Summary
holding that the law was the same even under the older statute - Code 1930, § 1778
Summary of this case from Prather v. George P. (In re Prather)Opinion
No. 33697.
May 8, 1939.
1. MORTGAGES.
In suit to set aside a foreclosure in pais of deed of trust, finding that deed of trust indebtedness had not been paid at time of foreclosure held sustained by the evidence.
2. MORTGAGES.
Whether a transaction constitutes payment and discharge of a mortgage is dependent upon the intention of the parties thereto.
3. MORTGAGES.
A transaction will not constitute payment and discharge of a mortgage where the parties thereto mean to keep the security alive and not to extinguish it.
4. MORTGAGES.
The proceeds of insurance upon mortgaged property while primarily a payment on and satisfaction pro tanto of the mortgage debt may by agreement between the mortgagor and mortgagee be diverted and applied to other uses.
5. INSURANCE.
Where homestead was owned by husband, and wife joined with him in execution of note and deed of trust, and building was subsequently destroyed by fire, the insurance money belonged to the husband and not to the wife (Code 1930, section 1778).
6. HOMESTEAD.
Under the statute, the wife has the veto power against encumbrances or conveyances by her husband of the exempt homestead, but there is no statutory limitation on husband's common law rights to deal with the indebtedness secured by the homestead (Code 1930, section 1778).
7. HOMESTEAD.
Where homestead was owned by husband who, together with wife, gave deed of trust thereon and building was subsequently destroyed by fire, and proceeds of fire policy were paid to husband and beneficiary of deed of trust and husband deposited money in his wife's name but subsequently by agreement with beneficiary gave check thereon for $3,000 upon agreement that beneficiary would use funds in rebuilding and that the deed of trust should remain upon the property, all of which was done, and deed of trust was foreclosed because of default in payment, wife could not attack foreclosure (Code 1930, section 1778).
8. WITNESSES.
Distributee of an estate of a decedent is a competent witness under statute to establish a claim of the decedent against the estate of another decedent (Code 1930, section 1529).
9. WITNESSES.
The statute relating to competency of witnesses in suit involving decedents' estates applies to a direct claim of the witness, not to an indirect one (Code 1930, section 1529).
APPEAL from the chancery court of Monroe county; HON. JAS. A. FINLEY, Chancellor.
Augustin Magruder, of Starkville, for appellants.
Appellant respectfully asserts that when her check for $3000 was paid to and accepted by Mr. J.F. Plant, all on December 26, 1930, the deed of trust was of no further effect whatsoever.
Section 2152 of the Mississippi Code of 1930 is as follows: "Payment of the money secured by any mortgage or deed of trust shall extinguish it, and revest the title in the mortgagor as effectually as if reconveyed."
Jones v. Hyman Mercantile Co., 98 So. 845; Turner v. Givens, 166 So. 367.
The Turner case quotes from 41 C.J. 787, sec. 895, to the effect that a mortgage which has been paid may be kept alive for other purposes, "where such is the intent of the parties," etc. Conceding for the moment that this court would adhere to the principle there stated, it could have no bearing at all on this case for the obvious reason no such intent on the part of appellant was anywhere shown.
The rightfulness of appellant's position is all the more apparent because of the fact that the $3000 payment was from the proceeds of a fire insurance policy with loss payable clause in favor of Mr. J.F. Plant. In other words, Mr. Plant had not merely the security of a deed of trust but had and received the money required to pay off the indebtedness after the McFarlane home had been destroyed by fire. He having exercised his rightful claim to the insurance money, in accordance with the provisions of the deed of trust, his testamentary devisees should not now be heard to say that the deed of trust was not fully paid on December 26, 1930.
Hardin v. Grenada Bank, 180 So. 805.
Appellant objected to the testimony of Mr. Whitaker on the ground that as beneficiary and executor of the J.F. Plant will he was incompetent to testify in establishing a claim against the estate of J.C. McFarlane, deceased.
Section 1529 of the Mississippi Code of 1930 reads in part as follows: "A person shall not testify as a witness to establish his own claim or defense against the estate of a deceased person, which originated during the lifetime of such deceased person, or any claim he has transferred since the death of such decedent."
Whitehead v. Kirk, 61 So. 737, 104 Miss. 776.
Mr. Whitaker's testimony was also objected to on the ground that it came within the condemnation of the statute of frauds.
Sec. 3343, Code of 1930; Wade v. Long, 151 So. 564; Allen v. Smith Brand, 133 So. 599; Tanner v. Walsh, 183 So. 278.
