Kittel v. Straus , 47 N.D. 88 ( 1920 )

Bronson, J.

I dissent. The majority opinion holds invalid the mortgage involved, only so far as the same affects the homestead rights of the plaintiff. The majority opinion sustains the mortgage as a lien upon the property not within the homestead estate. It therefore upholds the testimony and contentions of the defendants and the findings and conclusions of the trial court to the effect that this mortgage was given by tlxe husband of the plaintiff to secure an indebtedness of $5,000, and interest, owing by the husband to the bank, and for advances to be made, covering traveling expenses or other incidental matters, and that such mortgage was not given as collateral in connection with the making of exhibit 100, which was afterwards repudiated between the directors of the bank and the husband. At the time this mortgage was executed, the property so mortgaged stood in the name of the husband. The majority opinion, further, is practically based entirely upon the testimony of one W. F. Kittel concerning the circumstances of the execution of the mortgage by the plaintiff, and upon the asserted fact that there was nothing to show that the plaintiff knew of any other consideration for the mortgage than such as was stated and in that contract. It is to be noted that the plaintiff in this ease did not testify and no reason is asserted in the record for the absence of her testimony. The trial court prepared extensive findings and also an extensive memorandum opinion showing that he had given this case very careful and considerate attention. The trial court has found that this mortgage was executed by the plaintiff as the result of representations made to her by her husband and his brother, W. F. Kittel, in connection with their business with the defendant bank; that she did not seek any interview with any of the members of that bank, or any explanation with reference to the execution of this mortgage, or make any statement with reference to any restrictions as to its use and purposes; that she knew that her lmsband had been the head of. that bank for a long time and had managed its affairs, and therefore must have known the relations and financial matters to be calculated and considered in making a settlement between the bank and her husband; that the execution of this mortgage was for the accommodation and use of her husband at his solicitation and the solicitation of this W. F. Kittel; that, both in reason and law, she constituted her husband her agent to use this mortgage for the purposes he deemed best in dealing with the bank. The trial court further found that the value of the homestead consisting of four lots, being a part of the premises mortgaged, was $8,000, or $3,000 in excess of the homestead limitation of $5,000. It is to be noted that the record discloses that this bank-was wrecked and went into the hands of a receiver by rea.son of acts of default of the plaintiff’s husband and his brother; that this husband pleaded guilty to making false entries and misapplication of funds under tbe Federal Statutes, and was sentenced to' tbe Federal Penitentiary and at the time of this trial was on parole; that the testimony of this brother W. F. Kittel was taken in the Federal Penitentiary, • at Leavenworth, where he was then confined under sentence for violating the banking laws, and that there is testimony in the record to the effect that he was discharged from the bank when discovered in acts of forgery.

The majority opinion, however, have not stated the real reason why the plaintiff signed this 'mortgage. It has not stated the testimony of this Kittel, which recites the reason why she signed this mortgage. Only that part of the testimony has been quoted by the majority opinion which contains Kittel’s statement to the plaintiff, and not her statement to him. This testimony demonstrates, conclusively, the serious error in which the majority opinion has fallen in stating that the testimony, as quoted in the majority opinion, was the basis of her reason for signing the mortgage.

This testimony is as follows:

Q. You then returned the mortgage, as I understand it, back to your brother at the bank?

A. She objected at first to signing it.

Q. Did she finally sign it ?

A. She said she'would not sign it unless there was a clause embodied in it to the effect that there would be no prosecution of my brother and myself.

Q. That clause Avas in the contract?

A. No, but I told her that such a clause, in my opinion, could not be inserted in the mortgage. She Avould only agree to sign the mortgage and deliA’er it to me with the understanding that it Avas not to be delivered to the directors of the bank unless they agreed that there should, be no prosecution of my brother and myself. She was very insistent upon this point, and at the time that I took the mortgage into the meeting of the directors and Mr. Tenner, I stated that the mortgage was delivered with this understanding, and that it should be returned to her if there was any prosecution of myself or my brother.

