Herbold v. Sheley

Decision Date05 April 1929
Docket NumberNo. 38786.,38786.
Citation224 N.W. 781,209 Iowa 384
PartiesHERBOLD v. SHELEY ET AL.
CourtIowa Supreme Court

OPINION TEXT STARTS HERE

Appeal from District Court, Poweshiek County; D. W. Hamilton, Judge.

Action in equity to foreclose a mortgage on real estate. The issues and facts are fully recited in the opinion. There was a decree as prayed, and the defendants Sheley and Tindall appeal. Affirmed.

For former opinion in this case, see 220 N. W. 88.

De Graff, J., dissenting.McCoy & McCoy, of Oskaloosa, and R. J. Smith, of Montezuma, for appellants.

Henry Silwold, of Newton, and Bechly, McNeil & Scovel, of Montezuma, for appellee.

STEVENS, J.

On November 19, 1913, the appellant Tindall executed a note for $12,450, due March 1, 1918, with interest at 5 per cent., to Charles W. Clark, executor, and, to secure the payment thereof, executed a mortgage upon a tract of 103 acres in Poweshiek county. Thereafter Tindall conveyed the mortgaged premises to the appellant Sheley, who assumed and agreed to pay the indebtedness secured by the foregoing mortgage. On February 26, 1920, Sheley sold and executed a deed conveying the same premises to Percy Engle, the grantee assuming and agreeing to pay the balance of $10,000 due on the Tindall mortgage. Before this deed was recorded, and in pursuance of an arrangement between Engle and the Citizens' State Bank of Newton, the name of Engle as grantee in the deed was erased, and that of the Citizens' State Bank of Newton substituted therefor. This deed was filed for record February 24, 1921. As a part of the consideration for the conveyance by Sheley of the mortgaged premises to Engle, the latter executed a note payable to him for $12,765 and a second mortgage on the premises to secure the payment thereof. Subsequently, upon an arrangement presently to be mentioned, the land was conveyed by the Citizens' State Bank to Engle, who, on February 23, 1921, reconveyed the same to the Citizens' State Bank for an expressed consideration of $1 and other valuable consideration. The grantee in the latter deed, in terms, assumed and agreed to pay the balance due on the Tindall mortgage, and also assumed and agreed to pay the second mortgage to Sheley. This deed also contained the following recital:

“This deed is made for the purpose of correcting and perfecting the title in said grantee. Grantor, Percy Engle, reserves his right to repurchase said premises under his contract with said grantee.”

On March 4, 1918, an agreement in writing, extending the time of payment of the Tindall note and mortgage to March 1, 1923, with interest at the rate of 5 1/2 per cent., was entered into between Clark and Sheley. Shortly before the latter maturity, that is, March 1, 1923, E. D. Rayburn, administrator of the Jesse Mackey estate, which owned the Tindall mortgage, demanded payment thereof of the Citizens' State Bank. Full remittance was made to Rayburn, who, as administrator, assigned the mortgage to the Bankers' Trust Company of Des Moines, by which it was duly assigned to the Citizens' State Bank of Newton. The entire transaction appears to have been carried on by correspondence as follows:

Citizens' State Bank. Member Federal Reserve System. Capital and Profits $75,000.00. Newton, Iowa. February 27, 1923. Mr. B. B. Vorse, Vice President, Bankers' Trust Company, Des Moines, Iowa--Dear Blanchard: Mr. Ed Rayburn, Vice President of the First National Bank of Montezuma, forwarded to us a mortgage and note due March First, on which there remains a balance unpaid for $10,000.00, which mortgage covers 103 acres of land in Section 27--27--15. There is also to be included in the papers blank assignment of the mortgage in question.

As a kindness to me I wonder if you will accept the inclosed draft on the Federal Reserve Bank and send Mr. Rayburn your cashier's check for a like amount in payment of these papers, forwarding them to us together with your bill for your services for which I shall be more than glad to make the proper restitution.

With best regards, I am, Very truly your,

[Signed] W. M. Sayre, Cashier.”

February 28, 1923. Mr. W. M. Sayre, Cashier, Newton, Iowa--Dear Wayne: I now enclose note, mortgage and assignment as referred to in yours of the 27th. I have forwarded draft to Mr. Rayburn at Montezuma for $10,000.00, for which we received your draft for like amount. Please note that the assignment is made to the Bankers' Trust Co., instead of in blank. If you will prepare assignment running from us to you, we will be pleased to execute the same for you.