Appellees in their answer and cross-bill emphasize the fact that the deed of trust contains "adequate" provisions for securing "any and all future advances." Thus they appear to bind themselves to the proposition that the two checks totaling $3000 issued after December 26, 1930, by Mr. J.F. Plant constituted "future advances" within the scope of the deed of trust. Such proposition is unavailing.
19 R.C.L. 393, sec. 167.
Assuredly it is not here shown that the appellant, at the time of the execution of this deed of trust on November 10, 1927, had in mind ever so remotely that such a "future advance" as now sought to be established, would be made. Neither did her husband, and neither did Mr. J.F. Plant. A new $3000 debt to be created after payment of the original $3000 debt was not "in the contemplation of the parties" at that time. And further, it was never in the mind of appellant, who was not even informed thereof until over eight years after such "future advancement" was made.
Most, if not all, of the Mississippi cases dealing with the matter of "future advances" deal with mortgages covering growing crops, as to which advances in cash are customarily made during the crop year to the mortgagor by the mortgagee for labor, supplies and like incidents to the cultivation of a crop, all of which were within the contemplation of the parties at the time of the execution of instrument.
Liberty Mercantile Co. v. Allen, 98 So. 774.
If the amount of an indebtedness under a deed of trust can be changed and altered as here attempted, by an alleged oral agreement to which one of the persons to be charged thereby was in no way a party, under color of a provision for "future advances" expanded at liberty to cover a new loan over three years later, and if the homestead rights of the wife can be thereby swept away and destroyed, then there can be no limit to the iniquities which may arise from the "future advances" clause of a deed of trust.
Jones v. Lamensdorf, 167 So. 624; Herron v. Land, 119 So. 823.
After a mortgage on the homestead, executed by both husband and wife, has been paid, the husband alone by verbal agreement or otherwise cannot revive the mortgage and attach its security to other debts.
29 C.J. 892, sec. 272; Spencer v. Fredenhall, 15 Wis. 666; Davis v. Crawford, 168 So. 261.
Regardless of any other considerations in this case the rights which appellant asserts are fully protected by the various statutes of limitation.
Appellant's position is that she was never in any way bound by the new loan of $3000 made after December 26, 1930, but assuming for the purposes of this phase of the argument that the appellant became jointly bound with her husband for the repayment of the advances totaling $3000 made by Mr. Plant, that the deed of trust in question was security for the repayment thereof, still whatever rights were then established have long since been barred by the statute of limitations.
Sec. 2290, Code of 1930; Hembree v. Johnson, 80 So. 554; Sections 2313 and 2318, Code of 1930; Musser v. First Natl. Bank of Corinth, 147 So. 783; Proctor v. Hart, 72 Miss. 288, 16 So. 595; First National Bank Trust Co. v. Landau, 184 So. 618.
Leftwich Tubb, of Aberdeen, for appellees.
The check for $3000 dated December 26, 1930, and that day handed to Mr. Plant did not operate as a payment of the note and deed of trust.
There can be no question of doubt in the unprejudiced mind of the fact that the $3000 check did not pay the note secured by this deed of trust. It was never accepted as such payment; it was not applied as a payment on the note or on the trust deed; neither the note nor the trust deed was surrendered. Mr. Plant continued to hold possession of these papers.
Mr. Plant had amassed a fortune and at his death was probably the wealthiest man in Monroe County. After this check of $3000 had been delivered to Mr. Plant, December 26, 1930, these papers, the note and the trust deed securing it, continued in the possession of Mr. Plant down to the date of his death. This record discloses that he had a will which was probated in the Chancery Clerk's office of Monroe County, and in accordance with this will Mrs. Plant was devised the dwelling house, its contents, an automobile and $75,000 of bonds, stocks and notes. Mrs. Whitaker was given an estate of $60,000; Mr. Whitaker, $15,000; and $5,000 to each of several brothers and sisters, and sundry real estate was devised to his grandchildren and others, and a large balance to his residuary legatees. At Mr. Plant's death, which occurred February 13, 1934, these papers were a part of his estate and in the division of the estate among the devisees, Mrs. Plant became the owner of this note and trust deed. These papers were delivered to her and at the trial of this cause she produced them, the originals thereof, in court. They do not show any credit or endorsement of any payments except the semi-annual payments of interest.
The mere fact that Mr. Plant and Mrs. Plant, the devisee in his will, remained in possession of these papers and made production of them at the trial raises a very strong legal presumption to the effect that the note secured by this deed of trust had not been paid.