In this connection it is to be noted that, in the course of the proceedings of the bank’s directors and in trying to make an adj nstment of the. bank’s affairs so that it might continue, it was represented and made to appear that the defalcations were something like $'75,000. Later, however, this amount was discovered to be over $200,000, by reason whereof this bank went into the hands of a receiver. This testimony of the brother, therefore, concerning this demand' of the plaintiff, upon which ground alone she consented to the signing and delivery of the mortgage is important because it demonstrates her knowledge of her husband’s and her brother-in-law’s doings in connection with the bank. It demonstrates further a familiarity of knowledge of the transactions of such parties. It is to be noted, further, that Battel in his testimony testified that he took this mortgage and delivered it at the meeting of the directors, with this understanding that it should be returned to the plaintiff if there was any prosecution of himself or plaintiff’s husband.

I am unable to find any testimony that this plaintiff signed this mortgage, and so agreed to sign for the reason that it was made as collateral to this contract between her husband, and the directors of the bank. Accordingly, the record, upon the testimony of this brother, discloses that the only understanding which the plaintiff had was for a conditional delivery of the mortgage based upon nonprosecution for crimes involved. It is rather difficult, therefore, to understand the holding of the majority opinion that this mortgage was executed by the plaintiff for the purpose of being collateral to this contract. Exhibit 100. The majority opinion does state that they cannot find that the plaintiff executed this mortgage for any other purpose than that stated in the testimony of this brother. That purpose, as stated in the majority opinion, is not the purpose as disclosed by the evidence of this brother and contained in his deposition. The majority opinion further states that if this testimony of the brother is of doubtful credence in view of his conviction, it is fully corroborated by reference to the mortgage and the purpose for which the security was given. It is difficult to understand what corroboration may thus be inferred when the mortgage itself speaks of a definite indebtedness and a definite note, and when the majority opinion otherwise finds the mortgage to be valid as security for this very indebtedness thus described in the mortgage. The majority opinion accordingly demonstrates the correctness of the trial court’s findings, viewed in connection with the evidence above stated herein. It is further evident that the testimony of this brother served as a self-serving declaration in favor of the plaintiff, who was not a witness, and who did not present herself to give testimony in this case. The majority opinion further practically states- that it is only equitable to permit the foreclosure of this mortgage upon a homestead, but it cannot permit such to be done without intrenching upon the policy of the law concerning homestead estates. This is an action in equity; principles of equity should apply to the plaintiff as well' as to her husband and this brother. Their actions should be scrutinized closely just as they were very closely scrutinized in a very recent case in Wisconsin, where the plaintiff was seeking to retain title conveyed by her husband and was there claiming to be a bona fide purchaser. See Spangler v. Kittel, 172 Wis. 583, 179 N. W. 759. It is not asserted in this record that any fraud, duress, or improper influence was exerted upon the plaintiff. This mortgage was delivered, as found by the trial court, and, as found by this majority opinion, to secure the indebtedness described in that mortgage. The mortgage as an instrument became valid only upon delivery. Stockton v. Turner, 30 N. D. 641, 153 N. W. 275.

It is well settled by statute and decisions that a mortgage cannot be delivered to the mortgagee conditionally. Comp. Laws 1913,- '§ 5497; Sargent v. Cooley, 12 N. D. 1, 94 N. W. 576; First Nat. Bank v. Prior, 10 N. D. 146, 86 N. W. 362. This mortgage, upon its delivery, accordingly, took effect absolutely, discharged from the parol conditions upon .which delivery was made. Upon this record, and pursuant to the findings of the trial court, also as sustained in the majority opinion, at least with respect to the property other than the homestead estate, it is further manifestly inequitable to permit this plaintiff, who, possessed of and chargeable with knowledge of her husband’s and brother-in-law’s transactions, asserted only one reason as a condition in the signing of this mortgage, to rescind her signature to the mortgage -and to defeat' the just claim of the bank. Upon principles of both equity and law the plaintiff is not entitled to prevail. The judgment in all things should be affirmed.

Bronson and Robinson, JJ., concur.