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brought to defendants' house was of no importance. The question was as to when the work and labor of putting them in place was performed; and, if it had not theretofore appeared from the moving papers that the answer of defendant wife was sham, she produced at the hearing abundant proof of that fact. The quibbling and evasive character of the counter affidavits could properly be considered when disposing of plaintiff's motion. See Thul v. Ochsenreiter (Minn.) 75 N. W. 4. If by defendant's answer she intended to deny the value of the materials furnished and the work and labor performed, the averment was clearly bad as a negative pregnant, for the answer would have been technically true if plaintiffs' claim was a single cent too great.

Admitting, without deciding, that the proposed amended answer was an improvement upon its predecessor, the court below did not abuse its discretion when it denied defendant's motion for leave to amend, made after the original answer had been shown to be sham and false, and had been stricken out for these reasons. Judgment affirmed.

SHARPE v. LARSON.

(Supreme Court of Minnesota. Nov. 29, 1898.) ACTION FOR LIBEL-EVIDENCE-DAMAGES.

1. Any circumstance appearing by the evi dence on the trial of an action of libel or slander which tends to lessen or overcome the presumption of malice should be considered by the jury in mitigation of damages, and a charge of the court, or a refusal to charge, which deprives a defendant of the benefit of such evidence, is erroneous.

2. Held, in the case at bar,-an action for libel.-that the verdict in plaintiff's favor for $750 was excessive in amount.

(Syllabus by the Court.)

Appeal from district court, Norman county; Frank Ives, Judge.

Action by Peter Sharpe against B. B. Larson. Verdict for plaintiff. From an order denying a new trial, defendant appeals. Reversed.

Ole J. Vaule, for appellant. W. W. Calkins and H. Steenerson, for respondent.

COLLINS, J. Action for libel, in which plaintiff had a verdict for $750. From an order denying his motion for a new trial, defendant appeals.

The substance of the libelous publication sufficiently appears in an opinion written on a former appeal, at which time it was held that the complaint herein contained facts sufficient to constitute a cause of action. Sharpe v. Larson (Minn.) 72 N. W. 961. And the case referred to in the publication was that disposed of by the court on appeal in an earlier action between these same parties; the opinion being found in 67 Minn. 428, 70 N. W. 1, 554. The Ole Furuseth mentioned was the justice of the peace from whose decision the defendant attempted to appeal to the district court, and who prepared the defective notice which

has caused all of the unfortunate litigation between these parties. At the trial of the present case, Furuseth testified that after the attempted appeal, and just prior to the term of district court at which the appeal was dismissed, he met this plaintiff, and had a conversation with him concerning the appeal, during which plaintiff said that he had received the notice, but that it was worthless, whereupon Furuseth asked if defendant, Larson, knew of this, and was informed by plaintiff, Sharpe, that he did not, at which Furuseth remarked that probably he (Furuseth) had better tell him (Larson). Sharpe then said, "No; don't do that. We can beat him out of that appeal." It also appeared that Furuseth had told defendant of this conversation before the article herein involved was published, and also that, at defendant's request, Furuseth had made an affidavit as to what was said by plaintiff, Sharpe, and himself on this occasion, and had delivered it to defendant. This affidavit was introduced in evidence at the trial, and was the affidavit mentioned in the published notice. Because of this evidence the court below was requested to charge the jury, in effect, that if they found that plaintiff, Sharpe, told Furuseth not to tell defendant, Larson, that his notice of appeal was worthless, this circumstance might be considered in mitigation of damages. The court refused so to charge, defendant's counsel excepting, and there is no claim that the substance of this request was elsewhere given to the jury. It was error for the court below to refuse to charge the jury as requested. If the fact that Furuseth had, prior to the publication, informed defendant of the conversation with Sharpe, and had also furnished to him an affidavit as to what the latter had said, was not available as a complete defense in the action, it bore upon the questions of malice and damages. Gen. St. 1894, § 5258, provides that in an action for libel or slander the defendant may, in his answer, allege both the truth of the matter charged as defamatory, and any mitigating circumstances, to reduce the amount of the damages. Therefore any circumstance appearing in the evidence which tended to lessen or overcome the presumption of malice on defendant's part should have been considered by the jury in mitigation of damages. By the refusal to charge as requested, defendant was deprived of the benefit of this circumstance, and a new trial must be had. We deem it incumbent upon us to now say, in view of another trial, that the verdict rendered was greatly excessive in amount. Order reversed.

