Smith v. Schultz

AILSHIE, J.

— This action was instituted for the foreclosure of a vendor’s lien on 480 acres of land. The amount alleged to be due was $5,000 and interest evidenced by four promissory notes. Judgment was entered for the plaintiff and defendant appealed.

The assignments of error are too numerous to be taken up in detail, and, indeed, as we view them, they are all reducible to a few propositions which we shall group and treat briefly herein. It appears that J. A. Schultz, individually and as president and principal owner of the capital stock of the Farmers’ Store Co., had some dealings with respondent, Theodore ~W. Smith, and advanced him money and finally took a deed to the land here in question as security for the amount ■due from Smith to the Farmers’ Store Co. The business ran along that way for some time and finally they had a settlement, and it was agreed that in consideration of the amount due and the execution of the four promissory notes, aggregating $5,000, that Schultz should have the land, and that the deed which had previously been held as security should become an absolute conveyance and should be so regarded and treated. The notes were accordingly executed and the business transactions with reference to the sale of the land were thereupon closed. In the meanwhile, Smith seems to have been residing on the land at such times as he was in the county. On the other hand, he had been absent from the county a considerable portion of the time since the first transaction. About the same time, Schultz, who had been in the employ of the bank of Nez Perce, became indebted to the bank, and also the Farmers’ Store Co., of which Schultz was president and principal owner, became likewise heavily indebted to the bank. In settling this indebtedness, Schultz deeded the land previously acquired from Smith to the bank, and the bank subsequently conveyed the land to the appellant, O. M. Collins, who was president of the bank.

The following are the essential questions which are presented on this appeal and the determination of which will be decisive of the case: First, does the fact that the conveyance from Smith to Schultz, in the first place, was intended as a mortgage defeat Smith’s right to assert a vendor’s lien and to foreclose the same? Second, does the fact that Schultz’s wife signed the four notes representing the balance of the purchase price for the land, constitute security and amount to a waiver of the vendor’s lien? And, third, if Smith is entitled to assert a vendor’s lien against the property, is there sufficient evidence in the record to show that Collins had either actual or constructive notice of Smith’s lien at the time of his purchase from the bank, and had the bank either actual or constructive notice of the lien at the time of its purchase from Schultz? The answer to these questions will be determinative of the ease, and will cover all the material and essential assignments of error presented by appellants.

Addressing our attention to the first question above suggested, it may be observed that there is no controversy or dispute but that the conveyance when first given by Smith to Schultz was intended as security, and, under the decisions of this court, was a mortgage. (Kelley v. Leachman, 3 Ida. 392, 29 Pac. 849; Felland v. Vollmer M. & M. Co., 6 Ida. 120, 53 Pac. 268; Hannah v. Vensel, 19 Ida. 796, 116 Pac. 115; Bergen v. Johnson, 21 Ida. 619, 123 Pac. 485.) The parties to this action, however, are confronted with a number of subsequent transactions which have become admitted facts in the case that necessarily change their relations to the original transaction. After the adjustment of the accounts between Smith and Schultz, an actual sale took place, and while no new deed passed from Smith to Schultz, it is clear and apparent from the record that it was the agreement and understanding between them that the original deed should stand as an absolute deed of a fee simple title from Smith to Schultz, and the deed on its face purported to convey a clear and fee simple title. All their subsequent dealings were had upon the theory and basis that this did convey a clear and perfect title, and the notes were given by Schultz to Smith on that theory and understanding.

The author in 20 Am. & Eng. Ency., 2d ed., 942, says: The voluntary surrender or cancelation of a defeasance or an instrument in the nature of one, as a general rule, renders the conveyance absolute and vests complete title in the grantee therein. Such a case is an exception to the maxim, ‘Once a mortgage, always a mortgage. ’ ’ ’

In Green v. Butler, 26 Cal. 596, the court, speaking of this same principle of law, said: “Where a deed and defeasance are in separate instruments, thus constituting a mortgage, a purchase of the equity of redemption by the mortgagee from the mortgagor for its full value, and a surrender of the defeasance to the mortgagee to be canceled, and the retention of it by the mortgagee, is in law a cancelation of the defeasance, though not actually destroyed. ’ ’ To the same effect, see note to case of Bradbury v. Davenport, 55 Am. St. 105; Gravlee v. Lankin, 120 Ala. 210, 24 So. 756.

There is still another and equally valid reason why appellants cannot now urge that the original conveyance from Smith to Schultz was a mortgage only. They are claiming their title through this same deed. The law is well established that “a party cannot be permitted to claim under and against the same deed.” (Gibson v. Lyon, 115 U. S. 439, 6 Sup. Ct. 129, 29 L. ed. 440; 11 Ency of Law, 446.) Of course, the deed being absolute on its face, though intended as security, could have furnished a basis for innocent purchasers to acquire a valid title, but the title would not be valid if they had notice of the fact that the conveyance was only intended as security. If, on the other hand, they had no notice of the fact that it was intended as security only and purchased on the theory that title was absolute, and at the same time had notice that the original vendor had a lien on the property for the balance of the purchase price, they would not be allowed to subsequently deny the absolute character of the conveyance in order to defeat the vendor’s lien. They must adopt one theory and pursue that consistently and adhere to it as well when it proves detrimental to their interests as when it proves beneficial. It is clear to us that the appellants cannot urge at this time that the conveyance from Smith to Schultz was only a mortgage and did not pass a clear title.