41 C.J. 793, sec. 915.
The burden of proof to show payment was on complainant below, appellant here. We submit that the burden of proof was on the complainant below to show payment of this note secured by the trust deed or mortgage, and when the record is examined from its four corners there is an absolute failure on the part of complainant below to meet this burden.
We submit the intention of these parties as established by the testimony of Mr. Whitaker and by all the other surrounding facts and circumstances is controlling here.
41 C.J. 790, sec. 904; Hartford Fire Ins. Co. v. Buckwalter Lbr. Co., 77 So. 798, 116 Miss. 822; Cade v. Toler, 124 So. 793, 155 Miss. 606.
We submit that under all the evidence in this case there is no substantial conflict and that the evidence overwhelmingly establishes the contract entered into by Mr. McFarlane and Mr. Plant to the effect that the insurance money, all of it, would be used in the repair and erection of the burned residence, and therefore would not be applied as a payment or credit on the note and deed of trust and that this note and deed of trust would continue in full force and effect until its maturity, November 2, 1932.
Mr. Whitaker certainly did not testify to establish his own claim against the estate of a deceased person. He does not have any claim against the J.C. McFarlane estate or against Mrs. McFarlane within the contemplation of the statute.
Cock v. Abernathy, 77 Miss. 872; Lann Carter Hardware Co. v. Carberry, 75 So. 377, 114 Miss. 519.
Mrs. McFarlane at the time of this transaction had no title or interest in the homestead property; the title was vested solely and alone in J.C. McFarlane, the husband. The law vested in her merely a veto power against the sale or encumbrance of this property. She had already acted under this power waiving any right she might have to object to a sale or encumbrance of the homestead when on November 10, 1927, she signed the note and deed of trust here in question. After that act Mr. McFarlane had under the decisions of this court the power and the right to contract with reference to this debt and even to extend it for an additional period of time without consulting or procuring the consent of his wife. This principle is thoroughly established by the following decisions of this court.
Billingsley v. Niblett, 56 Miss. 537; Smith v. Scherck, 60 Miss. 491; Herron v. Land, 119 So. 823, 151 Miss. 893.
Argued orally by Augusta Magruder, for appellant, and by C.L. Tubb, for appellees.
Mrs. McFarlane, the appellant, filed her bill in the chancery court of Monroe County against Mrs. Plant, the appellee, and the trustee, Lusk, in a deed of trust on Mrs. McFarlane's homestead in the city of Aberdeen to cancel and set aside a foreclosure in pais of the deed of trust, at which Mrs. Plant became the purchaser, upon the ground that at the time of the foreclosure the indebtedness secured by the deed of trust had been paid off and discharged. Mrs. Plant made her answer a cross-bill denying the material allegations of the bill, and praying for a writ of possession of the property. The cause was heard on the pleadings and proofs resulting in a decree in Mrs. Plant's favor, from which Mrs. McFarlane appeals.
There was little if any substantial conflict in the material evidence. The facts are these: Mrs. McFarlane's husband, J.C. McFarlane, owned their homestead. Mrs. Plant's husband, J.F. Plant, who was a man of large means, and Mr. McFarlane were close personal and business friends. Mr. McFarlane was president of the Commercial Bank Trust Company. Mr. Plant was a stockholder and director in that institution. On November 10, 1927, Mr. McFarlane borrowed from Mr. Plant the sum of $3,000 for the payment of which he and his wife executed their note for that amount, payable on November 10, 1932, with six per cent interest payable semi-annually, on May 10th and November 10th, to secure which note they executed the deed of trust involved on their homestead. The homestead was insured against loss by fire. The deed of trust contained the usual loss payable clause — to J.F. Plant and J.C. McFarlane, as their interest might appear.
