John Hancock Mut. Life Ins. Co. v. Lookingbill

• Citation: 253 N.W. 604,218 Iowa 373
• Decision Date: 13 March 1934
• Docket Number: No. 42338.,42338.
• Parties: JOHN HANCOCK MUT. LIFE INS. CO. v. LOOKINGBILL et al.
• Court: United States State Supreme Court of Iowa

218 Iowa 373

253 N.W. 604

JOHN HANCOCK MUT. LIFE INS. CO.

v.LOOKINGBILL et al.

No. 42338.

Supreme Court of Iowa.

March 13, 1934.

Appeal from District Court, Story County; Sherwood A. Clock, Judge.

This is an action to foreclose a real estate mortgage, brought by plaintiff, a foreign mutual life insurance company, against the defendant who was the owner of the real estate. Judgment of foreclosure, as prayed, was granted by the lower court. Opinion states the facts.

Affirmed.

H. H. Gunder and William E. Voor, both of South Bend, Ind., Fred E. Hansen and C. A. Smedal, both of Nevada, Iowa, for appellants.

Penningroth & Holmes, of Cedar Rapids, Henry & Henry, of Des Moines, Lee, Steinberg & Walsh, of Ames, and H. E. Hadley, of Nevada, Iowa, for appellees.

MITCHELL, Justice.

During his lifetime E. B. Clarke was the owner of certain real estate located in Story county, Iowa. He executed a note in the amount of $16,000 on January 28, 1929, to the Midland Mortgage Company, an Iowa corporation, promising to pay the principal sum on February 1, 1934, with interest at 5 per cent., payable annually on February 1st of each year, with the usual provision for acceleration of maturity in the event of failure to pay said interest. His wife, Etta Clarke, also signed the note and mortgage. To secure the payment of the said debt, Clarke and his wife gave a real estate mortgage to the Midland Mortgage Company on the same date. This company was in the business of making real estate loans, and it resold them to various clients, mainly insurance companies. The Midland Mortgage Company forwarded to the John Hancock Mutual Life Insurance Company a copy of the application which was executed by the Clarkes, and an inspector's report describing the farm, to the home office of the insurancecompany in Boston, Mass. The assistant treasurer of the John Hancock Mutual Life Insurance Company received these papers in Boston, had them duly checked, and recommended the loan for acceptance by the finance committee of the insurance company. The committee approved the loan and the Midland Mortgage Company was so notified. The note, mortgage, and assignment were forwarded by the Midland Mortgage Company to the Atlantic National Bank in Boston, and the John Hancock Mutual Life Insurance Company on March 1, 1929, paid to the bank in Boston for the credit of the Midland Mortgage Company the sum of $16,068.89, being the full amount of the note, plus interest to the date upon which the payment was made by the insurance company. The insurance company then returned the assignment to the county recorder of Story county, Iowa, and the same was duly recorded. In July of the same year the Clarkes sold the farm by warranty deed to the Delaware General Financial Corporation, and the amount of the mortgage, to wit, the sum of $16,000, was figured in as part of the consideration paid by the Delaware Corporation to the Clarkes. The Delaware General Financial Corporation paid the interest in 1930 and in 1931, but failed to pay the 1932 interest. The John Hancock Mutual Life Insurance Company commenced this action against the Clarkes and the Delaware General Financial Corporation, praying for judgment on their note of $16,000, plus interest, and for foreclosure of the mortgage. Crim A. Gunder and wife were joined as defendants, being the tenants upon the land against which foreclosure was brought.

The defendant-appellee, E. B. Clarke, and wife, Etta Clarke, filed cross-petition, setting up the fact that because of the dealing between said defendants-appellees and the Delaware General Financial Corporation their liability was only a secondary liability, and that, before any claim could be made against said E. B. Clarke and Etta Clarke, the security must be exhausted, including the rents and profits. This claim made by these defendants-appellees was first made by way of answer and then the same relief was asked for by way of cross-petition. The Delaware General Financial Corporation, the grantee of the original mortgagors, and the owner of the record title at the time of the foreclosure, filed answer and set up the following defenses: First, a denial on information and belief of the execution of the note and mortgage; second, an alleged oral extension of time for the payment of the interest due February 1, 1932; third, a plea that the John Hancock Mutual Life Insurance Company had no right to foreclose a mortgage in the courts of Iowa because it was a foreign corporation and had not secured or received a permit from the secretary of the state of Iowa to transact business in this state, under the provisions of chapter 386 of the Code of Iowa. By way of counterclaim, the said appellants demanded judgment against the insurance company for the sums of money paid by appellant Delaware General Financial Corporation as interest on the note and mortgage after appellant Delaware General Financial Corporation acquired title to the farm. The tenants, who were also defendants, joined in the answer.

