Downey v. Gifford

• Decision Date: 13 March 1928
• Docket Number: 38661
• Citation: 218 N.W. 488,206 Iowa 848
• Parties: W. A. DOWNEY, Appellee, v. FRANK H. GIFFORD, Administrator, Appellant
• Court: Iowa Supreme Court

218 N.W. 488

206 Iowa 848

W. A. DOWNEY, Appellee, v. FRANK H. GIFFORD, Administrator, Appellant

No. 38661

Supreme Court of Iowa, Des Moines

March 13, 1928

REHEARING DENIED OCTOBER 19, 1928.

Appeal from Poweshiek District Court.--D. W. HAMILTON, Judge.

Suit to establish satisfaction of mortgage on personal property. Decree for plaintiff. Defendant appeals.

Affirmed.

C. H E. Boardman and J. H. Patton, for appellant.

Rayburn & Rayburn and Korf & Korf, for appellee.

MORLING J. STEVENS, C. J., and DE GRAFF and ALBERT, JJ., concur, KINDIG, J., concurs in result. WAGNER, J., not participating.

OPINION

MORLING, J.

The ultimate question is whether an interest installment of $ 1,500, due October 1, 1924, for which a certificate of deposit was issued by the Merchants National Bank of Grinnell, and retained by it "in escrow" until after its failure, was discharged or paid thereby; or perhaps, more properly, Who must bear the loss on the certificate caused by the failure of the bank?

Defendant's intestate sold the hotel and personal property in question, located in Grinnell, on contract. The Monroe Hotel Corporation (hereinafter called "the corporation") became the owner of the vendee's rights thereto. The corporation objected to the vendor's title to the real property, because of a reservation in an antecedent deed. By written "escrow" agreement, dated September 17, 1924, a conveyance and note and mortgage for the balance of the purchase price, $ 60,000, all dated April 1, 1924, were deposited, with the abstract, with the Merchants National Bank, pending the determination of merchantability, which, by the agreement, was submitted to the district court for adjudication. On September 29, 1924, the district court, in deciding on the agreed case, declared the title unmerchantable. By the terms of the note, an installment of interest, amounting to $ 1,500, would become due October 1, 1924. Mr. Pulliam was the manager of the corporation. Mr. Johnson, of Oskaloosa, was its attorney. Mr. Patton was attorney for defendant. Mr. Pulliam testifies without contradiction:

"Following the trial of the case, I recall a conversation between myself and Mr. Patton, as attorney for Mr. Gifford [defendant], about payment of interest that would fall due on the 1st day of October, 1924. * * * Mr. Patton suggested that it be put up in interest-bearing paper, so whoever it fell to, or belonged to, and the settlement was finally made so they would be getting some interest on the money held up. * * * We were ready to pay the interest at that time. * * * There was an escrow agreement or contract that Mr. Patton had drawn up while we were in his office. We went down to the bank [Merchants National Bank] to carry out that escrow agreement. * * * I wrote a check for the corporation to the bank for $ 1,500. The bank made the payment for $ 1,500. They issued a certificate of deposit for $ 1,500 in Mr. Gifford's name. * * * That certificate of deposit was not delivered to Mr. Gifford. It was delivered to the * * * Merchants National Bank. * * * I had a reason for drawing the check to the bank, and not to Mr. Gifford. I had confidence in the bank, but that was not the reason. I put it up to Mr. Patton just in the form it was. It was agreed to by Mr. Patton and Mr. Johnson and I. * * * Whoever made the suggestion, I agreed to it and carried it out. I would have been glad to have given Mr. Gifford the $ 1,500 that day, but the reason I could not was because of the correcting of the title."

The "escrow" agreement of September 17, 1924, recited that the deeds and bill of sale for the property and the $ 60,000 note and mortgage were "deposited with the Merchants National Bank of Grinnell, Iowa, in escrow, pending the decision of said district court as to the questions submitted to said court in said agreed statement of facts, said papers to be held in escrow by said Merchants National Bank until such decision and upon a decision by said court, the Merchants National Bank to then deliver said warranty deed, bill of sale, and two quitclaim deeds to the Monroe Hotel Corporation of Iowa, and deliver to Frank H. Gifford, administrator, said note and mortgage."

