American Sav. Bank & Trust Co. v. Helgesen

• Decision Date: 06 July 1911
• Citation: 64 Wash. 54,116 P. 837
• Court: Washington Supreme Court
• Parties: AMERICAN SAVINGS BANK & TRUST CO. v. HELGESEN et al.

116 P. 837

64 Wash. 54

AMERICAN SAVINGS BANK & TRUST CO. v. HELGESEN et al.

Supreme Court of Washington

July 6, 1911

Department 1. Appeal from Superior Court, Mason County; John R Mitchell, Judge.

Action by the American Savings Bank & Trust Company against George B. Helgesen and others. Judgment for plaintiff, and defendants appeal. Affirmed.

George W. Bright and Hamlin & Meier for appellants.

Farrell Kane & Stratton, for respondent.

PARKER J.

This is an action to recover judgment against Samuel Erickson and wife upon two negotiable promissory notes evidencing their community debt in the total sum of $2,500, and also to foreclose two mortgages given to secure the same upon property in Mason county, one being upon land and the other upon personal property. George B. Helgesen was made a defendant because he has become the owner of the land by virtue of an execution sale thereof under a judgment rendered in his favor against the defendants Erickson and wife. A trial before the court resulted in a personal judgment against Erickson and wife for the amount of the notes, and a foreclosure of the mortgages against all of the defendants. From this disposition of the cause, the defendants have appealed. The right of respondent to judgment upon the notes and to foreclosure of the mortgages depends largely upon it having become holder of the notes in good faith for value before maturity, and upon the lawful execution of the mortgage upon the land by Erickson and wife.

In October, 1906, Erickson and wife executed five negotiable promissory notes for the total sum of $3,190 payable to a Mrs. De Wees. These notes were delivered to Charles H. Gray, her son, who was her agent in the making of the loan evidenced by the notes. These notes were secured by mortgages executed about the same time upon the same land and personal property here involved. While they were taken in the name of Mrs. De Wees the evidence tends to show that the debt they evidenced was to some extent the property of Gray as well as of Mrs. De Wees. For the purpose of argument we will assume, as is contended by counsel for appellant, that the interest charged and agreed to be paid upon this loan was greater in amount than the highest rate allowed by law, and was therefore usurious under sections 6251 and 6255, Rem. & Bal. Code. This usurious interest agreement did not, however, appear upon the face of the notes. It was accomplished by making the amount of the principal stated in the notes greater than the sum actually loaned. These notes matured at different dates, the first matured on February 1, 1907, and the last on February 1, 1908. Before the maturity of any of them they were all assigned to respondent as collateral security to a loan evidenced by notes payable by Gray to respondent. This loan appears to have been a pre-existing debt of Gray to respondent, but the evidence also tends to show that these De Wees notes were given to respondent in lieu of other securities which respondent then held as security for the Gray loan, and which were then surrendered to Gray. Just when these surrendered securities were delivered to respondent by Gray, relative to the time of the making of the Gray loan, is not clear; but the general course of business testified to between Gray and respondent indicates that they were given by Gray to respondent at the time of the making of the loan, or were substituted for other securities which had been given to respondent by Gray at that time. These notes were assigned to respondent by the indorsement of Mrs. De Wees made by Gray as her agent, and also by his personal indorsement. The mortgages securing these notes were also assigned to respondent about the same time. On October 1, 1907, Gray's debt to respondent being still unpaid, or at least largely so, it evidently having been continued by renewal from time to time, and the larger part of the debt evidenced by the De Wees notes having matured, and the larger part of such matured portion being unpaid, respondent insisted that Gray procure new notes and mortgages from Erickson and wife to take the place of the De Wees notes and mortgages as collateral security to Gray's indebtedness to respondent. Thereupon Gray procured from Erickson and wife the execution of the notes here sued upon. These notes were made payable direct to Gray instead of Mrs. De Wees. They bear no evidence of usury upon their face, and it is not claimed that they are tainted with usury save as the De Wees notes were so tainted. At the same time, for the purpose of securing these new notes, new mortgages upon the same personal property and upon the same land were executed by Erickson and wife, except as it may be concluded that the new mortgage upon the land was not lawfully executed because of the failure of Mrs. Erickson to actually subscribe her name thereto with her husband. There were several places for Mrs. Erickson to sign in the execution of these new papers, in all of which she signed her name with her own hand except upon the new mortgage upon the land. This new mortgage was then complete in every respect except as to her actual subscription in the usual place for signing at the foot thereof. Her name then appeared in full in the body of the mortgage, with that of her husband as grantor. Her husband then subscribed his name thereto in the usual manner, and both of them then subscribed their names to all of the other papers. Acknowledgment of the execution of the mortgage as having been made on October 1, 1907, by both her and her husband is certified to in usual form by indorsement thereon by a notary public. It is clear from the evidence that Mrs. Erickson then intended to sign this mortgage, and that she thought she had signed it, as she had signed the other papers in connection with the giving of the new notes, and that she then actually acknowledged the execution of the mortgage. It is equally clear that the notary and others present thought she had then subscribed her name to the mortgage. This omission was not discovered until some months later. Soon after October 1st, these new notes and mortgages were assigned to respondent by Gray, and the De Wees notes and mortgages were thereupon surrendered and canceled. The evidence tends to show that the amount due on the De Wees notes was approximately the same as the amount of the new notes at the time of the substitution. On October 18, 1907, the new mortgage on the land was duly recorded in the auditor's office of Mason county. On December 4, 1907, appellant Helgesen recovered a judgment against Erickson and wife in the superior court of King county upon a community debt owing to him by them. On December 7, 1907, a transcript of this judgment was duly filed in the office of the clerk of the superior court for Mason county, so that it then became a lien upon the land of Erickson and wife in that county under section 445, Rem. & Bal. Code. This judgment, and an execution sale thereunder by the sheriff of Mason county, is the basis of appellant Helgesen's title to the land. Thereafter it was discovered that Mrs. Erickson had not subscribed her name to the new mortgage upon the land. She was advised of that fact, and asked to subscribe her name thereto, which she did in the presence of the same notary who had taken her acknowledgment thereto on October 1st. We think the evidence shows that she then signed it of her own free will, and that she then stated in substance that she thought she had signed it at the time of her acknowledgment on October 1st. This mortgage was again recorded on March 25, 1908, in the auditor's office of Mason county, but without any additional certificate of acknowledgment.