SIMMER v. BLABON. (Supreme Court of Minnesota. Nov. 30, 1898.) MORTGAGE FORECLOSURE-SURPLUS-BURDEN OF PROOF.

On the trial of an action to recover a surplus in the hands of a mortgagee after a fore

closure sale, it appeared from the foreclosure proceedings, under the power of sale, that he claimed in the notice of sale, and in the affidavit of costs and disbursements, that certain sums were due for taxes, but he did not anywhere state that he had paid any such taxes. Held, the burden was on him to show that he had paid them. Whether, if he had so stated, the burden would be on the plaintiff, quære. (Syllabus by the Court.)

Appeal from district court, Hennepin county; William A. Lancaster, Judge.

Action by Gertrude Simmer against George W. Blabon. Verdict ordered for defendant. From an order denying a new trial, plaintiff appeals. Reversed.

Smith & Smith, for appellant. Brooks & Hendrix, for respondent.

CANTY, J. This is an action brought by the grantee of the mortgagors of a city lot against the mortgagee to recover a surplus remaining in his hands after paying all sums which he had a right to retain on a foreclosure sale under the mortgage. The foreclosure was made under the power of sale contained in the mortgage, and the notice of sale states: "Default having been made in the payment of $253.91 interest money, and $229.72 taxes, which is claimed to be due at the date of this notice." It appears by the affidavit of costs and disbursements that the property was bid in at the sale for the full amount of the principal and interest, costs, and disbursements, and also the following items:

"Amount of taxes due March 26, 1892

Interest to date of sale..

$229 72 1 92 $231 64"

The action was brought to recover this latter sum on the theory that defendant had no right to retain it. On the trial the foreclosure proceedings, including said affidavit of costs and disbursements, were introduced in evi-dence, and also tax receipts dated 11 days after the day of the foreclosure sale, but the description of the property in the receipts is fatally defective. However, for the purposes of this case, we regard that as immaterial. this state of the evidence the court ordered a verdict for defendant, and from an order denying a new trial plaintiff appeals.

On

Defendant contends that the burden was on plaintiff to show that defendant had not paid taxes for which he is entitled to retain this $231.64, and plaintiff contends that the burden was on defendant to show that he had paid such taxes. We need not consider where the burden of proof would be if the defendant either in his notice of foreclosure sale, or in his affidavit of costs and disbursements, or in both, had stated that he had paid the taxes for which he claims the right to retain the $231.64. He has not so stated. In the notice he simply stated that default had been made in “$229.72 taxes, which is claimed to be due at the date of this notice." In the affidavit of costs and disbursements he simply stated the amount of

taxes due on March 26, 1892, and the interest thereon to the date of sale. In the absence of any assertion in the foreclosure proceedings that he has paid such taxes, we are clearly of the opinion that the burden was on him in this action to prove that he had paid them. He has not maintained that burden, and the order appealed from is therefore reversed, and new trial granted.

GRAY v. BLABON.

(Supreme Court of Minnesota. Nov. 30, 1898.) MORTGAGE FORECLOSURE-ACTION FOR SURPLUSEVIDENCE.

In an action by an assignee of a second mortgage to recover a surplus arising from a foreclosure sale on the first mortgage, the answer denied the execution of the second mortgage. It was introduced in evidence on the trial, but the promissory note referred to in such second mortgage, and secured by it, was not introduced in evidence or its absence accounted for. Held a fatal defect in plaintiff's proof, and judgment was properly ordered for defendant.

