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(5 Kan. App. 279)

LOONEY Y. REEVES et al. (Court of Appeals of Kansas, Northern Depart

ment, C. D. Jan. 18, 1897.) Conflict Or LAWS-RES JUDICATA-COVENANTS

WARRANTY-DAMAGES-MITIGATION. 1. The record of a judgment rendered by a court of another state is not admissible in evidence for the purpose of proving the determination of a fact involved in the trial of a case in a district court of this state, when such record shows that such judgment was rendered without jurisdiction of one of the necessary parties.

2. In an action in this state to recover on the covenants of warranty in a deed executed in this state for a failure of title to real estate sitnated in the state of Missouri, the measure of recovery is governed by the laws of this state.

3. When the title to real estate fails, the measure of the vendee's recovery on the vendor's corenants of warranty is the purchase price. When no definite price is agreed upon, but there is an exchange of lands, the agreed value, or, if none, the market value, of the lands given in exchange, is the measure of dama ges.

4. In an action brought by the vendee of lands to recover damages for a want or defect of title, the vendor may show, in mitigation of damages, that before the trial he had perfected the title in the plaintiff.

(Syllabus by the Court.)

Error from district court, Ellsworth county; W. G. Eastland, Judge.

Action by W. H. Reeves and another against Ozroe B. Looney. From a judgment for plaintiffs, defendant brings error. Reversed.

Ira E. Lloyd, for plaintiff in error. N. Coover and C. J. Evans, for defendants in error.

the deed to Looney the consideration for the Ellsworth county land was placed at $7,000. The court instructed the jury that if they should find that the deed from Looney expressed the actual consideration received by him for the Missouri land, the plaintiffs would be entitled to recover the amount thereof as damages for a breach of the covenants of title; but that, if they should find that it was understood that the land was of much less value, or was valued at a much less sum than that expressed in the deed, then they should ascertain such valuation, and return a verdict in favor of the plaintiffs for the amount thereof. An instruction was also given that if the jury should find and believe from the evidence that no speci. fied sum was understood or agreed upon between the parties as the valuation of the land, but that the sum of $1,500 was inserted therein as a matter of convenience only, then the plaintiffs would be entitled to recorer as their damages the amount which the jury should find and determine from the evidence to be the consideration which was actually paid or given for the land. The jury found that neither deed expressed the actual consideration for the land therein mentioned, and also made the following special findings of fact: “(4) On October 29, 1890, what was the market value of the real estate described in the deed offered in evidence, and dated October 29, 1890, being the deed from Mary Reeves and A. P. Reeves to 0. B. Looney? Ans. $4,460.80. (5) When O. B. Looney received the said deed described in the preceding interrogatory, did he not pay to the said Mary Reeves, or the plaintiffs in this action, the sum of $500, and also exe. cute to the plaintiffs in this action the deed, a copy of which is attached to the plaintiff's: petition? Ans. Yes. (6) Was the transaction between the Reeveses and Looney in the exchange of real estate simply a trade of one tract of land for the other, Looney paying $500 in addition to the Missouri land, without reference to any particular valuations so far as the Missouri land was concerned? Ans. Yes.”

In answer to the first question raised by the plaintiff in error we need only to state that the deed containing the covenant of warranty was executed in this state, and the covenantee is here seeking to recover for a breach of such covenant. The damages in such case must be computed according to the law in this state.

The plaintiff in error complains of the admission in evidence of the record of a judg. ment of eviction rendered in Missouri against the defendants in error, and the giving of an instruction to the effect that such record disclosed a valid judgment. This record shows that the Missouri court acquired no jurisdiction of W. H. Reeves, yet it proceeded to render a judgment against him. As, under the numerous decisions of our supreme court, that judgment against W. H. Reeves

