Forney v. Gerling, 44711

• Decision Date: 08 April 1967
• Docket Number: No. 44711,44711
• Citation: 426 P.2d 106,198 Kan. 613
• Parties: Vern L. FORNEY, Appellee, v. Paul H. GERLING, Appellant.
• Court: Kansas Supreme Court

Page 106

426 P.2d 106

198 Kan. 613

Vern L. FORNEY, Appellee, v. Paul H. GERLING, Appellant.

No. 44711.

Supreme Court of Kansas.

April 8, 1967.

Syllabus by the Court

In an action by one real estate broker against another for usurious interest charges and slander of title, the record is examined and it is held: (a) The trial court did not err in overruling the defendant's motion for a directed verdict; (b) the trial court did not err in overruling the plaintiff's motion for a directed verdict; and (c) the trial court erred in giving instructions to the jury which were clearly erroneous and prejudicial to the defendant, thereby requiring the reversal of the judgment and the granting of a new trial.

Emmet A. Blaes, Wichita, argued the cause, and Roetzel Jochems, Robert G. Braden, J. Francis Hesse, James W. Sargent, Stanley E. Wisdom, Cecil E. Merkel, Harry L. Hobson, Bruce W. Zuercher, L. D. Klenda, Charles M. Cline, Richard A. Loyd, Stephen M. Blaes and Jack S. Ramirez, Wichita, were with him on the brief, for appellant.

William L. Fry, Wichita, argued the cause, and Vincent L. Bogart and Frank W. Hylton, Wichita, were with him on the brief, for appellee.

SCHROEDER, Justice.

This is a financial fracas between two real estate men, one suing the other in two counts for usurious interest and slander of title. A jury returned a verdict in favor of the plaintiff for a sum of money nowhere supported in the evidence or embraced within the instructions. Appeal has been duly perfected by the defendant specifying trial errors.

Several instructions given to the jury by the trial court are so clearly erroneous as to require reversal of the judgment.

Present counsel for the appellant (defendant below) did not represent him at the trial of this case, and present counsel for the appellee (plaintiff below) were not the first to represent him.

This melee is studded with unconventional financial transactions confounded and intertwined with loans, interest, service fees, commissions, alleged usury, attorney fees, conveyances, mortgages (both first and second), creditors, wives, escrow agent, sister, minor daughter, guardian, real estate men and mistakes by both court and counsel.

In view of the appellant's contention that the trial court erred in failing to sustain his motion for a directed verdict, it will be necessary to review the evidence.

The medley goes something like this:

Prior to February 15, 1961, Forney (plaintiff-appellee) was a real estate broker, and had conveyed the tract of real estate in question to Kester to secure a loan which Kester was going to get for him. Upon the loan being obtained, Kester was to have a twenty-five percent interest in the tract, which was to take effect after the loan was repaid. Also, prior to February 15, 1961, Forney had discussed with Gerling (defendant-appellant) his financial needs. Gerling was Forney's employee holding a license to sell real estate for him as a broker. Forney stated he had an opportunity to sell the tract, and was going to sell it. Gerling stated he thought he could arrange a loan for Forney so that Forney would not have to sell it. Gerling thought he could get this money from his sister. Forney told him to see if he could get it.

Forney was the only witness who testified in the case. The record discloses that in reliance upon Gerling's statement to Forney that he would get Forney the loan at 6 1/2%, Forney committed himself to his creditors. Exhibit '1,' which is the contract between Forney and Gerling, was typed by Forney on the 15th day of February, 1961, in two parts. The first part consisted of four pages in the record on appeal and is signed at the end thereof by Gerling and Forney and their respective wives.

After these signatures at the end, entitled 'Supplement to Gerling-Forney Contract,' is a short paragraph. It is dated the 15th day of February, 1961, and signed by Gerling and Forney.

The first part of Exhibit '1' purports to be a contract wherein Gerling and his wife agree to sell to Forney and his wife the real property in question, the purchase price being the total sum of $39,760.17 to be paid as follows:

'(a) $13,000.00 with interest thereon at the rate of 6 1/2% per annum on the unpaid balance to be paid by parties of the Second Part to the parties of the First Part in monthly installments of $147.62 beginning on the 15th day of March, 1961 and continuing on the 15th day of each month thereafter until paid.

