Higby v. Bahrenfuss

• Decision Date: 20 June 1917
• Docket Number: No. 31167.,31167.
• Parties: HIGBY v. BAHRENFUSS ET AL.
• Court: Iowa Supreme Court

180 Iowa 316

163 N.W. 247

HIGBY

v.BAHRENFUSS ET AL.

No. 31167.

Supreme Court of Iowa.

June 20, 1917.

Appeal from District Court, Hamilton County; R. M. Wright, Judge.

Action to recover interest on a promissory note. Defense, that the note was without consideration; that plaintiff, as indorsee, took it with notice of infirmities. Judgment for plaintiff in the court below. Affirmed.Wesley Martin and D. C. Chase, both of Webster City, for appellants.

McGrath & Archerd, of Eagle Grove, for appellee.

GAYNOR, C. J.

This action is brought to recover interest on a certain note for $1,500 given by the defendants to one William Greenwood, which appears to have been indorsed without recourse by Greenwood to one Bair and by him to the plaintiff. The petition is in the usual form.

The answer admits the execution of the note; alleges that the note is collateral to a certain mortgage of even date therewith; that there was a contemporaneous written agreement between Greenwood and these defendants, at the time of the execution of the note and mortgage, that there should be no personal liability on the note and mortgage, and that the land covered by the mortgage should be the full measure and limit of defendants' liability on the note; that this agreement was either written in the mortgage or attached to the mortgage, and was understood by all the parties to be a part of the agreement covered by the note and mortgage; that said note was without consideration; that the consideration has wholly failed; that the note was obtained by false and fraudulent representations; that defendants were deceived, and received no value; that the note was given as a part of the purchase price of certain land in Dakota; that the land was not worth to exceed $500. and was at the time mortgaged for $1,000. The defendants further say that the plaintiff is not a good-faith purchaser of the note; that he had knowledge of the infirmities in the note, or notice thereof.

The defendant also filed a cross-petition in equity asking that the contract be reformed so as to express the real agreement of the parties. The cause was tried as an equity action The court entered a decree dismissing defendants' cross-bill, and entering judgment against the defendants for $286.10. From this judgment defendants appeal.

[1] After the evidence was all in, the defendants offered to file an amendment to their cross-petition, setting up that the contract sued on, or the mortgage given as a part of the same contract, had been materially altered in that the agreement, that the defendant should not be bound personally for the note, had been erased. This was refused, or, if filed, was stricken out on motion of the plaintiff for the reason that it was filed too late. This is the first error relied upon for a reversal.

It appeared upon the trial that the clause limiting liability was not in the mortgage or attached thereto. It is contended that the court in furtherance of justice should have allowed the amendment charging an alteration to have been made in the instrument, and that this should have been permitted to conform the pleading to the proof. It is true that to allow amendments is the rule; to reject them the exception. It is also true that the law authorizes amendments to conform the pleadings to the proof. It was discovered upon the presentation of the mortgage that this agreement was not in the mortgage or attached thereto. This must have been known to defendants at the time of filing the cross-petition. It was because of this that the cross-petition asking reformation of the instrument was filed.

The only evidence that this contract was ever in the mortgage is found in the following testimony:

Bahrenfuss testifies to the effect that he told Greenwood that he must protect him in some way. He says:

“We agreed that we would put it on the land only. I was not to be personally liable on the note.”

He asked the scrivener to put it in, and relied on him to do so. His statement that it was in, we think has its foundation in the belief that the scrivener did as ne agreed to do. or on what the scrivener told him.

The scrivener testified that he remembered that the defendant insisted on the mortgage being drawn, so that the land only should be liable for the debt; that there should be no personal liability; that that talk was in the presence of Greenwood; that that talk was the first time they came to his office: that he, as scrivener, was directed to insert that clause in the mortgage. He testified:

“I would say that I put it in the mortgage if I hadn't seen the mortgage. If I had been asked if I put it in before the mortgage was presented to me, I would say that I did.”

The scrivener examined the mortgage, however, and found no evidence of any erasure.

Mrs. Bahrenfuss testified:

“The mortgage was to fall back on the land in Dakota. That was the conversation. Mr. Tucker wrote it in the mortgage with pen and ink. It was read over. I heard this part read that only the land should be holden on the note. The mortgage was to be on the Dakota land only.”

She further testified:

“I was with my husband and Mr. Greenwood when they went to tell Mr. Tucker, the scrivener, how to draw the mortgage. They were drawn and ready for signature when I came to sign. I didn't read them. What he wrote in there was that the mortgage was to be on the Dakota property only. That is the statement that was to have been put in there. That was what we talked about in the office. The mortgage was to be upon the Dakota property only.”

She also says that she saw the clause in controversy in the instrument, but this, we think, cannot be true in the light of all she testified to.

On the question of alteration or erasure, a chemist was called who said he was acquainted with the action of chemicals; that there is a chemical that will remove the evidence of ink writing; that he had removed ink by the use of this chemcal; that the mortgage bears no evidence of an alteration or erasure.

The evidence may tend to show that there was an agreement to have this incorporated in the mortgage, but the evidence is not clear and satisfactory as the rule requires. There is no evidence that anything had been erased. It was not found in the mortgage, and no trace of its ever having been there was discovered by any one. The amendment offered, the rejection of which is complained of, did not, however, go to the fact that this agreement sould have been in the mortgage, and that the writing ought to be reformed so as to show that fact. That issue was tendered in the original cross-petition. This amendment was intended to present the issue that the mortgage, at the time of its execution, contained the clause, but it had been wrongfully erased; that it had been altered by having this clause removed after the execution of the instrument. This pleading would not conform to the proof, nor if it had been admitted would the proof sustain it. We think there was no error in refusing to accept this amendment or in striking it from the files, if filed.

[2][3] The second error complained of is that the court erred in holding the plaintiff to be a good-faith purchaser. What constitutes a good-faith purchaser, a holder in due course, is defined by our statute; is defined by the Uniform Negotiable Instruments Law found in section 3060a52, Supplement Code 1913:

“A holder in due course is a holder who has taken the instrument under the following conditions:

1st. That the instrument is complete and regular upon its face.

2d. That he became the holder of it before it was overdue, and without notice that it had been previously dishonored, if such was the fact.

3d. That he took it in good faith and for value.

4th. That at the time it was negotiated to him he had no notice of any infirmity in the instrument or defect in the title of the person negotiating it.”

Section 3060a56 provides:

“To constitute notice of an infirmity in the instrument or defect in the title of the person negotiating the same, the person to whom it is negotiated must have had actual knowledge of the infirmity or defect, or knowledge of such facts that his action in taking the instrument amounted to bad faith.”

Section 3060a26 provides:

“Where value has at any time been given for the...