Tansil v. McCumber

• Decision Date: 15 December 1925
• Docket Number: No. 36735.,36735.
• Parties: TANSIL v. MCCUMBER ET AL. (VAUGHT, INTERVENER).
• Court: Iowa Supreme Court

201 Iowa 20

206 N.W. 680

TANSIL

v.MCCUMBER ET AL. (VAUGHT, INTERVENER).

No. 36735.

Supreme Court of Iowa.

Dec. 15, 1925.

Appeal from District Court, Appanoose County; E. S. Wells, Judge.

Suit in equity to recover from the defendants George E. and Barbara McCumber the amount of a promissory note and foreclose a real estate mortgage given to secure it. J. M. Vaught was brought in as defendant because he held a note of the McCumbers for $871.81, which was secured by the mortgage, but the security for which, plaintiff claims, was subordinate to the security for plaintiff's note of $4,038.96. The McCumbers answered; Vaught filed an answer and cross-petition. Decree for plaintiff for $500 and in favor of the school fund for interest on the $500. Decree for Vaught against the McCumbers upon the note held by him. The plaintiff appeals. Modified and affirmed.Howell & Howell, of Centerville, for appellant.

Fee & Smith and W. B. Hays, all of Centerville, for appellees.

H. E. Valentine, of Centerville, for intervener Vaught.

MORLING, J.

We proceed to discuss the evidence with reference to the findings of the court below that the transactions between the plaintiff and the defendant McCumber, involving the Missouri land, amounted in equity to a mortgage, were unconscionable, usurious, and fraudulent, and that the mortgage on the Iowa land now sought to be foreclosed was to be canceled as a result of plaintiff taking back the Missouri land.

In 1919, during the boom, Harve McCumber bought, on account of his father, the defendant George E. McCumber, a 285-acre farm in Missouri at $95 per acre, on which George paid $12,075 and gave a mortgage for the balance, $15,000, with interest at 5 per cent. A $3,000 installment of this mortgage with $750 interest came due in the spring of 1921. Defendant was unable to pay. Foreclosure by advertisement, which would be without redemption, was commenced. Harve and Attorney Haynes applied at various places for a loan of the amount necessary to save the farm. After unsuccessful efforts elsewhere, they applied to plaintiff, Tansel, cashier of a bank at La Plata, Mo. The question arising at this point is whether the relationship assumed between plaintiff and George McCumber was that of purchaser (or grantee) and vendor (or grantor) or lender or borrower. There is no dispute that they asked for a loan and second mortgage on the Missouri land. Both sides have invited our attention to the 800 pages of transcript to which we find it desirable in some instances to refer for accuracy. The lower court had the advantage of seeing and hearing the witnesses. Much depends upon the manner of their testifying, whether the answers were spontaneous or halting and hesitating. The spontaneous statements of the witnesses, as against equivocating or hesitating ones, have more weight. Plaintiff says:

“They put the proposition up to us and wanted to borrow the money to pay this installment and give us a mortgage on the farm, a second mortgage, and we hesitated about the matter and told them it was too near the market value of the farm, that in case that he didn't repurchase this farm, or, that is, in case we had to foreclose our mortgage if he gave us a mortgage--Q. Yes. A. That we would be out of expense of foreclosure. Q. Yes. A. And-- Q. How much--go ahead. A. Well, that is about all; it was too close to the market value of the farm.”

Later plaintiff says:

“At the expiration of the first option, you might call it, or first contract, George McCumber * * * said that he believed that things were going to look better in the next few years, and he would like mighty well to renew the option on the farm. We told him that we were not satisfied with the manner in which he had handled the farm, and that we would rather just have our money. * * * ‘You have got all the revenue off of it, and we would rather you would pay us our $6,000.’ ”

Plaintiff does not claim that he refused to make a loan as requested. He did advance money. He did demand and take obligations for the payment of interest. No written obligation for repayment of the principal was taken. It was the belief of both parties to the transaction that the deed to be referred to was a conveyance and was not a mortgage. The correctness of their belief depends upon what was actually done and its legal effect. The plaintiff and his associate, Gooding, throughout expostulate that they did not want the land; that it was not worth the amount of their investment; that they wanted their money. On the other hand, the McCumbers thought they had an equity in the land, and they were anxious to save the $12,000 which they had invested. In general they regarded the plaintiff as one who was entitled to repayment of the money he had advanced for them and not as a purchaser, though very notable among other exceptions was their demand of plaintiff that he pay them the difference between the $15,000 prior incumbrance on the land and the $18,000 stated as a consideration in the contract to be referred to. Neither party was always consistent in his attitude toward the other, or in his view of the legal relationship which he claimed the other sustained toward him.

