Opinion
No. 21275.
February 6, 1950.
APPEAL FROM THE CIRCUIT COURT OF CLINTON COUNTY, R. B. BRIDGEMAN, J.
Gerald Cross, Lathrop, R. H. Musser. Plattsburg, for appellant.
Robert H. Frost, Plattsburg, Watkins Watkins and O. W. Watkins, Jr., St. Joseph, for respondents.
This is an action in equity to set aside the release of a deed of trust and to foreclose the same. It is alleged that plaintiff is the owner of three promissory notes executed by William A. Simmon and payable to C. E. Simmon, plaintiff herein; that on June 27, 1932, the said William A. Simmon and his wife executed a deed of trust upon certain land to secure the payment of said notes, which deed of trust was duly recorded; that on October 22, 1938, the defendants Florence (Eisiminger) Marion and Grace Moran induced their father, William A. Simmon, to execute a warranty deed conveying to them the land described in the deed of trust, which deed did not mention the deed of trust; that on November 12, 1938, the same defendants "in a fraudulent manner and unlawfully procured without conveyance or assignment to them or to said William A. Simmon and with him brought said notes to the recorder's office and requested and induced E. C. James, defendant herein, to release the same on the margin of said record"; that at all times since the execution and delivery of said notes the plaintiff has been the sole owner thereof, and that he has never at any time transferred or conveyed the same; that said William A. Simmon died in August 1942, and that the amount due on the notes is $2,000, plus interest. The prayer of the petition is to set aside the release of the deed of trust, ascertain the amount due on the notes, and foreclose the deed of trust.
The answer of defendants Florence Marion and Grace Moran (1) denied the execution of the notes and deed of trust, and alleged as alternative defenses (2) that if the notes were executed they were paid in full, and (3) that the notes were not valid obligations of said W. A. Simmon because there was no consideration for them, and that "said notes were for a mere pretended indebtedness and were never delivered" to plaintiff. The defendant Fred Kerns, who was named as trustee in the deed of trust, and defendant E. C. James, who signed the marginal release of the deed of trust, are nominal parties and have no interest in the litigation.
The trial court found the issues in favor of defendants and plaintiff appealed to the Supreme Court. That court transferred the case to this court, holding that title to real estate is not involved. Simmon v. Marion et al., 358 Mo. 888, 217 S.W.2d 537.
Plaintiff contends that there is insufficient evidence to support the trial court's decree. While defendants Florence Marion and Grace Moran pleaded several defenses, as hereinbefore recited, the record shows that the main issue in the case is whether W. A. Simmon received from plaintiff any consideration for the notes in question. Defendants state in their brief that their "main defense" was that the notes and deed of trust "were without consideration, and were prepared as a part of a scheme concocted by W. A. Simmon, purportedly the maker of the notes, in which scheme the appellant was a party, together with James B. Moran, deceased husband of the respondent, Grace Moran, in order to place an encumbrance on the real estate to protect it against creditors of the said W. A. Simmon." With this in mind we will summarize the evidence.
The record shows that about 1909, W. A. Simmon acquired a ninety acre tract of land in Clinton County, Missouri, near the town of Hemple. He had two sons, Clarence E., the plaintiff herein, and Elmer; and two daughters, Florence Marion and Grace Moran, the defendants in the case. Florence Marion, formerly Florence Eisiminger, was married after the suit was instituted. Grace Moran is the widow of James B. Moran, who died in August 1940. W. A. Simmon's first wife died in 1924, and in 1926, he married a widow, Mrs. Mary E. Jackson. W. A. Simmon died in 1942; his second wife died in 1935.
