Ayres v. Probasco

The opinion of the court was delivered by Valentine, J.: statement of facts. This was an action on two promissory notes and a mortgage. The notes were executed by William M. Ayres alone. The mortgage was executed (as it appears upon its face) 'by both Ayres and his wife, Melissa T. Ayres, and both the notes and the mortgage were executed to Richard Probasco. Probasco was the plaintiff in the court below, and Ayres and wife, Frank Sutter, and W. L. Challiss were the defendants. The defendant. Ayres and wife set up as defenses to the action that the notes were usurious, and the mortgage was void. The — 184 — transactions connected with the execution and delivery of said notes and mortgage were, so far as they are necessary to be stated, substantially as follows: Mrs. Ayres owned, and she and her husband occupied as a part of their homestead, the W.J of the S.E.J of section 18 in township 4, of range 21 east, in Doniphan county, less ten acres out of the southwest corner of said land. Said land was mortgaged to one A. B. Symns, who was foreclosing his mortgage in the district court of Doniphan county, and the land was about to be sold to ■satify said Symns’ mortgage. B. O’Driscoll was the attorney for Ayres and wife in said foreclosure suit. In order to save their land from being sacrificed, Ayres and wife concluded to try to borrow the money and pay off the mortgage. O’Driscoll acted as their agent in attempting to procure and negotiate the loan. He had an interview with W. L. Challiss, of Atchison, about the matter, and from what transpired they all expected to borrow the money of Challiss. They expected to borrow $1,000, and to pay interest thereon at the z’ate of fifteen per cent, per annum. O’Driscoll furnished an ordinary printed blank mortgage, and Ayres and wife signed and acknowledged the same before E. W. Stratton, a justice of the peace of Doniphan county. O’Driscoll and Ayres then took said blank mortgage to Atchison, and went to the office of said W. L. Challiss. Challiss however was not loaning money for himself, but was loaning money for Richard Probasco, of Maryland. He required a greater rate of interest than fifteen per cent, per annum. O’Driscoll and Ayres finally agreed to the terms proposed by Challiss, and Ayres executed his two promissory notes which read as follows: “$550.00. Atchison, Kas., Dec. 1,1871. “ One year after date I promise to pay to Richard Probasco, or bearer, five hundred and fifty dollars, value received, payable at Exchange Bank, with interest at 12 per cent, per annum from date until paid, and payable semi-annually. “William M. Ayres.” The other note is precisely the same as the above, except that it is made payable in “two years after date,” instead of in one. The two notes together amounted to $1,100. O’Dris — 185 — coll and-Challiss then filled up the said blank mortgage so as to make it correspond with said notes, and so as to make it a security for the payment of said notes, O’Driscoll doing the principal part of the writing. They filled up the blank for the description of the land with the same land that hád prior to that time been mortgaged to Symns; and they made Probasco the mortgagee. ■ The notes and the mortgage were then delivered to Challiss, as the agent of Probasco, and in consideration therefor Challiss paid Ayres $1,000, and only $1,000. Ayres, being present all the time, agreed to all that was done/ and ratified and qonfirmed the same. He therefore has no right to raise any question of mere irregularity in the execution of said mortgage. But the question of the execution of said mortgage is one of power, and not a question of mere irregularity, as we shall presently see. After Ayres received said money from Challiss he paid off the mortgage to Symns therewith. The notes and the mortgage to Probasco are the instruments upon which the present suit is brought. 1.Leading questions, when allowable. Ayres and wife now claim that said mortgage is void, and that said notes are tainted with usury, and these are the main questions in the case. It is true that a vast number of other questions are raised, but they are mainly technical and frivolous. For instance, the first question raised, , ' (both iu tms court and in the court below,) is# upon the ground that the court below allowed the plaintiff to ask O’Driscoll a leading question. Five such questions are raised in this court, and seven such questions were raised in the court below. Indeed, the defendants even objected to the plaintiff asking the defendant Ayres a leading question, although it was asked in a legitimate cross-examination of said Ayres. We have already stated something of the connection which O’Driscoll had with the transactions out of which this cause of action arose. O’Driscoll was also the attorney for Ayres and wife in this case in the court below. He was called as a witness for the plaintiff below. He did not show himself to be a “fast witness” for the plaintiff, but on the contrary plainly showed himself to be obviously the — 186 — reverse. Yet notwithstanding all this, seven different questions that were put to him by the plaintiff were objected to-by the defendants on the ground that they were “leading.” Some of them were leading; but still there was scarcely the remotest possibility that the witness could be led, either from inclination on his part or from inadvertence, into testifying too favorably for the plaintiff. His evidence abundantly shows this. The court therefore did not err in permitting leading questions to be put to him. Indeed, it possibly would have been an abuse of judicial discretion if the court had refused to permit such questions to be aske^l. 2. Knowledge of agent, isknowledge of principal. We will now pass from the many immaterial and unsubstantial questions raised by the defendants below to the more material ones. The whole of the transactions out of which this cause of action arose, were oarrie(j on anc[ consummated on the part of Probasco through his agent Challiss. Therefore, whatever came to the knowledge of Challiss, pending the negotiations for said loan, must be presumed to have come to the knowledge of Probaseo. Notice to the agent is notice to the principal, in such a case. Greer v. Higgins, 8 Kas., 519; 1 Parsons on Contracts, 74. And delivery of the notes and mortgage to Challiss, was delivery to Probaseo. Challiss was really standing in the place of Probaseo in every particular. 