Passing to the second proposition as to whether or not the fact that Mrs. Schultz signed these promissory notes with her husband for the balance of the purchase price of the land constitutes such security as amounts to a waiver of a vendor’s lien, we find that discussed in a twofold aspect. First, if this was purchased by Schultz, the husband, as appears to have been the case, then under the decisions of this court the wife did not become responsible on the note. (Bank of Commerce v. Baldwin, 12 Ida. 202, 85 Pac. 497.) Under the statutes of this state and the decisions of this court, “A married woman cannot bind herself personally for the payment of a debt that was not contracted for her own use or benefit or for the use or benefit of her separate estate, or in connection with the control and management thereof or in carrying on or conducting business therewith,” unless the contract and obligation is made so as to create a lien or encumbrance on her separate estate or some portion thereof as security for the payment of the debt. In this case it would appear that the property purchased did not become the separate property of the wife, and that it was not purchased for her separate use or benefit nor inured to the benefit of her .separate estate. Her signature to the note would not, therefore, constitute security within the meaning of the provisions of the statute. (Sec. 4431, Rev. Codes. See, also, Feltham v. Smith, 84 Ind. 485; Gravlee v. Lamkin, 120 Ala. 210, 24 So. 756; Vermont Loan & Trust Co. v. McGregor, 5 Ida. 510, 51 Pac. 101; Strode v. Miller, 7 Ida. 16, 59 Pac. 893.) If, however, -as suggested on the other hand, this property became community property and therefore a kind of partnership property between the husband and wife, then the wife’s signature to the note would not constitute security within the contemplation of the statute, but would merely be evidence of the community indebtedness or the signature of one of the purchasers, in which event it would not constitute security within the purview of the statute.

The next and important question presented is the sufficiency of the evidence to show that the appellants here had either actual or constructive notice of the respondent’s lien as a vendor of the property. On this question the evidence is very conflicting, but a court could not say there is no substantial evidence to support the contention that appellants had notice of this lien. Schultz testified positively that he notified Collins before the sale that he still owed $5,000. Smith also testified that he told Collins prior to the latter’s purchase of the property that he had not been paid in full for the land. Collins- does not deny that Schultz advised him that he was still owing something on this land, but says he passed it by lightly as a matter not concerning him. There is also evidence in the record tending to show that Smith was living on the land immediately prior to Collins’ purchase of the same, and that when Collins went to look over the place he saw Smith on the land and talked with him.

The evidence on the question of notice is certainly not satisfactory, but that is not at all strange. On a question of this kind, and in a case of this character, it is to be expected that there would be a sharp conflict in the evidence as to whether the purchaser had notice of the vendor’s lien. It is such eases that get into court. Where there is no conflict in the evidence, there is seldom any litigation. Our examination of the evidence on this point has served to convince us that we would not be justified in holding it insufficient to support the findings that the appellants had notice of respondent’s lien.

Another question has been urged on this appeal which deserves some consideration. At the time of the purchase of this land by Schultz, and his sale to the bank and the subsequent sale by the bank to Collins, there was an outstanding mortgage against the property aggregating about $2,200. This obligation was assumed by Schultz as a part of the purchase -price. Since that time Collins has paid the mortgage, and it is now claimed by him that if respondent is to be given a vendor’s lien for the balance of the purchase price that Collins should first be reimbursed for the amount he has paid out on this mortgage. The trial court did not take this view of the case, but; on the contrary, gave respondent a decree of foreclosure for the balance of the purchase price as represented by- the purchase price notes above considered. We think the judgment of the trial court was entirely correct. The $2,2'00 mortgage was assumed as a part of the purchase price, and Schultz agreed to pay that to the mortgagee. Collins became the purchaser of the land and holds the title to the same, and when respondent’s lien is satisfied it will only complete the full payment of the purchase price to the original vendor Smith. On the other hand, if for any reason the land should not bring at foreclosure sale enough to pay the mortgage and respondent’s lien, it would result in denying respondent the full purchase price for his land to the extent of whatever deficiency might result from such sale. Respondent is clearly entitled to have his lien satisfied if the land will sell for that sum at foreclosure sale.

Finally, it is argued by the appellants that the trial court erred in allowing respondent judgment for attorney’s fee in the sum of $600 on foreclosure of this lien. This contention is made under specification No. 12 of insufficiency of the evidence to support the judgment, and is based upon the specific ground “that there is no evidence in the record showing that the plaintiff had paid or agreed to pay his attorney any sum whatever for the foreclosure of said mortgage, or that he was to receive any compensation therefor.” Two witnesses were produced and testified on the question of attorney’s fee and were cross-examined by counsel for appellants. No question was raised in the lower court as to the sufficiency of the evidence in this respect, and an examination of the evidence convinces the writer that it is suffieent to support the judgment for attorney’s fee. No question is raised in this ease by appellant as to the right of respondent under the law to recover an attorney’s fee in a case of this kind. The question is rather presented here upon the theory that the law supports such a fee, but that sufficient evidence has not been presented to justify its allowance.

In the opinion of the writer, the judgment should be affirmed as to the attorney’s fee, but the majority of the court are of the opinion that it should be disallowed and that the judgment should be modified to that extent. We conclude, therefore, that the judgment should in all respects be affirmed except as to attorney’s fee allowed by the lower court, and be modified to the extent of disallowing such fee. Judgment in all respects affirmed, except as to the. attorney’s fee and modified in that respect so as to disallow the attorney’s fee. Respondent will pay the costs for his own brief, and all other costs of this appeal will be taxed against the appellants.

Sullivan, J., concurs.