Hackett v. Watts

• Decision Date: 03 April 1897
• Citation: 40 S.W. 113,138 Mo. 502
• Parties: HACKETT et al. v. WATTS et al.
• Court: Missouri Supreme Court

40 S.W. 113

138 Mo. 502

HACKETT et al. v. WATTS et al.

Supreme Court of Missouri, Division No. 2.

April 3, 1897.

STATUTE OF FRAUDS — PLEADING — MORTGAGES — SUBROGATION — BONA FIDE PURCHASER.

1. The defense of the statute of frauds is properly raised by a general denial in an action on the contract.

2. An oral agreement to assign as security a contract for land, and to execute a mortgage of the land upon obtaining a deed, is within the statute of frauds. Rev. St. 1889, § 5186.

3. Where the purchaser in a land contract, who had paid the price, deposited the contract with a bank which he owed, and with it an instrument stating that the contract was deposited to secure all indebtedness against him, the instrument created an equitable mortgage of the land described in the contract.

4. Where the deposit of a land contract with a creditor to secure notes constituted an equitable mortgage, and two of the notes were paid by sureties thereon, who released the security to the creditor, the sureties on the other note were entitled, on paying it, to be subrogated to the creditor's rights under the equitable mortgage.

5. The sureties so entitled to subrogation could enforce the mortgage as against one who, with notice that the contract was held by the creditor as collateral, purchased the land from the debtor, and obtained a deed, whether or not such purchaser knew particularly of said sureties' claim.

Appeal from circuit court, Clinton county; William S. Herndon, Judge.

Action by Saul Hackett and another against Lott Watts and others. From a judgment in favor of plaintiffs, defendant John M. Bickel appeals. Affirmed.

This is an action by plaintiffs to recover against the defendant Watts the sum of $5,586.65, paid by them to the Watson Bank as surety for said Watts; to be subrogated to the rights of said bank in and to a certain contract for the purchase of a tract of land therein described, one life policy of insurance, and four hundred shares of stock in the Sioux Valley Stone Company, deposited by said Watts with said bank as collateral security for said debt; to set aside a certain deed from the Missouri Wesleyan Institute to the defendant Bickel for said land; that he be declared to hold title to same for the use and benefit of plaintiffs; and that said land, policy of insurance, and shares of stock be sold, and that the proceeds arising from such sale be applied to the payment of their demand. On the 2d day of March, 1891, defendant Watts purchased from the Missouri Wesleyan Institute a tract of land in the city of Cameron, Mo., at the agreed price of $1,000. The purchase money was paid at the time, but, instead of making Watts a deed for the land, the institute executed to him an instrument of writing by which it obligated itself to execute to him a deed in fee simple by deed of general warranty upon the payment of the purchase money. This instrument, although not acknowledged, was filed for record in the recorder's office of Clinton county, Mo., on the 21st day of September, 1892. Watts built a house on the land at a cost of five to six thousand dollars, and moved into it with his family. On August 18, 1891, Watts desiring to borrow $5,000 from said bank, he applied to the plaintiffs to become his sureties on a note for that amount, and to indemnify and save them harmless from their liability he proposed to transfer to them his contract for the purchase of said land, together with his life insurance policy, and certificates for 200 shares of stock in the Sioux Valley Stone Company. The trial court found that under these conditions plaintiffs signed the note as Watts' sureties, and that he received the money on the note, and at that time deposited with the bank said certificate of stock and said contract. Thereafter, on September 8, 1891, said Watts borrowed of said bank the additional sum of $10,911 on two notes, — one for $5,000, and the other for $5,911, upon which said last-named notes one J. M. Poorbaugh was surety. On the same day said Watts signed and deposited with said bank the following instrument of writing, to wit: "Watson, Mo., Sept. 8th, 1891. The certificates of stock of the Sioux Valley Stone Company herein described as certificate No 83, for 200 shares, and certificate No. 82, for 200 shares, and certificate No. 81, for 200 shares, and certificate No. 58, for 100 shares, and certificate No. 57, for 100 shares, and certificate No. 95, for 200 shares, of the said company (Del. to Watts 12-9-91), and policy in the New York Life Insurance Company No. 417,989 for $5,000.00, an article of agreement hereto attached, are deposited with the Bank of Watson to secure any indebtedness that now appear or shall come against me in any way. Lott Watts. Witness: J. M. Poorbaugh." The bank, at the time said instrument of writing was deposited with it, had knowledge of the previous agreement of Watts with plaintiffs by which said contract was to be held by said bank for the purpose of securing plaintiffs as sureties upon the note signed by them. The notes given by Watts and Poorbaugh were adjusted and settled before the commencement of this suit, and all collaterals released by reason of their adjustment. The policy of insurance was permitted by Watts to lapse and become forfeited by reason of his failure to pay premiums, and, as only one premium was paid on it after forfeiture, it was worthless. The stock in the stone company turned out to be worthless also. On the 31st day of August, 1892, while said contract and other collaterals were held by said bank, Watts, in consideration for the exchange of 200 shares of stock of said stone company, agreed in writing to sell said Cameron property to the defendant Bickel, and said Bickel thereafter, on the 14th day of October, 1892, procured from said Missouri Wesleyan Institute a warranty deed for the consideration, as recited in said deed, of one thousand dollars. Bickel had notice at the time of contracting with said Watts, as well also as at the time of receiving the deed from the institute, that the contract between Watts and the institute, in regard to the Cameron property, was held by the Bank of Watson as collateral security for the payment by Watts of the note upon which plaintiffs were sureties.