In June 1932, W. A. Simmon and his second wife, Mary E., executed a deed of trust conveying the said ninety acre tract of land to Fred Kerns, as trustee, which instrument purported to secure the payment of seven promissory notes, viz.: a note (Exhibit C) for $500, dated June 1, 1924; a note (Exhibit D) for $750, dated May 15, 1928; a note (Exhibit E) for $750, dated April 1, 1926; all of said notes being payable to C. E. Simmon one year after date with 6% interest; and three notes (Exhibits 2, 3, and 4) in the total sum of $2,000, dated April 15, 1925, July 1, 1927, and August 15, 1929, respectively, and payable to James B. Moran one year after date with 6% interest. All of the above described notes purport to have been executed by W. A. Simmon. A provision in the deed of trust which was recorded in Clinton County, extended the time for payment of the notes to June 27, 1935. This suit was filed on September 21, 1942. There is no indorsement by the payee on any of these notes, but notations on the back of each purport to be entries showing that the interest was paid annually up to 1930. Across the face of each note, and apparently in the same handwriting, are the words "Paid in Full." Stamped on the back of each note are the following words and figures: "Cancelled, Nov. 12, 1938, Jno. W. Porter, Ex-Officio Recorder of Deeds, Clinton County, Mo." The deed of trust also purported to secure a note for $3,500, dated December 10, 1926, and payable to Mary E. Simmon one year after date. This note was not offered in evidence, but the record in the recorder's office shows the following: "Note for $3500 marked paid presented Oct. 22, 1938 and released." Plaintiff's brief states that this note is not in controversy.
The record also shows that on October 22, 1938, W. A. Simmon, in consideration of one dollar, executed a warranty deed conveying the ninety acre tract of land to his daughters, Florence (Eisiminger) Marion and Grace Moran, "free and clear of any encumbrances," which deed was recorded in Clinton County by Grace Moran
The plaintiff offered the following evidence to show that the release of the deed of trust was void: J. Ledgerwood, the deputy recorder, was called by plaintiff to identify the marginal release which reads:
"The notes secured by the within Deed of Trust were produced and cancelled in my presence this 12th day of November, 1938. John W. Porter, Recorder, By J. Ledgerwood, Deputy." "The Debt mentioned in the within Deed of Trust having been fully paid and discharged, I hereby acknowledge satisfaction in full, and release the property herein conveyed from the lien and incumbrance thereon, this 12th day of November, 1938. Emsley C. James, Assignee of the note. Attest: John W. Porter, Recorder, by J. Ledgerwood, Deputy." Emsley C. James, the probate judge of Clinton County, testified as a witness for plaintiff that W. A. Simmon brought the three C. E. Simmon notes (Exhibits C, D, and E) to him and requested him to sign the marginal release of the deed of trust; that solely for the accommodation of W. A. Simmon, he went to the recorder's office and signed the release; that when he saw the notes they were marked "Paid in Full"; that the notes were not indorsed or assigned to him; that he did not own the notes and had no interest in them. The three James B. Moran notes (Exhibits 2, 3, and 4) were not specifically mentioned by this witness but, according to the record, they were evidently presented and cancelled at the same time.
Plaintiff testified on direct examination that he lived in El Dorado, Kansas, from October 1920 to March 1932. As tending to show he was able to help his father financially, he testified that while he was in Kansas he earned about $200 a month and made a profit of $500 on a real estate transaction. He also testified on direct examination, over repeated objections of defendants based on the dead man's statute, that the signatures on the notes (Exhibits C, D, and E) and the words "Paid in Full" on each note were in the handwriting of his father, W. A. Simmon; that the dates on said notes were correct; that his father delivered the notes to him on said dates when plaintiff was in Hemple on his vacation; that the consideration therefor was money loaned by plaintiff to his father; that the notations or indorsements on the back of the notes which show the payment of the interest were made by plaintiff, and that "they were correctly made"; that the principal of said notes had never been paid; that he never sold or indorsed the notes to anyone; that he kept the notes at a bank in El Dorado, Kansas, until he returned to Missouri and moved on the farm with his father in 1934; that thereafter he kept the notes at the farm in his father's tin box which also contained papers belonging to his father; that when he returned to Kansas in 1941, he left the notes in the tin box; that after the death of his father he authorized his brother Elmer to take possession of the notes, and that Elmer delivered the notes to him. The three notes (Exhibits C, D, and E) were offered in evidence.