CLARK, J. This is an action brought in the district court of Ellsworth county by William H. Reeves and James O. Reeves to recover from Ozroe B. Looney $1,500 damages upon alleged breach of covenants contained in a deed of general warranty to 120 acres of land in Cape Girardeau county, Mo. The plaintiffs recovered a judgment for $619.65, and the defendant, as plaintiff in error, has brought the case to this court. The evidence preserved in the record clearly shows that on October 29, 1890, Looney claimed to be the owner of said real estate, and that Mrs. Mary Reeves, the mother of the defendants in error, was the owner of land in this state situated in said Ellsworth county, upon which there was an incumbrance of about $3,330; that on said October 29th, in said Ellsworth county, by virtue of a trade which was then and there consummated, Mrs. Reeves conveyed to Looney her Ellsworth county land, subject to the incumbrances thereon, and Looney, in consideration therefor, at the same time and place, executed to the defendants in error the warranty deed above mentioned, and paid in cash, either to Mrs. Reeves or to her said sons, the sum of $500; that the consideration for the land so conveyed by Looney, as expressed in the deed, was $1,500, while in

was void, it was error to admit such record

) in evidence for the purpose of showing a Marnan, 37 Ind. 168; Hodges v. Thayer, 110 judgment against him; and the court also Mass. 286; Evans v. Fulton (Mo. Sup.) 36 S. erred in its instructions to the jury respect- W. 230. Because of the errors of the court ing said record, and in refusing to instruct herein pointed out, the judgment will be rethe jury as requested by the plaintiff in er- versed, and the cause remanded for further ror.

proceedings in accordance with the views Complaint is also made of the ruling of the expressed in this opinion. court in refusing to permit the plaintiff in error to introduce evidence tending to show that since the commencement of this action

(5 Kan, App. 326) he had acquired a good title to the Missouri

CHAPMAN v. STEINER et ux. land, and that under the laws of that state (Court of Appeals of Kansas, Northern Departsuch after-acquired title inured to the bene

ment, C. D. March 22, 1897.) tit of the defendants in error. The court NONNEGOTIABLE NOTE-AssIGNMENT-Par. erred in this ruling. Such evidence was ad

MEST TO ASSIGNOR. missible in mitigation of damages. King v.

1. Where a note, otherwise negotiable in form, Gilson, 32 Ill. 348; Bank v. Glenn, 68 N. C.

contains the following clause: “In case of the

breach of any of the covenants or conditions in 35; Reese v. Smith, 12 Mo. 344; Baxter V. the mortgage deed securing this bond conBradbury, 20 Me. 260; 3 Sedgw. Dam. $ 978; tained, to which said deed reference is hereby Kimball v. Bell, 19 Kan. 173, 174, 30 Pac. 240.

made, and which is made a part of this contract,

in either such case the said principal sum with It is finally contended that, as no stipulat

all accrued interest shall, at the election of the ed price for this land was agreed upon in legal holder or holders hereof, at once become the trade, the measure of damages upon a

due and payable without further notice, and failure of title thereto would be the actual

may be demanded and collected, anything here

in contained to the contrary notwithstanding," value of the property at the time of the held, that this clause renders the note a nontrade, with interest thereon from the date negotiable instrument. of eviction, and that the court erred in re

2. Where the maker of a nonnegotiable infusing to so instruct the jury, as well as in

strument pays the same to the payee named

therein without notice that the same has been ruling out evidence offered tending to show assigned to other parties, in good faith, belieythe value of said land, and that the same ing that the payee is entitled to collect the same, was less than $200. The defendants in er

such payment is an extinguishment of the in

debtedness. ror insist, however, that the measure of dam

(Syllabus by the Court.) ages upon the breach of covenants of title to. real estate is the purchase price paid

Error from district court, Ellsworth countherefor, with interest from the date of evic

ty; W. G. Eastland, Judge. tion, and that the court properly instructed

Action by C. C. Chapman against John the jury upon this point; and that, as there

