Summary
In Empire Trust Co. v. Hitchcock (Mo. App.), 123 S.W.2d 565, it was charged, as in the case at bar, that the purchaser of property assumed and agreed to pay an outstanding mortgage debt, and it was held therein that it must be shown that the minds of the vendor and the purchaser met on the subject, or that the purchaser was estopped from denying the existence of such an agreement.
Summary of this case from Wissmann v. PearlineOpinion
January 9, 1939.
1. — Judgment. In action to prevent mortgage foreclosure from all pleadings and evidence, sole issue adjudicated was validity of note and mortgage as valid and subsisting lien upon real estate, and that plaintiffs had legal right to foreclose same, and final judgment rendered thereon, even though it was appealed, constitutes a final adjudication of that issue between parties.
2. — Mortgages. Allegation, in action for deficiency judgment, that defendants by warranty deed, had assumed and agreed to pay mortgage debt was put in issue by defendant's general denial.
3. — Evidence. Parol evidence is admissible to prove that purchaser assumed and agreed to pay an outstanding mortgage debt on land conveyed to him.
4. — Evidence — Mortgages. Clause in deed of conveyance reciting that grantee "assumes and agrees to pay" outstanding mortgage may be disproved by oral evidence.
5. — Mortgages. To establish that purchaser assumed and agreed to pay an outstanding mortgage debt to which he was not a party, it must be shown that there was a meeting of minds between vendor and vendee on the subject, or a showing as will estop vendee from denying existence of such an agreement.
6. — Mortgages. On appeal from instructed verdict for plaintiff in deficiency suit against defendants who denied assuming mortgage, grantor's evidence that he executed an "open deed" if taken as true (and it must be so taken in ruling instructed verdict) then there was no agreement between grantor and defendants.
7. — Mortgages. In suit for deficiency judgment, question whether defendants assumed and agreed to pay mortgage debt was for the jury, for under evidence introduced, offered and rejected, defendants are not irrevocably bound as matter of law because having accepted deed containing assumption clause and making no complaint for four years.
8. — Mortgages — Trial. On question whether defendants in action on deficiency judgment, assumed and agreed to pay mortgage indebtedness, weight of the evidence (including parol evidence) and credibility of witnesses is for jury.
Writ of Error to Andrew Circuit Court. — Hon. R.B. Bridgeman, Judge.
REVERSED AND REMANDED.
Earl C. Borchers and John P. Randolph for plaintiffs in error.
(1) It was error to refuse to permit the defendants to testify that the deed he received and recorded was not the deed he was supposed to get, and that he did not agree to assume and pay all or any part of the Avitt note. Central Missouri Trust Co. v. Taylor, 289 S.W. 658; Duvall-Percival Trust Co. v. Corzine, 295 S.W. 851; La Monte Bank v. Crawford, 27 S.W.2d 762; Johnson v. Maier, 187 S.W. 143, 194 Mo. App. 169. (2) It was error for the Court to refuse to allow defendants to show by the witness Avitt that he gave a deed in blank for the purpose of discharging or paying the note upon which plaintiff was claiming a deficiency was chargeable to the defendants: (a) If such a trade was made the note had been discharged in toto. (b) The subsequent insertion of the names of the defendants in the Avitt deed did not make them a party to any agreement to assume and agree to pay any balance on the Avitt note. (c) The Court erred in refusing to allow defendants to show by said witness Avitt that the assumption clause was not in the deed later delivered to defendants Hitchcock at the time said deed was executed by said Avitt and his wife. (3) It was error for the Court to consider this case an action on the promissory note executed