On cross-examination plaintiff testified, first, that his father paid the interest each year up to 1930, as shown by the indorsements on the back of each note, and that such indorsements were made by plaintiff, which was consistent with his testimony on direct examination. However, plaintiff then testified that he went to Hemple, Missouri, on June 1 of each year and there collected from his father the interest due on June 1, and indorsed the payments in his own handwriting on plaintiff's Exhibit C; that his father sent him checks in payment of the interest on Exhibit D and Exhibit E; that the interest payments on Exhibit D were indorsed on that note by plaintiff, but that the indorsements on Exhibit E were written by his father, at the direction of plaintiff. If plaintiff's father made the indorsements on Exhibit E, as plaintiff stated, then the testimony of plaintiff that he had all of the notes in Kansas, until he returned to Missouri in 1932, was false. This discrepancy in plaintiff's testimony might be attributed to confusion or forgetfulness on the part of the witness were it not for other evidence in the case. The original notes are before us and we have carefully examined them. It is obvious that the indorsements on all of the notes are in the same handwriting. Furthermore, all of such indorsements appear to have been made with an indelible pencil having the same degree of sharpness at the time of each entry, although the indorsements purport to have been made once a year over a period of five years. These facts tend to support defendants' contention that the notes and deed of trust were prepared to protect the real estate against the creditors of W. A. Simmon, and that the indorsements were all placed on the notes to give them the appearance of being valid obligations upon which interest payments were made. It may be added that defendant Grace Moran, plaintiff's sister, testified that all of the indorsements under discussion were in the handwriting of plaintiff.
Plaintiff also testified on cross-examination that the notes dated June 1, 1924, and May 15, 1928, were made out at Hemple, but that the note dated April 1, 1926, was made out at El Dorado, Kansas. He explained the fact that all of the notes were on identical forms by saying that his father sent him a blank form for the April 1 note (Exhibit E) which he made out and sent back to his father for signature, and his father then sent it back to him — a very unusual method of transacting business. If this is true, plaintiff must have returned the note to his father, for he testified, as stated above, that his father indorsed the interest payments on Exhibit E.
Plaintiff further testified on cross-examination that his father executed the deed of trust in 1932 to secure the notes which his father had signed when he borrowed money from plaintiff, and that plaintiff knew of no scheme to save his father's farm. Defendants' counsel confronted plaintiff with a letter dated January 5, 1940, which plaintiff had written to his sister Grace Moran, wherein he stated: "* * * will say that if it hadn't been for us he (their father) wouldn't have a roof, as you call it, over his head, or a farm, as I call it. You know as well as I the scheme we all went into to keep him from losing the farm * * *." Plaintiff admitted that he wrote the letter, but stated that the scheme he referred to was a plan of his sisters to get the farm in their own names. He attempted to explain the use of the words "we" and "us" in his letter by saying it was a mistake.
