Opinion
Opinion filed December 6, 1927.
1. — Mortgages and Deeds of Trust — Sale of Incumbered Real Estate — Grantee Assuming Incumbrance — Principal and Surety — Release of Surety by Extension. Where the owner of real estate incumbered by mortgage sells it, and his vendee as a part of the purchase price assumes the payment of the mortgage debt, the vendee becomes the principal and the original principal becomes surety, and the mortgagee, after receiving notice of the grantee's assumption, is bound to recognize the conditions of suretyship and to respect the rights of the surety in all his subsequent dealings with the parties, and the doctrine concerning suretyship must control their dealings; and, where the grantee is granted an extension of time for the payment of the mortgage debt without the knowledge of the makers, they are released from liability thereon.
2. — Bills and Notes — Novation — Oral Agreement to Discharge. An oral agreement whereby the owner of a note secured by deed of trust on real estate, agreed with the purchaser of such real estate who assumed the payment of the note, and the makers, at the time of the purchase, that he, the owner of said note, accepted the purchaser and released the makers, held effectual to discharge the makers of the note, section 908, Revised Statutes 1919, requiring a renunciation to be in writing, unless the instrument is delivered up to the person primarily liable thereon, being inapplicable, as the agreement was not a renunciation but a novation.
On Motion for Rehearing.3. — Same — Renunciation — Imports Gratuitous Abandonment or Giving Up of a Right. Section 908, Revised Statutes 1919, requiring a renunciation to be in writing, is not concerned with a release or discharge, by novation, or by any other contract or agreement founded upon a valuable consideration, as renunciation imports the gratuitous abandonment or giving up of a right and does not import a release or discharge for a valuable consideration.
Appeal from the Circuit Court of Montgomery County. — Hon. Ernest S. Gantt, Judge.
AFFIRMED.
Claude R. Ball for appellant.
(1) The defendants admit the execution and delivery of the note sued on, and defend on the theory of an oral agreement with plaintiff that defendants were released from liability on the note when they deeded the land to Powell and because they allege that plaintiff said that he would accept Powell in their stead. Such oral evidence was not sufficient, even if uncontradicted to authorize a verdict for defendants. The answer alleged an oral agreement. Hence the answer stated no defense. Sections 908 and 981, R.S. 1919; Engle v. Brown, 202 Mo. App. 345; 8 Corpus Juris, sec. 855, page 615; Henderson v. Henderson, 21 Mo. 385-6. (2) It was error to render judgment for defendants. The answer stated no defense. Did not plead a renunciation in writing or, that the note was delivered up to the defendants, the persons primarily liable thereon. Therefore defendants' answer stated no defense to plaintiff's cause of action, and the court erred in overruling the demurrer to defendants' answer and in rendering judgment for defendants. Same authorities cited under No. 1. (3) The verdict and judgment should have been for the plaintiff, because, under sections 908 and 981, and under the Engle case, supra, defendants' answer stated no defense and evidence admitted on behalf of defendants was incompetent, immaterial and proved nothing.
W.C. Hughes for respondents.
(1) Hudson was maker of the note; Nelson was payee; the note being secured by deed of trust on lands. When Powell and afterwards Jones, and still later Ingelman, purchased the land and assumed the debt, with Nelson's knowledge and consent, then Hudsons, the original makers, became sureties, and their obligation thereafter was that of surety. Laumeier v. Hallock, 103 Mo. App. 116; Massillion Engine Thr. Co. v. Haywood, 256 S.W. 536; Bank of Senath v. Douglass, 178 Mo. App. 664; Nelson v. Brown, 140 Mo. 580; Reagan v. Williams, 185 Mo. 620; Wonderly v. Giessler, 118 Mo. App. 708. (2) And when the time of payment was extended in consideration of the interest being paid at the rate of eight per cent per annum instead of seven per cent per annum, without the sureties' knowledge or consent, this released the sureties from all further obligation. Peoples Bank of Chamois v. Smith, 263 S.W. 475; Authorities cited under point 1. (3) When the payee agreed with the makers with the consent of the purchaser of the land, Powell, to accept Powell and discharge Hudsons, this constituted a novation, and discharged the makers. And later when the payee, Nelson, agreed with Jones, and later with Ingleman to accept them, this constituted a novation, and discharged the original makers. Brown v. Croy, 74 Mo. App. 462; Martin v. Harrington, 174 Mo. App. 707; Babbitt v. Railroad, 149 Mo. App. 441; Elliott v. Qualls, 149 Mo. App. 482; Leckie v. Bennett et al., 160 Mo. App. 145; Reavis v. Reavis, 213 Mo. App. 119; Hicksville Handle Co. v. Herb, 226 S.W. 63; Emerson-Brantingham Imp. Co. v. Sawyer et al., 242 S.W. 1007. (4) A novation is from the common law, and applies to any sort of obligation, and is not a renouncing or release of the debt in any sense, but is an express continuation of the debt, with the substitution of a new debtor; hence, the renunciation statute, section 908, Revised Statutes 1919, has no application whatsoever to the facts in this case, which establish a novation as distinguished from a renunciation.
