Washington National Bank v. Woodrum , 60 Kan. 34 ( 1898 )

The opinion of the court was delivered by

Allen, J. :

To discuss at length all the assignments of error argued in the brief, and answer fully all the contentions of counsel for the plaintiff in error wmuld extend this opinion to an unwarranted length. Such of the assignments only as are deemed most important will be mentioned. The first is that the court erred in refusing to require the plaintiff separately to state and number her causes of action. It is claimed that five separate causes of action were included in the petition, as follows: (1) For interest paid; (2) for rents and profits of the land ; (3) to have the Boss contract assigned to plaintiff; (4) to recover the other quarter-section of land ; (5) to cancel the judgment entered in the foreclosure case. Most of these supposed different causes of action are in no sense separate and distinct. The recovery of interest paid and of rents and profits of the land have somewhat the appearance of severable causes of action, yet these are directly connected with the single main transaction. The substance of the plaintiff’s case was that she had given into the possession of the' bank by way of mortgage her property; that through foreclosure proceedings the bank had obtained the legal title to her land and taken the rents and profits thereof, and had also collected on these notes interest payments which it had no right to retain, and that it fraudulently retained her property so received after the debt of her husband, which it was given to secure, had been fully discharged from funds of his own. There really Avas but one cause of action, which was for a full accounting as to these transactions and to such relief as the equities of the case entitled her.

The demurrer to the amended petition was rightly overruled. Boss, Miller, Woodrum or any of the other judgment creditors Avas not a necessary party to the action. There Avas no impropriety in joining the several causes of action. The petition stated facts sufficient to constitute a cause of action. The action was not based on any parol trust agreement, void under the statute of frauds, but was one arising by implication of law from the transactions of the parties. Many of the averments of the petition, and some of those contained in the reply, were unnecessary and might properly have been stricken out as surplusage, as asked in the defendant’s motion, but they appear to us to have been harmless. The question of prime importance in the case was whether the two notes executed by the plaintiff to the bank and secured by mortgage on her land represented an indebtedness which she owed to the bank for the land itself which she had bought from the bank, or whether, as claimed by her, these notes were delivered to and held by the bank solely as collateral security to debts of her husband which were primarily evidenced by other notes executed by him. If her claims were true, on payment of her husband’s debt from his own funds, the bank would be by implication and intendment of law a trustee liable to account for all securities belonging to her which it held, and it would still be so liable no matter what changes in the form or character of such securities had taken place. It must be observed, in order that there may be no misunderstanding of the px-inciple here applied, that the contract entered into at the time the notes and mortgage were delivex’ed to the bank was not such an one as the statute of frauds x’equires to be ixx writing. It was nothing xnore nor less than the ordinary transaction of pledging notes secxxred by mortgage for the debt of another. All liability on such notes would of course cease whenever the principal debt which they were given to secure was paid. The cases of Ingham v. Burnell, 31 Kan. 333, 2 Pac. 804, and Gee v. Thrailkill, 45 id. 173, 25 Pac. 588, much relied on by the plaintiff in error, are not in point. This is not a case of the conveyance of land upon a trust not evidenced by writing.

The objection to the petition based on the conclusiveness of the judgment in the foreclosure case as a final adjxxdication of the rights of the parties at first blush appears somewhat forcefxxl, but oix closer examination it will appear that at the time of the fox’eclosure, which was prior to the payment by J. G. Woodrxxm of his indebtedness to the bank, the plaintiff had xxo defense which she could have maintained in that case. The notes executed by her were due by their terms. The debt of her husband was unpaid. The bank had a right to x'esort to this collateral security for the payment of the principal debt and to a judgment foreclosing its mortgage. It also had the right to proceed to sell the mortgaged land. It had the right to appropriate the proceeds of the sale to the payxnexit of J. G. Woodrum’s debt. This, however, it did not do. Having bid in the land it saw fit to retain the land itself as security rather than to reduce Woodrum’s debt by the amount of the bid. This it did in accordance with the parol agreement set out in the petition. There was no wrong or impropriety in its doing so, but as a result of this change in the form of the security the, bank did not come absolutely to own the plaintiff’s land. It had paid nothing for it either to the plaintiff or by an allowance of credit on her husband’s indebtedness. It held the land as it had originally held the notes and mortgage, as security, and only as security for the unpaid debt of the husband.

Much stress is laid on the statements in the petition with reference to the foreclosure judgment cutting off the liens of general judgment creditors. It is contended that the agreement with reference to this foreclosure, as set up in the petition, shows that a fraud on the rights of other creditors was intended, and that the judgment finally rendered in this case returns to the plaintiff her land freed and discharged from the claims of creditors, which constituted incumbrances on it prior to the foreclosure. This contention is without substance. The plaintiff having been the owner of the equitable title to the land from the time of the execution of the mortgage to the entry of .the decree in this case, all judgments against her were liens on that equitable interest, and when, by the judgment in this case, the legal title was restored to her, the creditors were benefited rather than injured by having the evidence of her title to the land disclosed and made of record in such form that they could resort to it for the payment of their debts, freed and cleared from the apparent title of the bank.

The allegations of error based on the refusal of the court to require the plaintiff to elect whether she would stand on the alleged contract or the claim of fraud, on the impaneling of the jury and admission, and rejection of evidence, the bank’s demurrer to the evidence, the instructions, and the special questions, the motions for judgment and for a new trial, present merely in different forms the substantial questions already determined. Some testimony was admitted which might with propriety have been excluded, but it does not appear of sufficient importance to warrant a reversal of the case.

After all, the substance of the controversy was as to whether the $1000 note and the $600 note represented a separate and distinct indebtedness which the bank had a right to collect or were given merely as collateral security to a debt of J. G. "Woodrum’s. This controversy was resolved by the jury on ample testimony in favor of the plaintiff. This conclusively settles the fundamental difference between the parties-, and all else follows as a legal consequence of this finding taken in connection with the further finding that J. G. Woodrum had fully paid all his debt to the bank from his own funds. The bank still held Mrs. Wood-rum’s property, and she was entitled to have it restored to her, with the rents and profits resulting from its possession. She was also entitled to have the money judgment which had been entered against her in the foreclosure suit canceled, not on the theory that it was wrongfully or erroneously rendered in the first instance, but that the payment of her husband’s debt operated as a payment of this judgment, which stood merely as security for-it.

No material error appearing in the record the judgment is affirmed.