(Syllabus by the Court.)

Appeal from district court, Hennepin county; William A. Lancaster, Judge.

Action by L. Gray against George W. Blabon. Verdict for defendant. From an order refusing a new trial, plaintiff appeals. Affirmed.

Smith & Smith, for appellant. Brooks & Hendrix, for respondent.

CANTY, J. This action is similar to Simmer v. Blabon (filed herewith) 77 N. W. 233, except that this action is brought by the assignee of the second mortgage. The answer denied, on information and belief, that any such mortgage had been executed. On the trial plaintiff introduced the second mortgage in evidence, and the assignment of it to himself, but he did not introduce in evidence the promissory note referred to in that mortgage and secured by it, or account for the absence of that note. The execution of the note and the transfer to him were not admitted. In our opinion, there was a fatal defect in his proof. He was in fact suing to recover the indebtedness for which the note was given. If he brought suit on the note, he would have to produce it on the trial or account for its absence. He would have to do likewise if he brought an action to foreclose the second mortgage, and this is, in effect, such an action. The order appealed from is affirmed.

RICHARDSON v. MERRITT.1
(Supreme Court of Minnesota. Nov. 30, 1898.)
PRINCIPAL AND SURETY-RIGHTS INTER SE-
SET-OFF.

1. The surety of an insolvent principal was indebted to the principal. This action was brought to recover such debt. He pleaded in his answer that an action had been brought

1 For opinions on petition for reargument, see 77 N. W. 407 and 968.

against him as such surety. He did not move for a stay of proceedings in this action, but went to trial without objection, and on the trial proved that he was such surety, and that said other action was pending to determine his liability as such. Held, this was no defense; that he should have moved before trial for a stay of proceedings, until his liability as surety could be determined, and he could pay, if found liable, and offset in this action the amount so paid.

2. Case remanded, with leave to defendant to apply to the court below to hold the case open for that purpose..

(Syllabus by the Court.)

Appeal from district court, St. Louis county; J. D. Ensign, Judge.

Action by William E. Richardson, assignee, against Leonidas Merritt. The court ordered judgment for plaintiff, and from an order denying a new trial defendant appeals. Affirmed.

Washburn, Lewis & Bailey, for appellant. Billson, Congdon & Dickinson, for respondent.

CANTY, J. From April 12, 1893, to July 11, 1894, defendant was indebted to the American Loan & Trust Company in the sum of $3,000, for which it held his promissory note. On the latter day the trust company, being insolvent, made an assignment under the insolvency law for the benefit of all its creditors. The assignee accepted the trust, qualified, and brought this action to recover the amount of the note. The defendant in his answer admitted the making of the note, and alleged that on April 16, 1892, the trust company as principal, and he and other persons as sureties, executed to the county of St. Louis a bond, and that an action has been brought against him and the other sureties on the bond to recover the sum of $106,000. On the trial, the court found that the bond was executed to secure the payment of such moneys of said county as should be deposited with the trust company within the period prescribed in the bond, and that said other action was brought to recover the sum of $106,141.08, the same being the balance claimed by the county to be due it from the trust company for county funds so deposited with it pursuant to the designation of it as a depository of county funds under the bond. The court ordered judgment for plaintiff herein for the full amount due on the note, and from an order denying a new trial defendant appeals.

Appellant contends that the facts found by the court, as above stated, constitute an equitable defense to the action. We cannot so hold. We are of the opinion that the facts so found gave defendant a right to a stay of proceedings until a reasonable time had elapsed to enable him to have his liability on the bond determined, and to pay the amount adjudged against him thereon, and plead such fact of payment in a supplemental answer in this action. But defendant never made before trial any motion for a stay of proceedings in this action. On the contrary, he went to trial on the merits, without objection. Aft

