Corn Belt Sav. Bank v. Kriz

• Decision Date: 15 May 1928
• Docket Number: 38641
• Citation: 219 N.W. 503,207 Iowa 11
• Parties: CORN BELT SAVINGS BANK, Appellee, v. EMMA KRIZ et al., Appellants; EDWARD KRIZ et al., Appellees
• Court: Iowa Supreme Court

219 N.W. 503

207 Iowa 11

CORN BELT SAVINGS BANK, Appellee, v. EMMA KRIZ et al., Appellants;

EDWARD KRIZ et al., Appellees

No. 38641

Supreme Court of Iowa, Des Moines

May 15, 1928

REHEARING DENIED DECEMBER 14, 1928.

Appeal from Linn District Court.--F. O. ELLISON, Judge.

Foreclosure of mortgage of property owned by Emma Kriz, for one note of $ 1,300, signed by defendants Edward Kriz and Emma Kriz, then husband and wife, two notes for $ 1,200 each, signed by Edward Kriz, and one for $ 353, signed by Edward Kriz. Defendant Rose Kriz is the holder of a subsequent mortgage. Defense and cross-petition by Emma Kriz that the action is premature; that the mortgage was not intended to secure any note except the joint one for $ 1,300; that the clause in the mortgage whereby the mortgagors purported to covenant to pay all other indebtedness that the mortgagee might hold or acquire against either mortgagor under which security for the other notes is claimed, was not agreed to; that the signature of defendant wife to the instrument incorporating it was procured by fraud. Defense by Rose Kriz that she took her subsequent mortgage for $ 1,900 in reliance upon plaintiff's representations that it would be subject only to $ 1,300 owed plaintiff. Decree for plaintiff. Emma and Rose Kriz appeal.

Affirmed.

L. D Dennis, for Emma Kriz, appellant.

Crissman & Linville, for Rose Kriz, appellant.

Ring & Hahn and C. J. Lynch, for Corn Belt Savings Bank, appellee.

Frank C. Byers, for Terry-Durin Company, codefendant, appellee.

MORLING J. STEVENS, C. J., and DE GRAFF, ALBERT, KINDIG, and WAGNER, JJ., concur.

OPINION

MORLING, J.

The controverted covenant of the mortgage reads:

"The said mortgagor hereby covenants * * * second to pay all other indebtedness that the mortgagee may hold or acquire against said mortgagor, or either of them, and pay any and all notes and other obligations which the mortgagor, or either of them, may at any time be owing the mortgagee during the existence of this mortgage."

Emma and Rose Kriz claim the existence of confidential relations between them and plaintiff's cashier, Sadowsky, who procured execution of the mortgage sued upon, and who also drew or supervised the drawing of the second note and mortgage held by Rose Kriz. Emma Kriz claims that Sadowsky represented the mortgage sued upon to be, in substance, in the form of a preceding mortgage, securing $ 1,300 only of the indebtedness now sued for, and that the blanket clause was concealed from her.

Sadowsky was director and reader in the Christian Science Church, of which defendant Emma and her husband were members for fourteen years. She says she was intimately acquainted with Sadowsky, and he was one of her confidential advisors. Plaintiff held a note originally given for $ 2,000, secured by an ordinary mortgage on the property in question, signed by Edward and Emma Kriz, on which $ 700 had been paid. Emma and Edward Kriz had domestic difficulties, and in contemplation of divorce, Edward conveyed to Emma the property in question. Emma consulted Sadowsky concerning her troubles, and sought his help, which he promised to grant, and pursuant to which he interviewed Edward Kriz. He says that, after investigation, he concluded that there was fault on both sides, and that, when Emma Kriz found he was not quite as sympathetic with her, she did not come to him any more. Emma says that, in the latter part of 1925, or early part of 1926, Sadowsky informed her that the mortgage would have to be renewed. In another place she says that she received nothing favorable from Mr. Sadowsky concerning reconciliation, and that, after she discussed with him her domestic difficulties, he said that the $ 1,300 mortgage on the 40-acre farm had to be renewed. "He had it all ready for me." Sadowsky handed her the mortgage. Her testimony is that she was so affected by her trouble with her husband, "crying terribly," and so nearsighted that she could not see anything in the mortgage except what was in large print.