by the Avitts, and it was error to overrule defendants' objection to the statement by the witness Sparks: — "this is a suit on a promissory note —." Phoenix Trust Co. v. Garner, 59 S.W.2d 779, 227 Mo. App. 929. (4) It was error for the Court to refuse to admit in evidence the twenty-six (26) receipts offered by defendants. (5) Under plaintiffs' evidence, and theory of the case, plaintiff knew nothing about the alleged assumption clause in the deed in question and therefore could not have been a party to such an agreement, and was neither misled thereby nor entitled to recover thereunder. Johnson et al. v. Maier et al., 187 S.W. 143. (6) Plaintiff failed to show any consideration for alleged assumption agreement, and trial Court upon objection of plaintiff refused to allow defendants to show that there was no consideration in fact for such an agreement. Johnson et al. v. Maier et al., 187 S.W. 143; Ward v. Hartley, 77 S.W. 302, 178 Mo. 135. (7) Recording of deed is evidence of delivery and acceptance only so far as it relates to passing of title, and is insufficient alone from which to find that grantees assented to obligation to pay mortgage debt which instrument sought to impose on them, and it was error for the Court to rule out defendants' testimony and evidence on the theory that recording of the deed and taking possession of the land precluded defendants from denying acceptance of assumption clause in deed. Duvall-Percival Trust Co. v. Cozine, 295 S.W. 851; Central Missouri Trust Co. v. Taylor, 289 S.W. 658. (8) The Court erred in instructing verdict for plaintiff. (a) It is not within the province of the trial Court to pass upon the weight or credibility of the evidence in determining whether to give instructed verdict for plaintiff where plaintiffs' evidence is disputed or denied by pleadings or testimony of defendants. (b) In giving instructed verdict trial Court must look to the law of the case alone and not invade the province of the jury as the triers of the facts. (c) The jury may disregard any evidence, though same is not directly contradicted, especially where effect of such evidence is expressly denied by adverse party. Lovell v. Davis, 52 Mo. App. 342; Schumacher v. Kansas City Breweries Co., 152 S.W. 13, 247 Mo. 141; Anderson v. Kansas City Rep. Co., 233 S.W. 203, 290 Mo. 1; Kneuven v. Berliner's Estate, 54 S.W.2d 494. (d) Evidence is not conclusive where the facts established by it are not admitted, and the jury may disregard it. Fish v. Chicago, R.I. P. Ry. Co., 172 S.W. 340, 262 Mo. 106. (e) Burden of proof is on plaintiff to make out case as stated in petition; whether that has been done is question for the jury. Chuck v. Abe, 40 S.W.2d 558, 328 Mo. 81; Connole v. East St. Louis S. Ry. Co., 102 S.W.2d 581, l.c. 586. (f) Where allegations of petition are denied defendant is entitled to have jury pass on credibility of plaintiffs' evidence though defendant himself offers no evidence. Cluck v. Abe, 40 S.W.2d 558; Schroeder v. C. A. Ry. Co., 18 S.W. 1094, 1095, 108 Mo. 322, 18 L.R.A. 827. (g) To recover, plaintiff must prove case by preponderance of evidence. This is a question for the jury, and not for the Court. Stiers v. Edwards, 42 S.W.2d 362; Carner v. St. Louis-San Francisco Ry. Co., 89 S.W.2d 947, 338 Mo. 257; Hasenjager v. Mo.-Kansas-Texas R. Co., 53 S.W.2d 1083, 227 Mo. App. 413. (9) Evidence importing alleged undertaking by grantee to assume and pay encumbrance should be clear and convincing, McFarland v. Melson, 20 S.W.2d 63. (10) The H.S. Smith Investment Company while holder of the Avitt deed in blank was the owner of the deed and the equitable owner of the property and therefore, could not insert a valid assumption clause in the deed for the reason that it could not make a valid contract with itself. Robertson v. Vandalia Trust Co., 66 S.W.2d 193, 228 Mo. App. 1172.
J.V. Gaddy and Ronald S. Reed for defendant in error.
