Hibernia Sav. Inst. v. Luhn

• Decision Date: 17 June 1891
• Citation: 13 S.E. 357,34 S.C. 175
• Parties: Hibernia Sav. Inst. v. Luhn.
• Court: South Carolina Supreme Court

13 S.E. 357

34 S.C. 175

Hibernia Sav. Inst. v. Luhn.

Supreme Court of South Carolina

June 17, 1891

Appeal from common pleas circuit court of Charleston county; T. B Fraser, Judge.

This was an action brought to foreclose a mortgage given by defendant, Josephine S. Luhn, to the Hibernia Savings Institution of Charleston, plaintiff. The cause was referred and the master's report is as follows: "To the Honorable the Presiding Judge: This case was referred to me by an order of the court filed July 5, 1889, to inquire into and report upon the issues of law and fact therein involved with leave to report any special matter. I have held references, have been attended by the solicitors of the parties, have taken testimony, which is hereto attached, and have heard arguments upon the issues involved. I submit the following report: The complaint in this action is brought for the foreclosure of a mortgage executed by the defendant to the plaintiff, under date of 23d January, 1885, to secure her bond of even date, conditioned for the payment of $1,800 on the 18th January, 1886, with interest after maturity at the rate of 7 per cent. per annum payable semi-yearly in advance. The complaint alleges simply: (1) That the plaintiff is a corporation, chartered under the laws of this state. (2) That the bond and mortgage were duly made, executed, and delivered by the defendant to the plaintiff, as above stated describing the property mortgaged. (3) That the mortgage was duly recorded. (4) That the condition of the bond has been broken, and that there is due thereon the sum of $1,989. And then follows the prayer of judgment of foreclosure and sale. The answer of defendant admits all the allegations of the complaint, but alleges 'that at the time of the execution and delivery of the bond and mortgage mentioned this defendant was a married woman; that the money received from plaintiff corporation was not used for the benefit of this defendant, or for the benefit of her separate estate. Wherefore defendant prays that the said bond and mortgage be declared null and void, and that the complaint be dismissed.' After the testimony had been closed, and the plaintiff had made his argument in chief, the attorney for the defendant moved for leave to amend the answer by striking out the words, 'that the money received from plaintiff corporation was not used for the benefit of this defendant or for the benefit of her separate estate,' and substituting the words, 'that said bond and mortgage were not made for the benefit of her separate estate.' The motion was opposed by plaintiff, but I granted the amendment, as it does not seem to me change materially the defense, and it was represented to me by defendant's counsel that, owing to his sickness at the time, the answer had not been drawn according to his instruction. Plaintiff excepted to this order. The case therefore came up upon the complaint and the amended answer. A great deal of testimony offered was excepted to on both sides on the grounds of irrelevancy and incompetency, and by consent of counsel for both parties it was all taken subject to any legal exception that may be urged against it, whether stated specifically in the minutes of reference or not. After a careful examination and weighing of evidence, I find the following facts: On January 16, 1885, the late Dr. G. J. Luhn, the husband of defendant, applied to the Hibernia Savings Institution, the plaintiff herein, for a loan on behalf of his wife, representing himself as her agent. The application was made to F. J. McGarey, the cashier of the bank, at the banking-house. The application was made in writing upon a printed slip of the bank, and the original application is in existence, (Ex. A.) It reads as follows: 'To the President and Board of Directors of the Hibernia Savings Institution. Charleston, S. C., January 16, 1885. Gentlemen: I asked for a loan of $1,800, @ 7% per annum, for which offer as security one new two-story frame house, Smith street, just below Vanderhorst street, lot 40x133. Respectfully, Josephine S. Luhn, per G. J. Luhn.' On Mr. McGarey's examination, he was asked by plaintiff's attorney, 'At the time Dr. Luhn was negotiating for the loan, and at the delivery of the bond and mortgage, as the agent for his wife, what purpose did he state the money would be used for by her?' I ruled this question out as incompetent. The answer of the witness thereto was however taken, subject to exception, and will be found in the appendix to the testimony. The application was referred to the board of directors. They employed Capt. James F. Redding to examine the property. Redding made the examination, found that the buildings on the premises 'were nearing completion,' and made the following indorsement in writing upon the original application: 