Peters v. Goodrich

• Decision Date: 13 December 1921
• Docket Number: 34216
• Parties: R. C. PETERS, Appellant, v. W. S. GOODRICH, Appellee
• Court: Iowa Supreme Court

185 N.W. 903

192 Iowa 790

R. C. PETERS, Appellant, v. W. S. GOODRICH, Appellee

No. 34216

Supreme Court of Iowa, Des Moines

December 13, 1921

Appeal from Pottawattamie District Court.--O. D. WHEELER, Judge.

ACTION to recover on the mortgage assumption clause in a warranty deed. The defendant pleaded a want of consideration for assumption of the mortgage, and that the deed did not express the true contract between the parties, and prayed reformation of the deed. Decree for defendant, and plaintiff appeals. --Affirmed.

Affirmed.

Stout Rose, Wells & Martin and George S. Wright, for appellant.

Tinley Mitchell, Pryor, Ross & Mitchell, for appellee.

FAVILLE J. EVANS, C. J., STEVENS and ARTHUR, JJ., concur.

OPINION

FAVILLE, J.

One Lingren was the owner of certain lands in Oteo County, Nebraska. On February 6, 1906, Lingren and his wife executed and delivered to appellant their certain promissory note for $ 4,000, due March 1, 1911, and secured the said note by a mortgage upon the said land. The mortgage was duly recorded, soon after its execution. Thereafter, the said real estate passed by a series of mesne conveyances to one Stahl. The latter conveyed the premises to the appellee by warranty deed, which deed contained the following clause, "Subject, however, to the mortgage indebtedness upon said land, of which the principal sum is $ 5,640.41," and the further provision that said real estate was "free from incumbrance, except as above stated, which the party of the second part assumes and agrees to pay when due."

This suit is to recover the amount due on said mortgage from appellee, the grantee in said deed, under the assumption clause therein. It appears that Stahl was a resident of Huron, South Dakota; and in the summer of 1913, he left his home to spend the winter in California. Before so doing, however, he listed the said land in Oteo County, Nebraska, with one Christensen, a land agent, for sale. In order to enable Christensen to effectuate a sale of the premises, Stahl executed a warranty deed to the said Nebraska property, and placed the same in the hands of Christensen. The consideration in said deed was left blank, as was also the name of the grantee. This deed is the one in controversy in this action, and was executed July 26, 1913.

After Stahl had gone to California, the agent, Christensen, undertook to find a buyer for said property, and discovered the appellee, Goodrich, whom he interested as a prospective purchaser in the Nebraska land. At that time, the appellee was the owner of a quarter section of land in South Dakota, upon which there was an outstanding mortgage of $ 5,000. As the result of the negotiations between appellee and Christensen, the parties finally agreed to an exchange of equities in the said lands. To adjust matters satisfactorily, it was necessary for Stahl to give a note of $ 3,000, secured by a second mortgage upon the South Dakota land, which he was to receive from the appellee. Christensen and the appellee went to an office, and had a contract drawn. This contract was in the usual form of land contracts for the exchange of land; and, by its terms, Stahl agreed to convey to appellee the land in Oteo County, Nebraska, "subject to mortgage incumbrance aggregating $ 5,640," in consideration of which the appellee agreed to convey to Stahl certain lands in Hand County, South Dakota, "subject to a mortgage of $ 5,000." The contract provided that each party was to convey by warranty deed.

After the contract was signed by the appellee, it was forwarded to Stahl in California, who executed and returned the same. When the time arrived for consummation of the transaction, Stahl's agent, Christensen, took the deed which Stahl had left with him, as before stated, and inserted therein as a consideration "the sum of one dollar and other good and valuable considerations," filled in the name of appellee, as grantee, and delivered said deed to the appellee. The deed contained the mortgage assumption clause, as originally inserted therein when Stahl executed the deed in blank, the previous summer. The appellee at said time delivered to Christensen, for Stahl, a deed to the South Dakota land. It also appears that the deed from appellee to Stahl of the South Dakota land contained a recital that the grantee therein "assumes the $ 5,000 mortgage, and also agrees to pay the same."

As before stated, it is the contention of the appellee that the assumption clause in the said deed from Stahl to him was not inserted therein in pursuance of the contract between the parties, and that the same was without consideration. It fairly appears from the evidence that the contract for the exchange of properties between Stahl and the appellee was a contract for the exchange of equities. The properties were not equal in value, nor were the incumbrances thereon; but Stahl placed an additional incumbrance upon the South Dakota land which he received from the appellee, and took it subject to the existing mortgage thereon. The appellee, in turn, by the terms of the contract, took the Nebraska land subject to the outstanding incumbrance thereon, which is the mortgage in controversy. The written contract executed by the parties at the time clearly and expressly provides for an exchange of properties, and that the said properties were to be exchanged subject to the respective incumbrances. As stated, the deed that was delivered to the appellee had been executed by Stahl before his departure for California, and had been left with Christensen, in anticipation of a sale of the property. Neither Stahl nor his agent, Christensen had the appellee in mind as a prospective purchaser, at the time of the execution of this deed. It was simply left with Christensen as a matter of convenience, to facilitate the consummation of a sale of the property if Christensen found a buyer during Stahl's absence.

It is contended by the appellee that the said deed did not express the true contract between the parties in regard to the outstanding incumbrances, and that there was no consideration for the assumption of the mortgage in question. We think the evidence fairly supports the appellee's contention in this regard. It is the real contract between the parties that is controlling in a case of this kind. If there was no agreement between Stahl and the appellee that the latter should assume the mortgage in controversy, then the clause in the deed cannot be enforced against the appellee at the instance of the appellant. Notwithstanding the recitals in the warranty deed, it was available to the appellee to show the true contract between him and his grantor, as against appellant. He not only could show this where said contract was evidenced in writing, but it was available to him to establish by parol the true contract between the parties, as against the claim of the mortgagee. In an action brought by the mortgagee, who was a third party seeking to assert rights under the assumption clause in the deed, the appellee was entitled to prove the real contract between himself and his grantor, and to establish this by parol, even though it varied or contradicted the recitals of the deed. Such is the established rule in this state.

In Livingston v. Stevens, 122 Iowa 62, 94 N.W. 925, we said:

"It is contended that evidence of negotiations and agreements had between plaintiffs and Tucker, before the making of the mortgage on September 19th, was incompetent and immaterial, because all such were merged in the mortgage, and parol evidence of such prior arrangements is incompetent. If the action were between the parties to the mortgage, this objection would, no doubt, be good. But the rule excluding parol proof where there is a written contract or agreement does not apply to actions between a party to the contract and a stranger. Manifestly, such stranger is not to be concluded thereby. He had no part in the making of the contract, and third parties cannot bind him by an instrument to which he is not a party. This is fundamental doctrine, although frequently overlooked by courts, and counsel, and, in its support we need only cite Evens v. Wells, 22 Wend. 345; Fuller v. Acker, 1 Hill 473; Greenleaf, Evidence, Section 279; Lee v. Adsit, 37 N.Y. 78; Furbush v. Goodwin, 25 N.H. 425; Bradner on Evidence, Section 27, page 335, and cases cited."

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