
    Frederick H. Miller, appellee, v. Gabriel Gunderson et al., appellants.
    Filed June 2, 1896.
    No. 6637.
    1. Negotiable Instruments: Admission oe Execution. Evidence contradictory of tbe terms of a promissory note cannot furnish a defense to such note when it is admitted by defendants that such note was duly executed by them.
    2. Mortgages: Cancellation: Tendee. A mortgage will not be canceled upon tbe application of the mortgagor, no creditor being interested, without a tender or requirement that -the mortgagee be reimbursed for such expenditures as he has made, and indemnified as to such liabilities as in good faith he has incurred, on the faith of such mortgage.
    Appeal from tbe district court of. Douglas county. Heard below before Walton, J.
    
      B. G. Burbank, for appellants:
    Partnership property, with tbe consent of all the partners, may be mortgaged to secure tbe individual debts of one or more of tbe partners. {Richards v. Reveille, 44 Neb., 38; Roop v. Herron, 15 Neb., 73; Deitrich v. Hutchinson, 20 Neb., 52; Sylvester v. Henrich, 61 N. W. Rep. [Ia.], 945; Fisher v. Syfers, 10 N. E. Rep. [Ind.], 306; In re Kahley, 2 Biss. [ü. S. C. C.], 383; Smith v. Smith, 54 N. W. Rep. [Ia.], 73; Rational Banlc of Metropolis v. Sprague, 20 N. J. Eq., 13; Carver Gm & Machine Co. v. Bannon,85 Tenn.,738; Case v. Beauregard, 99 U. S., 119; Huisharnp v. Moline Wagon Co., 121 U. S., 310; Veal v. Keely Co., 86 Ga., 130; Kennedy v. Rational Union Bank, 23 Hun [N. Y.]„. 491; Wiggins v. Blaclcshear, 26 S. W. Rep. [Tex.], 939.)
    
      John L. Carr, David W. Merrow, and Isaac E. Congdon, contra.
    
   Ryan, O.

About tbe first day of January, 1888, Frederick H. Miller entered into partnership with Gabriel M. Gunder-son for tbe purpose of carrying on tbe planing mill business in tbe city of Ornaba. It was stipulated between tbe partners that tbe first named contributed $20,000 and tbe last named $15,000. It was also provided tliat eight per cent interest was to be allowed on any excess of capital which, one partner might have, and that this interest was to be paid, with other expenses, from tbe business of the firm, before a division of profits. In tbe latter part of tbe year 1887 Gabriel Gunderson, tbe father of Gabriel M. Gunderson, had been asked by Frederick H. Miller to furnish money for tbe operation of a planing mill, which Miller bad constructed, but bad not means enough to operate. Mr. Miller’s arrangement, as he claims, was to take Gabriel M. Gunderson into partnership with him, tbe father to furnish tbe amount of money necessary to enable Gabriel M. Gunderson, bis son, to become such partner. Tbe Gundersons insist that tbe advances made by the elder Gunderson were loans to tbe firm of Miller & Gunderson. This is tbe first matter of dispute between the litigants. Whatever this arrangement was, there is one thing certain, and that is that under it Gabriel Gun-derson furnished $7,500 on January 17, 1888; $5,000 on April 24, 1888; $900 on May 17, 1888; and at some time prior to the last named date, $60.80, — making a total of $13,460.80. It seems that the first item of $7,500 was credited by Gabriel M. Gunderson upon the books of the firm of Miller & Gunderson as a payment on account for the capital advanced by himself as the junior member. There was no evidence that Gabriel Gunderson knew anything of this entry. When he sent the draft for $7,500 from Chicago, his place of residence, he inclosed three promissory notes, each of $2,500, to be signed by Gabriel M. Gunderson, Frederick H. Miller, and the wife of Miller. These notes were accordingly executed. Gabriel Gun-derson explained in his testimony that he supposed this was the proper way for these notes to be given, though they were for the indebtedness of the firm of Miller & Gunderson. This firm, from its commencement, instead of making money ran into debt, until on January 13,1893, in a letter written by Frederick H. Miller to Gabriel Gunderson in Chicago, the situation was stated in this language: “I suppose you know that the mill is in the hands of the sheriff, and I do not see how the matter can be continued much longer, as about all the outstanding accounts are collected that can be at present, except a feAv hundred dollars. The judgments against us in the sheriff’s office amount to about three thousand dollars, and more to hear from.. There not being any prospect of fixing up the matter, think it would be best for all concerned for you to be here.” Upon receipt of this letter Gabriel Gunderson 'went to Omaha. On January 19, 1S93, the firm of Miller & Gunderson, by F. H. Miller, as partner, and F. H. Miller and Gabriel M. Gunderson, individually, joined in making a chattel mortgage upon the personal property of said firm to secure its five promissory notes to Gabriel Gunderson, payable on demand, of which notes each of three was for .$3,270.10, another was for $6,780.51, and still another was for $5,000. At the same time F. H. Miller and Gabriel M. Gunderson, the joint owners of the planing mill real property, their wives joining, made a mortgage on said real property to secure payment of the notes above described, except the $5,000 note, to be hereafter explained. These notes represented advances and interest. These mortgages were duly filed for record on the day following their date. Soon afterward Gabriel Gunderson commenced proceedings for their foreclosure.