3. Usurious notes and contracts. What statute governs. Were said notes usurious? Certainly they were. Only $1,000 was loaned, although the notes were given for $1,100. And while under our statutes the highest rate of interest allowed to be contracted for is’ only twelve per cent, per annum on the amount of the debt or loan, yet in this case interest at the rate of twelve per cent, per annum was contracted for on an amount greater than the amount loaned. Twelve per cent, interest on $1,100 is more than twelve per cent, interest on $1,000. Twelve per cent, interest on $1,100 is equal to thirteen and two-tenths per cent, interest on $1,000. In 1871, when these notes were executed, all interest was forfeited if the parties contracted for more than the highest — 187 — rate of interest allowed by law. (Gen. Stat., 526, ch. 51, §4.) And the laws in force, when these notes were executed is the law that now governs, although a subsequent law (Laws of 1872, page 284,) has been passed by the legislature. (Jenness v. Cutler, 12 Kas., 500, 510 to 512.) 4. Mortgages. Executing a “Blank mortgage," a nullity. 5. wuenauthority to agent to lie in •writing, Is said mortgage void? We are reluctantly compelled to answer this question in the affirmative. Mrs. Ayres never executed said mortgage. She signed and acknowledged a paper, but this paper in legal effect was nothing. It was just such a blank mortgage as mav be purchased at almost any printing office for a few cents. At the time 'she signed and acknowledged the same she had never heard of Richard Probasco. She did not expect the mortgage to be so filled up as to make him the mortgagee. Nor did she expect to have it filled up so as to make it a security for the payment of any sum greater than $1,000. She expected to have the mortgage filled up so as to make W. L. Challiss the mortgagee, and so as to secure the payment of just $1,000. This it may be said she authorized to have done. But even this-authority was given by her only by parol. She never authorized in writing any portion of said mortgage to be filled up. It was therefore not her mortgage, even when filled up. An estate in land is usually transferred by deed. An interest in land less than an estate may probably be transferred by, a simple contract in writing. But no interest in land, if it is to continue for more than one year, whether it be an estate or less than an estate, can be transferred except in writing or by operation of law. (Statute of Frauds, Gen. Stat., 505, ch. 43, § 5.) And if the transfer is to be made through an agent, the agent must be authorized in writing; (Id.) It is true, an owner of real ° ' ' ' estate may by parol authorize an agent to make a simple contract concerning such real estate which will bind the owner personally; (Rottman v. Wasson, 5 Kas., 552;) but in such a case no interest in the land is transferred from the owner to the agent, or from the agent to the person with whom the agent contracts. No interest in the land passes — 188 — from the owner to any one, and the person with whom the agent contracts gets no interest in the land. If the contract is broken by the owner, the remedy of the other party is an action against the owner personally, either for the specific performance of the contract, or for damages. There is a vast difference between authorizing an agent to transfer an interest in land, and authorizing him to make a contract which will have the effect to compel the owner of the land personally to transfer at some future time such interest. The agent cannot be authorized to do the first by parol: (see said § 5 of the Statute of Frauds.) But he may be authorized to do the second by parol: (Rottman v. Wasson, supra.) Now, a mortgage of real estate, although it may not be technically an estate in land, yet it certainly is an interest in land. It is in form a conveyance, and is in fact, a lien that may be paramount to any subsequent conveyance, lien, or incumbrance. It is an incipient and conditional alienation of the estate that may eventually overturn and destroy the homestead interest of the mortgagor, and may wholly absorb and swallow up every other right or interest which he may have in the mortgaged premises. It is indefinite in its duration. It is coexistent and co-extensive. with the debt which it is made to secure; and nothing but the extinguishment of the debt will destroy it. In the present case, one of the notes which the mortgage was made to secure, was to run two years before it became due. Therefore, as a mortgage of real estate creates an interest in the land of indefinite duration, even if Mrs. Ayres had authorized O’Driscoll or her husband by parol to fill up said blank mortgage, as it afterward was filled up, the authority would have been void. Upon this proposition the authorities in the different states' are conflicting; or at least, the law upon this subject is different in the different states, as shown by the decisions thereof. But the great preponderance of authority, both in this country and in England, lays down the doctrine as we have stated it. See the following authorities: Burnes v. Lynde, 6 Allen, 305; Preston v. Hull, 23 Grattan, 600; People v. Organ, 27 Ill., 27; Ingram v. — 189 — Little, 14 Geo., 173; Upton v. Archer, 41 Cal., 85; McMurtry v. Frank, 4 Monroe, 435; Cummins v. Casserly, 5 B. Mon., 75; Williams v. Crutcher, 5 How., (Miss.) 71; Mosby v. State of Ark., 4 Sneed, (Tenn.) 324; Graham v. Holt, 3 Iredell (N.C.) Law, 300; Byers v. McClanahan, 6 Gill & J., 250; Blood v. Goodrich, 9 Wend., 68; 12 Wend., 525; Worrell v. Munn, 5 N. Y., 229, 239; Cross v. State Bank, 5 Pike, (Ark.) 525; Ayers v. Horness, 1 Ohio, 368; Perminter v. McDaniel, 1 Hill, (S.C.) 267. 