Connecticut Mut. Life Ins. Co. v. Endorf

• Decision Date: 12 November 1935
• Docket Number: 43135.
• Citation: 263 N.W. 284,220 Iowa 1301
• Parties: CONNECTICUT MUT. LIFE INS. CO. v. ENDORF et ux.
• Court: Iowa Supreme Court

263 N.W. 284

220 Iowa 1301

CONNECTICUT MUT. LIFE INS. CO. v. ENDORF et ux.

No. 43135.

Supreme Court of Iowa.

November 12, 1935

Appeal from District Court, Clinton County; Frank D. Kelsey, Judge.

An action to set aside the release of a mortgage and re-establish the lien thereof as against a junior lienholder on the ground of mutual mistake. The facts appear in the opinion.

Affirmed.

Hugh H. Shepard and T. A. Kingland, both of Mason City, for appellant.

Miller & Claussen and E. C. Halbach, all of Clinton, for appellees.

ANDERSON, Justice.

This is an action in equity brought by the plaintiff-appellant the Connecticut Mutual Life Insurance Company, against the Endorfs, mortgagors, and Jay Williams, appellee, who holds a judgment against the Endorfs for approximately $900. The mortgage which is involved was dated January 6, 1928 securing a $5,000 note. No payments had been made upon the mortgage, other than some interest, and at the time this action was commenced there was approximately $6,000 due thereon, including delinquent taxes. There was also a second mortgage covering the real estate involved for $4,000, dated July 1, 1931. The defendant Williams procured a judgment in the district court of Clinton county, Iowa, on the 9th day of September, 1931, against title holders, Endorf. It will thus be noticed that Williams' judgment was junior to the lien of both the first and second mortgages. Some time in December, 1933, some negotiations took place between the appellant mortgage holder and the makers thereof, the defendants Endorf having for its purpose the conveyance of the mortgaged premises to the appellant in satisfaction of its mortgage. The plaintiff claims that such negotiations resulted in an oral agreement on or about the 15th day of December, 1933, under the terms of which the defendants Endorf were to execute a conveyance of the mortgaged property to appellant and the appellant was to satisfy its mortgage and return the same to the makers thereof, the Endorfs. The plaintiff claims that under said oral agreement the property in question was to be conveyed free and clear of all incumbrances except the lien of the first mortgage and delinquent taxes. On or about December 15 1933, the conveyance in question was executed by the defendants Endorf, and at the same time what is known in the record as an estoppel agreement, both being prepared by the appellant and executed by the title holders, Endorf. The deed recited that the property was free and clear of all liens and incumbrances except appellant's mortgage and delinquent taxes. The so-called estoppel agreement also contained statements to the effect that the conveyance was executed voluntarily; that the mortgage indebtedness represented the fair value of the property; that no other person was interested directly or indirectly in the premises; and that there were no other liens existing upon the property. The estoppel agreement also contained a further statement that it was not the intention of either of the parties that the title to the real estate should merge to the prejudice of the mortgagee's rights as against junior lienholders. At the time this conveyance and estoppel affidavit were prepared and executed, the second mortgage of $4,000 and the judgment lien of the defendant Williams were still unsatisfied and both were shown upon an abstract of the title which was furnished the appellant. Later a release of the $4,000 second mortgage was secured by the payment to the holder thereof of the sum of $10. After the execution of the deed to the appellant of the mortgaged premises and the execution of the so-called estoppel affidavit, and after they had both been delivered, together with the abstract of title to the appellant, the appellant attempted to obtain from the defendant Jay Williams a release of his judgment. The testimony shows that such was attempted several times, the last time being January 17, 1934, and that Williams refused to release his judgment. On February 10, 1934, the appellant caused the deed to be made of record and also a release of its mortgage. In October, 1934, the appellant brought this action in the district court of Clinton county, Iowa, asking that the release of its said mortgage be canceled, its mortgage reinstated and established as a first lien against the mortgaged property, and that said mortgage be foreclosed and that it have judgment for the amount shown to be due thereon. The appellant basing its right to such relief upon the allegation that the acceptance of the deed and the release of appellant's mortgage was all done under the mutual belief and mistake of law and fact on the part of both plaintiff and the said defendants Endorf that the lien of the judgment of the defendant Jay Williams had been fully discharged by the discharge from all provable debts through a discharge in bankruptcy; and that it would not have accepted the said deed and released the said mortgage had it known that the discharge in bankruptcy of Endorf did not release the lien of the Williams judgment. There was an answer in the nature of a general denial filed by the appellee Williams. Upon submission of the issues thus joined to the court, the court found for the defendant Williams and dismissed the petition of the plaintiff insurance company. The insurance company appeals.

The appellant claims that the mistake was one of both law and fact, and that it was mutual, and that under such circumstances equity will grant relief. There is no question but what in a proper fact situation equity can and will relieve against the consequences of the release of a mortgage and permit suit to be brought thereon, and it will be unnecessary to discuss that part of appellant's argument dealing with this proposition.

The first serious question that presents itself is whether the record sustains the allegations of fact upon which appellant seeks relief. In this case appellant pleads the making of an oral contract under which it was agreed that the mortgaged premises should be conveyed to it free of all incumbrances except its mortgage, and that plaintiff should discharge its note and mortgage and pay $10 to obtain a release of the second mortgage. It is further alleged by appellant that in such oral contract the Endorfs represented that there were no liens on the premises other than the first and second mortgages, and that the Williams judgment had been discharged in bankruptcy. There is no allegation of fraud or misrepresentation. The mutual mistake upon which appellant bases its claim for relief is bottomed upon the alleged oral contract, and we will first inquire as to the proof which plaintiff claims sustains its allegation of a mutual mistake. The negotiations leading up to the making of the alleged oral contract were conducted by one Henderson, who was acting in some capacity as agent for the appellant company. He, Henderson, testifies that he was asked by the company to obtain the deed and estoppel affidavit and the release of the second mortgage. He testifies that he had called upon the Endorfs several times during a two-year period, but did not talk with them in detail as to the matter of obtaining the conveyance from them and the release of the second mortgage. The conveyance and the estoppel agreement were not even presented to the Endorfs by Henderson, the agent. He mailed them to a banker friend of his, a Mr. Rutenbeck of Lowden, who knew the Endorfs, and who told Henderson he would have no difficulty in getting a deed. Rutenbeck obtained the signatures of the Endorfs to the two instruments. Henderson further testifies that he did not remember whether he personally had negotiations or interviews with Mr. Endorf as to the details leading up to the execution of the deed and estoppel agreement. Rutenbeck, who obtained the signatures of the defendants Endorfs, was not a witness upon the trial, and he is the only one other than the Endorfs who could have testified as to the negotiations or details, if there were any, looking to the execution of the deed and the release of the mortgage. Endorf testified that when he gave his deed on December 15, 1933, he did not know what liens were on the place. " I didn't guarantee to these people there weren't any but they took it that way. I and Mrs. Endorf didn't guarantee it. I took their statement for what the liens were. I didn't tell those people what the liens were on the place. I didn't know whether this judgment was a lien on the land or not. I never knew. I don't know that now. I have never told anybody that it wasn't a lien." And Mrs. Endorf testified, " We didn't make any guarantee to Mr. Henderson of any kind as to how the title of our land stood. I didn't know as a matter of fact, when I signed that whether the land was free of liens or not. We didn't tell him what to put in the deed or the affidavit." Mr. Endorf further testified that no one said anything about the Jay Williams judgment. " There was nothing...