First National Bank of Van Buren v. Hoover

• Decision Date: 06 October 1923
• Docket Number: 24,727
• Citation: 218 P. 1003,114 Kan. 394
• Parties: THE FIRST NATIONAL BANK OF VAN BUREN, ARK., and W. T. MAXWELL, Bank Commissioner of the State of Arkansas, Appellees, v. N. N. HOOVER and LUCY L. HOOVER, his wife; JOEL WOOD, and the LEOTI LAND COMPANY, Appellants
• Court: Kansas Supreme Court

218 P. 1003

114 Kan. 394

THE FIRST NATIONAL BANK OF VAN BUREN, ARK., and W. T. MAXWELL, Bank Commissioner of the State of Arkansas, Appellees, v. N. N. HOOVER and LUCY L. HOOVER, his wife; JOEL WOOD, and the LEOTI LAND COMPANY, Appellants

No. 24,727

Supreme Court of Kansas

October 6, 1923

Decided July, 1923.

Appeal from Wichita district court; ROSCOE H. WILSON, judge.

Judgment affirmed.

SYLLABUS

SYLLABUS BY THE COURT.

1. CONTRACT -- Joint Adventure -- Between H and M to Handle Peaches -- M to Buy, and H to Sell--Money Borrowed by M to Buy Peaches a Private Debt of M--Not a Joint Debt of H and M H and M undertook to handle peaches during the peach season and by their agreement M was to buy the peaches and H was to look after selling them and at the end of the selling season any profits or losses were to be shared equally. Held, money borrowed by M on his own account for the purchase of peaches was the debt of M and not the joint debt of H and M.

2. SAME--Material Alterations in Real-estate Mortgage--Mortgage Nonenforceable. H executed a real-estate mortgage to secure his note to a bank and sent it to the cashier. At the time he did not have with him the exact amount of his note, the due date, nor the rate of interest and left blanks for those items and he wrote the cashier to fill in the blanks before filing it for record. The cashier filled the blanks according to H's instructions and afterwards, and without the knowledge or consent of H, altered the mortgage by increasing the amount and so as to show that it secured not only H's note to the bank, but also a note which the cashier had given to the bank. Held, that the alterations rendered the mortgage nonenforceable.

3. SAME--Service by Publication--Voluntary General Appearance--Jurisdiction of Trial Court. Where a suit was filed upon a promissory note and to foreclose a mortgage and the defendant, without objecting to the nature of the process upon him, filed an answer setting out all his defenses and the case was tried on its merits, held, that the court had jurisdiction to render any judgment proper under the pleadings and evidence without regard to the nature of the process served upon the defendant.

H. A. Russell, and Stanley L. Smiley, both of Scott City, for the appellant.

W. C. Dickey, of Leoti, and E. L. Matlock, of Van Buren, Ark., for the appellees.

OPINION

HARVEY, J.:

This is a suit to foreclose a mortgage. The case was tried to the court, who made exhaustive findings of fact as follows:

"1. N. N. Hoover and E. E. Morris, in the spring of 1919, entered into an agreement whereby Morris was to purchase peaches in the vicinity of Mountainburg, Arkansas, and Hoover was to market such peaches, and profits and losses were to be divided equally between them.

"2. That at such time, and until about June 1, 1920, Morris was cashier of the Bank of Mountainburg.

"3. Morris was cashier of the Bank of Mountainburg, from the time of its organization and for several years had on the books of said bank what he termed a 'peach account.' It was his custom to draw checks of the bank for the purchase of peaches, and charge such checks to such account and to credit such account with the proceeds of the sales. The purchase of the peaches in 1919 were handled in this same manner.

"4. There was no agreement by which Hoover was to furnish any capital for the purchase of the peaches, and he did not know how the purchases were financed by Morris.

"5. At the end of the season the 'peach account' showed an overdraft of $ 6,800.

"6. Morris and Hoover had a meeting in September, 1919, at which time it was ascertained that the losses on the peach business amounted to $ 6,800.

"7. On September 18, 1919, Hoover executed his note to the Bank of Mountainburg for $ 3,400, to cover his half of the losses. Morris, as cashier, agreeing that the bank should loan Hoover that amount and the loan was approved by the Discount Committee of the bank. Morris, on the same day, executed his note to the Bank of Mountainburg for $ 3,400.

"8. The proceeds of said notes were applied on the overdraft for $ 6,800 on the 'peach account.'

"9. Later, Morris notified Hoover that the Bank Commissioner was insisting on security for the two notes; that he had given security for his note, and asked Hoover to execute a mortgage on his Kansas land, to secure his note.

