Merriam v. Leeper
| Decision Date | 22 November 1921 |
| Docket Number | 34144 |
| Citation | 185 N.W. 134,192 Iowa 587 |
| Parties | R. M. MERRIAM, Appellee, v. A. J. LEEPER et al., Appellants |
| Court | Iowa Supreme Court |
Appeal from Delaware District Court.--E. B. STILES, Judge.
SUIT in equity, to foreclose three real estate mortgages amounting to a sum total of $ 46,000. These mortgages were executed on May 10, 1918, and drew interest from March 1, 1919, and purported to become due in seven years from March 1, 1919, with interest at 5 per cent. The plaintiff purported to declare the same due, by reason of certain accelerating provisions contained in the mortgages. The defendants pleaded that none of the mortgages sued on were due, for the following reasons (1) That the alleged accelerating provisions of the mortgages upon which the plaintiff purported to declare the mortgages due had been waived by the plaintiff before bringing suit (2) because such accelerating provisions had no proper place in the mortgages, and the defendants' signatures were obtained to such mortgages in such form by fraud and deceit of the plaintiff and his assignor, in that the plaintiff's assignor had fraudulently concealed the same from the knowledge of the defendants at the time of the execution of the mortgages, and had by fraud and artifice induced the defendants not to read such provisions, whereby the defendants signed the mortgages without any knowledge of the presence of such provisions. These facts were set forth in a cross-bill, and a reformation of the mortgage was prayed. The decree of the trial court found a waiver on the part of plaintiff, and dismissed plaintiff's petition. It also dismissed the defendants' cross-bill, on the ground that fraud was not proved, and on the further ground that the defendants were negligent in having failed to read the mortgage. Both parties appeal. The defendants, having first perfected their appeal, are denominated the appellants.--Affirmed in part; reversed in part.
Affirmed in part; reversed in part.
Korf & Korf, Campbell & Campbell, and Carr & Carr, for appellants.
Bronson & Tierney, for appellees.
I.
The mortgages in question were executed pursuant to a prior contract between the parties thereto, executed on April 20, 1918. This prior contract was one of exchange of farms. Leeper owned a farm of 200 acres in Polk County. The plaintiff, Merriam, and one Mangold owned a farm of 400 acres in Delaware County, title to which was held by Mangold. The negotiations of exchange were brought about by two real estate agents, namely, Zimmerman for Leeper, and McGregor for Mangold and Merriam. The contract of exchange called for mutual deeds from the contracting parties to be delivered on or before June 1st following, subject to certain specified incumbrances. The contract contained the following:
On May 10, 1918, Leeper and wife executed notes and mortgages for $ 56,000, including those in suit. These notes and mortgages purported in terms to run for seven years from March 1, 1919, at 5 per cent annual interest. In fine print, however, the notes contained the following proviso:
The mortgages contained the following:
"If said premises be sold, shall cause the whole of said money to become due, and this mortgage may be foreclosed thereupon immediately."
These provisions in fine print were not discovered by Leeper at the time he executed the notes and mortgages, nor were they discovered until many months thereafter. On October 15, 1918, Leeper sold the 400-acres farm to the defendant Allfree. Some time between October, 1918, and March 1, 1919, Allfree negotiated with Merriam, who was in the real estate business in Delaware County, for a renter. A renter was found for him by Merriam, to whom Allfree rented the land for the year 1919. Merriam was at that time the holder of the notes and mortgages in suit by a transfer thereof from Mangold, which appears to have been made on June 4, 1918. At this time, and up to the fall of 1919, both Allfree and Leeper were still ignorant of these provisions now referred to. They gained their first information in that regard by a notice from Merriam to the effect that he had declared the notes and mortgages due.
As already indicated, the trial court found that the plaintiff had waived the provision, so far as the particular sale from Leeper to Allfree was concerned, but refused to reform the instruments for want of sufficient proof. The result is that, though the sale by Leeper to Allfree cannot further be made a ground for declaring the mortgages due, yet Allfree becomes bound to these provisions for the future, and is unable to sell his property without accelerating the due date of the mortgages. He is further subjected to the same peril because he is not a resident of Delaware County. Allfree and Leeper are both residents of Jasper County.
The evidence is undisputed that the provision of the contract for 5 per cent interest for a term of seven years is a very valuable one for the payor, and that mortgages for such a term and at such a rate could be replaced only at an expense of approximately $ 6,000. Where this loss, if any, should fall, as between Leeper and Allfree, is a question not litigated; but Allfree and Leeper join in the same defense and cross-bill, Leeper being personally liable on the notes as the maker thereof, and Allfree being liable thereon as having assumed the debt.
Upon the record before us, we have little trouble in affirming the decree below upon plaintiff's appeal. The more important question, and perhaps the more difficult, arises upon the defendants' appeal from the dismissal of their cross-bill. The burden was upon the defendants to show that Leeper signed the notes and mortgages in the form in which they were drawn, either under mutual mistake as to their contents or else as a result of fraud on the part of plaintiff's assignor. We will assume at this point that the burden was also upon them to show that the fraud or artifice of the plaintiff's assignor was instrumental in preventing him from reading the instruments which he signed, or in inducing him not to read them.
The discussion of the question thus presented by the cross-bill divides itself quite naturally into two stages:
(1) Was Leeper under legal obligation to sign these notes and mortgages in the form in which they were drawn at the time he signed them? Could he, in legal right, in view of his antecedent contract, have refused to sign the notes and mortgages in the form in which they were presented to him?
(2) Were the objectionable provisions included by mutual mistake? Did the plaintiff's assignor use any artifice with fraudulent intent to prevent Leeper from reading the fine print in the instruments, or with intent to induce him not to do so? If yea, was such artifice an efficient cause in so inducing Leeper to omit the reading of such provisions?
Turning to the first phase, we have already set forth the provisions of the antecedent contract as to the incumbrances which were to be executed by Leeper and his wife upon the 400-acre farm purchased by him. The contract represented a meeting of the minds of the parties, and was an enforcible contract. It did not deal in the details of the form of the incumbrances that were to be created. The quoted provisions, however, implied that the incumbrances were to be put into appropriate form. A court of equity might well find, in the enforcement of the contract, that it contemplated the execution of notes and mortgages in the ordinary and usual form necessary to carry out its fair implications. If Leeper had discovered these objectionable provisions before he signed the papers, and if thereupon he had refused to sign such instruments on account of the presence of these provisions he could have justified himself in so refusing only on the ground that such provisions were not ordinary or usual in notes or mortgages, and that they were not fairly within the contemplation of the parties or within the implications of the contract. As regards the provisions which required Leeper to continue his residence in Delaware County, he was not a resident of Delaware County, but was at that time a resident of Poweshiek County. He had no intention of ever becoming a resident of Delaware County, and plaintiff and his assignor undoubtedly so understood. The notes and mortgages were actually signed in the home of Leeper in Poweshiek County. This was his home when he signed the contract. Up to the time of signing the notes, he had breached no condition of the contract. When he signed the notes, however, he breached the condition as to residence in Delaware County as soon as it was made. This condition was imposed upon him, not by the contract, but by the notes. As to the condition declaring the notes due in the event of a sale of the land, this was contained in the...
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