er he had paid the amount for which he is liable to the county on the bond, or any part thereof, he would have an equitable defense on the merits for the amount so paid, even though it was paid after this action was commenced. Cosgrove v. McKassay (Minn.) 68 N. W. 76; Thompson v. McClelland, 29 Pa. St. 475; Beaver v. Beaver, 23 Pa. St. 167; Brittain v. Quiet, 54 N. C. 328. But if, by reason of his being a surety on the bond, he has, without making any payment as such surety, a complete defense to this action, and every action brought by plaintiff, he may escape liability on the note and the bond both, and thereby be $3,000 ahead. He may succeed in preventing a final determination of his liability on the bond until the statute of limitations has run against the note, and then it may turn out that he is not liable on the bond at all. In the meantime, no action can be maintained on the note, and the insolvent estate of the trust company must remain unsettled, perhaps for years. If the equity for which defendant contends is a defense on the trial, it must be as a plea in bar, which entitles him to judgment on the merits, or a plea in abatement, which entitles him to have the action dismissed. In our opinion, it is neither. He has certain equitable rights, to protect which, under the old practice, a bill in equity would lie to enjoin the prosecution of this action until a sufficient time had elapsed for him to determine his liability as surety on the bond. But a temporary injunction only would issue for this purpose, and, after he had paid the amount of his liability as surety, a final hearing would be had, and a permanent injunction would then issue. Mattingly v. Sutton, 19 W. Va. 19 (see page 35). This is a well-recognized equitable right. Brandt, Sur. § 227. Of course, if it was determined that he owed nothing as surety, or owed less than the amount claimed to be due from him to his insolvent principal, the temporary injunction would be dissolved or modified accordingly, and the action so enjoined would proceed to a final determination. The practice of issuing such an injunction is now abolished, and, under our code practice, the office of the temporary injunction is performed by an order in the action staying proceedings before trial. Instead of the final hearing for a permanent injunction, the defendant should file a supplemental answer, alleging that he has paid the amount of his liability as surety, or so much thereof as is sufficient to offset the amount due plaintiff, and then proceed to trial. It will thus be seen that, neither under the present practice nor the old common-law and equity practice, should the action terminate until defendant's liability as surety was determined, and, if he was held liable, until he had paid enough to offset the claim of his insolvent principal against him. But, of course, if he does not use reasonable diligence to bring about this result, the stay of proceedings may be vacated.

Defendant has proceeded in this case on the

theory that he had a right to urge on the trial an equity which, if sustained, should have postponed the trial,-an equity which, for the present, should prevent a trial without abating the action. This course is approved in Walker v. Dicks, 80 N. C. 263, but in that case the defendant had paid on his liability as surety more than sufficient to offset the amount due from him to his insolvent principal, so that on this point the opinion is merely obiter. However, the same doctrine was laid down in Scott v. Timberlake, 83 N. C. 383, where the surety had paid nothing. We cannot follow these cases. We are of the opinion that the remedy is by motion to stay proceedings before trial, not to prove on the trial an alleged defense, which should have no effect but to postpone the trial.

But we are of the opinion that the trial court might yet, in its discretion, stay proceedings until this defendant's liability as surety is determined, with a view to further proceedings to be instituted by supplemental pleadings, and the introduction of further evidence therein, when defendant's liability as surety is determined. In that case the issues already tried would be disposed of, the findings already made would stand, and the case would remain open a reasonable time for further issues, and a trial thereon, when such liability as surety was determined. The order appealed from is affirmed, with leave to defendant to apply to the court below so to stay proceedings and open the case.

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DYSON v. JOHNSON et al. (ST. PAUL NAT. BANK, Garnishee). (Supreme Court of Minnesota. Dec. 5, 1898.) VALIDITY PREFERENTIAL MORTGAGES MENT FOR BENEFIT OF CREDITORS. 1. Preferential mortgages and securities given by an insolvent debtor, if free from fraud in fact, are valid, except in insolvency proceedings.