Steiner and Frances Steiner, his wife. Judgwas no understanding or agreement between

ment for defendants, and plaintitf brings erthe parties, when making the trade, that the

ror. Affirmed. value of the 120 acres should in that transac- Wheeler & Switzer, for plaintiff in error. tion be estimated by them at any particular | Ira E. Lloyd, for defendants in error. sum, the value of the property given in exchange therefor must necessarily be deemed MCELROY, J. On the 2d day of August, the purchase price. It is well settled that, 1886, the Western Farm-Mortgage Company, where the title to real estate fails, the meas- of Lawrence, a corporation, organized and ure of the vendee's recovery on the vendor's doing business under the laws of the state of covenant of warranty is the purchase price. Kansas, loaned to John Steiner and Frances Stebbins v. Wolf, 33 Kan. 767, 7 Pac. 512; Steiner the sum of $500, and accepted as eviReese v. Smith, supra; Baxter v. Bradbury, dence of such indebtedness their real-estate supra; Dickson V. Desire's Adm'r, 23 Mo. coupon bond, payable to the order of one W. 151; King v. Gilson, supra. The jury evi- J. Neill at the Third National Bank in the dently arrived at their estimate of damages city of New York on the 1st day of August, by deducting from the value of the Ells- 1891, which real-estate mortgage bond is in worth county land the amount of the in- words and figures as follows: "No. 5,999. cumbrances thereon and the $500 paid by United States of America. $500.00. RealLooney. This, would leave $610.SO as the Estate Mortgage Coupon Bond. Secured by actual consideration paid for the 120 acres; First Mortgage. 8 Per Cent. Semiannually. and this sum, with interest thereon from Know all men by these presents, that the unthe date of eviction, would equal the amount dersigned, of the county of Ellsworth, and of the general verdict. We see no objection state of Kansas, do, for value received, hereto this method of ascertaining the amount by acknowledge ourselves to be indebted, and of damages sustained by the defendants in by these presents promise to pay to the order error. Where no definite price is agreed up- of W. J. Neill the principal sum of five hunon, but there is an exchange of lands, the dred dollars in lawful money of the United agreed value, or, if none, the market value, States of America, at the Third National of the lands given in exchange therefor, is Bank in the city of New York, on the first the proper measure of damages. Burke v. day of August, A. D. one thousand eight hundred and ninety-one, with interest thereon at changed to the Western Farm-Mortgage the rate of seven per cent. per annum, from Trust Company of Denver. date, payable semiannually on the first days After the maturity of said note, and on the of February and August in each year until 13th day of February, 1893, the plaintiff in said principal sum shall be fully paid accord- error brought this action in the district court ing to the tenor and effect of ten interest below to recover from the defendants in error notes of seventeen and 60/100 dollars each, upon said promissory note, and to foreclose bearing even date herewith, hereto annexed, the mortgage securing the same. To the petipayable at said Third National Bank in the tion filed in said action below, the defendants city of New York, provided said principal in error filed an answer in due time, alleging sum and the interest thereon be paid at ma- as defenses substantially as follows, to wit: turity; but, in case of default and election as First. That the loan evidenced by said note hereinafter provided, then it is expressly was negotiated by the Western Farm-Mortagreed that this bond shall draw interest at gage Company, a corporation at Lawrence, the rate of twelve per cent. per annum from Kan.; that, while the note was executed to date, and, if suit be instituted for the collec- W. J. Neill as payee, the Western Farmtion hereof, a reasonable sum shall be added Mortgage Company was the real party in inag attorney's fees. It is agreed that every in- terest, and that the said W. J. Neill had no stallment of interest evidenced by coupon interest therein except as the agent and rephereto annexed, not paid at maturity, shall resentative of the Western Farm-Mortgage draw interest at the rate of twelve per cent. Company; that the Western Farm-Mortgage per annum until paid. It is further expressly Trust Company of Lawrence was, after the agreed that in case of default in the payment negotiation of said loan, organized for the of any installment of interest, or any portion purpose of succeeding to the business of the thereof, for