We have summarized all of plaintiff's testimony in order to point out the discrepancies therein which, in our view, destroyed the value of plaintiff's testimony even if he was a competent witness. It is clear, however, that part of this testimony was inadmissible. Plaintiff's testimony was admitted over defendants' timely objection that plaintiff was incompetent to testify under the dead man's statute, his father being dead at the time of the trial. Mo.R.S.A. § 1887. Plaintiff contends that defendants waived his incompetency, if any, by cross-examining him. The cross-examination of plaintiff as to transactions with his father did not amount to a waiver of his incompetency with respect to such matters if the cross-examination was restricted to matters brought out on direct examination. It is only where the cross-examination brings out new matter relating to transactions with the deceased party, concerning which the witness did not testify on his direct examination, that the incompetency is waived, and then only as to such new matter. Bussen v. Del Commune, Mo.App., 199 S.W.2d 13, 19, and cases cited. It would unduly lengthen this opinion to repeat plaintiff's testimony for the purpose of comparing the direct examination with the cross-examination. It is sufficient to say that the only new matter upon which plaintiff was cross-examined was matter as to which he was not incompetent. We hold, therefore, that defendants did not waive their objection. The question remains as to whether plaintiff's testimony was admissible. Plaintiff was competent to testify that the signatures on the notes (Exhibits C, D, and E) and the words "Paid in Full" on each note were in the handwriting of his father, for a witness who is disqualified under the dead man's statute may nevertheless testify as to the deceased's handwriting. Stephenson v. Stephenson, 351 Mo. 8, 16, 171 S.W.2d 565, 568. But plaintiff was not competent to testify that the dates on the notes were correct; that his father delivered the notes to him on said dates; that the consideration for the notes was money loaned by plaintiff to his father; that his father paid the interest on the notes up to 1930; or that the principal of said notes had not been paid. Allaben v. Shelbourne, 357 Mo. 1205, 1217, 212 S.W.2d 719, 726; Goddard v. Williamson's Adm'r, 72 Mo. 131; In re Reichelt's Estate, Mo.App., 179 S.W.2d 119, 122; Dull v. Johnson, Mo.App., 106 S.W.2d 504, 507. It follows that the last mentioned testimony cannot be considered in determining whether there is sufficient evidence to support the decree. In an equity case the appellate court will consider only such evidence as it deems admissible without regard to the trial court's rulings in that connection. Webb v. Salisbury, 327 Mo. 1123, 39 S.W.2d 1045; Vining v. Ramage, 319 Mo. 65, 3 S.W.2d 712; Pfotenhauer v. Ridgway, 307 Mo. 529, 271 S.W. 50; Gregar v. Broadway Auto Laundry Co., Mo.App., 83 S.W.2d 142. While the chancellor admitted the testimony under discussion, he expressed doubts as to its competency, and it is probable that he did not consider such evidence in making and entering the decree.
Plaintiff read in evidence the deposition of his son, Clarence H., who was twenty-three years of age when the deposition was taken on April 27, 1943. The son testified that he was present when one of the notes in question was executed; that his father handed his grandfather (W. A. Simmon) a roll of bills; that his father filled out the note and his grandfather signed it. The witness identified the note as plaintiff's Exhibit D, the note of May 15, 1928. According to this witness' testimony, he was seven years and eight months old at the time the note was executed. It is rather difficult to believe that a child of that age would understand the nature of the alleged transaction, and that he could remember the details of such transaction for fifteen years. In fact, the witness finally said: "At the time I did not know about it. I asked my father about it and he told me." The son also testified that after the note was executed (the time was not stated), he heard his grandfather say that "he would like to pay this money as soon as he could"; that "he talked about two or three notes or amounts * * * around $2000"; and that in 1935 (when the witness was about fifteen years old), he saw his grandfather pay plaintiff "some interest." For obvious reasons the testimony of this witness is of little probative value, if any.
J. J. Bodde, a farmer, testified as plaintiff's witness that he heard W. A. Simmon say that "he owed a debt, he said he owed Clarence Simmon, he would like to pay him if he could"; and that W. A. Simmon made such a statement "more than one time as far as — you see it wasn't of any interest to me."
Plaintiff also called as a witness his brother Elmer, who testified that his father, W. A. Simmon, told him several times that he owed the plaintiff $2,000; that the witness and his father were partners in the implement business from about 1922 to 1932; that the business was closed out in 1932, the year the deed of trust was executed; that the partners received about $1,500 for the assets of the business, which sum was turned over to his father; that after the sale of the business his father said that he still owed the plaintiff the sum of $2,000; that at the time of said sale in 1932, the partnership owed "some" debts. The plaintiff then offered in evidence twelve promissory notes (plaintiff's Exhibits G to R, inclusive), all of which notes were said to be obligations of the partnership in 1932. The principal sums of said notes amount to approximately $4,000. We do not know plaintiff's purpose in offering these notes in evidence, but this evidence does tend to support defendants' version of the reason for the execution of the deed of trust and the notes secured thereby.