In the latter part of 1930 what is commonly known as the "Depression" had begun. Banks were failing. On November 27, 1930, the McFarlane residence was destroyed by fire, and on the 16th of the next month the McFarlane Bank failed and closed. McFarlane was largely indebted to his bank, which was afterwards reduced to judgment against him. The fire loss on the residence was adjusted in the sum of $4,464, and on December 26, 1930, the insurance company issuing the policy delivered a check for that amount, payable to J.F. Plant and J.C. McFarlane. McFarlane deposited the check in the Monroe Banking Trust Company of Aberdeen to the credit of his wife. The McFarlanes desired to rebuild their home. This insurance money was the only means they had for that purpose. Mr. Plant and his son-in-law, Whitaker, who had a very large part in attending to all of Mr. Plant's business affairs, and Mr. McFarlane met and conferred with reference to that subject. The result was the following agreement among them: McFarlane agreed to turn over to Plant $3,000 of the insurance money to be held by him while the home was being rebuilt, and by Plant to be applied to the cost of rebuilding as such rebuilding progressed, and that the deed of trust indebtedness should continue. At that time the amount due on it, principal and interest, was a little more than $3,000. Accordingly McFarlane drew a check on the Monroe Banking Trust Company against the insurance money there to the credit of his wife in the sum of $3,000, payable to J.F. Plant, signing his wife's name by him. Plant cashed this check. Brannin Son, building contractors, were employed by McFarlane to rebuild the home. While the work of rebuilding was in progress, Plant, on December 27, 1930, paid the contractors $1,000, and on January 17, 1931, $2,000. All these transfers of funds were shown by cancelled bank checks, as well as by the testimony of Whitaker, who had a very large part in the whole transaction representing his father-in-law. Mr. Plant died in 1934, and Mr. McFarlane in 1935. Plant left a will disposing of his large estate. His son-in-law, Whitaker, was a very substantial beneficiary under the will. In the division and settlement of the Plant estate, this mortgage indebtedness of the McFarlanes was set aside and apportioned to Mrs. Plant.
The evidence was ample to sustain the finding of the chancellor that the deed of trust indebtedness had not been paid at the time of the foreclosure. Whitaker's testimony to that effect, which was supported by record and other evidence, was most convincing. Amongst the other evidence were the facts that Mrs. Plant had possession, as her husband had up to the time of his death, of the note and deed of trust evidencing the indebtedness. And furthermore, the indebtedness was not due for nearly two years after the fire and rebuilding of the home. Whether a transaction constitutes payment and discharge of a mortgage is dependent on the intention of the parties thereto. It will not have that effect where they mean to keep the security alive, and not to extinguish it. The proceeds of insurance upon mortgaged property, while primarily a payment on and satisfaction pro tanto of the mortgage debt, may, by agreement between the mortgagor and mortgagee, be diverted and applied to other uses. 41 C.J., Secs. 904 and 905, page 790.
It is argued however that Mrs. McFarlane's husband could not bind her by such an agreement. In considering this question it should be borne in mind that although Mrs. McFarlane joined with her husband in the execution of the note and deed of trust, he owned the home — the title was in him and not in her. The insurance money therefore belonged to him, not to her. Section 1778, Code of 1930, gives the wife the veto power against encumbrances or conveyances by her husband of the exempt homestead, but imposes no limitation of his common law rights to deal with the indebtedness secured by the homestead. Smith v. Scherck, 60 Miss. 491; Herron v. Land, 151 Miss. 893, 119 So. 823. Although neither of these cases is directly in point, they illustrate the principle. In the Smith case the wife joined with her husband in executing a deed of trust on the homestead, which belonged to the husband, to secure a debt due by him. The court held that a new promise in writing by him alone made before the bar of the statute of limitations had attached, operated to prevent such bar and to give a new period for both the debt and the security to run; that the statute did not require the concurrence of the wife in such a new promise. The inequity of Mrs. McFarlane's position is manifest. If she should succeed, she would have the rebuilt home without paying for it. That Plant paid for it out of the insurance money, and neither he nor his estate has ever been repaid the deed of trust loan, is substantially undisputed, unless, of course, the foreclosure of the deed of trust is upheld. Mrs. McFarlane was not prejudiced in her rights by the disposition made by her husband of the $3,000 insurance money. On the contrary, she was benefited thereby. As the result she now has a home that she would not have had. And, furthermore, the reasonable inference is from all the facts and circumstances in evidence that Mrs. McFarlane either expressly or impliedly consented to the disposition made by her husband of the insurance money.
It is argued on behalf of Mrs. McFarlane that Whitaker was not a competent witness under Section 1529 of the Code of 1930, which provides, among other things, that a person shall not testify as a witness to establish his own claim or defense against the estate of a deceased person, which originated in the lifetime of such a deceased person, or any claim which he has transferred since the death of such decedent. Whitaker, as above stated, was a beneficiary under Mr. Plant's will. The effect of his testimony was to defeat not to establish a claim against the estate. The distributee of the estate of a decedent is a competent witness under the statute to establish a claim of the decedent against the estate of another decedent. Cock v. Abernathy, 77 Miss. 872, 28 So. 18. Illustrating: see Lann Carter Hardware Company v. Carberry, 114 Miss. 519, 75 So. 377. The statute applies to a direct claim of the witness, not to an indirect one.
Affirmed.