'Approved. J. F. Redding, Committee, January 19th, 1885.' On January 24, 1885, Dr. Luhn presented himself at the bank with the bond and mortgage, (Exhibits B and C,) which are dated 23d January, 1885, the mortgage being probated January 24, 1885, and received the money. Eight hundred dollars was paid him in cash, and one thousand in check No. 160 on the Bank of Charleston, N. B. A., to the order of 160, which check is in evidence. (Ex. D.) It is indorsed, 'G. J. Luhn.' No further inquiry was made by the bank. The title seems to have been examined by their solicitor, but no written opinion was furnished, and no abstract of title has been offered in evidence. There are no payments indorsed upon the bond. Mr. McGarey testifies that the loan was charged on the books of the bank against Mrs. Josephine S. Luhn. Dr. Luhn is dead. The defendant being a married woman, the burden of proof is upon the plaintiff to show that the contract was made with reference to the separate estate of Mrs. Luhn. The mortgage is of property which is conceded to be Mrs. Luhn's separate estate. As I understand the law, however, the mortgage is only the security for the debt; the debt or contract being the bond. If the contract represented by the bond was made with reference to the separate estate, then it was competent for Mrs. Luhn to mortgage the separate estate to secure the bond; otherwise, the contract and the mortgage securing it are both void. Mrs. Luhn has testified to a state of facts tending to show that she never intended to sign any bond and mortgage at all; that she never authorized her husband to borrow money for her, as her agent, upon the security of her separate estate; and that she was in fact overreached by her husband in the matter; and that she signed the bond and mortgage under a misapprehension of their purport. Inasmuch as the bond and mortgage is admitted by the answer, I do not consider the testimony competent, not being pertinent to any issue raised in the pleadings. See McGrath v. Barnes, 18 S.C. 606; Mitchell v. De Graffenreid, Harp. 451. Discarding Mrs. Luhn's testimony upon this point, therefore, from consideration, there remains, however, sufficient evidence to satisfy me of the following facts: That the lot in Smith street was given by Dr. Luhn to his wife, the conveyance being dated July 23, 1884, and that he proceeded to erect upon it a house for her. That he employed a builder, F. Lucas, to erect the house, made the contracts himself individually, with said builder, paid the bills regularly every week, and purchased and paid for the lumber which went into the house. That the house was begun in October, 1884, and was finished by the 1st of February, 1885, or a few days after. That immediately after the completion of the house the same builder went on with the work of erecting other houses for Dr. Luhn upon the adjoining lots owned by him. That on the 26th of January, 1885, there were issued from the office of the city assessor several building permits. One of these was issued to Mrs. Josephine S. Luhn, upon the application of the builder, F. Lucas, for the erection of a two-story wooden building on the lot on the east side of Smith street, between Calhoun and Vanderhorst streets, at an estimated cost of $1,800. On the same day, permits were taken out by G. J. Luhn for various other buildings on adjacent lots. That on the 26th January, 1885, when this permit was issued to Mrs. Luhn, upon the application of the builder, the buildings on the said lot were almost completed, and they were in fact completed a few days later. That Mrs. Luhn had no money of her own to pay for the erection of said buildings, and that the cost of the same had been, by weekly payments, defrayed by Dr. Luhn. While it is of course possible that Dr. Luhn may have intended to reimburse himself for the cost of the house from the $1,800 raised upon the bond, there is no proof whatever that the money was obtained for that specific purpose or was so applied. I find that Mrs. Luhn did not receive the money raised upon the bond and mortgage, and that the plaintiff has failed to show by satisfactory proof that the contract sued upon was made with reference to Mrs. Luhn's separate estate. On the contrary, I hold that the transaction was in substance a borrowing of money for the husband's benefit, upon the credit of the wife's separate estate. The plaintiff was dealing with a married woman, -a person with a limited power,-and is bound to show, therefore, by a preponderance of legal proof, that the contract was made within the scope of that power. This the plaintiff, in my judgment, has failed to do; and therefore, under the settled law of this state, I hold, as conclusion of law, that the bond and mortgage sued upon must be declared null and void. I recommend, therefore, that said bond and mortgage be adjudged to be null and void, and that the complaint be dismissed, with costs. Respectfully submitted, G. H. Sass, Master. October 8, 1889."

Decree,...