State Finance Co. v. Moore

• Decision Date: 03 August 1918
• Docket Number: 14695.
• Citation: State Finance Co. v. Moore, 103 Wash. 298, 174 P. 22 (Wash. 1918)
• Court: Washington Supreme Court
• Parties: STATE FINANCE CO. v. MOORE et ux.

174 P. 22

103 Wash. 298

STATE FINANCE CO. v. MOORE et ux.

No. 14695.

Supreme Court of Washington

August 3, 1918

Department 2. Appeal from Superior Court, Spokane County; Bruce Blake Judge.

Suit by the State Finance Company against Thomas B. Moore and others. From a judgment for plaintiff, defendants Thomas B. Moore and wife appeal. Affirmed.

E. O. Connor and Mulligan & Bardsley, all of Spokane, for appellants.

Hamblen & Gilbert and Graves, Kizer & Graves, all of Spokane, for respondent.

MACKINTOSH J.

The plaintiff is foreclosing a real estate mortgage. The facts in connection with it are as follows: In 1913 the defendants Birch executed a note and second mortgage to the Traders' National Bank, of Spokane, in the sum of $72,000, the mortgage being upon the property known as the Tokyo Apartments, in Spokane. These instruments were executed to one Gates, as trustee for the bank, and by him reconveyed to the Spokane & Eastern Trust Company, with which the Traders' National Bank consolidated subsequently to the original transaction between the Birches and Gates. The Spokane & Eastern Trust Company thereafter assigned the note and mortgage to the State Finance Company, a subsidiary of the Spokane & Eastern Trust Company, and the plaintiff herein. On September 24, 1915, the plaintiff commenced this action. Subsequently to the transaction between the Birches and Gates, several transfers of the Tokyo Apartments were made: (1) October 1, 1913, deed of Birches to defendants Swager. Consideration, $10. (2) March 8, 1915, deed of defendants Swager to defendant Lizzie S. Gerhauser. Consideration, $10. (3) January 29, 1916, deed of defendant Gerhauser to appellants Moore and wife. Consideration, $1.

The first two of these instruments contain clauses assuming and agreeing to pay the existing indebtedness of $72,000 against the property, and the last instrument provided that the appellants Moore took the property 'subject to valid mortgage now on record.' It will be noted that the conveyance of defendant Gerhauser to appellants Moore and wife was made after the commencement of the action to foreclose, and subsequently to the taking of default against Gerhauser in that action. At the time of the commencement of the action a notice of lis pendens was duly filed in the auditor's office. During 1913 and 1914 transactions were had between the Birches and the Spokane &amp Eastern Trust Company, whereby a bond issue to the Birches was made by the trust company, part of the security for which was the note and mortgage in question, which had in the meantime become the property of the Birches. In the matter of the bond issue various transactions between the Birches and the trust company reduced the formers' indebtedness to $37,500. At the foreclosure sale the plaintiff bid in the mortgaged premises for the sum of $89,000, holding the difference between that sum and the Birches indebtedness 'as trustee for and on behalf of Seymour Birch and wife.'

Four claims of error are made:

1. The first relates to a question of amendment of the pleadings and in disposing of this assignment it is unnecessary to say more than that, after a thorough consideration of it, we see no merit therein.

2. That the plaintiff has not capacity to sue, not being the real party in interest. The plaintiff in this case is suing under a written assignment, and the defendants were entitled to all of the defenses as against this plaintiff that they would have been entitled to against the trust company, and the judgment will bind the trust company as well as the plaintiff. We see no valid objection to the action being prosecuted in this way.

3. It is claimed that the note was discharged by operation of law because the Birches, the makers thereof, had become the owners of the note, and were the owners thereof at the time they put it up as security for the bond issue in 1914. Appellants' argument on this point is based upon section 3509, Rem. & Bal. Code, which provides that a negotiable instrument is discharged when the debtor becomes the holder of the instrument at or after maturity, in his own right. This statutory provision is only intended for the protection of parties to the instrument, as to a person who is not a party thereto and against whom no liability can be enforced in an action upon the instrument the instrument has not been discharged when the parties to it the principal debtors, admit that it is still in full force and effect. ...