6 Estoppel; void mortgage, Is Mrs. Ayres estopped from denying that said mortgage is her mortgage? We think not. This case is obviously dissimilar from the case of Knaggs v. Mastin, (9 Kas., 532, 548, et seq.) It may be just as immoral for Ayres and wife to claim that their mortgage is void, as it was for Knaggs and wife to claim that their deed was void; but still there are distinctions between the two cases which render them very dissimilar from each other. The instrument in this case was not filled up as Mrs. Ayres had directed that it should be filled up, while the instrument in the other case was filled up just as Mrs. Knaggs had directed. And the mortgagee in this case, through his agent Challiss, was perfectly cognizant of all the facts connected with the execution of the mortgage at the time the mortgage was delivered to him, and at the time he parted with his money, while the grantee in the other ease was wholly ignorant of all the irregularities in the execution of said deed at the time the deed was delivered to him, and at the time he parted with his money, and for a long time afterward. Both Mrs. Ayres and Mrs. Knaggs enjoyed the benefit of the money, or a portion thereof, procured by means of their respective instruments, and in this respect only (so far as any foundation for equitable estoppel is concerned,) are the two cases similar. But merely enjoying the benefit of money, procured irregularly and wrongfully, is not of itself a sufficient ground upon which to found an equitable estoppel, so as thereby to make what would otherwise be a void deed or mortgage a valid instrument. A party invoking the aid of — 190 — estoppel must himself show that he has been vigilant and careful in the protection of his own rights and interests. Where a person negligently or knowingly puts it within the power of some other person to swindle and defraud him, and he is thereby swindled and defrauded, he is generally allowed to suffer the consequences of his own negligence and folly. Neither the courts nor the law can undertake to protect men of sound mind from all the consequences of their own negligence and follies. The rule of estoppel in pais will be found stated in the case of Clark v. Coolidge, 8 Kas., 189, 196. Mr. Probasco ought to have said, through his agent Challiss, when O’Driscoll and Ayres desired to borrow said money from him, and offered to deliver said mortgage to him, “I know that mortgage is void, as a mortgage of Mrs. Ayres; I will therefore not receive it. You must furnish me a better' mortgage if you want the money.” 7. Homestead; mortgage of husband alone. If said mortgage had been on the property of Ayres, and on any other property than the homestead of Ayres and wife, it would have been valid as to Ayres, although void as to his wife. But this mortgage was on the property of Mrs. Ayres, and on property occupied as the homestead of herself and husband. Is the mortgage therefor valid as to Ayres, (the husband,) or is it absolutely void? We think it is absolutely void. (Const. of Kas., art. 15, § 9; Morris v. Ward, 5 Kas., 239; Dollman v. Harris, 5 Kas., 597.) A mortgage is a contingent alienation of the mortgaged premises. It is a lien thereon that may finally engulf and swallow up the whole estate. And such alienation ctm only be effected, and the lien created, by the joint consent of the husband and wife. (Const., art. 15, § 9, and cases above cited.) Now as Mrs. Ayres did not give her consent to said mortgage, it is void as to her; and, being void as to her, it must also necessarily be void as to her husband, there being no joint consent of the husband and wife. This virtually leaves Probasco without any security on his notes, so far as the case is now presented to us. It is true, that Challiss received from Ayres, as collateral security, two other — 191 — notes, given by Lloyd McNamee to Ayres on the purchase by McNamee of another portion of the Ayres homestead, which notes were merely delivered to Challiss without indorsement, (McCrum v. Corby, 11 Kas., 465, 470.) And as Ayres and wife had never made a deed to McNamee for the premises, Ayres made a deed to Challiss therefor, in order to enable Challiss to make a deed to McNamee for the premises, and then to collect the McNamee notes. But as this deed was executed by Ayres alone, and for a portion of his homestead, it was also void. And.as Ayres and wife now refuse to make a good deed to either Challiss or to McNamee, or to any one else on said sale to McNamee, said collateral security may not be worth very much. As McNamee was not made a party to this suit, and as there has not been any sufficient showing as to whether Ayres and wife could.be compelled to make a good deed .for said premises to McNamee, we cannot tell whether Challiss and Probasco may have said premises sold to satisfy the McNamee notes and the proceeds thereof applied in payment or part payment of the notes given by Ayres to Probasco. (Stevens v. Chadwick, 10 Kas., 406.) The only judgment that could be rendered in this case in favor of Probasco, as the case is now presented to us, would be a personal judgment against William M. Ayres for the amount of the first note, without interest. Perhaps however, upon a second trial, with the pleadings amended, and other evidence introduced, and other findings made, other and additional relief may be granted to the plaintiff Probasco. The judgment of the court below will be reversed, and cause remanded for a new trial. Kingman, C. J., concurring.