A written agreement, dated April 18, 1921, was made between George E. McCumber and plaintiff, reciting that McCumber had conveyed to plaintiff by warranty deed, in consideration of $18,000, the Missouri land, subject to the $15,000; that McCumber should possess and operate the land and not suffer waste to buildings, etc. McCumber agreed to pay the taxes on the land for 1921, and all fire insurance premiums during the year. It was provided that, on payment of $6,000 on or before March 1, 1922, plaintiff should reconvey, with interest on the mortgage up to March 1, 1922, fully paid. If the $6,000 was not paid, then plaintiff agreed to surrender the land March 1, 1922.

The $6,000, according to all parties, was made up of the following items: $3,750 installment of principal and interest due on the mortgage; $225 interest for one year on the $3,750; $600 interest on the balance of the $12,000 mortgage for one year; $1,425 rent for one year. Defendant and his son Harve thought about $2,000 of the $6,000 was bonus, or the amount to be paid for the privilege of redeeming.

There was no written agreement to repay any of plaintiff's advances. Harve testifies:

“Q. And in consideration of him paying the $3,950 you agreed to pay back $6,000. Is that correct? A. Yes, sir. * * * If we paid $6,000 on the 1st day of March, they were supposed to deed the farm back to us. * * * Q. Now, as I understand it, at that time you had already deeded them the farm as a mortgage or security for that loan. (Objected to as leading, etc.) A. Yes, sir.”

On cross-examination he says:

“They had the deed to the farm. Q. Is it their farm--was it their farm? A. It was, I guess. * * * Q. Then why shouldn't you pay rent, $1,425, on the place, if it was their place? * * * A. Because when they took this farm we was to pay them $6,000 on the 1st day of March, and they had been making a good rate of interest.”

Shortly before the expiration of the original contract, George McCumber asked for a renewal. On March 1, 1922, another contract was made, extending the former one to January 15, 1923, on condition that defendant should give his note dated March 1, 1922, due January 15, 1923, for $4,038.96 and a mortgage on defendant's 312 acres in Appanoose county. The contract provided that the amount of the note “is in no wise a penal sum, but a valid, admitted, and existing consideration for which the time aforesaid is extended, and the sum of $1,238.96 is hereby acknowledged by the said George E. McCumber.”

By the writing, the plaintiff agreed that when defendant had paid $6,000 on the original contract he would credit $2,000 on the $4,038.96 note, when the interest on the $12,000 due March 1, 1923, was paid, the note would be credited with $600, and, when defendant should produce tax receipt for 1922, plaintiff would credit $200 on the note. It was stipulated that, on failure to comply with the provisions of the contract, the defendant McCumber and son should surrender the premises to plaintiff January 15, 1923, which provision of the contract was declared to be of the essence, and the breaking of any provision would work a forfeiture.

The note was given, dated March 1, 1922, due January 15, 1923, for $4,038.96 and 8 per cent. interest. The mortgage with receivership and the other usual clauses was likewise executed. The defeasance clause called for $4,910.77 on January 15, 1923, with interest at 8 per cent. The difference between the note and mortgage is made up of a note held by the intervener, Vaught, for $871.81, payable to plaintiff, but given for an indebtedness to Vaught. In an amendment to the petition, plaintiff alleges that Vaught has no right in the mortgage security on account of his note, because Vaught took an assignment of it without recourse. The $4,038.96 note, according to plaintiff, was made up of the following items: Cash advanced to Harve to buy hogs, $500; amount paid for taxes on the Missouri farm for 1921, which the first contract required McCumber to pay, $202.96; interest on the $6,000 and on the taxes and on the $500, $536. The $536, the $500 for hogs, and the $202.96 taxes makes $1,238.96. Tansel testified:

“The first item in that was $2,000. Q. What was that for? A. It was to be considered as rent and the right to sell the farm. Q. How much of it was rent, that $2,000? A. $1,425 we figured as rent. * * * Then the difference between the 1425--$1,425--was that or a part of it at least for the right to redeem and resell for another year? A. Yes, sir; privilege of redeeming or reselling, which at any time we would make a deed.”

He says that $600 was put in for interest due March 1, 1923, on the $12,000 mortgage up to March 1, 1923; $200 was for the taxes for 1922. Tansel says:

“We agreed with Mr. McCumber, if he would fulfill his...