Williamson v. Craig
| Decision Date | 18 October 1927 |
| Docket Number | 38167 |
| Citation | 215 N.W. 664,204 Iowa 555 |
| Parties | WILLIAM L. WILLIAMSON et al., Appellants, v. EARL H. CRAIG et al., Appellees |
| Court | Iowa Supreme Court |
Appeal from Lee District Court.--JOHN E. CRAIG, Judge.
An action in equity, in which it is sought to cancel a mortgage and note and to quiet title. From a decree in favor of the defendants and interveners plaintiffs appeal.--Modified and affirmed.
Modified and affirmed.
Hollingsworth & Hollingsworth, B. F. Jones, and Bernard A. Dolan, for appellants.
E. W McManus, for Earl H. Craig, Pioneer Investment Co., Ernest A Jackson, Leo V. Stevens, Carl B. Pray, N. M. Hubbard, Royal Union Mutual Life Ins. Assn., State Life Ins. Co., appellees.
J. O Boyd and J. C. Calhoun, for W. C. Donaho, intervener, appellee.
Thomas J. Guthrie and Sawyer & Norman, for Des Moines Savings Bank & Trust Co., intervener, appellee.
ALBERT, J. EVANS, C. J., and DE GRAFF, MORLING, and WAGNER, JJ., concur.
I.
In the early part of the year 1923, August A. Zinnert was the owner of a tract of land consisting of 162 2/3 acres, in Lee County, Iowa. This land was at that time incumbered by a first mortgage of $ 7,500 and a commission mortgage of $ 375, both executed to the Keokuk Trust Company. Both of these mortgages were due, or presently to become due, and Zinnert was arranging to meet the same and to borrow some additional money. One McCutcheon was a real estate man, and apparently Zinnert turned over to him the negotiation for this new loan. He took the matter up with one C. W. Durrett, vice president of the aforesaid trust company, and application was made on the 17th day of January for a loan of $ 13,000, which loan was submitted to the Pioneer Investment Company, of Des Moines, and accepted by them. On March 1, 1923, a note for $ 13,000 was executed by Zinnert and wife to Earl H. Craig, and on the same date a mortgage on the land was executed, to secure this amount. This mortgage was duly recorded, March 16th following, and these instruments, together with the abstract, were forwarded to the Pioneer Investment Company. The Pioneer Investment Company was unincorporated, and was a partnership. For convenience in conducting their loan business, they took all mortgages and notes in the name of Earl H. Craig, who was one of the partners. This loan was presented to the Royal Union Mutual Life Insurance Company for sale, and was accepted by them, but, owing to some reorganization that was pending at that time, this company was not able to handle the loan. Carl B. Pray, vice president and cashier of this insurance company, presented this proposed loan to the Des Moines Savings Bank & Trust Company, which is intervener in this action. The latter bank purchased said note and mortgage, and paid to Pray the sum of $ 13,000 in cash for the same. This purchase was made by the Des Moines Savings Bank & Trust Company on the 17th day of April, 1923, and on this date due transfer of the note and mortgage was made to it.
About one year after the execution of the mortgage and note in controversy herein, Zinnert and wife, by warranty deed, conveyed the land in question to plaintiff, William L. Williamson, subject to a mortgage of $ 7,500 and accrued interest, which the grantees agreed to pay. This deed bears date January, 21, 1924.
The first question raised in the case is whether or not the Des Moines Savings Bank & Trust Company was an innocent purchaser for value before maturity. Under this contention, one of the principal claims is that the note in controversy was not negotiable; therefore the Des Moines Savings Bank & Trust Company could not be an innocent purchaser. The note is in the usual form of a negotiable promissory note, but in addition contains the following clause:
"This note is secured by a mortgage deed made by August A. Zinnert and Myra H. Zinnert, (husband and wife) to Carl H. Craig, conveying real estate in Lee County, Iowa."
Among other provisions of the mortgage were:
(1) That the mortgagor would pay reasonable charges of any attorney in whose hands said notes should be placed after maturity for collection, without foreclosure.
(2) That the mortgagor would pay all taxes and assessments of any kind levied on the land or upon the interest of the mortgagee therein, or upon this mortgage or the notes of indebtedness secured thereby.