2. If the members of a co-partnership, in good faith, solely to secure their debts to one or more, but not all, of their creditors, transfer, by bill of sale or otherwise, the firm property, reserving to themselves the right of redemption, the conveyance is not an assignment for the benefit of creditors, but a mortgage, and a valid security, except in insolvency proceedings, even though the debtors were then insolvent, to the knowledge of the mortgagees, and the transfer covers all of the co-partnership assets. Truitt v. Caldwell, 3 Minn. 364 (Gil. 257), distinguished.

3. Held, that the conclusion of law herein, to the effect that such a bill of sale and agreement reserving the right of redemption is a valid mortgage, is sustained by the findings of fact, and that the latter are sustained by the evidence.

(Syllabus by the Court.)

Appeal from district court, Ramsey county; George L. Bunn, Judge.

Action by Chris Dyson against James Johnson and others. The St. Paul National Bank was summoned as garnishee. Findings for the garnishee, and from an order denying a new trial the plaintiff appeals. Affirmed.

Morphy, Ewing & Gilbert, for appellant. Stringer & Seymour, for respondents.

START, C. J. The respondent herein the St. Paul National Bank was summoned as garnishee, the plaintiff claiming that it had money and other property in its hands and under its control belonging to the principal defendants. It appeared and made disclosure, in which it denied the plaintiff's claim; and thereupon a supplemental complaint against it was filed, to which it made answer. The case was tried by the court without a jury, resulting in findings of fact and conclusions of law in favor of the respondent; and the plaintiff appealed from an order denying his motion for a new trial. The material facts found by the trial court, briefly stated, are: The defendants on June 12, 1895, were copartners in the lumber business at Amery, in the state of Wisconsin, and each was a resident of that state. They were then insolvent, but believed that sufficient funds would be realized from a previous sale of a portion of their property to pay their debts in full. The respondent did not then know or have reasonable cause to believe them insolvent. On the day named the defendants were indebted to the respondent bank in the sum of $23,000, and they then executed and delivered to the bank an absolute bill of sale (containing a warranty, and an irrevocable power of attorney to receive, collect, and recover the personal property thereby sold) of substantially all of their remaining co-partnership assets, consisting of promissory notes, accounts, and other property, but not of their individual property, of which one of the defendants then had a considerable amount. At the same time, and as a part of the same transaction, it was mutually agreed by the parties to the bill of sale that it should be given solely as security for the payment of such indebtedness, except that it was provided that the bank should pay 5 per cent. of the proceeds of the property upon a claim of Dr. Wade against the defendants amounting to $2,000; the remainder of such proceeds to be applied to the payment of its own debt against them. If any balance was left, it was to be returned to the defendants. It was also agreed between the parties that the defendants might at any time after the making of the bill of sale pay their indebtedness to the bank and Dr. Wade, and thereupon the bill of sale should be void, and the title to all the property therein described should revert to them. The bank took immediate possession of the notes, accounts, and property set forth in the bill of sale, and has since been collecting the amounts due thereon as rapidly as practicable, and has realized a net balance therefrom of $17,070.69, which it has applied to the payment of its debt against the defendants. The respondent is a banking corporation, and its place of business was and is the city of St. Paul, at which place the evidence shows the contract was made. The defendants for some

time prior to the making of the bill of sale maintained an office at St. Paul, in charge of an agent, for the sale of lumber and the collection of accounts due therefor; but their principal place of business was at Amery, Wis. The trial court's conclusions of law were to the effect that the bill of sale, in connection with the agreement, was, in effect, only a mortgage, and secured the bank's debt against the defendants, and that it is entitled to hold the property described therein until the debt is paid; that, if any balance remains after the payment of the indebtedness secured by the mortgage, the bank is responsible to the plaintiff therefor, to the extent of his claim, and that, other than this, he is not entitled to any relief.