the space of ten days after it be- Western Farm-Mortgage Company; that the comes due and payable, or in case of the defendants in error had no notice, actual or breach of any of the covenants or conditions constructive, of the transfer and sale of said in the mortgage deed securing this bond con- note by said W. J. Neill, of the Western tained, to which said deed reference is hereby Farm-Mortgage Company, to the plaintiff in made, and which is made a part of this con- error. Second. That after the execution of tract, in either such case the said principal said note and mortgage defendants in error sum, with all accrued interest, shall, at the paid the interest as the same became due, election of the legal holder or holders hereof, either to the Western Farm-Mortgage Comat once become due and payable without fur- pany or to the Western Farm-Mortgage Trust ther notice, and may be demanded and col- Company, its successor, and at the maturity lected, anything herein contained to the con- of said note paid the principal to the Westtrary notwithstanding. All appraisement, ern Farm-Mortgage Trust Company at its homestead, exemption, and stay laws are office in Denver, Colo. Third. That at the hereby expressly waived. It is further ex- time said note was paid to the Western pressly agreed and declared that this bond Farm-Mortgage Trust Company at Denver, and the interest notes hereto annexed are made Colo., the said company was acting as the and executed under, and are in all respects to duly-authorized agent of the plaintiff in error be governed and construed by, the laws of for the collection of the same. the state of Kansas, and are given for an To this answer the plaintiff in error filed åctual loan of five hundred dollars; said loan a reply, admitting the negotiation of the being secured by a mortgage deed on real es- loan by the Western Farm-Mortgage Comtate, duly recorded. In witness whereof we pany, and the organization and succession in have hereto affixed our hands and seals and business of the Western Farm-Mortgage made delivery hereof, at Lawrence, Kansas, Trust Company; and also admitting the paythis second day of August, A. D. 1886." On ment of the several interest coupons to the the same day the defendants in error execut- Western Farm-Mortgage Company and the ed and delivered to said W. J. Neill their Western Farm-Mortgage Trust Company by mortgage deed, by which they conveyed to the defendants in error, but denying the the said W. J. Neill certain real estate located agency or authority of either of said compain Ellsworth county, Kan., to secure said nies to collect the interest or the principal note, together with the interest thereon. for the plaintiff in error; and alleged that About January 29, 1887, W. J. Neill assigned the plaintiff in error had not knowledge of and delivered said bond to the plaintiff in er- the fact that W. J. Neill was not the real ror. Steiner paid the several installments of payee in the said note, or of the relation interest, and finally, on about the 1st day of existing between the Western Farin-MortAugust, 1892, he remitted by bank draft the gage Company and the Western Farm-Mort. entire amount then due on the bond and mort- gage Trust Company, or of the fact that gage, being the principal sum and interest the defendants in error had paid either inthereon, amounting in the aggregate to terest or principal, as alleged in their answer, $.522.50. All of these payments and remit- to the Western Farm-Mortgage Company or tances were made by Steiner to the mortgage the Western Farm-Mortgage Trust Company; company, which made the loan originally, that the interest coupons and the principal although the name of the company had been note were made payable by their express terms at the Third National Bank of New of, for the space of ten days after it beYork City; and that the interest coupons comes due and payable, or in case of the were paid in due course of business through breach of any of the covenants or conditions the said Third National Bank of New York in the mortgage deed securing this bond conCity, where they were made payable; and tained, to which said deed reference is herethat the plaintiff in error had nothing to do by made, and which is made a part of this with W. J. Neill, the Western Farm-Mort- contract, in either such case the said princigage Company, or the Western Farm-Mort-pal sum, with accrued interest, shall, at the gage Trust Company, in the way of receiving election of the legal holder or holders hereof, interest or principal upon said note after it at once become due and payable without furwas delivered to him.