(4) To keep all buildings at any time on such premises insured against loss by fire, lightning, or tornadoes.
(6) To pay all expenses and disbursements (including a reasonable attorney's fee) occasioned by any suit or proceeding wherein said mortgagee or holder of any of said notes as such may be made a party.
It further provides:
"If the insurance is required and not provided or if said taxes or assessments or rates or expenses, or disbursements are not paid as above agreed, the holder of said principal note may procure such insurance or pay such taxes, assessments, rates, expenses, or disbursements and all money so expended shall be due forthwith without demand; and with interest from the date of payment at the rate of 8% per annum shall be added to and made a part of the debt secured thereby."
It is further provided that, in case of foreclosure proceedings, there shall be included a reasonable attorney's fee, outlay for documentary evidence, and stenographer's charges; and the cost of procuring a completed abstract, showing whole title to said premises, and embracing judgment ordering sale thereof, shall be added to and made a part of the indebtedness secured hereby, and shall be included in any judgment that may be rendered in such proceedings, and such proceedings shall not be dismissed nor release hereof given until such expenses and disbursements have been paid, provided always that, when the said covenants and agreements are performed, premises shall be released from the lien thereof at the expense of the undersigned.
Appellants urge that, because of the above quoted part of the note and mortgage, the note is nonnegotiable, because the amount is uncertain.
In the case of Des Moines Sav. Bank v. Arthur, 163 Iowa 205, 143 N.W. 556, we had a somewhat similar situation, except that in that case a clause almost identical with the clause in the note in the instant case was not included in the body of the note, but was simply a memorandum on the margin thereof. We held in that case that, under the conditions there existing, the memorandum on the margin of the note did not divest it of its negotiable character.
Later, in the case of Hubbard v. Wallace Co., 201 Iowa 1143, 208 N.W. 730, we had a case where the note had similar provisions with reference to the mortgage securing the same as in the case at bar, except that in the Hubbard case there was added the statement that the terms of the mortgage are made a part of the note. We there held that the note in controversy was a nonnegotiable instrument.
In the case of Allison v. Hollembeak, 138 Iowa 479, 114 N.W. 1059, the note had an indorsement on the back thereof as follows:
"This note is secured by purchase money mortgage on 160 acres of land in Guthrie County, Iowa, and payee herein agrees to look to mortgage security for payment of this note."
After holding that the writing on the back of the note, having been there at the time it was executed, became a part of it, we held that the instrument was thereby rendered nonnegotiable.
The line of demarcation between these cases seems to be that, if the statements in the note refer to some other instrument for terms and conditions, or make the terms and conditions of some other instrument a part of the note, and the terms and conditions referred to in the other instrument would make the amount due on the note uncertain, then the note would be nonnegotiable; but if the statement in the note is simply a recital of the consideration for which the paper is given, or merely a reference to the origin of the transaction, its negotiability is not affected thereby. Slaughter v. Bank of Bisbee, 17 Ariz. 484 (154 P. 1040); Treat v. Cooper, 22 Me. 203; Elliott v. Smitherman, 19 N.C. 338; Ryland v. Brown, 2 Head (Tenn.) 270; Hubert v. Grady, 59 Tex. 502; Smilie v. Stevens, 39 Vt. 315; Dollar Sav. & Trust Co. v. Crawford & Ashby, 69 W.Va. 109 (33 L. R. A. [N. S.] 587, 70 S.E. 1089).
These cases were all decided prior to the passage of the Negotiable Instrument Act.
People's Bank v. Porter, 58 Cal.App. 41 (208 P. 200); King Cattle Co. v. Joseph, 158 Minn. 481 (198 N.W. 798, affirmed on rehearing, 199 N.W. 437); Continental Guar. Corp. v. Peoples Bus Line, 1 W. W. Harr. (Del.) 595 (117 A. 275); State Banking Co. v. Morgan, 30 Ga.App. 430 (118 S.E. 415).
In the case of Bright v. Offield, 81 Wash. 442 (143 P. 159), the Washington Supreme Court seems to make the same distinction that we have made in our cases, although the exact question was not really involved. It is there said:
In the case of Shanabarger v. Phares, ...
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