(1) It was not error to refuse to permit the defendants to testify that the deed they received was not the deed they were supposed to get, and that they did not agree to pay all or any part of the Avitt note, (a) the affirmative defenses set up by defendants in their answer and cross petition, had all been adjudicated adversely to them in a former suit, (b) because no such pleadings were tendered by them raising such an issue for the court to determine. Donnell v. Wright, 147 Mo. 639; Hamilton v. McClain, 169 Mo. 51; Berry v. Majestic Milling Co., 263 S.W. 929; Hartwig v. Ins. Co., 167 Mo. 584 Mo. App. 128; LaRue v. Kempf, 186 Mo. App. 57; Nelson v. Nelson, 221 S.W. 1066; Emmett v. Aldrich, 231 Mo. 124; Bush v. Block Titus, 193 Mo. App. 704. Where there is nothing on the face of the petition to indicate other than a valid contract, if it is to be invalidated by an intrinsic matter, such matter should be pleaded. Carter v. Metropolitan Life Ins. Co., 275 Mo. 84, 204 S.W. 399; McDearmont v. Sedwick, 140 Mo. 182; School Dist. v. Scheidley, 138 Mo. 690; Bell v. Warehouse Co., 205 Mo. 493; Shoney v. Railroad, 231 Mo. 147. (2) It was not error for the court to refuse to allow defendants to show by the witness Avitt that the deed he gave in blank for the purpose of paying or discharging the note upon which the plaintiff was claiming a deficiency, was chargeable to the defendants. It would not have been error to refuse such evidence. (3) It is apparent from the record that the court did not consider this case as a suit on a promissory note. (4) It was not error for the court to refuse the twenty-six receipts offered by the defendants. (5) Unless there is an issue of fact made by the pleadings which questions the legality of the assumption clause, the mere acceptance of the deed with the clause assuming and agreeing to pay the note, is sufficient to bind the grantee. Priddy v. Bank, 132 Mo. App. 279; Pratt v. Conway, 148 Mo. 291; Nelson v. Brown, 140 Mo. 580. (6) Recording of the deed is evidence of delivery and acceptance only so far as it relates to the title, and is insufficient alone from which to find that the grantees assented to the obligation to pay the mortgage debt. (7) It was the duty of the court to instruct a verdict for plaintiff because (a) the facts necessary to be shown by plaintiff was established by documentary proofs which the defendants were estopped from denying because of the adjudication in the former suit, and (b) that the defense offered by the defendants had been previously adjudicated, and (c) no issue of fact was raised by the pleadings (which had not already been determined) which could defeat the claim made by the plaintiff in the petition. Dunham-Buckley Co. v. Halberg, 69 Mo. App. 509; Weese v. Brown, 102 Mo. 299; Hoster v. Lange, 80 Mo. App. 234; Crawford v. Stayton, 131 Mo. App. 263; St. Charles Savings Bank v. Orthwein Inv. Co., 160 Mo. App. 369; Janes v. Levee Dist. No. 2, 183 S.W. 697; Sturtevant Bank v. Hawk, 215 S.W. 758; Crouse v. Spurgeon, 256 S.W. 1072.
Empire Trust Company, a corporation, was the sole owner of a note, secured by mortgage on real estate. The mortgage was foreclosed and this suit was brought by it, as plaintiff, against Milan E. and Nina B. Hitchcock, defendants, for the deficiency between the net amount realized from the foreclosure sale of the real estate and the full amount of the note and interest. The trial court, at the conclusion of all of the evidence, directed a verdict for plaintiff. Judgment was duly rendered on said verdict and defendants appealed but later dismissed the appeal. They sued out a writ of error which brings the case before us. The parties will be referred to herein as follows: Empire Trust Company as plaintiff, and Milan E. and Nina B. Hitchcock as defendants.
Plaintiff instituted the suit by filing a petition alleging the following: Ownership of a certain promissory note signed by A. Jennie and Clyde E. Avitt, in the principal sum of $4000; the credits on said note; the existence of record of a mortgage deed executed by the Avitts as security for said note; the existence of record of a warranty deed from the Avitts to defendants whereby the land described in the above mentioned mortgage deed was conveyed to defendants; and the existence in said warranty deed of the following assumption clause:
"`This deed is given subject to a certain deed of trust dated November 5, 1930 and given to J.F. Healey to secure to him the payment of a note for $4000.00 on which there is an unpaid balance of $3300.00 which the parties of the second part assume and agree to pay.'"