ther notice, and may be demanded and colUpon the issues as thus formed the case lected, anything herein contained to the conwas tried, and the facts disclosed upon the trary notwithstanding." By this clause the trial are as follows, to wit: First. That the mortgage is made a part of the bond or note. mortgage and note were executed as alleged By this reference each and every condition, in the plaintiff's petition. Second. That the provision, and stipulation in the mortgage note was assigned as follows, to wit: For deed becomes as much a part of the bond value received, I hereby assign and transfer as if the same was written therein, and it the within bond, together with all my rights, is necessary to examine the mortgage in ortitle, and interest in the mortgage deed se- der to ascertain what are really the provicuring the same, to ---;" and was then sions and conditions of the bond or note, delivered to the plaintiff in error on or about for the reason that such mortgage is made a January 29, 1887. Third. That the loan evi- part of, and incorporated into, the bond or denced by said note was negotiated by the note by its terms. In this mortgage the Western Farm-Mortgage Company, and that Steiners agreed to pay all the taxes and asW. J. Neill was simply a nominal party as sessments levied upon said premises when payee therein, and acted simply as the agent the same are due, and insurance premiums or representative of the Western Farm-Mort- for the amount of insurance therein specigage Company. Fourth. That the Western fied; and, if not so paid, the legal holder Farm-Mortgage Trust Company was organ- of the mortgage may, without notice, declare ized for the purpose of succeeding to the the whole sum of money therein secured at business of the Western Farm-Mortgage once payable, or may elect to pay such taxes, Company. Fifth. That the defendants in er- assessments, and insurance premiums. The ror paid the several interest installments as amount so paid shall be a lien on the premthey became due to the Western Farm-Mort- ises, and be secured by the mortgage, and gage Company and its successor, the West- collected in the same manner as the principal ern Farm-Mortgage Trust Company. Sixth. debt, together with interest at the rate of 12 That there was no assignment of the mort- per cent. per annum. But whether the legal gage sued on in this action recorded in the holder of this mortgage elects to pay such office of the register of deeds of Ellsworth taxes, assessments, or insurance premiums county, Kan., and that on July 20, 1891, and or not, it is distinctly understood that the before the defendants in error had notice legal holder thereof may immediately cause that the note and mortgage had been trans- this mortgage to be foreclosed, and shall be ferred to the plaintiff in error, said defend- entitled to the immediate possession of the ants Steiner paid the amount due thereon in premises, and the rents, issues, and profits full, $522.50, to the Western Farm-Mortgage thereof. It also contains an agreement that Trust Company of Denver, and that said the mortgagors will keep the buildings, company retained the principal amount of fences, and other improvements upon said said note,--the $500 remitted to it by Steiner, premises in as good repair and condition as -and failed and neglected to forward the the same now are, and that said mortgagors same to the then owner and holder of the will abstain from the commission of strip bond and mortgage, C. C. Chapman. The or waste on said premises until the whole case was submitted to the jury upon the sum of money thereby secured is fully paid. admissions of the parties and the evidence It also contains an agreement that, in case under the instructions of the court, and the of the breach by the said mortgagors of any jury returned a general verdict in favor of of the covenants or agreements contained in the defendants in error, and certain special said mortgage, then the bond secured therefindings of fact. The plaintiff in error duly by shall bear irterest at the rate of 12 per filed his motion for judgment upon the spe- cent. from that date, and that the couTeycial findings of fact, and also his motion for ance shall become absolute, and that the A now trial, both of which were overruled by mortgagee shall be entitled to the possession the court, excepted to by the plaintiff in er- of the mortgaged premises, and to have and ror, and the case is here for review. Toe receive the rents and profits tbereof. It questions to be considered here are:

also contains covenants that at the delivery 1. Is the note sued on a negotiable instru- thereof the mortgagors were the lawful ownment? "It is further expressly agreed that ers of the premises, and that they were in case of default in the payment of any seised of a good and indefeasible estate of installment of interest, or any portion there- inheritance therein, free and clear of all in

48 P.-39

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cumbrance, and that they would warrant was not recorded, and Steiner had no notice and defend the same in the quiet and peace- of such assignment. He paid the money to able possession of the mortgagee, his heirs the Farm-Mortgage Trust Company, believand assigns forever, against the lawful ing that such company was the owner of the claims of all persons whomsoever. In Killam note and mortgage. He had no notice that v. Schoeps, 26 Kan. 310, the supreme court the bond and mortgage belonged to any one held that an instrument which contained a other than the mortgage company.

Steiner contract in respect to the title to personal had made all his interest payments to this property, and for the possession thereof, was company, and in due time thereafter the innot a negotiable promissory note; and Brew- terest coupons were returned to him marked er, J., said in the opinion: “You may not in- "Paid" by such company. Ping. Mortg. $ corporate with such a promise stipulations 1151, “Assignment of Mortgage and Debt": and agreements as to other matters, and “The payment of the bond by the mortgagor then say that the absolute promise to pay to the mortgagee without notice of an unmoney lifts the contract into the region of recorded assignment defeats the claim of negotiable paper. This is the general rule, the assignee, and entitles the mortgagor to and, whatever exceptions there may be, this its cancellation.

The mortgagor is not one.

In 1 Daniel on Negotiable Instru- may pay or settle with a person having the ments (paragraph 59), the rule is thus stated: apparent authority to receive satisfaction 'In the sixth place, it is essential to the of the mortgage, and a payment thus made negotiability of the bill or note that it pur- will prevail against one having a secret, port to be only for the payment of money. concealed, and reserved interest in the mortSuch, at least, may be stated to be the gen- gage. After the mortgagor has notice of the eral rule, for, if any other agreement of a assignment, he cannot then deal lawfully different character be ingrafted upon it, it with the mortgagee in making payment of becomes a special contract, clogged and in- the debt." In Lockrow v. Cline, 4 Kan, App. volved with other matters, and has been 716, 46 Pac. 720, this court held that a note, deemed to lose thereby its character as a the same in form as the one under considercommercial instrument.'

We con- ation, was a non-negotiable note, and that clude, then, that whenever any stipulation payment of the same made to the Western concerning other matters than the payment Farm-Mortgage Trust Company by Cline, of money is incorporated in one instrument without notice of the assignment, was an with a promise to pay money, such double extinguishment of the indebtedness. Seccontract will not be adjudged a negotiable tion 3, c. 68, Gen. St., being paragraph 3887, paper." In Iron Works v. Paddock, 37 Kan. Gen. St. 1889, reads: “The recording of the 510, 15 Pac. 574, it was held "that, where a assignment of the mortgage, shall not be note contains other provisions than the un- deemed of itself, notice to a mortgagor, his conditional payment of money, it is nonnego- heirs or personal representatives so as to intiable.” We hold that the bond in contro- validate any payment made by them, or eiversy is

a nonnegotiable instrument. It ther of them to the mortgagee." We think therefore follows that the court did not err this section has reference to mortgages in instructing the jury "that the note sued standing alone, or to a mortgage securing on in this action was a nonnegotiable instru- debts and notes of a nonnegotiable character. ment."

In Burhans v. Hutcheson, 25 Kan. 625, the 2. Did the payment to the Western Farm- supreme court says, with reference to this Mortgage Trust Company operate to dis- section of the statute: “A better interpretacharge the defendants in error from liabil- tion, and one clearly more in accord with ity to the plaintiffs in error? The payee, W. the law of mortgages of this state, is that J. Neill, at the time of the execution of the such section has reference only to a mortmortgage, was a clerk in the office of the gage standing alone, or one securing debts Western Farm-Mortgage Company, and aft- and notes of a nonnegotiable character. I'nerwards held the same position with the der this interpretation section 3 of the stattrust company. He bad no interest what- ute is not nugatory, but has ample room for ever in this bond, or the mortgage given to operation.” We think the jury were warsecure its payment. The Western Farm- ranted in finding that Steiner acted in perMortgage Trust Company was organized for fect good faith in the payment of this note, the purpose of succeeding to the business of and that, in consequence, he was entitled to the former company, and each of said com- the verdict, and that the findings and the panies directed Steiner to make bis payment verdict of the jury were in accordance with to the Denver company.

The trust com- the evidence and law. pany, of Denver, regularly sent notices to There was one instruction given by the Steiner of the date when his interest and court in this case, which, if examined alone, principal would mature, and requested pay- would seem to be misleading; but this inment to be made to it. Steiner had no no- struction, when examined in connection with tice that the plaintiff in error owned, or the admissions of the parties at the trial, claimed to own, any interest in the note and and in connection with the undisputed evi. mortgage, until long after he made the final dence in this case, could not prejudice the payment. The assignment of the mortgage rights of plaintiff in error. There was no

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