1. The plaintiff claims that the conclusions of law are not justified by the facts found by the court, for the reason that the bill of sale and agreement constitute in law an assignment by insolvent debtors of the whole of their property for the benefit of special and preferred creditors, with a resulting trust in the surplus for the benefit of the debtors, to the exclusion of their other creditors. If this proposition be correct, the transaction is void as to creditors, whether its validity is to be tested by the laws of Wisconsin, as plaintiff claims, or by the laws of Minnesota, as it must be. The contract was made in this state; the money coming to the hands of the bank, a domestic creditor, by virtue thereof, which the plaintiff seeks to reach by this action, is within this state; and, if the contract is valid under our law, it will be enforced, even if invalid under the laws of Wisconsin. To do otherwise would simply deprive a domestic creditor of the benefit of its security valid by our laws, so that the plaintiff, a nonresident creditor, might obtain a preference. The question then is, do the findings of fact of the trial court justify the conclusion that the contract is fraudulent, and void, as a matter of law, as to creditors? In considering this question we are to keep in mind that there is neither evidence nor finding in this case that the transaction in question was fraudulent in fact; hence it is immaterial whether the vendors in the bill of sale were insolvent or not, or whether the bank knew them to be insolvent or not. It would be otherwise if this was an action by an assignee or receiver in insolvency to set aside the transaction as a preference. Except in such an action or proceeding, preferential mortgages and securities, if free from fraud in fact, are valid. Berry v. O'Connor, 33 Minn. 29, 21 N. W. 840; Bannon v. Bowler, 34 Minn. 416, 26 N. W. 237; Mackellar v. Pillsbury, 48 Minn. 396, 51 N. W. 222. It is claimed on behalf of the plaintiff that the decision of this court in the case of Truitt v. Caldwell, 3 Minn. 364 (Gil. 257), answers the question in accordance with his contention. The docurine of this case seems to go further than the general trend of the decisions of the courts of other states. See Jones, Chat.

Mortg. §§ 352-356. But it does not go far enough to sustain plaintiff's claim, and is clearly distinguishable from the one at bar. In the former case there was an unconditional transfer of the legal title of the property. In the latter there was a conditional transfer of the legal title for the purpose of security only. In the former case there was no right of redemption reserved to the vendor, but a trust reserved in the surplus for his benefit, without first paying all of his debts. In the latter the property could be redeemed at any time by paying the indebtedness secured thereon. In the one case the absolute legal title was interposed between the creditors and the property of their debtor, with a resulting trust in the avails thereof to him. In the other the vendee did not acquire the absolute title subject to such trust, but a lien upon it, with power of sale, and the property remained liable to the process of the court at the suit of creditors, subject to the lien of the bank. It is true in this case that the bill of sale and contract provide for the payment to the vendors of any surplus realized from the property remaining after the payment of the indebtedness secured on the property, but the title to the surplus is exactly the same as the title to the property itself, and may be reached by creditors in the same way. It is also true that the bank was authorized to. and did, collect the accounts, and convert the property into money, precisely as if it were the owner thereof; but it was by the contract irrevocably made the attorney of the vendors for this purpose. The exercise of this power would not prevent the vendors from redeeming the balance of the property, and the avails of what had been converted into money, by paying the indebtedness which it secured. The fact that this right was given by the contract to collect the accounts and convert the property into money would not prevent the transaction from being a valid pledge or mortgage of the property. It is immaterial in this case whether it was strictly a mortgage or pledge. The distinctive characteristics of the transfer in the case of Truitt v. Caldwell are concisely expressed in the opinion in these words: "This conveyance is not simply a transfer of property to satisfy a debt; neither is it a mortgage or a pledge to secure the claim of the plaintiffs. The grantor here has no resulting interest in the property conveyed, upon payment of the debt, as is a usual, if not necessary, incident to a mortgage or pledge. No forfeiture or power of sale is given upon the happening of any contingency, nor any language used showing an intent on the part of the grantor to convey the property as security for the payment of his debt." The case is cited, and distinguished from one similar in some respects to the one at bar, in the case of Wilcoxon v. Annesley, 23 Ind. 295. For the reason suggested, the case of Truitt v. Caldwell is not here in point. The same is also true of the cases of Camp v. Thompson, 25 Minn. 175, and Butler V.

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