We are glad to have had this opportunity to serve you.

Yours very truly,

[Signed] B. B. Vorse, Vice President.”

Citizens' State Bank. Member Federal Reserve System. Capital and Profits $75,000.00. Newton, Iowa. March 13, 1923. Mr. B. B. Vorse, Vice President, Bankers' Trust Company, Des Moines, Iowa--Dear Mr. Vorse: I filled out the assignment of mortgage blank for which you sent me on the 9th inst. and if you will execute the same and return, I will make it right with you when my ship comes in. Very truly yours,

[Signed] W. M. Sayre, Cashier.”

March 14, 1923. Mr. Wayne Sayre, Newton, Iowa--Dear Wayne: Enclosed find assignment of mortgage executed by the writer and Mr. Pidgeon, our secretary, properly acknowledged. We are very glad to be of any assistance at any time. Yours very truly,

Vice President.”

February 28, 1923. First National Bank, Montezuma, Iowa--Gentlemen: We now enclose check for $10,000.00 to your order, covering papers referred to in yours of the 27th.

+----------------------------------+
                ¦Yours very truly,¦Vice President.”¦
                +----------------------------------+
                

E. D. Rayburn, President, E. B. Williams, Vice Pres. A. C. Heath, Cashier. S. E. Smith, Asst. Cashier. No. 72--564 First National Bank. Capital and Surplus $115,000.00. Montezuma, Iowa. February 27--23. Bankers' Trust Co., Des Moines, Iowa--Gentlemen: At the request of Mr. Sayre of Newton I am enclosing mortgage, note and assignment of the same, Amt. $10,000.00. Mr. Sayre says he will remit interest direct to us so with this understanding you may remit us the $10,000.00 for above.

Very truly yours,

[Signed] E. D. Rayburn, Pres.”

The assignments referred to are in the usual form of such instruments.

On February 28, 1923, by an agreement in writing between the Citizens' State Bank and W. M. Sayre, who was then the holder of the legal title to the mortgaged premises, the time of payment of the Tindall note was extended for five years from March 1, 1923, with interest at 6 per cent., and, on the same day, the note was transferred and mortgage assigned by the Citizens' State Bank to the appellee, Herbold.

Personal judgment was prayed in the petition against Tindall as the maker of the note and against Sheley, who, in the deed conveying the premises, assumed and agreed to pay the mortgage indebtedness. Only a decree of foreclosure was asked as against Sayre, who defaulted. Judgment and decree was entered as prayed.

The material and controlling facts, as disclosed by the testimony of the witnesses, are without serious dispute. There is, however, a sharp difference of opinion between respective counsel as to the conclusions to be drawn therefrom.

The two primary propositions urged by appellants for reversal, that is, that, if the Citizens' State Bank acquired title to the mortgage in controversy for the consideration and in the manner shown by the evidence payment resulted as a matter of law, and therefore appellants were discharged from liability, and that a valid extension of time in favor of the principal, without the knowledge or consent of a surety, operates to discharge the surety from liability, are not challenged by appellee.

The avoidance sought by appellee in this case of the rules stated is also predicated upon sound principle of law or equity. It is insisted by appellee that the conveyance of the legal title to the mortgaged premises to the Citizens' State Bank was for the sole purpose of collateral security for indebtedness due from Engle thereto, and that the agreement of the bank to assume and pay such indebtedness was without consideration and void; that no principle of suretyship is involved, and that the assumption by the bank and its promise to pay the mortgage indebtedness, in the deed from Engle to it, was ultra vires and void, for the reason that the bank had no right under the laws of this state, to purchase real estate, and that the purported authorization by the directors of the bank of the transaction was void because the resolution was not legally adopted. Further details of the several transactions are essential to a proper understanding of the claims of counsel and of the questions to be decided.

The deed from Engle and wife to the bank was executed and delivered February 23, 1921. On the same day, the board of directors of the bank authorized, ratified, and approved the transaction, as shown by the minutes of a meeting held thereby on that date as follows:

“Called meeting of the Board of Directors of the Citizens State Bank of Newton, Iowa, held at the Bank's office on the above date at 10:30 o'clock A. M. with the following members present and voting in the affirmative, dated Newton, Iowa, ...

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