The petition further alleged that by reason of said assumption clause defendants assumed and agreed to pay said mortgage note; alleged the unpaid balance thereof; and prayed for judgment for said balance, interest, and reasonable attorney fees.
Defendants filed answer and counterclaim wherein every allegation in plaintiff's petition was denied, and for counterclaim alleged that the note had long since been discharged by operation of law and that plaintiff knew said fact; and that defendants were and are the sole owners of said real estate, free and unencumbered, but plaintiff had, theretofore, wantonly, maliciously, and without authority, foreclosed said mortgage and thereby cast a cloud on title of defendants, because of which facts they prayed damages.
To this answer and counterclaim plaintiff replied, denying generally the allegations of defendant's answer, and pleaded a prior proceeding and judgment in Nodaway county circuit court as res adjudicata of all issues pleaded in defendants' counterclaim.
All of the evidence in the case, including that offered by both parties hereto, tended to establish the following facts:
The H.S. Smith Investment Company, a corporation, was engaged in the business of loaning money on real estate. On November 5, 1930, it loaned to A. Jennie and Clyde E. Avitt (who will be referred to herein as "the Avitts"), $4000, on their promissory note, secured by deed of trust on forty-five acres of land. The loan was made in the name of J.F. Healey, who was merely a "straw man," and who immediately indorsed the note in blank. On November 10, 1931, said note and mortgage was pledged by the investment company as collateral to secure a loan of $4250 made by plaintiff to said investment company; and from that time forward, at all times, it remained in the hands of plaintiff as collateral security, although the original loan was renewed on February 8, 1932, and was thereafter carried forward from time to time in new loans and consolidations of various other loans made to the investment company by plaintiff.
On March 7, 1932, the Avitts executed and delivered to the investment company a warranty deed covering the mortgaged land. This deed was delivered to the investment company in settlement of the debt of the Avitts to it, or so that the investment company might get its money out of the land. The deed so signed and delivered was an "open deed." On February 27, 1932, defendants contracted for purchase of said land from the investment company. As consideration therefor, according to the contract between the defendants and the investment company, which was offered in evidence but which was excluded on objection by plaintiff, there was an exchange of property, and the following is recited therein:
"It is hereby understood and agreed that the parties of the second part are to pay a difference of Thirty-three hundred and 00/100 Dollars ($3,300.00) which is to be evidenced by a note secured by first Deed of Trust on the first above described property, to be executed by the parties of the second part; same to be dated the date of the transfer of the Warranty Deeds, to be due three years after date, and to bear interest at the rate of six per cent per annum, payable semi-annually, and to be held by H.S. Smith Investment Company, or assigns, or assume a balance of $3,300.00 on the Deed of Trust now on said first above described property."
(Defendants contend that the italicised portion of the contract is a forgery or alteration and was added thereto after same was signed, executed, and delivered.)
Defendants offered oral evidence to the effect that they signed the above mentioned contract and a note for $3300.00, payable to the investment company, together with a deed of trust securing said note, left all papers with the investment company and went immediately into possession of the land; that after they were in possession the warranty deed (which was in evidence here), and the contract, were received by them through the mail in one envelope; that they opened said envelope, saw what was in it, paid but little attention to the instruments, did not examine or read them, laid them away and paid no further attention to them until they were notified, in April, 1936, that plaintiff was threatening foreclosure; that they then took said papers to an attorney for advice and learned that the deed was not the deed they were to get; and that they never agreed at any time, with any one, that they would assume and pay the mortgage debt, or that the deed they were to receive should contain any assumption clause. They also offered oral and documentary evidence, which was excluded, tending to prove that they had made some twenty-six payments on the $3300 note referred to in the aforementioned "offer of evidence."