Elmer further testified that after the death of his father in 1942, the plaintiff authorized him to take possession of the three notes (Exhibits C, D, and E); that he and his two sisters found the notes in their father's safe deposit box at a bank in Stewartsville, Missouri; that all of said notes had been marked "Paid in Full" and stamped "Cancelled" and that he delivered the notes to plaintiff.
Fred Kerns testified as plaintiff's witness that W. A. Simmon had told him he had executed a deed of trust in which the witness was named as trustee; that he didn't tell him anything about any indebtedness to the plaintiff, but did tell him that "he was giving Clarence a deed of trust to protect himself." This testimony, of course, supports the defendants' contentions. The foregoing is all of the evidence offered by plaintiff.
Defendants offered in evidence the testimony of Mr. Robert Frost, an attorney, to the effect that he was present in the office of Dan Frost, another attorney, when the deed of trust in question was executed; that the plaintiff, his father W. A. Simmon, and James B. Moran, were all present; that in the discussion in which all parties took part, including the plaintiff, it was stated that W. A. Simmon had been in business at Hemple, with his son Elmer, and had become financially involved; that W. A. Simmon said he "had signed he didn't know how many notes, he had no way of knowing"; that plaintiff, W. A. Simmon, and James B. Moran discussed "the steps to be taken" to keep Mr. Simmon from losing his ninety acre farm; that they discussed "some notes that were to be given or had been given to protect the farm" and also discussed the execution of a deed of trust for the same purpose.
Defendant Grace Moran testified that she was the widow of James B. Moran, the payee of three of the notes (Exhibits 2, 3, and 4) described in the deed of trust; that her father was in debt in 1932; that shortly before her father died, her brother, the plaintiff herein, was at her home in St. Joseph and told her that the notes that W. A. Simmon had given him were to protect their father's farm, and that plaintiff had never given his father any money or other consideration for the notes. Grace Moran also identified Exhibits 2, 3, and 4, and they were offered in evidence.
Defendant Florence Marion testified that she had discussed the making of the notes with plaintiff and her father, W. A. Simmon, in the summer of 1932, or shortly thereafter, at which time the plaintiff and her father said the notes had been made to protect her father because he was in debt; that they wanted her to know the notes were made payable to plaintiff and to James B. Moran rather than to her because she was a widow at the time, and it appeared more reasonable that plaintiff and Mr. Moran had money to lend than that she did, and that plaintiff himself told her there was no consideration for these notes.
On rebuttal, the plaintiff denied that he had told his sisters that he did not give his father any consideration for the notes.
Plaintiff contends that the release of the deed of trust on November 12, 1938 was void because E. C. James, who signed the marginal release, was not the assignee of the notes and had no authority to satisfy the record. As stated, E. C. James testified that the notes were not assigned to him; that he had no interest in them, and that he signed the release as an accommodation to W. A. Simmon. In fact, the defendants do not contend that the notes were assigned to E. C. James. We agree, therefore, that plaintiff's rights, if any, with respect to the deed of trust, were not prejudiced by the unauthorized action of E. C. James in signing the release. Only the true holder of a note secured by a deed of trust can satisfy the record. Mo.R.S.A. § 3465; Pierpoint v. Prudential Ins. Co., 350 Mo. 629, 638, 167 S.W.2d 64, 66; Crecelius v. Home Heights Co., Mo.Sup., 217 S.W. 508; Berryman v. Becker, 173 Mo.App. 346, 158 S.W. 899; Cummings v. Hurd, 49 Mo.App. 139, 147. Since the defendants received the warranty deed from their father on October 22, 1938, prior to the date when E. C. James signed the marginal release, it is clear that the land conveyed to them was subject to the deed of trust if it was valid. Armstrong v. Robards, 81 Mo. 445. It appears, however, in the cases cited above, where the court set aside a void release, that the party seeking such relief was the holder of an unpaid note given for a sufficient consideration and secured by a valid deed of trust. The general rule is that a sufficient consideration is essential to the validity of a mortgage or deed of trust. Indeed, there can be no mortgage or deed of trust unless there is an obligation to be secured thereby. Cobble v. Garrison, Mo. Sup., 219 S.W.2d 393, 394; Finnerty v. John S. Blake Bro. Realty Co., 276 Mo. 332, 207 S.W. 772. Consequently, if the evidence in the instant case shows, as defendants contend, that the notes were issued without any consideration moving from plaintiff to his father, then the deed of trust is invalid and unenforceable. If the deed of trust is invalid, the fact that the release was unauthorized and void does not aid the plaintiff. On the other hand, if the notes were given for a sufficient consideration, the plaintiff is entitled to have the release set aside and the deed of trust foreclosed. It follows that the main issue and decisive question in the case is whether or not the notes (Exhibits C, D, and E) were without consideration. As heretofore stated, that is conceded by defendants.
