Hach v. Hill

Gantt, P. J. The petition is based on the principle that a warranty deed executed to secure advances, or a loan, though absolute on its face, may be declared a mortgage only. The contract of Hach with Hill, Nall & Co. was the consideration, and the only consideration ; for the deed from Mrs. Hach to Hill, Nall & Co. and the two papers will be read together, in giving effect to the deed. The trial court correctly held that the warranty deed was intended by the parties thereto as a mortgage to secure advances to be made by Hill, Nall & Co. to Nicholas Hach, and Mrs. Hach was competent to mortgage her land for that purpose, and her admissions that she executed the deed for that purpose are binding upon her, and we adhere to the view expressed in paragraph 1 of Judge Sherwood’s opinion in division numbered 1. The proper construction of the contract between Nicholas Hach and Hill, Nall & Co. is the main object to be attained by the judgment of this court. The view taken by the appellants is so radically different from that held by respondents, that the most careful consideration is demanded. The appellants contend that the contract, read in the light of the surrounding circumstances and the objects in view, is one for the reimbursement of Hill, Nall & Co. for the re-equipment [27] of the stave factory and placing it in running order, whereas Hill, Nall & Co. insist that it was to secure them not only the advances to restore the property, but all the losses inciorred by them during the time, some four or five years that they ran the factory, these losses amounting, according to the finding of the circuit court, to $4,725.72, and interest on the same to date of the trial below, $1,585.46, or a total of $6,311.18. The language of the contract is : “The.party of the second part contracts and agrees with said party of the first part to complete said factory at and within reasonable cost and time; to equip the same for a stave and head factory; to keep an account of all money expended ; and on the expiration of this contract to reconvey to said party of the first part said factory together with said steamboat, provided said party of the first part pays to said party of second part all indebtedness due them for the completion of said factory or on any other account whatever,, to pay said party of the first part nine per cent., net, on all staves, heading or products of any kind made at said factory.” The contract was to continue two years. If unprofitable, Hill, Nall & Co. might discontinue without claim from Hach for damages. Hach testified that, at the time of conveying the premises, the old factory had been burned, and, to get it rebuilt, he and his wife made the deed, and he the contract with defendants, Hill, Nall & Co.; that it cost $902 to rebuild. This was all the money the firm furnished. The factory burned again in 1880, but it had been insured for $3,000; this was collected and the factory again rebuilt at a cost of $1,685.35. He testified that, at the expiration of the two years, no new arrangement was made. He applied to the company for a statement and settlement, but could not get one. The firm and Craig, their assignee, have continued to use the property not only during the two years, but up to the trial, some six or seven years. [28] The rental of the property was fairly worth $100 per month. Dines, one of the firm of Hill, Nall & Co., testified that his firm had run the factory themselves “ on their own account,” some four years before it went into Craig’s hands. Hach had no control, real or apparent, after the two years expired. The construction we place on this contract and deed is, that this deed was intended as a mortgage to secure advances to be made for the benefit of Hach; these advances must be gathered from the written contract executed contemporaneously. Prom this contract we understand Hach undertook to turn over the property and business to Hill, Nall & Co. for two years and give them his services and experience in running the factory. Hill, Nall & Co. were to rebuild and equip the factory and keep an account of all money expended, that is to say, in building and equipping the factory. Hach was to receive as compensation for his services nine per cent. By the contract, he was to have no other interest in that business. His contract for a per cent, on sales, with no liability for the profits or losses, did not constitute him a partner. Wiggins v. Graham, 51 Mo. 17; Campbell v. Dent, 54 Mo. 325; Gill v. Ferris, 82 Mo. 156. At the end of two years the property was to be returned to Hach, provided he repaid the amounts expended and all other indebtedness whatever. One rule of construction is that which the parties themselves by their conduct put upon their contracts. Before Hach can be charged with the losses attending this business, let us see how Hill, Nall & Co. treated his relation to them. After two years, Dines says that they ran the factory on their own account. If they did, certainly no court would expect Hach to suffer the losses or bear the expenses of a business in which he was in no way interested. .•Win, they paid him wages at $2.50 per day. So that he was neither a partner by virtue of his contract, [29] nor is he recognized or consulted as such by the firm in charge of the business, and the payment of daily wages negatives the idea that he was a partner in any sense. Was he a grantor? There is nothing in the contract itself that guarantees Hill, Nall & Co. against losses. On the contrary they expressly reserve the right to discontinue when the business proves to be a losing one. They now testify it was a losing business all the time. If this were true, and knowing that Mrs. Hach stood as surety for their losses, their conduct had little in it to commend them to consideration in a court of justice; but we think the evidence clearly shows they were running the business on their own account, and Hines swears that he supposed Hach had abandoned the contract. To permit his firm now to charge Mrs. Hach’s property as they were permitted to do in the court below with the total amount of payments made for all purposes on account of this factory during the whole time from the entering into the contract up to the transfer to Craig, including purchase of stave timber and wages of employes and incidental expenses, would in our opinion be unjust and inequitable, and not justified either by the language of the contract or the circumstances of the parties. Why should Hach suffer the losses of a business in which he was not a partner and had no interest beyond his salary fixed at nine per cent, of the sales of staves, heading and products? “A construction that would bring about such a result ought to be adopted with great hesitation,” and we cannot bring ourselves to such a view. We think an account ought to be taken of the moneys expended -in rebuilding the factory the first time. To this ought to be added interest at six per cent, until the receipt of the insurance money received from the fire. An account of this should be taken. If it exceeded, as Hach testifies, the necessary cost of [30] rebuilding and repairing, then that balance should be used in reducing the original advancement and interest, and the balance, if any so left, should bear interest to the date of the accounting. On the other hand, it appears that the property was worth $100 a month rent. An account of these rents after the two years should be taken also with interest at six per cent, from the end of each year. As to the claim made by respondents that the court below found for Craig, we have only to say Mr. Craig is not here complaining of the decree, aild the claim that he was an innocent purchaser for value without notice' is utterly inconsistent with a decree in favor of plaintiffs. Had the court so found, there would have been no occasion for a finding and decree permitting plaintiffs upon the payment of the balance found due to redeem the lot. But as this case must be reversed for anew accounting we do not adjudge what Craig’s rights are. The evidence and the decree are too indefinite to justify us in deciding whether he is an innocent purchaser or not. That will depend upon his showing, and the burden is on him to establish that equity. For these reasons, the cause is reversed and remanded for new trial in accordance with these views. Sherwood, C. J., and Black, Brace and Macfarlane, JJ., concur; Judge Barclay dissents, and Thomas, J., not sitting.