The court made a finding of facts substantially as herein stated, and, in effect, held that the deposit by Watts in the Watson Bank of the policy of insurance, certificate of stock in the stone company, and contract with the institute for the Cameron property at the time he received the money on the note upon which plaintiffs were sureties, and the instrument of writing of date September 8, 1891, was a legal assignment of the policy of insurance, and the certificate of stock, and an equitable assignment to the bank of the contract between Watts and the institute for a deed to the Cameron property, of which Bickel had notice at the time he contracted with Watts for the property, and received a deed from the institute therefor, and that, the last two notes having been liquidated, plaintiffs were entitled to the benefit of all the collaterals, and, having paid off the debt upon which they were sureties, were entitled to be subrogated to the rights of the bank. The court rendered the following judgment: "It is therefore ordered and adjudged that the plaintiffs recover of and against the defendant Watts the sum of $5,916.45, with interest at 8 per cent. per annum, and for all costs of this suit; that the same be declared a lien upon said Cameron property and said certificates of stock Nos. 57, 58, 81, and 82; that plaintiff be subrogated to all interests or liens of said bank upon said property, and that such lien be foreclosed against all parties to this suit. It is further ordered that said certificates of stock and said Cameron property be sold by the sheriff of this county for the purpose of satisfying the amount of said judgment and costs, together with costs of sale, and that an order of sale issue for that purpose; that from the proceeds of said sale there be paid, first, the costs and expenses of such sale, next the amount of said judgment and costs, and that the surplus, if any, be paid to John M. Bickel." John M. Bickel then filed motions for new trial and in arrest, which were overruled, and he saved his exceptions, and brings the case to this court by appeal.

S. H. Corn, for appellant. Lewis & Ramsay, for respondents.

BURGESS, J. (after stating the facts).

It is insisted by appellant that the court erred in permitting the plaintiffs to prove their contract with Watts by parol testimony; that the contract, in so far as it was intended to create a lien upon the land in question to indemnify plaintiffs as sureties upon Watts' note to the bank, was within the operation of the statute of frauds, and no action can be maintained upon it. The petition alleges: "That at the time of the execution of said note [upon which plaintiffs were sureties], and as inducement to obtain the signatures of the plaintiffs thereon, said defendant Watts stated and represented to the plaintiffs that he had recently purchased certain lots or tracts of land from the Missouri Wesleyan Institute, a corporation having its place of business at Cameron, in the state of Missouri, and upon which said property said Watts was at the time engaged in making valuable improvements, and that he held a contract for the purchase of said property, which he would assign to plaintiffs to secure them as such sureties; and that as soon as he obtained a formal deed therefor he would execute to plaintiffs a mortgage on such property to secure them, and would, in addition, turn over to them a certain policy of life insurance," etc. The allegations with respect to the assignment by Watts to plaintiffs of the contract for a deed to the Cameron property, and the promise by him to execute to them a formal mortgage on the property as soon as he obtained a deed therefor, being in regard to real estate, the...