This is an action to recover the balance alleged to remain due and unpaid on a promissory note executed by defendants and made payable to plaintiff. The note is for the principal sum of $600, and bears date March 14, 1920. It was secured by a deed of trust of the same date given by defendants on a small farm in Montgomery county. The note bears endorsements showing a payment of $100 on March 14, 1920, payments of interest due on March 14, 1920, March 14, 1921, March 14, 1922, and March 14, 1923, and a payment of $333 derived from sale of farm under deed of trust.
The trial, which was had before the court without a jury, resulted in a judgment for defendants. Plaintiff appeals.
Plaintiff urges reversal of the judgment here on the ground that under the law and the undisputed facts plaintiff was entitled to recover.
The evidence shows that on January 3, 1921, after the execution of the note sued on and the deed of trust given to secure the same, the defendants sold and conveyed the farm covered by the deed of trust to Hughes Powell, who assumed the payment of the note as a part of the purchase price, with the knowledge of the plaintiff; that afterwards, on January 18, 1921, Hughes Powell sold and conveyed the farm to J.W. Jones; that Jones assumed the payment of the note as a part of the purchase price, and that in consideration of the assumption of the note by Jones and the payment of an increased rate of interest thereon, plaintiff extended the time for payment of the note one year from said date; that on November 8, 1922, Jones sold and conveyed the farm to Henry Ingleman; that Ingleman assumed the payment of the note as a part of the purchase price, and a further extension of one year in the time for payment of the note was made by agreement between Ingleman and plaintiff; and that these extensions were made without the knowledge of defendants. It is settled law that if the owner of real estate encumbered by mortgage sells it, and his vendee as a part of the purchase price assumes the payment of the mortgage debt, the vendee becomes the principal and the original principal becomes surety, and the mortgagee after receiving notice of the grantee's assumption, is bound to recognize the conditions of suretyship and to respect the rights of the surety in all his subsequent dealings with the parties, and the doctrine concerning suretyship must control their dealings; and where the grantee is granted an extension of time for the payment of the mortgage debt without the knowledge of the makers they are released from liability thereon. [Laumeier v. Hallock, 103 Mo. App. 116, 77 S.W. 347; Regan v. Williams, 185 Mo. 620, 84 S.W. 959; Nelson v. Brown, 140 Mo. 580, 41 S.W. 960; Wonderly v. Giessler, 118 Mo. App. 708, 93 S.W. 1130; Citizens' Bank of Douglass, 178 Mo. App. 664, 161 S.W. 601; Massillion Engine Thresher Co. v. Hayward (Mo. App.), 256 S.W. 536; People's Bank v. Smith (Mo. App.), 263 S.W. 475.]
Moreover, there was evidence that at the time Powell purchased the farm and assumed the payment of the note, plaintiff by express agreement with Powell and defendants accepted Powell and released defendants from liability thereon. Plaintiff says that because this agreement was not in writing, it was not effectual to discharge the defendants, since section 908, Revised Statutes 1919, requires that a renunciation of a negotiable instrument must be in writing, unless the instrument is delivered up to the person primarily liable thereon. We think the statute is inapplicable. The agreement was not a renunciation, but a novation. [Reavis v. Reavis, 213 Mo. App. 119, 247 S.W. 217; Emerson-Brantingham Implement Co. v. Sawyer (Mo. App.), 242 S.W. 1007; Hicksville Handle Co. v. Herb (Mo. App.), 226 S.W. 63; Brown v. Croy, 74 Mo. App. 462; Martin v. Harrington, 174 Mo. App. 707, 161 S.W. 275; Elliott v. Qualls, 149 Mo. App. 482, 130 S.W. 474; Central Missouri Trust Co. v. Taylor (Mo. App.), 289 S.W. 658; State Bank of Wellston v. Hafferkamp (Mo.), 287 S.W. 331, l.c. 335.]
The Commissioner recommends that the judgment of the circuit court be affirmed.
The foregoing opinion of SUTTON, C., is adopted as the opinion of the court. The judgment of the circuit court is accordingly affirmed. Daues, P.J., and Becker and Nipper, JJ., concur.
ON MOTION FOR REHEARING.
Plaintiff, on motion for rehearing, insists that our opinion in this case is in conflict with the decision of the Kansas City Court of Appeals in Engle v. Brown, 202 Mo. App. 345, 216 S.W. 541. It is true that our opinion is not in accord with the decision in that case, but it is in accord with the decision of that court in the later case of Central Missouri Trust Co. v. Taylor, 289 S.W. 658, which, we think, repudiates the ruling in the former case.
It is manifest that our statute, requiring a renunciation to be in writing, is not concerned with a release or discharge, by novation, or by any other contract or agreement founded upon a valuable consideration. Renunciation imports the gratuitous abandonment or giving up of a right. It does not import a release or discharge for a valuable consideration. [Leask v. Dew, 92 N.Y.S. 891; Wekett v. Raby, 2 Brown's House of Lords Rep., 386; Dimon v. Keery, 66 N.Y.S. 817.]
The Commissioner recommends that plaintiff's motion for rehearing be overruled.
The foregoing opinion of SUTTON, C., is adopted as the opinion of the court. Plaintiff's motion for rehearing is accordingly overruled. Daues, P.J., and Becker and Nipper, JJ., concur.