Fort v. Colby

• Decision Date: 13 December 1913
• Citation: 144 N.W. 393,165 Iowa 95
• Parties: WILLIAM J. FORT, Appellee, v. MARY E. COLBY, CHARLES HAYDEN COLBY and C. H. COLBY, Appellants; and JOHN B. DANNER, EDWARD O. EVANS, ABBIE L. EVANS, WALTER CANADY, MARY A. CRAVENS, ALBERT K. KLINGBEIL, GEORGE B. DANNER and MARTIN L. MICKLEY, Appellees
• Court: Iowa Supreme Court

144 N.W. 393

165 Iowa 95

WILLIAM J. FORT, Appellee, v. MARY E. COLBY, CHARLES HAYDEN COLBY and C. H. COLBY, Appellants; and JOHN B. DANNER, EDWARD O. EVANS, ABBIE L. EVANS, WALTER CANADY, MARY A. CRAVENS, ALBERT K. KLINGBEIL, GEORGE B. DANNER and MARTIN L. MICKLEY, Appellees

Supreme Court of Iowa, Des Moines

December 13, 1913

Appeal from Wright District Court.--HON. C. G. LEE, Judge.

ACTION in equity to declare the conveyance of certain lands to be a mortgage, and to permit plaintiff to redeem therefrom. It is also prayed that defendants be required to account for rents and profits of said lands. There was a trial to the court and decree for the plaintiff, permitting him to redeem, and finding defendants chargeable with certain rents and profits. From the granting of this relief, the defendants Colby have appealed. In settling the account for rents and profits, the court allowed the defendants credit for certain permanent improvements made by them on the lands, and, from this part of the decision, the plaintiff appeals. The appeal by the Colbys having been first perfected, they alone will be termed appellants. The material facts as shown or claimed by the respective parties are stated in the opinion.

Affirmed.

Herrick & Herrick and Guernsey, Parker & Miller, for appellants.

Nagle & Nagle and Fort & Fort, for appellees.

OPINION

WEAVER, C. J.

The business transactions between the parties began in June 1901. Prior to that time they had no personal acquaintance. Plaintiff was then the owner of 4,449 acres of land, of which 340 acres were situated in Illinois, and the remainder in the counties of Marshall, Wright, and Dickinson, in Iowa. He had become involved in great financial difficulties. His lands were heavily incumbered by mortgage. One or more of the mortgages had been foreclosed; but the time of redemption had not yet expired. There were also judgment liens to be cared for and other outstanding indebtedness. His personal property was mortgaged, and his only apparent hope of relief was in finding some person or persons to whom he could sell or pledge the property mentioned or some of it on terms which would enable him to save the margin of value therein after paying or otherwise providing for his indebtedness. The aggregate amount of liens upon the lands was then about $ 155,000. At this juncture negotiations by correspondence and personal interview were opened between plaintiff and C. H. Colby, acting as agent and business manager for his mother, Mary E. Colby. Resulting therefrom, the plaintiff on December 3, 1901, conveyed all said lands by warranty deeds to Mary E. Colby. On the same day, and apparently as part of the same transaction, Colby executed and delivered to plaintiff a writing in the form of a lease of all said lands for five years, with an exclusive option to plaintiff to purchase the same at prices scheduled therein. More particular reference to this contract and the subsequent dealings and correspondence between the parties will be made in the further progress of this opinion.

