payment thereof by foreclosure proceedings.

Sixty acres of land covered by the mortgage were released of record by the mortgagee February 25, 1919. On November 20, 1920, the note was indorsed by the payee therein and the mortgage assigned to the appellant. This action was for the foreclosure of the mortgage on the remaining 200 acres.

The complaint is in the usual form, alleging nonpayment of taxes and assessments on the land and the election of the appellant to declare the principal of the note due by reason of such default, and alleging that nothing had been paid on the principal of the note.

The answer of the defendants admitted the execution and delivery of the note and mortgage. As a partial defense to the complaint the answer alleged payment of $ 3,600 on the mortgage made on or about the 12th of February, 1919, to W. Scott Neal as the agent of the mortgage company.

The cause was tried by the court with a jury sitting in an advisory capacity to pass on the question of whether or not payment of $ 3,600 had been made to W. Scott Neal. The finding of the jury was that such payment had been made. The court adopted this finding and found that credit for that amount should be given the respondent Folsom, and that appellant was entitled to foreclosure of the mortgage for the balance due. Decree was entered accordingly, from which judgment this appeal is taken by the Prudential Insurance Company.

For a proper consideration and determination of the questions presented by the appeal it will be necessary to review to a certain extent the evidence as presented by the record.

At the trial, plaintiff, after making formal proof, rested. Thereupon respondent Folsom was called as a witness in his own behalf, and testified substantially as follows: That in the latter part of January, 1919, he sold to one W. C. Cleveland, since deceased, a tract of land consisting of 140 acres for the sum of $ 21,000, which land included sixty acres of land embraced in and described in the mortgage in question, and an additional eighty acres owned by respondent and mortgaged to the state of Idaho for $ 4,800; that the contract of sale between him and Cleveland provided that Cleveland should pay the sum required to satisfy the mortgage to the state of Idaho on the eighty acres, and the amount required to secure a release from the mortgage involved in this suit on the sixty acres; that the said sums so paid by Cleveland should be deducted from the purchase price of the land; that he procured the loan represented by the mortgage sought to be foreclosed in this action from one W. Scott Neal, who was the agent of the mortgage company; that he had always paid the interest on the loan to Mr. Neal; that in order to arrange for the release of the sixty acres from the mortgage, respondent and Mr. Cleveland, on or about February 1, 1919, went to Mr. Neal's office and in a conversation had with him, Mr. Neal told them that the sixty acres would be released on payment of $ 3,600; that he afterwards saw the release of the sixty acres in the possession of Mr. Cleveland; that he did not see Mr. Cleveland pay the money to Mr. Neal, but at the time of his final settlement with Mr. Cleveland, had on or about April 19, 1919, he and Cleveland went to Mr. Neal's office for the purpose of making their settlement; that Mr. Neal informed him at that time that the money had been paid for the release; that Mr. Neal did the figuring; and that in the settlement the $ 3,600 was deducted from the purchase price of the land as well as the sum of $ 4,858.50 paid by Mr. Cleveland for the release of the eighty acres.

Mr. Folsom continued to pay the interest on the full amount of the note and mortgage after this purported conversation in Mr. Neal's office up to 1925, and, in explanation thereof, says that he did so because notices from the mortgage company called for that amount, and he simply paid what they asked for, although he testified he was in straitened circumstances and hard up financially during the period in which he made these payments of interest.

J. B Eldridge, the attorney who drew the contract of sale of the land by Folsom to Cleveland, testified that he did not retain a copy thereof, but, as he recalled the terms of the contract, there was a provision that Cleveland...