'(b) $26,760.17 with interest thereon at the rate of 6% per annum on the unpaid balance to be paid by the Parties of the Second Part to the parties of the First Part in monthly installments of $439.50, which includes Interest, Principal, Taxes, and Insurance, beginning on the first day of March, 1961, and continuing on the first day of each month thereafter until paid. It is agreed that the above mentioned amount of $26,760.17 represents the unpaid balance of a First Mortgage on the above described property, and should the payments increase or decrease due to an adjustment in Tax or Insurance reserve, payments are to be adjusted accordingly.'

Other provisions in the first portion of this contract are immaterial, except for the fact that the parties agreed to forthwith deliver to the escrow agent a general warranty deed conveying the real property to Forney. The escrow agent thereafter named in the contract was Gerling.

The supplement to the agreement reads:

'It is agreed and understood that the $13,000.00 loan mentioned under Paragraph 2-A is from Mr. Gerling's sister and that this loan is guaranteed by Mr. Gerling to be repaid to her by him in any event, and that in addition to the interest mentioned in the original contract, a service fee of $20.00 per week shall be paid to Paul H. Gerling until the $13,000.00 with interest on the unpaid balance at 6 1/2% per annum has been paid in full. It is further agreed that a minimum fee of $2,000.00 will be paid for this loan.'

The loan from Gerling to Forney came in various ways, part by way of a receipt for a payment of money Forney owed Gerling's credit union, and a part was in cash over a few days, some of which was paid on the closing day of the contract.

Forney testified when the arrangement was made for the loan, the interest was to be 6 1/2% and no other charge was mentioned or indicated at the time; that he thereupon prepared the first part of Exhibit '1.' He testified that the only reason Gerling received title to the property was that it was to be security, in effect a second mortgage; that he gave Gerling title to the property and Gerling agreed to give the title back to him when he paid the $13,000 loan.

On the day the contract between Forney and Gerling was executed, Forney prepared a deed from Kesters to Gerling and notarized their signatures.

Forney further testified it was not until the last minute that Gerling came up with a service fee. On cross examination when asked why he signed the supplement to the contract he testified:

'When I say I was 'under pressure' when I signed Plaintiff's Exhibit 1, I mean I was having demands made on me for money. One of them was Paul Gerling. Mr. Gerling was acting in the capacity of Treasurer of the Community Center Credit Union, demanding money, demanding payment. I did owe money to him. What I mean was I was under pressure from my creditors, that is why I signed the third page. Mr. Gerling was not to receive a commission for making me a loan, this was the only reason he received title to that property was that it was to be the security, in effect, a second mortgage.'

On the 14th day of December, 1961, Forney contracted to sell the tract to Dr. Matthews for $50,000.

On the 15th day of December, 1961, upon request Forney received from Gerling a statement as to what Gerling claimed was due him under the contract.

After the 15th day of December, 1961, by reason of a title opinion Forney learned that Mr. and Mrs. Gerling had conveyed title to the tract of real estate in question to Mrs. Gerling and their minor daughter, contrary to the escrow agreement set forth in the contract.

When Forney talked to Gerling about this Gerling told Forney that he borrowed the money from his daughter, and this was to give her protection, because he was using her money, and so he deeded it to her. (The deed to the daughter was dated October 19, 1961.)

The attorneys for Gerling and Matthews, in accordance with the title opinion requirements of Matthews' attorneys, conducted guardianship proceedings in the probate court to make it possible to close the transaction. By reason of these proceedings Gerling, appointed guardian for his minor daughter, conveyed by guardian's deed, pursuant to court order, the property in question to Forney and his wife on December 29, 1961, upon payment of the balance due under the written contract. The total attorney fee set up in the closing statement for the attorneys of Matthews on December 30, 1961, was $500 (for clearing title, attorney fees, court costs and additional abstracting) at least a substantial portion of which was attributable, according to the record, to the conveyance of the property by Gerling to his wife and minor daughter.

Upon closing the contract Gerling was given a check for $15,098.98, and a closing statement. This statement showed $500 withheld by Matthews from Forney to cover the clearance of title. Gerling did not pay any part of the $500 withheld, nor was he asked to pay any part.

On the 20th day of January, 1962, demand was made by Forney's attorney upon Gerling by letter, the pertinent portion of which reads as follows:

'According to my client's records he has paid to you as interest on said loan ($13,000) the sum of $2,795.05. The contract calls for the payment of $729.78 as interest on said note and contract. This figure represents an overcharge of $2,065.27.

'This letter is a demand upon you to forthwith remit either to the writer or to my client the sum of $4,130.54. If...