The petition in this case was filed by F. H. Miller as a quondam member of the firm of Miller & Gunderson. His former partner and the mortgagee were joined as defendants. The plaintiff in this petition described the various transactions in which he had taken part, in accordance with the theory that Gabriel Gunderson had made advances solely to enable his son to become a partner and to continue that relationship between the son and the plaintiff. It was averred that Gabriel Gunderson, in tbe encouragement of tbe formation of a partnership between bis son and'plaintiff, was conniving and conspiring with said son to defraud plaintiff, and that tbe subsequent transactions were carried on in pursuance of tbe same fraudulent common purpose of tbe father and son to deprive' plaintiff of bis property and to defraud tbe creditors of said firm, and that tbe proposed foreclosure of tbe mortgages would consummate these designs of tbe defendants. It will greatly simplify this investigation to say, once for all, that plaintiff’s counsel, in their brief, expressly state that in this litigation tbe rights of creditors are not involved. Tbe prayer of tbe petition was that the mortgages be declared fraudulent, inoperative, and void; that they be canceled; that tbe advertised foreclosure of tbe chattel mortgage be enjoined; that any proceedings by defendants under said mortgages be restrained until tbe controversy herein has been determined by tbe court, and for such other and further relief as in equity and good conscience tbe plaintiff might be entitled to. Tbe answer and reply raised tbe issues hereinbefore indicated. Upon a trial of these issues there was a decree in accordance with the prayer of tbe petition, on findings that Gabriel Gunderson, tbe defendant, obtained tbe mortgages from plaintiff by and through bis own and bis son’s fraud and misrepresentation, as alleged in tbe petition, that is to say, that said Gabriel Gunderson would, if said mortgages were given him, pay all tbe debts of tbe firm of Miller & Gunderson, which he bad not done and bad never intended, but bad always refused to do, and furthermore, that tbe money advanced by Gabriel M. Gunderson as bis part of tbe capital of tbe firm was loaned to him by his father for that purpose; that tbe notes to Gabriel Gunderson never represented any indebtedness of tbe firm of Miller & Gunderson; that as between tbe plaintiff and tbe defendants there was never any consideration for said notes, and that tbe plaintiff was not liable on said notes.

It would be a tedious»as well as fruitless task to recapitulate the evidence upon consideration of which the district court reached the above results. In respect to the proposition that Gabriel Gunderson obtained the mortgages by the representation that he would pay all the debts of the firm, it is deemed proper to say that it was shown that the First National Bank of Omaha, before the commencement of this action, had brought suit against Gabriel Gunderson upon this alleged promise to pay the debts of Miller & Gunderson to the amount of over $8,000. It is also shown by the evidence that after said mortgages had been made to him, Gabriel Gunderson had paid over $8,000 of the indebtedness of said firm on the faith of said mortgages. This defendant denied that he assumed the debt to the bank, but admitted that the above described note for $5,000 was one given to him to cover certain debts which he has in fact paid to said amount of over $3,000, and explained that the payment of these particular debts was necessary to obtain possession of the personal property mortgaged. Now, whether the theory of plaintiff is adopted, that is, that Gabriel Gun-derson was to pay all the debts of the firm, including that to the bank, or whether, as the mortgagee claims, he was to pay only certain specified debts, is not very material in principle, for, in any event, it is clear that Gabrie; Gunderson has advanced for the firm over $3,000 on the faith of these mortgages. To avoid the effect of this suggestion it is urged that while the mortgagee paid these debts, he took an assignment of the evidences thereof, which he still holds. There will be no diflicultj in defeating any attempted enforcement of these claims against the firm, whenever, either by the foreclosure of the mortgages or otherwise, these debts shall have been paid by the firm aforesaid. We cannot understand why Mr. Gunderson should be deprived of his mortgage security without a tender or requirement of indemnifying him against any alleged personal liability incurred solely on the faith of said mortgages. As to the findings that these notes never represented an indebtedness of Miller & Gunderson, but were given for advances made by the father to the son, it may be remarked, in the first place, that this conclusion was reached upon evidence of statements preceding the execution of these notes and in direct contradiction of their terms. In the second place, even if by competent evidence it could be shown that the undertakings of the signers were not what they were evidenced by the notes as being, nevertheless, the giving of a note and mortgage by a firm to secure payment of the debt of one of its individual members, when not violative of the rights of a creditor of the firm, has often been upheld as resting upon a sufficient consideration. Upon this point counsel for the appellants has cited rnany-authorities which sustain this proposition. As these will appear properly accredited to such counsel, it is deemed inadvisable to reproduce them.

The judgment of the district court is reversed and this action is dismissed at the costs of the appellee.

Reversed and dismissed.  