Smith v. Blackford

Decision Date31 December 1929
Docket Number6731-6733. [*]
Citation228 N.W. 466,56 S.D. 360
PartiesSMITH, State Superintendent of Banks, v. BLACKFORD et al.
CourtSouth Dakota Supreme Court

Appeal from Circuit Court, Butte County; James McNenny, Judge.

Suit by Fred R. Smith, as State Superintendent of Banks, against Ammon M. Blackford, Maud C. Blackford, and the Smiley Gay Hardware Company. From the judgment and order denying a new trial, defendants Smiley Gay Hardware Company and the Blackfords separately appeal, and plaintiff cross-appeals. Modified and affirmed.

J. M Armstrong, of Belle Fourche, and W. G. Rice, of Deadwood, for appellant Smiley Gay Hardware Co.

L. M Simons, of Belle Fourche, for appellants Blackford.

Robert C. Hayes, of Deadwood, and T. B. Thorson, of Pierre, for respondent.


From a judgment and orders denying a new trial in an action for foreclosure of a real estate mortgage, defendants Smiley Gay Hardware Company and the Blackfords separately appeal. The appeals are submitted upon one brief.

The mortgage was given to Ed. Sundquist by Ammon M. Blackford and Maud C. Blackford to secure the payment of three notes executed by the Blackfords to Sundquist on November 1, 1919 each bearing interest at 6 per cent. per annum from date as follows: Exhibit 1 for $5,160.13, due July 15, 1921; Exhibit 2 for $15,000, due July 15, 1920; and Exhibit 3 for $5,000, due July 15, 1921. On January 2, 1920, Sundquist transferred Exhibit 1 to Black Hills Trust & Savings Bank (hereafter referred to as the Deadwood bank). September 2, 1921, he transferred to said bank Exhibit 2, and on April 28, 1922, he transferred to said bank Exhibit 3, the transfer of the latter note being as security only, for a general indebtedness owed by Sundquist to the bank. At the time of the transfer of Exhibit 3 it was pledged to the Bell Fourche Savings Bank to secure the sum of $1,250, and the Deadwood bank paid that sum to the Belle Fourche Bank to procure the release of the note and its transfer to the Deadwood bank. The Blackfords, desiring to sell the mortgaged premises, found a prospective purchaser in one Warren T. McCray. But as a condition of his making a deal he required that the time of payment of the two notes Exhibits 1 and 2 be extended to July 15, 1923, and an agreement for such extension was entered into by McCray and the Deadwood bank, by the terms of which McCray agreed to pay these two notes (less all credits thereon), and $5,000 had been paid on the principal of the $15,000 note. McCray, as part of the same transaction, indorsed the $5,000 note, Exhibit 3, which was also extended to July 15, 1923. By the terms of the deed of the premises from the Blackfords to McCray, the latter, as part of the consideration, assumed and agreed to pay the mortgage indebtedness. Ammon Blackford testified that at the time of the making of the agreement between McCray and the Deadwood bank he understood that the Blackfords were to be released from liability on the notes, and that the bank was taking McCray in substitution for the Blackfords. There was other evidence to the effect that Blackford was insistent that he be released from liability on the notes when transferring the premises to McCray, but the cashier of the bank testified unequivocally that there was no such understanding on his part, and that he at no time said anything to the effect that the bank was either releasing, or intending to release, the Blackfords from liability on the notes. He says the only matter discussed was the extension of time on the notes, that Blackford was very desirous of having the extension granted in order that sale might go through, and that the extension was granted with the full knowledge and consent and at the desire of Ammon Blackford. The court found the facts to be in accordance with the cashier's testimony on this branch of the case, and we cannot say that the preponderance of the evidence is against this finding.

Appellants argue that the notes in suit were paid by Ed. Sundquist giving his note to the bank for $13,000 with new security on April 28, 1923, and his son Oscar Sundquist giving to the bank on the same date his note with security for $12,500, and that the bank agreed to return to Sundquist the notes in suit as soon as four months had elapsed from the time of the new transaction; the bank desiring to hold the old paper for four months with the right to retain it should the new security be invalidated by the possible initiation of bankruptcy proceedings against Sundquist. But it is clear from the statement rendered by the bank to Sundquist at the time of this new transaction that the indebtedness taken up by these two notes of $13,000 and $12,500 did not include any of the Blackford notes. That statement itemizes the several obligations that are taken up by these two notes, and none of the Blackford paper is included in the statement.

On September 7, 1923, the Deadwood bank commenced an action against McCray on the guaranty contract, and attached certain live stock owned by McCray, and in December, 1923, on executions issued on a default judgment obtained in this action, the bank sold the attached property for the aggregate sum of $18,265.70, and satisfied its judgment against McCray. On October 6, 1923, a petition in involuntary bankruptcy was filed against McCray in the state of Indiana, and he was adjudged a bankrupt on said petition on May 9, 1924, and in an action in the United States District Court in South Dakota by the trustee in bankruptcy against the plaintiff in the instant case, judgment was given in favor of the trustee for the recovery of the said sum of $18,265.70, less $6,265.70 incurred for the care, preservation, and sale of the live stock and other expenses, leaving a net judgment in favor of the trustee in the sum of $12,000, which judgment has been paid and satisfied.

Appellants contend that the satisfaction by the Deadwood bank of its judgment against McCray as guarantor of the notes, Exhibits 1 and 2, constituted the payment of those notes, and that such payment cannot be revoked or set aside because of the judgment and executions in that action having been vacated at the suit of the trustee in bankruptcy and the payment to the trustee pursuant to the federal court judgment of the net proceeds realized on the executions.

The satisfaction of a judgment has only the force of a receipt and like a receipt may be avoided as between the parties by showing that in fact no payment was received. Knaak v. Brown, 115 Neb. 260, 212 N.W. 431, 51 A. L. R. 237. When the attachment and sale of the McCray livestock was set aside by the judgment of the Federal Court and the Deadwood bank required to account for the proceeds to the trustee in bankruptcy and such proceeds were paid over to the trustee in pursuance of the Federal Court judgment, there was no error by the trial court in the instant case in holding that the satisfaction of the judgment of the Deadwood bank against McCray was without consideration and that such satisfaction should be vacated.

While the two Blackford notes, Exhibits 1 and 2, were owned and in the possession of the Deadwood bank and the note Exhibit 3 was in its possession as collateral security for the obligations of Sundquist, the mortgage securing these notes had not been formally assigned to the Deadwood bank. But the transfer of the notes carried with it, as an incident, the mortgage security. Rev. Code 1919, § 1551. Grether v Smith, 17 S.D. 279, 96 N.W. 93. While the Deadwood bank was thus the holder of the Blackford notes and mortgage given to secure the same, Sundquist, who appeared of record to be the mortgagee, commenced foreclosure of the mortgage by advertisement under a power of sale contained therein and bid in the mortgaged premises at the foreclosure sale. He afterwards assigned his certificate of sale to the Belle Fourche Bank as security for an indebtedness of $1,600 which he owed that bank. Smiley Gay Hardware Company, having a judgment against Sundquist for $1,775, issued execution thereon, and undertook to levy upon the...

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