By the "deposit in escrow" agreement of October 1, 1924, it is provided:

"The inclosed certificate of deposit issued by the Merchants National Bank of Grinnell, Iowa, for $ 1,500, dated October 1, 1924, and payable to Frank H. Gifford, administrator * * * being the interest due October 1, 1924, on the $ 60,000 promissory note executed by the Hotel Monroe Corporation of Iowa and payable to said administrator, and now on deposit in escrow with said bank, is to be kept by said bank on deposit until such time as said $ 60,000 note and mortgage securing same is released to said administrator under the agreement accompanying the deposit of said note and mortgage."

In the transaction of October 1, 1924, the Monroe Hotel Corporation made its check for $ 1,500, dated October 1, 1924, payable to Merchants National Bank. It had on it the notation, "In payment of int. to F. H. Gifford Admr. due Oct. 1-1924." The certificate of deposit of Merchants National Bank, dated October 1, 1924, "certifies that F. H. Gifford, Admr. has deposited in this bank payable to the order of self $ 1,500 * * * payable in current funds when properly endorsed. Bears interest at the rate of 5 per cent, per annum, payable 3, 6, 9 or 12 months after date. * * * No interest after one year."

The deposit agreement and the certificate were inclosed in an envelope, on which was written, by agreement of the parties concerned:

"The certificate inclosed $ 1,500 payable to Frank H. Gifford Admr. is subject to escrow agreement inclosed. This to be opened only by authority of said administrator and the Monroe Hotel Corporation."

A suggestion had been made of the possibility of getting quitclaim deeds which would remove the objection to the title. During October, 1924, defendant's attorney procured such deeds. He testifies that he told Pulliam:

"We will send you the deed and the mortgage and the quitclaim deeds from the Grinnell heirs and from F. H. Gifford, and the abstract. We will send them all down at one time; have the abstract showing the quitclaim deeds and showing the deed from Gifford, Admr. to the Monroe Hotel Corporation and expedite the matter, and not require two sendings of the abstract and two costs in bringing it forward."

Pulliam said he would send the deeds to his attorney, to which defendant's attorney replied that, before this was done, he wanted them recorded. He had them recorded October 28, 1924, and the next day took them to Pulliam, saying:

"'Now the quitclaim deeds are now a matter of record, and the title is corrected. I want all these papers released.' * * * Before he would do anything further with it, he wanted an appraisement made of that personal property, so as to separate what the mortgage actually covered and what was subsequently added to the personal property. I said to him, in substance, that could make no difference in the clearing of the title and releasing of these escrow papers and turning over to Mr. Gifford the certificate of deposit. * * * The only objection he had then to releasing certificates of deposit * * * was, he wasn't going to do it until an inventory was made of the personal property."

Mr. Patton gave the quitclaim deeds to Mr. Pulliam, who submitted them to Mr. Johnson, at Oskaloosa. Mr. Patton says that his recollection is that Mr. Pulliam "delivered these deeds back to me, saying he would do nothing with them until that inventory was made. I have had those deeds in my possession ever since." (The evidence is in conflict as to who held the deeds.)

The original contract is not in the record. An abstract of title was in the bank, and it is assumed in the evidence that the abstract, properly continued, was to be furnished. Mr. Patton says:

"I had an abstract of title at that time. The abstract of title had, at a prior date, been deposited, under an agreement with Mr. Gifford, as administrator, and the Monroe Hotel Corporation, sealed up in the Merchants National Bank, and was there at the time I was requesting it to be delivered. The abstract of title did not show a merchantable title, because it was, under this agreement, sealed up in the bank. The abstract of title had been continued previously for the purpose of this sale, for the purpose of making the deed. This was some time in 1923. It had been brought up to the date of the escrow agreement. * * * Q. No abstract of any kind was tendered to Mr. Pulliam, or the Monroe Hotel Corporation, or their attorney, showing any of those facts, was there? A. Well, unless my demand that the abstract and the other papers should be released and delivered would constitute a tender."

Defendant's attorney testifies also:

"There was also an abstract of title to the Monroe Hotel * * * These papers were placed in the Merchants National Bank of Grinnell, Iowa. They stayed there until April 6, 1925."

On the record, it must be found that the abstract of title, properly continued, was not furnished until April 6, 1925."

The Merchants National Bank did not open its doors on or after November 1, 1924. On April 6, 1925, an agreement between the defendant and the corporation (set out later) was made, by which, on performance of specified conditions, the personal property was to be discharged from the mortgage.

The $ 60,000 note has indorsed on it:

"The interest due on this note on October 1, 1924, is represented by a C. D. in the Merchants National Bank of Grinnell, Iowa, as an escrow deposit awaiting determination as to its value and who shall stand the loss caused by the failure of said bank."

Defendant argues, in substance, that the...