294 S.W. 111 | Mo. Ct. App. | 1927
To sustain the issues on their part plaintiffs offered in evidence the warranty deed from defendant, which was regular on its face, containing the covenant against incumbrances, as alleged. The record showing the Chamber's Deed of Trust, dated April 8, 1908, made to a trustee for the Butler County Bank securing a note in the sum of $635, together with the entry of satisfaction thereof, dated July 24, 1918, and the lien of the paving special tax bills, were likewise shown. D.M. Johnston, one of the plaintiffs, testified that plaintiffs paid off the Chamber's incumbrance of $635 and paving taxes to the amount of $474. Plaintiffs further proved a written contract was entered into April 27, 1912, between the Bank of Poplar Bluff (defendant), James A. Johnston (plaintiff) and J.O. Chambers (who was also a stockholder in the Grocery Company), which contract, after reciting that Chambers and wife had conveyed the property in question to defendant in order to pay and satisfy their note in the sum of $2500, provided as follows: "the said Bank of Poplar Bluff agrees to convey said property, within six months from date, to James A. Johnston, upon the payment to said Bank of Poplar Bluff, by said James A. Johnston, the sum of twenty-five hundred dollars; and the said James A. Johnston hereby agrees to pay to said Bank of Poplar Bluff, the sum of twenty-five hundred dollars within six months from this date."
Defendant, to sustain the defense pleaded, submitted evidence tending to prove a state of facts as follows: Prior to the time the contract above referred to was entered into between plaintiff James *131 A. Johnston and J.O. Chambers and defendant, plaintiffs and J.O. Chambers were jointly interested in the Simmons Grocery Company and controlled its affairs. The Simmons Grocery Company became indebted to the State Bank of Poplar Bluff in the sum of about $3000 and in May, 1912, this indebtedness had been reduced to $2500. At that time Chambers owned the real estate in question. Prior thereto Chambers and wife had given their note to plaintiffs, who were associated with Chambers in the grocery business, for $2500, securing the same by a deed of trust on this same real estate; plaintiffs transferred this note and deed of trust to the State Bank as collateral security for the indebtedness of the Simmons Grocery Company in which all were jointly interested. Thereupon it was decided to change the Simmons Grocery Company account to defendant Bank and after certain negotiations the contract dated April 27, 1912, heretofore set out, was entered into. In accordance with the terms of this contract the property owned by Chambers was deeded by him to defendant bank, the Chamber's note was satisfied and plaintiffs gave their note for $2500 of date May 1, 1912, to defendant, taking up the Simmons Grocery Company's note of the same amount. No money was actually paid by defendant for the Chambers deed. The note given by plaintiffs to defendant was not paid in full, although reduced in amount, at the time the warranty deed involved in this case was delivered to plaintiffs by defendant. This deed was dated June 3, 1912, and acknowledged June 30, 1914, when it was delivered and recorded.
There was evidence tending to show plaintiffs collected the rents from the property during the period the legal title was in defendant and also paid the interest on the note of $635, being the same note the lien of which plaintiffs claim constituted a breach of the covenant against incumbrances in this action. All this evidence was introduced over plaintiffs' objections.
It is defendant's contention that it had a right to prove the warranty deed from Chambers to it was in fact a mortgage; that it held the property merely as security for the $2500 note executed by plaintiffs and, upon the payment thereof, plaintiffs were entitled to a conveyance of the property; that defendant merely held the legal title to said property, whereas the equitable title was in plaintiffs and, therefore, defendant is not liable on the warranty or covenant against incumbrances contained in the deed. It is plaintiffs' contention that the parol evidence offered by defendant was inadmissible because it tended to contradict and vary the terms of the written contracts, including the deeds, offered in evidence. It is also contended that the issues here involved are equitable and should not have been submitted to the jury. Error is further assigned in the giving and modifying of instructions. *132
The important problem in this case relates to the question of the competency of the parol evidence offered by defendant tending to prove the Chambers deed to defendant was in fact an equitable mortgage and, that being established, whether or not defendant, occupying the position of a mortgagee, would be bound by the covenants of warranty and against incumbrances contained in a deed made by it to plaintiffs, occupying the position of mortgagors.