A negotiable instrument imports consideration, and the introduction of the instrument in evidence constitutes prima facie proof that it was given for a valuable consideration. Mo.R.S.A. § 3040. Defendants, in their attack upon the notes for want of consideration, have the burden of proof, and the proof must be substantial. Owens v. Owens, 347 Mo. 80, 146 S.W.2d 569; Duvall v. Duncan, 341 Mo. 1129, 111 S.W.2d 89; Gordon v. Raymond, 239 Mo.App. 321, 186 S.W.2d 849.
As stated, defendants' witnesses were Robert Frost, an attorney, and Grace Moran and Florence Marion, the defendants herein. Frost testified that he was present when the deed of trust was executed, and that he heard the plaintiff and W. A. Simmon say that the deed of trust was being executed to protect the farm against business creditors of W. A. Simmon. Grace Moran testified that the plaintiff told her that the deed of trust and notes were executed to protect his father's farm, and that he had never given his father any consideration for the notes. Florence Marion testified that plaintiff and her father, W. A. Simmon, had told her that the notes were without consideration, and that the notes and deed of trust were executed for the purpose mentioned above. The two daughters also testified that their father was in debt to business creditors when the deed of trust was executed in 1932; and the partnership notes introduced by plaintiff showed that W. A. Simmon was having financial difficulties in 1932. Defendants introduced a letter written by plaintiff in which he stated that he had been a party to a scheme to keep his father from losing the farm. Plaintiff's own witness, Kerns, testified that W. A. Simmon told him he was giving plaintiff "a deed of trust to protect himself."
The only testimony offered by plaintiff concerning the issue of consideration, other than his own testimony which we must disregard, was the testimony (by deposition) of his son, who was under eight years of age at the time of the events about which he testified; the testimony of his brother Elmer that his father had told him he owed plaintiff $2,000; and the testimony of J. J. Bodde, a farmer, that W. A. Simmon had told him he owed plaintiff "a debt." Plaintiff denied that he had told his sisters that he did not give his father any consideration for the notes.
This being an equity suit, it is the duty of this court to weigh the evidence and reach its own conclusion. Mo. R.S.A. § 847.114. Where, however, there is a conflict of oral testimony and the credibility of witnesses must be judged, as in this case, it is the rule to defer to the chancellor's finding unless the court is satisfied that the weight of the evidence is to the contrary. In this case there was competent evidence tending to support the conclusion reached below. The chancellor heard the testimony and observed the demeanor of all the witnesses except plaintiff's son; and he knew that most of the witnesses were not disinterested. He chose to believe defendant's witnesses and entered a decree accordingly. We cannot say, in view of the record, that defendants did not sustain their burden of proving that the notes were without consideration. Under these circumstances, we defer to the judgment of the trial court.
The judgment should be affirmed.
SPERRY, C., concurs.
The foregoing opinion of BOUR, C., is adopted as the opinion of the court. The judgment is affirmed. All concur.