Benton v. Morningside College

• Decision Date: 21 June 1926
• Docket Number: 37321
• Citation: 209 N.W. 516,202 Iowa 15
• Parties: DILLMAN E. BENTON, Appellant, v. MORNINGSIDE COLLEGE, Appellee
• Court: Iowa Supreme Court

209 N.W. 516

202 Iowa 15

DILLMAN E. BENTON, Appellant, v. MORNINGSIDE COLLEGE, Appellee

No. 37321

Supreme Court of Iowa, Des Moines

June 21, 1926

Appeal from Crawford District Court.--R. L. MCCORD, Judge.

Action to quiet title to certain real estate, as against an outstanding mortgage. Defendant filed a motion to dismiss which was sustained by the court. Plaintiff appeals.

Reversed.

L. W Powers, for appellant.

Andrew Bell and Kindig, Stewart & Hatfield, for appellee.

ALBERT J. DE GRAFF, C. J., and EVANS, STEVENS, and VERMILION, JJ., concur. MORLING, J., not participating.

OPINION

ALBERT, J.

I.

Appellant's petition is in two counts, and the first count is in two divisions. The first division of Count 1 recites that, on March 1, 1916, C. W. Payne was the owner of a certain tract of land in Crawford County, Iowa, comprising approximately 280 acres; that on that date he sold the land to the appellant, who gave to Payne a note for $ 40,000, secured by a real estate mortgage on the land thus purchased. This mortgage was duly recorded. The mortgage, by its terms, was not due until 1931.

In May, 1916, Payne transferred the mortgage, by written assignment, for a recited consideration of $ 40,000 in hand paid, receipt of which was acknowledged, to Morningside College. This assignment was not placed of record until 1920.

Payne was the sole owner of the Valley Bank of West Side, Iowa, a private institution owned and operated exclusively by him.

On March 1, 1918, appellant had on deposit in the Valley Bank a sum in excess of $ 40,000. On that date, he went to Payne, and told him that he desired to pay off said mortgage with the money he then had on deposit in the Valley Bank. He said that he desired to have his account charged with the amount due on the mortgage, and the mortgage note returned to him, and the record thereof satisfied. Payne advised him that the mortgage had been transferred to Morningside College, and that the Valley Bank was not in condition to pay out that much money at that time, but that, if Benton would allow the money to remain in the bank, Payne would pay off said mortgage as soon as he could conveniently do so. This was the first information appellant had that the mortgage had been transferred, and was not in Payne's possession.

It is further alleged that said Morningside College did not receive the transfer of said note or mortgage as bona-fide purchasers for value, but that they were transferred to said college by Payne as a gift or donation. Copies of the mortgage and the assignment thereof are attached to the petition.

Payne paid the sum of $ 7,500 on said mortgage, but appellant never withdrew any of the money on deposit with Payne. Appellant further alleges that, because of the matters above set forth, the mortgage has been paid in full; that, as Payne did not pay the money to Morningside College, appellant has a good defense, and is entitled to a set-off for the amount which he had on deposit with Payne when he first learned of the transfer to Morningside College; that no recovery on the said note can be had against appellant; that, because of matters herein alleged, appellant is owing nothing on the promissory note held by the Morningside College, and that the aforesaid mortgage is not a lien upon the property of appellant; that its existence creates a cloud on appellant's title to the land.

In Division 2 of Count 1 of appellant's petition, by reference he makes all of Division 1 a part of Division 2, and further alleges that, on March 1, 1918, Payne was an officer of Morningside College; that he was particularly charged with the management of the financial affairs of said college, and was authorized to enter into, on behalf of said college, the following arrangements:

On or about March 1, 1918, an agreement was entered into between this appellant and C. W. Payne and the Morningside College, represented by C. W. Payne, by which it was agreed that the $ 40,000 and interest which appellant then had on deposit with Payne, or the Valley Bank, would remain on deposit for a short period, when Payne would pay said amount directly to said Morningside College. It was further agreed that, by reason of this arrangement, Morningside College waived its claim against the appellant, and would look solely to Payne or the Valley Bank for payment of said mortgage. Appellant also alleges, in Division 2 of Count 1, that, by reason of said agreement, the mortgage and note have been paid, so far as the appellant is concerned, and the mortgage does not represent any existing lien upon his real estate, but that said mortgage, being of record uncanceled and unsatisfied, constitutes a cloud upon appellant's title to it.