We will first notice the contention of counsel for appellants, that respondent did not acquire the notes in good faith. It is undisputed that respondent acquired all of these notes as well as all of the De Wees notes long before maturity. Whether or not respondent acquired them in good faith involves only questions of fact touching the notice it had of the usurious interest charged and agreed to be paid upon the debt due from Erickson to Mrs. De Wees or Gray. A careful reading of all of the evidence convinces us that the trial court was fully warranted in concluding, as it did in effect, that respondent at the time of acquiring both the De Wees notes and the new notes had no notice whatever of the usurious nature of the agreement for interest upon the loan they were given to evidence; nor of any other possible defense available to Erickson and wife as against Mrs. De Wees or Gray. In reaching this conclusion we assume that in this case the burden of proving good faith and want of notice of infirmities in the notes, was shifted to respondent, under our holdings in Keene v. Behan, 40 Wash. 505, 82 P. 884, Ireland v. Scharpenberg, 54 Wash. 558, 103 P. 801, and other cases. Neither have we overlooked the fact that respondent's proof upon this question consists almost wholly of the testimony of witnesses who were interested in respondent's favor. The trial judge saw and heard these witnesses testify, and while he may not have been required as a matter of law to find in respondent's favor upon this evidence alone, under the decisions last cited, yet he was privileged to so find, and under all the circumstances shown we think he was fully warranted in so doing.

Touching the question of respondent acquiring the notes for value it is insisted that they were taken as collateral security for a pre-existing debt, and hence are subject to any defense which could have been successfully urged against the original holder. Assuming that they were taken to secure a pre-existing debt--which, however, may be well doubted as a matter of law in view of the substitutions made--we t...