"I could see $ 1,300. I finally told Mr. Sadowsky I couldn't read it. * * * He said it was not necessary to read it; he said the form was the same * * * as the other, except that it was made in a later year."

He did not say that it was for a greater sum than $ 1,300. She says that she knew her husband had borrowed money from the bank, prior to signing the note, but did not know the amount; that she had the new mortgage in her hand possibly an hour; that she did not remember whether Sadowsky asked her to read it. "I knew enough that I should read it. * * * I knew the old mortgage was all right." She says:

"When I close my right eye and look with my left, I can't read anything before me. After I commenced to cry, my eyes were very swollen. I had to look from the corner of my eyes. It was very difficult for me to see. I turned the mortgage twice in my hands, and tried to look out of the corners of my eyes; and the only thing I could see was the figures $ 1,300. I then advised Mr. Sadowsky I couldn't read it."

She also says: "Outside of my crying, my vision then was about the same as it is now." "While on the witness stand, I have read every word of the note and mortgage." Asked whether there was a part of the mortgage, as she read it on the stand, that she did not know was in it when she signed it, she quoted the clause in question. She says that she knew the other mortgage was for $ 1,300, but was not told that the new one was for a greater sum.

"When Mr. Sadowsky told me this mortgage was in form the same as the prior mortgage, except of a later year, I still hesitated. He then went and got a mortgage and showed it to me, of prominent people in our church, and said this mortgage was in form exactly like these people signed. It never occurred to my mind that he would do anything else but what was right. I then signed it, * * * because of the representations made by Mr. Sadowsky, and because of the confidential relations then existing between us."

Why she hesitated, or why other mortgages were shown to her, if they were not discussing the blanket clause (as will be seen, Sadowsky claims), is not explained.

The note given at this time is dated February 16, 1926, and is for $ 1,300, due in five years, with interest payable semiannually. The husband was not there when the wife signed the note and mortgage. At that time, plaintiff held three other notes given by Edward Kriz, one dated October 26, 1925, for $ 1,200 and interest, payable on demand, and secured by "Winter-Kriz stock" as collateral; another for $ 1,200, dated November 12, 1925, payable on demand, secured by the stock mentioned; a third for $ 353, dated November 30, 1925, payable on demand. The present suit is to foreclose for these notes, as well as the new $ 1,300 note. Sadowsky testifies that the collateral was not sufficient; that, in making the loans, he took into consideration the land in question, and that:

"It was the understanding between us that, so long as these notes were unpaid, the property should not be transferred or incumbered. I knew at that time that Kriz was only half owner of this 40-acre piece of land."

He makes no claim that the transfer to Emma Kriz was made to defraud the bank. Sadowsky says that he tried to be an advisor to both, that:

"I said, 'Mrs. Kriz, you know we loaned this money to your husband on the strength of his repeatedly telling us the property is unincumbered, and shall remain unincumbered as long as the indebtedness remains;' and I said, 'You know it, and this covers all of them, and I think it is only fair to the bank to ask this of you.' We talked about the matter, and finally I said to Mrs. Kriz, 'You don't have to sign it.' I said emphatically, 'You don't have to sign it,' and I further said, 'I don't want you to think there is any compulsion about it.'" (Mrs. Kriz denies such an agreement).

Sadowsky further testifies that he said to her:

"'Before you sign this mortgage, you better take it and read it over,' and handed it to her. After she stood there fully three quarters of an hour, around by herself,--she wouldn't even sit down; and she picked up the paper and was reading it, holding it very close to her eyes * * * Then she asked about this particular clause, and I explained it further. * * * This was after I had gone over the matter with her in regard to the three notes. She inquired what they were, and had made a number of inquiries when she was at the bank at different times. It was explained to her, after the mortgage was made, and before she executed it, that this mortgage was to cover these three notes. I said nothing about this mortgage was to be on the same form as the prior $ 2,000 mortgage, but did tell her that it was a new form."

He made the mortgage to recite a consideration of $ 1,300. The defeasance clause mentioned only the $ 1,300 note. He says he had been assured by counsel that the blanket clause was legal, and covered any other indebtedness Kriz might owe.

"So long as I had legal advice on that, I did not have to express the whole consideration in the mortgage. Q. In other words it is your thought that this particular mortgage and all of...