Brown v. Hiatts
APPEAL from the Circuit Court for the District of Kansas; the case being thus:
Brown filed a bill against Hiatt and wife to foreclose a mortgage, executed by the latter persons upon certain real propety in Kansas, to secure their joint and several bond for $2400, with interest, and to obtain a sale of the mortgaged premises for its payment. The case was thus:
On the 29th of May, 1860, Brown, who was then and still is a citizen and resident of Virginia, being at the time in Kansas, lent to the defendants, citizens of that State, the sum of $2000, at interest, at the rate of 20 per cent. a year, and took the bond in suit, payable in twelve months, for the amount, with the interest for the period included, making the sum of $2400, the whole drawing the stipulated interest after maturity.  As security for the payment of this bond with interest, and simultaneously with its execution, Hiatt and wife made and delivered to Brown the mortgage in suit, which covers three hundred and twenty acres, in the county of Leavenworth, in that State.
With the execution of the bond, and as further or collateral security for its payment, the defendant, Hiatt, assigned to the complainant a mortgage held by him upon certain real property in Kansas, executed by one Kenyon and his wife, to secure their joint note for $800, made in December, 1858, and payable in December, 1860, with interest at 6 per cent. a year. Upon this note there was then a credit of $75.
At the same time the defendant, Hiatt, also assigned to the complainant for the like further or collateral security a judgment rendered in his favor upon the foreclosure of a mortgage against one Perkins, in the District Court of the United States for the District of Kansas, on the 6th of June, 1859, for $763, and costs. This judgment drew 7 per cent. a year. The assignment was absolute in its terms, but it is admitted to have been executed as further or collateral security for the payment of the bond in suit.
The complainant, as stated, was at the time a citizen and resident of Virginia, and soon after the completion of the transaction in question he returned to that State, carrying with him the bond and mortgage, and retained them there in his possession until September, 1865. His residence was all this time in that portion of the State which was declared by the proclamation of the President to be in insurrection against the government of the United States, and was during the entire period of the war, until the surrender of the Confederate forces by General Lee, under the domination of the Confederate government.
At the time the collaterals mentioned were assigned it was agreed, in consequence of the residence of the complainant in Virginia, that the defendant, Hiatt, should exercise such oversight over them as would be necessary to preserve them for the purposes for which they were appropriated, so that resort might be had to them if the mortgage to the complainant should prove to be insufficient security.
In April, 1861, some correspondence was had between the complainant and Hiatt respecting these collaterals, in which the complainant expressed a desire that the conveyance of any property struck off to him on a sale under the Perkins judgment, should show on its face that the property was only held as collateral security, and in which Hiatt stated that he had a prospect of paying off the mortgage to the complainant by the proceeds of work on a contract in Pennsylvania during the coming summer. No intimation was made on either side of any agreement, by which the collaterals were, under any circumstances, to be taken in satisfaction of the bond and mortgage in suit.
On the 17th of April, of that year, the Convention of Virginia passed the ordinance of secession, purporting to take the State from the Union. The proclamation of President Lincoln declaring a blockade of her ports followed on the 27th of the same month, and the war commenced. From the time of its recognition until its termination, or at least until the cessation of active hostilities, all commercial intercourse between the parties, except by special license of the government, was illegal, and by the act of Congress of July 13th, of that year, and the subsequent proclamation of the President, was expressly interdicted.
During this period of non-intercourse and early in 1863, Hiatt went to the office of the district attorney of the United States in Kansas, and stated to that officer that the complainant had large claims against persons living in the State, secured by mortgages on real property, which were subject to confiscation; and in enumerating the debtors of the complainant, stated that he himself owed that person a considerable sum of money secured by mortgage on his farm, the amount of which he could not state, but it was the amount for which the mortgage was given, and that he would much prefer paying it to the government rather than to the complainant. This was the first intimation that the district attorney had that the complainant held any claims in Kansas subject to confiscation. Upon the suggestion thus made, that officer proceeded to examine the records of the county, and found among them the record of the bond and mortgage to the complainant. He thereupon instituted proceedings for their confiscation in the District Court of the United States for the District of Kansas, under the act of Congress of March 17th, 1862. To the information the defendants appeared and filed an answer, verified by the oath of Hiatt, in which they alleged that they were not indebted and had not been indebted to the complainant since May, 1861, upon the bond and mortgage executed by them. And they set up in substance that the bond and mortgage had been paid and satisfied by the Perkins judgment, or the property purchased under it, and the Kenyon note and mortgage, pursuant to a verbal agreement made at the time the bond and mortgage were executed.
Upon the trial of this question of payment and satisfaction, Hiatt produced what purported to be a letter from the complainant which supported the averment as to the agreement mentioned. The district attorney, believing the letter to be genuine and the testimony of Hiatt in support of it trustworthy, dismissed the proceedings, and instituted other proceedings for the confiscation of the Kenyon note and mortgage. These resulted in a sale of a part of the premises covered by that mortgage, and the proceeds of the sale were paid into court. In the meantime the Perkins judgment, owing to a defective acknowledgment of the mortgage on which it was given, proved to be entirely valueless, and the property upon which it was a lien, was sold to satisfy a prior incumbrance.
The present suit was commenced in February, 1867, and the defences made to it were substantially these:
1st. That a verbal agreement was a entered into between the parties at the time the bond and mortgage were executed, by which the complainant was to take in their satisfaction, at the election of the defendants, the Perkins judgment and the Kenyon note and mortgage, and that the defendants, in 1862, made such election, which was acceded to and accepted by the complainant. The election thus made was alleged by the defendants to have been communicated to the complainant by letter, sent by mail, and his acceptance of the collaterals was alleged to have been contained in a letter received by mail, from him, in which he stated that he should henceforth hold the collaterals as his own property in satisfaction of the bond in suit. These letters were not produced by the defendants in this case, but were alleged to have been lost. And it appeared that communication by mail between that portion of Virginia in which Brown, the complainant, resided, and Kansas, ceased in 1861, and was not re-established until after the cessation of hostilities in 1865.
2d. That the right of the complainant to maintain the suit was barred by the statute of limitations of the State of Kansas, which requires a suit of this character to be brought within three years after the cause of action has accrued; and—
3d. That the Perkins judgment and Kenyon note and mortgage had become valueless, and were lost through the neglect of the complainant, and that he should, therefore, be charged with their full amount. The defendants also alleged that the debt against Kenyon was confiscated by judgment of the District Court as the property of the complainant.
The Circuit Court held that the alleged verbal agreement was not proved, and that the statute of limitations of Kansas did not run against the right of action of the complainant during the continuance of the civil war, but allowed the amount of the Kenyon note, alleged to have been confiscated by the proceedings taken for that purpose, on the demand of the complainant, and gave judgment for the balance and a decree for the foreclosure of the mortgage and sale of the premises, if the amount found due was not paid within a designated period. From this decree both parties have appealed to this court.
Messrs. Conway Robinson and E. S. Brown, for Brown; Mr. A. G. Riddle, for the Hiatts.
Mr. Justice FIELD, after stating the case, delivered the opinion of the court, as follows:
^1 The law of Kansas, then in force, allowed parties to agree for the payment of any rate of interest on money due or to become due upon any contract.