"10. Hoover, on October 12, 1919, executed a mortgage on the land in question, leaving blank the amount of the consideration and the description of the note secured as to the rate of interest and the date of maturity. The mortgage as executed by Hoover recited: that it was given to secure 'one promissory note dated the 18 day of Sept. 1919 payable after date, with interest at the rate of per cent per annum from date, being made by the party of the first part and payable to the party of the second part.'

"11. Such mortgage was sent by Hoover to Morris with these instructions: 'There are several blanks in the mortgage which I have not the information with me to fill, but you can easily fill them in before filing it for record.'

"12. Morris filled out the mortgage to secure the $ 3,400 note of Hoover's and afterwards altered the mortgage so that it secured both the Hoover and Morris notes.

"13. The name of E. M. Hoover was added to the mortgage after its delivery to the Bank of Mountainburg, and the acknowledgment changed to show that E. M. Hoover was the wife of N. N. Hoover.

"14. E. M. Hoover was not the wife of N. N. Hoover, and the wife of N. N. Hoover did not sign or acknowledge the mortgage.

"15. The Hoover note was negotiated to the First National Bank of Van Buren, before maturity, in the due course of business, and the mortgage executed by Hoover was at such time delivered to the First National Bank of Van Buren.

"16. No assignment of the mortgage to the First National Bank of Van Buren has been recorded in the office of the register of deeds of Wichita county, Kansas.

"17. The Hoover mortgage was recorded in the office of the register of deeds of Wichita county, Kansas, on November 20, 1919.

"18. The Hoover note was executed in the state of Arkansas, and the mortgage was executed in the state of Florida, and sent to Morris at Mountainburg, Arkansas, with authority to fill in the blanks in the mortgage.

"19. Morris, as cashier of the Bank of Mountainburg, requested Hoover to make a payment on his note and Hoover, on February 11, 1920, authorized a sight draft for $ 2,500, which was drawn on that day, payable to the Bank of Mountainburg. The draft was paid by Hoover and at that time he had no notice or knowledge that the note and mortgage had been transferred to The First National Bank of Van Buren.

"20. $ 2,000 of the amount realized from the sight draft was paid to The First National Bank of Van Buren.

"21. In 1920, Hoover allowed Morris to use his list of customers during the berry season, the business being conducted in the name of N. N. Hoover & Company, under an arrangement whereby Hoover was to share in the profits. $ 1,000 of the profits arising from this transaction was paid by Morris to the Bank of Mountainburg, to be applied on Hoover's note.

"22. That the $ 1,000 so paid was paid by Morris as the agent of Hoover and Morris at that time had actual knowledge that the Hoover note and mortgage had been previously assigned to The First National Bank of Van Buren, and was not owned by the Bank of Mountainburg.

"24. That all matters between Hoover and Morris, relating to the 'peach deal,' were fully settled on September 18, 1919.

"25. That N. N. Hoover did not consent to the alteration of the mortgage and had no knowledge thereof until some time during the fall of 1920."

The court also made conclusions of law as follows:

"1. The transaction between N. N. Hoover and E. E. Morris relating to the purchase and sale of peaches in 1919, constituted a joint venture rather than a partnership.

"2. The indebtedness represented by the $ 6,800 overdraft in the Bank of Mountainburg in the 'peach account' was the debt of E. E. Morris and not the joint debt of E. E. Morris and N. N. Hoover.

"3. The payment by N. N. Hoover to the Bank of Mountainburg of $ 2,500 was a payment on his note for $ 3,400, and he is entitled to a credit thereon for such amount.

"4. The $ 1,000 payment made to the Bank of Mountainburg by E. E. Morris, for N. N. Hoover, did not constitute a payment on the $ 3,400 note of N. N. Hoover.

"5. The alterations of the Hoover mortgage were such as to render it void."

In accordance with these findings and conclusions the court rendered a personal judgment against N. N. Hoover and in favor of plaintiffs for $ 1,240.78, being the balance due on the $ 3,400 note executed by Hoover, after crediting his $ 2,500 payment, and decreed the mortgage to be void because of the material alterations made therein, and ordered it canceled of record. Both parties have appealed to this court and it will avoid confusion to refer to them as plaintiffs and defendants as they appeared in the court below.

The plaintiffs do not question the findings of fact made by the trial court. They complain that the court erred in holding that the transaction between N. N. Hoover and E. E. Morris relating to the purchase and sale of peaches in 1919 constituted a joint venture rather than a partnership, and in holding that the indebtedness of $ 6,800 represented by the overdraft at the Bank of Mountainburg was the debt of Morris and not the joint debt of Morris and Hoover. Since plaintiffs are claiming to be indorsees of the notes for value before maturity and holders of them in due course, it is difficult to see what standing they have to go back of the notes and say that the notes on their face do not represent the true liability...