The investment company was adjudged a bankrupt in 1935, and in March of 1936, after plaintiff began foreclosure proceedings under the Avitt deed of trust, defendants brought suit in Andrew county, which suit was tried in Nodaway county on change of venue, to prevent said foreclosure, to impound and cancel the Avitt note and deed of trust, and to clear the title of the real estate involved of the cloud of the mortgage. Plaintiff herein was joined in the Nodaway county case as defendant, together with W.C. Gow, trustee in the deed of trust, and LeRoy Mead, trustee in bankruptcy for H.S. Smith Investment Company. The petition alleged, as grounds for the relief prayed: that defendants (Hitchcocks) were owners of the property which is the subject of the deed of trust; that plaintiff claimed to own a note signed by the Avitts and secured by deed of trust thereon; that said deed of trust did not constitute any valid lien on said real estate because same had long since been destroyed by operation of law; and that all of defendants named therein, including plaintiff in the instant action, were fully aware of the facts stated in the petition. To that action plaintiff herein filed its separate answer and cross petition under date of May 4, 1936, wherein it generally denied the allegations of petition of defendants, claimed absolute ownership of the property (it having obtained title through foreclosure proceedings during the pendency of the action), and alleged: That defendants were unlawfully in possession; were insolvent; and were about to till the land and take the rents and profits. The prayer was for a receivership pendente lite, for judgment of title in plaintiff, and for a perpetual injunction restraining defendants from thereafter claiming title or possession, or interfering with the rights of absolute ownership as claimed by plaintiff. This cause was tried and the court rendered final judgment against defendants (the Hitchcocks) and in favor of plaintiff, from which judgment defendants duly appealed which said appeal is now pending so far as the record shows. These proceedings were all had long prior to the filing of the instant suit, and were pleaded and proved by plaintiff as a bar of the present action, it being their position that said judgment is res adjudicata of defendants' defense in this case. At least we conclude that to be their position, although both plaintiff and defendants appear, from the pleadings filed, to have been somewhat befogged in the whole matter; and they appear to have succeeded in confusing the court also.
From a consideration of all the pleadings and evidence in the case, as above set forth, we hold that the sole issue adjudicated in the Nodaway county proceeding was validity of the Avitt note and mortgage as a subsisting and outstanding lien against the real estate described in the mortgage deed, and that plaintiff in the case at bar, (defendants there) were the legal owners of said note and mortgage and had the legal right to foreclose same. That was the sole issue in that case; and the final judgment rendered thereon, even though it was appealed, constitutes a final adjudication of that issue as between the parties. [Rodney v. Gibbs et al., 184 Mo. 1; Robb v. Taylor, 193 S.W. 800.]
In its petition in the instant case plaintiff pleaded a cause of action based on the allegation that defendants, by the warranty deed through which the Avitts conveyed the land to the latter, had assumed and agreed to pay the Avitt note. This vital allegation was put in issue by the general denial of defendants. [Cross v. Wears, 67 S.W.2d 517, l.c. 520.] Had the pleadings stopped at this point the issue would have been clear cut and well defined.
But defendants did not stop at that point. They proceeded to plead a counterclaim based on the same facts that had been finally adjudicated in the Nodaway county case. This led plaintiff to plead the Nodaway county proceedings as res adjudicata of defendants' counterclaim. Neither such pleading had any place in this case. We will proceed to a discussion of the alleged errors on the issue of defendants' assumption of the mortgage debt, the sole issue triable in this proceeding. The first question to be determined is that of whether or not error was committed by the court in sustaining the objection to the admission of the oral evidence of defendant, Milan Hitchcock, to the effect that he did not, in fact, assume and agree to pay the mortgage, even though the deed under which he obtained title contained a clause to that effect. It was held by the Supreme Court in Bensieck v. Cook, 110 Mo. 173, l.c. 186, that parol evidence is admissible to prove that a purchaser assumed and agreed to pay an outstanding mortgage debt on land conveyed to him. This doctrine has been reaffirmed, and has been extended so as to apply to a case where the deed of conveyance specifically recited that the purchaser took subject to an outstanding mortgage. [McFarland v. Melson, 20 S.W.2d 63, l.c. 66.] By analogy of reasoning it follows that a clause in the deed of conveyance which recites that grantee "assumes and agrees to pay" an outstanding mortgage may be disproved by oral evidence.
