Opinion
June Term, 1876.
Judgment — Mortgage — Homestead.
In 1861 a judgment was obtained against A; execution issued and was levied upon his land, which was regularly kept alive until the said land was thereunder sold by the sheriff. In January, 1869, A sold the same land to C, making title, and taking a mortgage thereupon to secure the purchase money. In 1872, A died intestate, and B became his administrator. January 1, 1874, the land being worth less than the judgment, interest and costs, and the bond given by C as the purchase money for said land, by agreement C substituted for that note one for a less sum, signed by himself with D as surety, payable to B as administrator of A, whereupon B surrendered the note first given and secured by mortgage. Several months thereafter B, without the knowledge or consent of either C or D, and without any consideration, caused "Satisfaction" to be entered on the registry of the mortgage, In 1875, C. died intestate, leaving F, his widow and sole heir at law; E became his administrator. The land was subsequently sold under a ven. exp. issuing under the judgment aforesaid, and after paying off the same, interest and costs, a surplus of the proceeds of said sale remained in the hands of the sheriff. Upon this state of facts: It was held, (1) that the entry of "Satisfaction" made upon the registry of the mortgage did not satisfy the debt, nor did such entry release the land; but that the security attached to the substituted note; (2) that B, the administrator of A, was entitled to the surplus to be paid in extinguishment, pro tanto, of the note of C and D; (3) that C never had any beneficial interest in the land, except as subject to the paramount judgment and mortgage; and therefore F, the widow of C, was neither entitled to a homestead or dower.
CONTROVERSY, submitted without action, to Eure, J., at the Fall Term, 1875, of CHOWAN, upon the following case agreed:
At the Fall Term, 1861, of CHOWAN, judgment was rendered against Hudgins, the intestate of the defendant, for $506.63, with interest from January, 1860. Upon that judgment execution was issued, and on 4 November, 1861, levied upon the plantation of said intestate, (244) and ven. ex. have regularly issued to the day of sale, 6 December, 1875.
On 1 January, 1869, Hudgins sold the farm to Knoben, made title to him, and took a reconveyance in trust to secure purchase money. Hudgins died intestate in 1872, and defendant Bond qualified as his administrator.
On 1 January, 1874, the land being of less value than the amount of said judgment, interest and costs and the bonds given for the purchase money, and Knoben having failed in business, by agreement Knoben gave his note payable to Bond, administrator, with the defendant Hobbs as surety, for a less sum, and Bond surrendered his notes originally given for the land and secured by the deed of trust.
Thereafter, on 15 September, 1874, the defendant Bond caused the register of deeds of said county to enter upon the margin of the registry of the deed of trust from Knoben to Hudgins this memorandum: "The within trust satisfied," which he signed as administrator and caused the register of deeds to subscribe as witness. This was done by Bond without the knowledge or permission of either Knoben or Hobbs. Knoben died intestate in October, 1875, and the plaintiff Moore qualified as his administrator. The plaintiff Nelly is the intestate Knoben's widow and sole heir at law. He has no kindred. The land was sold by the sheriff under a ven. ex. issued upon said judgment, and brought the sum of $...... in excess of the principal, interest and costs of the judgment, which the sheriff holds for the party entitled. All the parties interested are before the court.
The defendant Henry Bond asks that if, in the judgment of the court, the entry by him made upon the registry has any effect upon the rights of any party, that the same be ordered to be stricken out; that the same was by him made and done upon no consideration from any person, and without the direction, knowledge or authority of the defendant (245) Hobbs, or any other party interested; that the same was inadvertently done by him, and in ignorance of any possible wrong or injury to his intestate's estate, or to defendant Hobbs. All of which is admitted by the plaintiff and Hobbs to be true.
The plaintiff Nelly Knoben claims that she is entitled to homestead or dower in said fund as the representative of land.
Plaintiff Moore claims: 1. That the surrender of the old bond and the acceptance of a new bond, with surety, releases the lien the land conveyed.
2. That if this is not so, then the entry made upon the registry, the voluntary act of the defendant Bond, has the legal effect to satisfy and discharge the trust and release the land conveyed, and that the money be paid him as the assets of his intestate.
The defendant Hobbs demands judgment in his favor, because, 1st: This substituted note, which he signed as surety for the debt secured by the trust, attached to the security provided for the original debt; and that by the voluntary act of the defendant Bond, the payee, that security was released and discharged, and by the act, in law, discharged him who was surety to the debt.
