Murphy v. Plains State Bank

• Decision Date: 06 November 1943
• Docket Number: 35932.
• Citation: 142 P.2d 733,157 Kan. 530
• Parties: MURPHY v. PLAINS STATE BANK.
• Court: Kansas Supreme Court

142 P.2d 733

157 Kan. 530

MURPHY v. PLAINS STATE BANK.

No. 35932.

Supreme Court of Kansas

November 6, 1943

Syllabus by the Court.

Where mortgagee in refinancing indebtedness on farm represented to Federal Land Bank that when designated consideration was paid all claims of mortgagee against farmer would be satisfied in full, a secret deed to farm taken by mortgagee to secure the amount mortgagee was not paid on the mortgage was void. Agricultural Adjustment Act § 32(d), 12 U.S.C.A. § 1016(d).

A secret deed to a farm, taken by a mortgagee to secure or to recover from the farmer the amount the mortgagee was not paid on its mortgage in the refinancing of the indebtedness on the farm, under 12 U.S.C.A. § 1016, is void as being without consideration, against public policy and in violation of the financing agreement.

Appeal from District Court, Meade County; Karl Miller, Judge.

Action by Elsie Mae Murphy against the Plains State Bank to have a deed to certain realty held to be void and for further relief. From a judgment for plaintiff, defendant appeals.

G. L Light, of Liberal (Auburn G. Light, of Liberal, on the brief), for appellant.

A. M Downer, of Dodge City (Geo. R. Gould, of Dodge City, on the brief), for appellee.

HARVEY Justice.

This was an action to have a deed to certain real property held to be void and for further relief. The trial court heard the evidence and made findings of fact and conclusions of law and rendered judgment for plaintiff. Defendant has appealed.

The pertinent facts disclosed by the pleadings and exhibits and found by the court may be summarized or quoted as follows: In May, 1932, plaintiff was the owner of a described quarter section of land in Meade county upon which there was a first mortgage to a life insurance company for $2,250. She was indebted, also, to the Plains State Bank (hereinafter called the bank) in the sum of $1,720 and to William P. Elliott, the cashier and managing officer of the bank, in the sum of $100 and to secure this indebtedness she executed to the bank a second mortgage upon her land. By November, 1934, payments were delinquent upon both of the mortgages and there were some pastdue unpaid taxes on the land. Plaintiff, at the suggestion of the bank, applied to the Federal Land Bank of Wichita, which was acting as agent for the Land Bank Commissioner, hereinafter called Federal Land Bank, for a loan sufficient in amount to retire all liens upon the land. The Federal Land Bank agreed to make the loan in the sum of $2,100 on condition that all liens against the security be fully satisfied. After the payment of the first mortgage and taxes this sum would leave not to exceed $500 to apply upon the bank's second mortgage. On November 19, 1934, there was due the bank on its second mortgage $2,150.48. On that date the plaintiff and her husband, as parties of the first part, executed a contract with the bank which recited that in consideration of $1,650.50, the receipt of which was acknowledged, the parties of the first part would sell and agree to convey to the second party plaintiff's land, which was described, subject to a first mortgage of $3100 the first parties were putting on the land to the Federal Land Bank. The first parties agreed to give immediate possession of the land, "and all allotment payments and rents hereafter paid are to go to second parties." Apparently the Federal Land Bank had been advised some time prior thereto that the bank's second mortgage on plaintiff's land was only $500, for on that date, November 19, 1934, the Federal Land Bank wrote the bank: "You hold a Note & Mtg. as an obligation of Elsie Mae Murphy for $500.00. Will you kindly state below the earliest date said indebtedness can be paid, giving the amount which you will accept in full satisfaction of the same. ***."

The bank replied to this communication on January 11, 1935, stating:

"The balance of the indebtedness referred to above is $500.00 as unpaid principal and $ none unpaid interest up to the 1"' day of February, 1935, upon which date or after which date said debt can be paid. ***", and that the debt was secured by a mortgage described by the book and page of its record.

"Upon payment to the undersigned of $500.00 *** said sum will be accepted in full satisfaction of this claim. *** The undersigned creditor further agrees, and, for the purpose of assisting the above named applicant in obtaining a loan from The Federal Land Bank and/or the Land Bank Commissioner, hereby represents to The Federal Land Bank and/or the Land Bank Commissioner that, directly or indirectly, no note, mortgage or other consideration or evidence of indebtedness has been or will be received from the debtor, incident to such acceptance or payment as hereinbefore provided, if made, other than the consideration paid by The Federal Land Bank and/or the Land Bank Commissioner; that no present agreement between the creditor and the applicant, or any other person, for the giving of any such note, mortgage or other consideration or evidence of indebtedness exists; that when said consideration is paid, all claims of this creditor against the above named debtor will have been satisfied in full and that no person, firm or corporation, other than the undersigned, is the owner of any interest in said indebtedness." (Italics ours.)

The instrument contained further statements pertaining to the closing up of the loan and the surrender and cancellation of the instruments evidencing the indebtedness of plaintiff to the bank. This instrument was consented to in writing by the plaintiff.

The plaintiff and her husband executed the mortgage to the Federal Land Bank and the loan was closed in accordance with the instrument previously quoted from. The Federal Land Bank was given no information with respect to the contract of November 19 between plaintiff and her husband and the bank. In closing the loan the bank did not send to the Federal Land Bank the $100 note claimed to be owned individually by Elliott and which was secured by the bank's second mortgage. The Federal Land Bank wrote and inquired about that and the bank reported that the note had been delivered to plaintiff. In fact, the bank or Elliott had induced or required plaintiff to give it a new note for $115 for the one delivered to her, and this fact was concealed from the Federal Land Bank.

Plaintiff continued to reside upon the land, collected the income and profits therefrom, made payments due to the Federal Land Bank on its mortgage, and payment of taxes for the first half of 1936 and prior years. By April, 1938, payments were delinquent upon the mortgage to the Federal Land Bank and through C. C. Wilson, secretary and treasurer of the Meade County Farm Loan Association, the Federal Land Bank was demanding payment. Its mortgage was subject to foreclosure. A few days prior to April 29, 1938, Mr. Elliott, on behalf of the bank, requested plaintiff to execute a deed in compliance with the contract between plaintiff and her husband and the bank of November 19, 1934, on the bank giving to plaintiff an exclusive option to purchase the property within a stated time. Plaintiff talked about the matter with Mr. Wilson, who rewrote the option and plaintiff and her husband did execute a deed to the bank for the stated...