This suit was begun September 9, 1907. Stated as briefly as practicable, the plaintiff claims and alleges that the Colbys undertook or agreed to lend or advance to him the money necessary to meet his obligations to the extent of $ 155,000, and that the deeds made by him to Mary E. Colby and the contract or lease executed by her to him were intended by both parties thereto solely as a mortgage or security for the repayment of said loan. He further alleges that at the time of said transaction he was laboring under great mental distress, rendering him unfit for the transaction of business of such magnitude, and the Colbys took advantage of his condition and necessities with the wrongful intent to obtain conveyance of the title to the lands, and eventually to deprive him thereof; that in pursuance of such purpose C. H. Colby sought him out, and solicited the opportunity to make the loan, and finally orally agreed to lend to plaintiff $ 155,000 for a term of five years at an agreed rate of interest, and that at the request of said Colby plaintiff accompanied him to the office of Colby's attorney, who prepared the papers for execution. He further says that Colby refused to accept security in the usual form, and insisted upon plaintiff's making deeds of conveyance absolute in form to secure the loan, claiming this was the better and more effective way, and plaintiff, believing in the good faith of such proposal and assurance, consented to the terms so imposed upon him. He further says that he himself was without independent counsel or advice, and was misled by the representations of Colby into signing said instruments without comprehending their full import and effect. Referring to later contracts and agreements of which we shall soon make mention, plaintiff makes substantially the same allegations of having been imposed upon and overreached by the statements and promises of the Colbys, and further avers that in July, 1903, and again in April, 1904, the Colbys served him with notice of forfeiture of the contract theretofore made between them. Soon thereafter, he alleges, said appellants insisted that he had lost all rights in the premises, and thereby under stress of his necessitous condition obtained his signature to a so-called relinquishment of his claims. Similar declarations are made as to all of the several writings which he alleges the Colbys obtained from him under the duress of his necessities, and he alleges that each and all of them were but successive steps in the accomplishment of the original scheme to defraud him. He further alleges that the amount of the agreed loan for the payment of his debts was not more than one-half of the value of the lands conveyed; that said defendants retained the whole amount of $ 155,000 in their own hands, paying nothing whatever to him, but agreeing to use and apply it to removal of the liens on his lands, but in violation of said agreement, instead of removing the judgment liens, and redeeming from the sheriff's sales, they took sheriff's deeds thereon to themselves. It is further alleged that the said Mary E. Colby has conveyed much the larger part of said lands to third persons, and that the value of the lands thus conveyed and the rents and profits derived from the lands in controversy are greatly in excess of the amount due from the plaintiff on said loan, and he asks that defendants make due accounting, and that he have decree establishing and confirming his title in the lands which have not been conveyed to third persons, and personal judgment against the Colbys for any balance which may be found in his favor on such accounting.

The Colbys deny all allegations of wrong and fraud, and plead that the deeds were made by the plaintiff and received by the grantee in good faith as absolute conveyances, and not as security. They further aver that the deeds made on December 3, 1901, were made in pursuance of a prior written contract, by which plaintiff undertook to convey to Mary E. Colby all said lands by warranty deed at the agreed purchase price of $ 155,000, which has been paid in full by said grantee in manner provided for in said agreement. It is further alleged that after the making of the conveyances and contract of December 3, 1901, plaintiff, in various instruments in writing, confirmed said deeds as absolute conveyances, and that, by taking leases of said lands from said grantee, and otherwise acknowledging her as the owner of said lands, he has estopped himself from now denying the same.

Trial was had to the court, resulting in a decree for plaintiff, declaring the conveyances to have been made as security only, and requiring the Colbys to account for rents and profits received. The conveyances made by Mary E. Colby to third persons were permitted to stand; but she was required to account for the moneys so realized. In the accounting defendants were given credit for moneys expended in paying off liens on the lands and in making permanent improvements on some of them. Taking all items into consideration, and treating the advancements made by Mrs. Colby as a loan, the court found that she had been fully repaid the amount thereof, with interest, leaving in her hands a remainder or surplus of $ 4,505.60 due the plaintiff, for which sum he was given judgment. It was further decreed that said Mary E. Colby reconvey the remaining unsold lands to plaintiff.

I. Considering first the defendants' appeal, the first fundamental inquiry is, of course, the actual nature of the transaction which culminated in the conveyances made under date of December 3, 1901. Were said deeds intended to be what they appear upon their face--absolute and unconditional conveyances of title--or were they made and delivered as security for the repayment of a loan?

That such an issue presents one of those exceptional cases in which a party is not precluded from denying the usual force and effect of a writing executed by him, and may prove, if he can, a prior or contemporaneous agreement and understanding, by which a deed absolute in form was given and received as a mortgage only, is, of course, too well settled to require discussion. 3 Pom. Eq. (3d Ed.) Sec. 1196.

The primary question we have to consider is whether such agreement or understanding in this case has been established by the evidence. The burden is, of course, upon the party asserting such agreement to establish it, not necessarily beyond a reasonable doubt, but by a fair and clear preponderance of evidence, for, in the absence of showing to the contrary, the presumption is that every writing is what it purports upon its face to be. On the other hand, the intent of the parties to make an absolute conveyance serve the purpose of security for...