The defendant Bond demands judgment, that the defendant Brinkley pay to him the amount of sales of the land in his hands, for that the security attached to the substituted note, and he has a right to receive it as a part of the assets of his intestate.
His Honor being of the opinion that the security attached to the substituted note and that the entry of the registry did not satisfy the debt nor release the land, gave judgment that the money be paid to defendant Henry A. Bond, administrator of Hudgins.
From this judgment the plaintiffs appealed.
Badger Devereux for appellants.
(246) Gilliam Pruden, contra.
Novation is mentioned as one of the modes by which a debt may extinguished. This takes place when a creditor, by note or otherwise, accepts some other promise of the debtor (with or without additional security), or of some other person, for the same of a different sum, in substitution for the original demand, and thereupon agrees that it shall be discharged. 2 Chitty on Contracts (11 Am. Ed.), 1371, To have the effect of discharging the original demand it is essential that the new promise should be accepted as a substitute for the old, which, by the terms of the acceptance, would then be agreed to be discharged.
Whether in any given case a new promise was so accepted is a question of fact and not of law. Like all other facts, it must be proved if disputed, and it may be proved either by direct evidence of the agreement or by inference from other facts. In no case is there any presumption of law as to whether a new security is a substitute for a prior one, or is collateral to it.
There is, however, presumption of fact applicable to such cases, arising out of the maxim that if a certain condition of things is once shown to exist, that condition will in general be presumed to continue until there is proof of a change. So, if a debt or security be one shown to be existing and valid, it will be presumed to continue so until proof of a change. The burden of proof, therefore, is on him who alleges that an original debt has been discharged.
In the present case it is not directly stated that it was a part of the agreement between Bond, the administrator of Hudgins, and the debtor, Knoben, that the mortgage security should be discharged. We are asked, however, to inter as a fact that it was agreed to be (247) discharged from the following admitted facts:
1. That upon the agreement the creditor took the debtor's note, with Hobbs as surety, for a sum not less than the original debt, and
2. Canceled or delivered upon the original note, and
3. That Bond some seven months afterwards caused an entry of satisfaction of the mortgage to be made on the register's book.
It may be remarked here that it strikes us as strange that Bond, who was one of the parties to the agreement, and must have known its terms, did not state with perfect clearness, and that he was not asked whether the discharge of the mortgage was then promised and agreed to by him or not. This was probably an oversight, and as the admission is equally, so far as appears, the act, or with the consent of all the parties, no inference to the prejudice of either can be drawn from it.
The first two facts relied on are consistent with the idea that the new note was to be collateral, and that the security of the mortgage was to be retained — and also with the idea that it was to be discharged; and no certain conclusion can be drawn from them.
As to the entry of satisfaction. If it had been made shortly after taking the new note from Knoben, to which Hobbs became surety, an inference might have been drawn that the entry was made in performance of an agreement that it should be made. But the entry was not made until about seven months after the taking of the new note, and Bond says that the entry was made by his direction, but "upon no consideration from any one, and without the direction, knowledge, or authority of Hobbs or of any other party in interest; that the same was inadvertently done by him," etc., which is admitted. Although Bond gives no reason why he directed the entry, and does not expressly (248) say that it was not made in compliance with an agreement on his part with Knoben, yet, it being a case agreed, the words of which are those of all the parties, on a fair construction, his statement is incompatible with any such agreement. And that being so, the entry amounts to nothing as between these parties.
Our conclusion is that there is nothing in the facts admitted from which it can reasonably be inferred that Bond agreed to discharge the mortgage security. Hence, notwithstanding the change in the form of the debt, the mortgage remained alive as a security for the debt, and Hobbs is entitled to the benefit of it for his indemnity.
As to the claim of the widow and heir of Knoben to dower and homestead from the fund, it is scarcely necessary to say that it cannot be supported, inasmuch as Knoben never had any beneficial interest in the land except as subject to the paramount judgment and to the mortgage.
We think that his Honor erred in directing the fund, after payment of the judgment, to be paid to the administrator of Hudgins, to be dealt with by him according to law.
The judgment should be that it be paid to the administrator of Hudgins in extinguishment pro tanto of the note of Knoben and Hobbs.
Subject to the modification above mentioned, the judgment below is affirmed, and a decree will be drawn in conformity with this opinion.
The costs in this Court will be equally divided between Bond, administrator of Hudgins, and Moore, administrator of Knoben.
PER CURIAM. Judgment accordingly.
(249)