As an exception to the general rule that oral testimony cannot be used to vary the terms of a valid written contract, the law is well settled that a deed, absolute on its face, may be proven by parol evidence to have been intended as a mortgage. This doctrine has been promulgated at times with various limitations requiring a foundation laid on the equitable ground of fraud or mistake, but what is known as the unrestricted doctrine is now the prevailing rule in the United States. Under this theory no such equitable grounds are necessary in order to make parol evidence competent for the purpose of showing the true character of the instrument. [19 R.C.L. 250; L.R.A. 1916-B Note, p. 47, Art. 15.] The unrestricted doctrine prevails in Missouri. [Carson v. Lee,
In the case of Carson v. Lee, supra, it is said that "A condition indispensable to hold a deed to be a mortgage is that there must have been a debt to secure, or some liability against which the grantee is to be guarded." All the Missouri cases dealing with the subject are the same effect. That being true, we must first determine whether or not there was an existing debt which would determine the character of the Chambers deed. It is at once obvious that the relation of debtor and creditor did not exist between Chambers (the grantor) and defendant bank (the grantee) in the deed made for the very purpose of extinguishing the indebtedness of Chambers. That such was a fact is clearly demonstrated by reference to the written contract entered into between plaintiff, James A. Johnston, the defendant bank and J.O. Chambers, by the terms of which defendant agreed to pay and satisfy the Chambers note of $2500. There was no other personal indebtedness of Chambers and in so far as his interest is concerned there could have been no mortgage. [Turner et al. v. Kerr,
In Fisk v. Stewart,
In Hall v. O'Connell,
In the light of these decisions and the ordinary principles of equity, we hold that it was competent to prove by parol evidence that the deed made by Chambers to defendant was a mortgage, although the plaintiffs, and not the grantors in the deed, were the ones indebted to defendant. The contract between the three parties heretofore referred to was sufficient in itself to show the true relation and understanding of the parties. By its very terms plaintiffs obligated themselves to pay defendant $2500 and defendant obligated itself to convey the property to plaintiffs upon such payment. The evidence was clear, cogent and undisputed that the Chambers deed was in fact a mortgage.
Considering it as an established fact that the defendant held this property as mortgagee under the deed from Chambers, is defendant bound by the covenants in its warranty deed to plaintiffs who may be said to occupy the proposition of mortgagors? Defendant's theory at the trial was, that if it held the property merely as a *134
security for a debt owing from plaintiffs to defendant, then defendant was not liable, and the court so instructed the jury. In other words, defendant assumes that mere proof it held only the legal title to the property absolves it from all liability on its covenant against incumbrances contained in its deed to the holder of the equitable title. No authorities are cited to support this assumption. The warranty deed made by defendant recited a consideration of $2500. It is always competent to show the real consideration in a deed by oral testimony unless the consideration is so stated as to indicate the recital thereof is intended as the real consideration, but it is not competent to show there was no consideration. When a deed recites a valuable consideration, the grantor is estopped from proving there was only a good consideration, or no consideration whatever, in order to destroy the effectiveness of the deed. [See v. Mallonee,
It is our opinion defendant has mis-conceived its defense, if any, to this action. It is well settled in this State that if the owner of real estate conveys it to another by general warranty deed containing the usual covenants of seizin and against incumbrances, and his vendee gives back a deed of trust or mortgage securing a part of the purchase price containing like covenants of warranty, the vendee does not thereby release the vendor from liability on the original covenants in the warranty deed. [Crosby v. Evans,
The Crosby case reviews the authorities from many States on that question. Among other cases cited is that of Willis v. McGough Company,
On the question of error in trial by jury, it may be said the trial court may submit the issues in an equity case to a jury and either adopt the jury's findings or reject them. [Yancey v. Bank,
For the reasons given the judgment is reversed and cause remanded.
Cox, P.J., and Bradley, J., concur.