Penn Mut. Life Ins. Co. v. Orr

• Decision Date: 06 February 1934
• Docket Number: No. 42345.,42345.
• Citation: 217 Iowa 1022,252 N.W. 745
• Parties: PENN MUT. LIFE INS. CO. v. ORR et al.
• Court: Iowa Supreme Court

217 Iowa 1022

252 N.W. 745

PENN MUT. LIFE INS. CO.

v.ORR et al.

No. 42345.

Supreme Court of Iowa.

Feb. 6, 1934.

Appeal from District Court, Woodbury County; Miles W. Newby, Judge.

Action in equity to foreclose a mortgage on real estate. From a judgment and decree in favor of plaintiff, the defendants appeal.

Affirmed.

F. W. Lohr, of Sioux City, for appellants.

Milchrist, Schmidt, Marshall & Jepson, of Sioux City, for appellee.

DONEGAN, Justice.

On May 3, 1924, Edith F. Orr and M. J. Orr executed and delivered to W. F. Grandy their promissory note for $21,000 and, as security for same, a mortgage covering certain real estate in the city of Sioux City, Iowa. Such note and mortgage were later assigned to the Penn Mutual Life Insurance Company. On July 13, 1932, the Penn Mutual Life Insurance Company filed its petition in equity against said Edith F. Orr and M. J. Orr, alleging that they had failed to make payment as provided in said note, asking for a personal judgment against them in the sum of $20,204.37, and for the foreclosure of the said mortgage. The defendants filed separate answers. In his separate answer, the defendant M. J. Orr admitted that he signed the note and mortgage, but claimed that his signature to said note was given without any consideration; that the consideration for said note was a loan made to Edith F. Orr, secured by the real estate described in the mortgage, in which the defendant M. J. Orr had no interest whatever except an inchoate right of dower; that he signed said note as husband of said Edith F. Orr merely to bind his inchoate right of dower or statutory interest in his wife's real estate and for no other purpose. In her separate answer the defendant Edith F. Orr admitted signing said note and mortgage, but denied that there was due on said note the amount claimed by plaintiff; alleged that Grandy had retained $420 of said loan as pretended commission in addition to amounts deducted therefrom for revenue stamps, recording fees, and abstract fees; and that in addition he had required insurance upon the mortgaged property in the sum of $26,500, which was written by him for the purpose of increasing the profit of said Grandy on said loan; that said mortgage also contained provisions requiring the mortgagor to pay all taxes and assessments, general and special, except federal income tax, assessed upon the mortgaged premises, and upon the mortgage or money secured thereby, without regard to any law theretofore or thereafter enacted; and that, because of said requirements, the said note and mortgage contracted for interest in excess of 8 cents on the dollar by the year and were usurious. Said defendant also alleged that the Penn Mutual Life Insurance Company is not a holder in good faith, and that the said W. F. Grandy was the agent of said plaintiff in the making of the loan to defendant, and that said plaintiff is charged with knowledge and notice of the illegal nature of the transaction. Defendant Edith F. Orr also filed a counterclaim in which she asked for an accounting to determine the exact amount of illegal and usurious interest paid by defendant, and that there be deducted from the principal 8 per cent. on the dollar by the year as provided by law. Upon the trial of the case the court entered judgment and decree in favor of the plaintiff in the sum of $21,138.24, with interest thereon at 8 per cent. from January 6, 1933, the date of the decree, and for costs and attorney's fees. From this decree and judgment, and from all parts of said judgment and rulings thereon, the defendants appeal.

[1][2][3][4] I. The first proposition presented by appellants is that the note sued upon was without consideration so far as the appellant M. J. Orr is concerned. The record shows without dispute that the legal title to the property covered by the mortgage was in the appellant Edith F. Orr, and appellant M. J. Orr contends that his only interest in the mortgaged property and in the loan secured thereon was because of his inchoate right of dower; that none of the money secured by the loan was paid to him; and that his only connection with the loan was in conducting the negotiations as agent for his wife, Edith F. Orr. He contends that the evidence is therefore such that the trial court should have decreed that there was no consideration to support his signature to the note, and that as to him there should be no personal judgment. The evidence shows, however, that appellant M. J. Orr not only conducted all the negotiations in regard to securing the loan, but that he stated that the property had been purchased and paid for by him and the title taken in the name of his wife. It further shows that there was no discussion whatever in regard to his inchoate right of dower or the reasons for his signature being attached to the note at any time either before or after it was signed, until the filing of his answer herein. It appears that his signature was attached to the note at the time that the loan was secured and as a part of that transaction. It is a rule of law so well established as to require no citation of authorities that the signer of a promissory note is presumptively liable thereon. It is stated in Nolte v. Nolte, 211 Iowa, 1289, 235 N. W. 483. 485, that:

“It is a fundamental rule that consideration passing from the payee of a note to the maker will support the liability of one who signs contemporaneously, as a surety or co-maker.”

In Myers v. Sunderland, 4 G. Greene, 567, one of the makers of a note defended on the ground that he had received no part of the consideration. In considering that question, this court said:

“The only question to be decided is, Do the averments in the answer constitute a bar to the action? The answer admits that the payee gave a full consideration for the note, but claims that the consideration was received by Weir, one of the makers. It matters not which of the makers of a note received the consideration. It must be presumed that the payee was induced to give the consideration on the credit of the names attached to the note. The makers of such a note are severally and equally responsible, without regard to the party who received the consideration.”

Appellant M. J. Orr having signed the note along with his wife and as a part of the same transaction in which she received valuable consideration, the burden was upon him to show failure of consideration for his signature. We think he has failed to sustain such burden.

[5] II. Appellants contend that the note sued upon was usurious. They base this contention on the fact that Grandy deducted $420 from the face of the loan as a commission; that the appellant Edith F. Orr received only $20,580, instead of $21,000; that this $420 commission together with the $1,260 interest for one year made a total of $1,680 paid by her on said note for the first year; and that this made a total charge for the use of...