By way of affirmative reply to the third defense, the appellee alleged:

First, that it was a foreign life insurance company and that it had been licensed by the auditor of state in 1914 and by the commissioners of insurance in subsequent years, to transact the business of life insurance in Iowa, and it was therefore not required to comply with the provisions of chapter 386 of the Code, relating to ordinary foreign corporations.

Second, that as a necessary and incidental part of said business of life insurance it had authority to invest its funds in mortgages on Iowa real etate.

Third, that it had no capital stock and for that reason did not come within the provisions of section 8427 of the Code of Iowa of 1931.

Fourth, that the note and mortgage sued upon were not a contract made by it in the state of Iowa, as referred to in section 8427.

Fifth, that the corporation laws of the state of Iowa have been uniformly construed by the executive officers of the state to require no permit from the secretary of the state to authorize life insurance companies duly licensed by the commissioner of insurance to purchase Iowa mortgages and foreclose the same.

Sixth, that the defendant-appellant corporation received the benefits of the mortgage when it purchased the real estate from the mortgagors and recognized its validity by the payment of interest thereon and is estopped from questioning its validity.

The case proceeded to trial. Evidence was offered. The lower court found in favor of the appellee and entered a decree, foreclosing the mortgage as prayed for in appellee's petition, and a judgment in rem against the mortgaged premises for the full amount of the mortgage, plus interest and costs, including attorney's fees. The court also denied the relief prayed for in the answer and counterclaim of the Delaware General Financial Corporation. The court also found that E. B. Clarke was only secondarily liable and his wife, Etta Clarke, signed the mortgage and note in suit only as the wife of the defendant-appellee E. B. Clarke and only for the purpose of releasing her dower interest in and to the premises in question, and that she was not liable on said note.

The appellant Delaware General Financial Corporation, not being satisfied with the finding and decree of the lower court, has appealed to this court.

There are but two questions which are argued in this court by the appellants.

[1] The first, the claim of the appellants that there was an agreement entered into between the appellant Delaware General Financial Corporation and the appellee John Hancock Mutual Life Insurance Company for the extension of time to pay the interest which was due on February 1, 1932. It appears that Mr. Gunder, who was one of the high officials of the Delaware General Financial Corporation, met one of the officials of the insurance company, and he was referred by this official to a Mr. Waples of the Midland Mortgage Company. Mr. Gunder thereafter got in touch with Mr. Waples, and they met at the Pennsylvania Hotel in the city of New York on the 19th of February. There is a marked conflict in the testimony as to just what took place at that time. Gunder claimed that in consideration of an agreement to turn over the rents to the insurance company Mr. Waples told him there would be an extension granted for the period of six months. Mr. Waples claimed Mr. Gunder talked with him, but that Mr. Waples stated all he could do would be to recommend to the insurance company allowing the matter to run for a period of six months, if the leases were assigned. There was nothing in writing. But, on the very day that Mr. Gunder claimed to have the agreement with Mr. Waples, Mr. Gunder wrote a letter, in which he said:

“I discussed the matter with Mr. Waples today. Taking into consideration that the Delaware General Financial Corporation acquired the equity in the land, subject to the mortgage of $16,000, and that none of the equity owners are obligated to pay the taxes and interest personally, he stated he was willing to recommend that the insurance company allow six months time within which to pay the interest provided the Corporation gave an assignment of the lease,” etc.

The record clearly shows that the appellant company has not met the burden of proof to show that there was a valid agreement for the extension of time for the payment of the interest. On this question there was but one witness on each side, but one conversation between these witnesses, and, in addition to this, the admitted letter, written by the witness for the appellant, in which he states that all Mr. Waples agreed to was to recommend to the insurance company an extension of time upon the assignment of certain leases. No leases were ever assigned, nor was an assignment of said leases ever tendered. The learned and able trial court had these two witnesses before him, and we believe was right in holding that the appellant company had failed to...