In a second count, appellant, by reference, makes Divisions 1 and 2 of said first count a part of the second count, and further alleges that, shortly after March 1, 1923, the Valley Bank closed its doors, and thereafter Morningside College made demand on appellant for the interest due on the mortgage; that appellant, without fully knowing the situation, under a mistake as to the facts in connection with the matter, without knowledge that Morningside College was not a bona-fide purchaser for value of the mortgage, and without full information as to what position Payne held with said college at the time the arrangement was made with said Payne, paid Morningside College, in April, 1923, $ 1,625, representing interest due on the unpaid balance of said mortgage; that, under the same fact situation, on March 1, 1924, he paid Morningside College the further sum of $ 1,625, as interest claimed; that both of these payments "were made by appellant under misapprehension of facts, and without knowledge of circumstances which constitutes a good on his part to said note secured by said mortgage;" that, under said misapprehension of facts, appellant filed his claim in the bankruptcy proceedings of C. W. Payne for the amount of his deposit, and he now tenders to appellee, Morningside College, an assignment of said claim, to the extent of at least the amount claimed by it to be due on said mortgage, and appellant offers to do whatever, in equity, should be done by him, under the circumstances. He prays for a decree finding that the aforesaid mortgage held by the college has been paid in full; that there is no obligation on the part of appellant on said note; and that said note shall not be in force as against him. He asserts that appellant has a good defense thereto and a set-off for said sum, and prays for a decree establishing that no lien exists upon the property of appellant by reason of the mortgage securing said note, and canceling said mortgage and note; that he have judgment for the amounts paid in 1923 and 1924, in the sum of $ 3,500; and for such further relief as is just and equitable in the premises.

As to this petition appellee filed a motion to dismiss, in eight divisions. In each division, each count is attacked on the ground that the facts therein stated do not constitute a cause of action, or entitle the appellant to relief demanded. Thirteen specifications are made under each division of this motion. To set them out in extenso would extend this opinion to unusual and unnecessary length. The questions raised therein will be treated later in the opinion, without especially pointing out the subdivisions of the motion by which they are raised.

No question is raised as to the correctness of this proceeding, whether the end desired to be accomplished here can be reached by this kind of proceeding, or whether such an action would lie, at the time this proceeding was commenced. We therefore give no attention to these propositions.

The first error relied upon for reversal is thus set out by appellant in his brief and argument:

"Under the statutes of this state, the maker of a negotiable instrument transferred otherwise than for a valuable consideration can set up, as against said transferee, any claim he had against the transferor when he first learned of the assignment, and, therefore, Benton could set up against Morningside College any claim which he had against Payne when he first learned that his note had been transferred to Morningside College, since the college received said note as a gift."

It is to be remembered that, under the new equity practice rule, established by the Code of 1924, a demurrer to a pleading has passed into the discard, and a motion to dismiss has been substituted therefor. The motion to dismiss occupies the same position and has the same force and effect as would the demurrer under the former practice, and the making of this motion confesses, as did the demurrer under the former practice, all facts in the pleading well pleaded, but does not confess conclusions of law set out in the pleading, or conclusions of fact, except where the facts from which the conclusions of fact logically follow, are set out.

There is nothing in the pleading to show that the note accompanying the mortgage in controversy was negotiable. Appellant, in his argument in the statement of error above set out, refers to a negotiable instrument, but in his brief he cites decisions and Iowa statutes governing nonnegotiable instruments; so that we are at a loss to know whether the note was negotiable or nonnegotiable. Appellant seems, however, in his pleading in the above statement of error, to treat it as a negotiable instrument. To avoid its force as such, he pleads that its transfer was without consideration because said transfer was made to the college as a donation or gift, and for that reason the college was not a bona-fide holder thereof for value.

At this point, the first attack is made on this pleading by said motion. In Paragraph 8 of the first division of Count 2 appell...