To establish that the purchaser assumed and agreed to pay an outstanding mortgage debt to which he was not a party, it must be shown that there was a meeting of the minds as between vendor and vendee on the subject, or there must be such a showing as will estop vendee from denying the existence of such an agreement. [McFarland v. Melson, supra, l.c. 67.]
On the question of whether defendants knowingly agreed to assume and pay the mortgage debt in this case, the evidence of grantor in the deed of conveyance is that he executed an "open deed," apparently meaning that the name of the purchaser or grantee was not written therein. His transaction in this regard was wholly between himself and the investment company, and defendants are not shown to have had any knowledge thereof. If his evidence is to be taken as true (and it must be so taken in ruling the instructed verdict) then there was and could have been no agreement as between grantor and defendants.
If we consider the investment company as the real grantor, then there is no evidence that defendants agreed with it that they would assume and pay said debt, other than the fact that the deed contained such a clause; the fact that the written contract of sale and exchange contained such a clause in the alternative; and that said deed was accepted and filed.
Defendants challenged the binding effect of the written contract on the grounds of forgery by alteration and addition, which they claimed was done without their knowledge or consent, after execution of the instrument. We think the contract could properly be attacked on such grounds.
It appears from the record that plaintiff tried its case on the theory that since the deed of conveyance, at the time same was delivered to defendants, contained an assumption clause, and that, since defendants accepted same and made no complaint for some four years thereafter, and then, with full knowledge of the contents of the deed, filed same for record and claimed title thereunder, they are irrevocably bound thereby. Under the evidence here introduced, and that offered and rejected, defendants are not irrevocably bound as a matter of law. The question presented was one for the jury.
This court has held through BLAND, J., in LaMonte Bank v. Crawford, 27 S.W.2d 762, l.c. 764, "Where the grantee's assent to the assumption clause is in issue, the mere recital in the deed that the grantee assumes and agrees to pay the mortgage debt, or the mere acceptance and recording of the deed by the purchaser, has been held not sufficient evidence of such assent." The author of the above opinion calls attention to a distinction between the cases as made in Johnson v. Maier, 187 S.W. 143, where the Springfield court held that, absent a showing that holder of the encumbrance had been misled to his injury thereby, defendant is not estopped to deny assumption of a mortgage debt even though he accepted the deed with full knowledge of the assumption clause and thereafter conveyed it. The question was whether defendant there actually assumed the debt; and that was a question for the jury. To the same effect see Citizens Bank v. Thomas, 214 Mo. App. 581, which is a case very similar to the case here under consideration. On the authority of the above, and many other cases in point which it is needless to cite, we hold that the question in this case is whether or not defendants actually assumed and agreed to pay the mortgage debt; and that such question should have been submitted to the jury.
It is not necessary for us to comment on the evidence admitted, or that offered and rejected, other than to say that the rule to be followed in the admission or rejection of evidence in this case is the same as it is in any other case, that is, whether such evidence is admissible on the question of the issue of assumption and agreement to pay the mortgage debt; the weight of such evidence (including parol evidence), and the credibility of witnesses, is for the jury.
The judgment should be reversed and the cause remanded. Campbell, C., concurs.
The foregoing opinion of SPERRY, C., is adopted as the opinion of the court. The judgment is reversed and the cause remanded. Shain, P.J., and Bland, J., concur; Kemp, J., not sitting because not a member of the court at time cause was argued and submitted.