Kittel v. Straus

Birdzell, J. (after stating the facts as above) : The sole question for our consideration upon this appeal is the validity of the mortgage referred to in the above statement as a lien upon the homestead of Richard and Florence Kittel. There is no question but what the mortgage given is the one referred to in the contract of December 3d, and there is nothing to show that Florence Kittel knew of any other consideration for the mortgage than such as was stated in that contract. Tho only testimony in the record concerning the circumstances of the execution of the mortgage by her is that of W. F. Kittel, who took it [92] to her for execution and took her acknowledgment. He testified by deposition as follows: “I took the mortgage to her and told her that a new contract was being entered into with the directors of the bank, by which they agreed to continue to operate the business of the bank, in which they agreed to remove any assets of the bank objectionable tn the department. . . . I explained to her the terms of the contract and the fact that it was drawn to take care of any liability of my brother and myself to the bank, and that the mortgage was required by the directors to guarantee the fulfilment of the contract by my brother and myself.” Even if this testimony be considered of doubtful credence in view of the witness’s fraud and deception as an officer of the bank, for which he was later convicted in the Federal court for violation of. § 5209, U. S. Comp. Stat., it can scarcely be disregarded entirely in view of the fact that it is so fully corroborated by the reference to the mortgage and the purpose for which the security was given as contained in the contract of December 3d. In this state of the record we cannot find that Florence Kittel executed this mortgage for any purpose other than that stated in the testimony of William F. Kittel and in the contract. The mortgage, in its effect upon the homestead, will therefore have to stand or fall in the light of its execution for this purpose as affected by the subsequent transactions regarding the contract. It is true that Kittel further testified that Mrs. Kittel would only consent to a delivery of the mortgage upon condition that the directors would not prosecute her husband, and that he communicated this condition to the directors. If the performance of such a condition be regarded as the consideration for the mortgage, it is obvious that it would be illegal as compounding a felony, and the entire mortgage would be void. If, on the other hand, it should be regarded merely as a condition affecting delivery, the condition is not operative after delivery to the grantee (Comp. Laws 1913, § 5491) ; and the question of the consideration for the mortgage is still open to inquiry. Of course it is not the law — and neither party to this proceeding contends that it is — ’that the consideration for a mortgage cannot be inquired into after delivery to the grantee or mortgagee. The majority of the court does not hold the consideration to be illegal, nor does it give effect to any condition upon which the mortgage Avas delivered. [93] The bank held this mortgage but a few days before it was ascertained that it would be impossible to carry out the contract. In the meantime neither the bank nor the directors had assumed any new obligation in reliance upon the mortgage, nor had either in any way altered their position. At most, according to the bank’s contentions, it had taken the mortgage as security for a debt long past due, and it was not until after the bank had closed that the excess was applied to wipe out the overdraft of the third party, with Kittel’s consent. The contract under which Florence Kittel understood that the mortgage was being given was soon rescinded, so far as the directors of the bank were able to rescind it, except for their failure to return the mortgage in question, and, possibly, some of the shares of stock which had been originally pledged with Straus. They refused to recognize it further as having any binding effect. Could they thus rescind the contract, and, as against Florence Kittel, leave the mortgage in possession of the bank as security for Kittel’s pre-existing debt? We have no good reason to doubt that, prior to the execution of the contract of December 8d, there was an understanding between Richard Kittel and some of the directors of the bank that he would mortgage his residence property to secure his past-due note. This is the testimony of Straus and some of the other directors. But there is no evidence that Florence Kittel was ever made aware of this promise, and neither is there any evidence from which we would be justified in saying that she executed the mortgage, intrusting it to her husband to uso as general security in any way ho should see fit. On the contrary, the evidence discloses that ’she understood the nature of the arrangement that was being made on December 2d and 8d. But she was not a party to that contract, and was in no way responsible for the fraud of her husband which occasioned its rescission and cancelation. She had the undoubted right to determine the conditions and terms upon which she would convey the homestead. The statute requiring a conveyance of a homestead to be executed and acknowledged by both husband and wife does not spend its force in exacting a mere formal act. Tt implies that either shall have power to give or withhold consent entirely, or to attach any condition that might be effective if the separate property of a grantor alone wore involved. We are of the opinion that the record in the instant, case clearly shows that the mortgage was [94] executed, by-Florence E. Kittel to be used as security for the performance of the specific contract of December 3d, and that when this contract was abandoned she had the same right to secure the release of the mortgage that she would have had if she had pledged her own property for a similar purpose. See Gammon v. Wright, 31 Ill. App. 353, 358; Johnson v. Callaway, — Tex. Civ. App. —, 87 S. W. 178, s. c. (Dashiell v. Johnson, 99 Tex. 546, 91 S. W. 1085); 13 R. C. L. 630. While it might at first blush seem but equitable to allow the bank to foreclose the mortgage upon th© homestead, as it was voluntarily executed and secures but a small part of the indebtedness of the officer whose conduct was responsible for so large a loss, it is evident to a majority of the court that it- cannot bo permitted in the instant case without trenching upon the policy of the law with respect to the homestead estate. To permit a mortgage to be enforced as against the homestead estate where it has been obtained for one purpose and is being-applied to another, and where the rights of no innocent third party Lave attached but remain in statu, quo, would be to establish a precedent that would deprive the homestead estate of the protection which the Constitution and the statutes have sought to accord to it. It follows from what has been said that the mortgage is of no effect as a lien upon the homestead of Richard and Florence Kittel. In so far, however, as it creates a lien upon any property of Richard Kittel exclusive of the homestead estate, it is valid,, as he had agreed to secure the specific obligation and recognized the mortgage as such security subsequent to the contract of December 3d. This lien was not defeated by the subsequent conveyance of the residence property from Richard Kittel to his wife. The judgment appealed from is reversed and the cause remanded, with directions to enter judgment in accordance with the foregoing opinion. The appellant will recover costs. Christianson, Oh. J., and Birdzbll and Grace, JJ., concur.