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Columbian Natl. Life Ins. Co. v. Dubinsky

Supreme Court of Missouri, Division One
Apr 16, 1942
349 Mo. 299 (Mo. 1942)


February 26, 1942. Rehearing Denied, April 16, 1942.

1. APPEAL AND ERROR: Exhibits not in Bill of Exceptions. Since certain exhibits were not included in the bill of exceptions allowed and filed and the bill contained no direction to the clerk to copy the same, the motion to strike said exhibits should be sustained.

But the record is otherwise sufficient without these exhibits to show that the result reached by the trial court was wrong, so the motion to dismiss the appeal will be overruled.

2. AGENCY: Mortgages: Unauthorized Agreement of Loan Correspondent. It was not shown that the loan correspondent of plaintiff mortgagee, in extending a real estate loan, had any authority to agree that the makers of the original notes should be relieved from liability. Testimony as to what the loan correspondent said would not establish his authority.

3. BILLS AND NOTES: Accommodation Makers. The Dubinskys obtained a real estate loan, and then sold the property to the Cohens. When the Dubinskys signed extension notes they were not accommodation makers, as no one can be an accommodation maker of a note given for his own debt.

4. PRINCIPAL AND SURETY: Extension of Debt. When the Dubinskys, the original mortgagors, sold the property to the Cohens, who assumed and agreed to pay the mortgage debt, the Cohens became the principal debtors and the relation of the Dubinskys changed to that of surety. While an extension without the consent of the Dubinskys would have released them, their consent was evidenced by their signature of the extension agreement and notes, and they remained liable.

5. MORTGAGES: Extension Notes as Collateral. It appears that the extension notes were to be, in effect, collateral security for the original notes, which were not released.

6. APPEAL AND ERROR: Equity: Ruling by Supreme Court. The Dubinskys having sought relief against mortgage notes in an equitable cross petition, the entire action is in equity. The Supreme Court may consider all evidence properly preserved in the record and direct what judgment should be entered. The record shows liability of the Dubinskys, but the trial court excluded evidence as to the amount of the debt, and this is the only issue to be determined on a retrial.

Appeal from Circuit Court of City of St. Louis. — Hon. Eugene L. Padberg, Judge.

REVERSED AND REMANDED ( with directions).

D. Calhoun Jones and Philip S. Alexander for appellant.

(1) An oral agreement to cancel a mortgage note is within the Statute of Frauds. Mo. Stat. Ann., sec. 2967, p. 1835. (a) It is an agreement respecting an encumbrance on land within the meaning of the statute. Wendover v. Baker, 25 S.W. 918, 121 Mo. 273; Gates Hotel Co. v. C.R.H. Davis Real Estate Co., 52 S.W.2d 1011. (b) It also may be within that section of the statute relating to agreements not to be performed within a year. Mo. Stat. Ann., sec. 2967, p. 1835; Waller v. Tootle-Campbell Dry Goods, 59 S.W.2d 751. (2) When parties have deliberately put their engagements into writing in such terms as import a certain legal obligation, it is conclusively presumed that the whole of the engagement of the parties and the extent and manner of their undertaking have been reduced to writing, and parol evidence is not permitted to vary or contradict the terms of such writing, or to substitute a new or a different contract for it. 22 C.J. 1070, sec. 1380; Burk v. Walton, 86 S.W.2d 92; First Natl. Bank Trust Co. v. Limpp, 221 Mo. App. 951, 288 S.W. 957. (a) The rule permitting the consideration of written contracts to be inquired into by parol evidence does not apply where the statement on the contract as to the consideration is more than a mere receipt or acknowledgment of payment, and is of a contractual nature. If the instrument states a contractual consideration, parol evidence is not admissible to contradict the consideration expressed. 10 R.C.L. 1044, sec. 238; Meyer v. Weber, 109 S.W.2d 702. (3) The parties to a cause are concluded by their pleadings and restricted in the maintenance of an affirmative defense to the special allegations upon which it is based. Provines v. Wilder, 87 Mo. App. 162; White v. United Brothers Sisters, etc., 180 S.W. 406. (4) Hearsay is not admissible as secondary evidence. Krause v. Spurgeon, 256 S.W. 1072; Scrivener v. American Car Foundry Co., 330 Mo. 408, 50 S.W.2d 1001. (5). Where a renewal note is sued on, and the defense of lack of consideration raised, it is proper for plaintiff to show that notes for which renewal note was given were not paid, since this testimony goes directly to question of consideration. This is too obvious to require citation of authority. (6) Wide latitude should be given in cross-examination; any facts contradicting, disproving or inconsistent with adversary's proof or position may be developed on cross-examination. Federal Chemical Co. v. Farmers Produce Exchange, 123 S.W.2d 612; Massman v. Muehlbach, 95 S.W.2d 808, 231 Mo. App. 72. (a) The agreement made in renewal of the notes involved in 1937, was admissible as an admission on the part of defendants Dubinsky that note sued on was executed by them for consideration. Globe American Corp. v. Nidler, 131 S.W.2d 340. (7) The evidence showed that the note sued on was supported by consideration as to defendants Dubinsky, and the trial court erred in finding that they executed the note solely for the accommodation of plaintiff. (a) Extension of time of payment of indebtedness is sufficient consideration for execution of note. 8 C.J. 236, 237; Cox v. Sloan, 57 S.W. 1052, 158 Mo. 411; Citizens Bank v. Oaks, 184 Mo. App. 598, 170 S.W. 679; North Side Finance Co. v. Sparr, 78 S.W.2d 892. (b) Extension of time of payment of note secured by mortgage, granted by holder to purchaser from mortgagor, does not release mortgagor where he consents to extension. Russkamp v. Fetchling, 101 S.W.2d 524. (c) A note given by a surety on another note or debt is supported by a valid consideration as to said surety. Montgomery v. Schwald, 166 S.W. 831, 177 Mo. App. 75. (8) Plaintiff's agent had no authority, implied or apparent, to make the agreement alleged by defendants, the agreement was not binding on plaintiff, and the trial court erred in finding that plaintiff entered into such an agreement. 2 C.J. 562, sec. 204; Burnett v. Royal Union Mut. Life Ins. Co., 112 S.W.2d 134; Murphy v. Holliway, 16 S.W.2d 107. (9) Where the answer to an action at law sets up an equitable defense and prays for affirmative relief, the case becomes an equitable suit and is governed by the rules of procedure applicable thereto. Wendover v. Baker, 25 S.W. 918, 121 Mo. 273. (10) An equity case, on appeal, is considered de novo by the appellate court, which may weigh the evidence for itself, makes its own findings, and determine what decree should be entered. Peikert v. Repple, 114 S.W.2d 999, 342 Mo. 274; May Stores v. Union Electric, 107 S.W.2d 41. (11) Evidence must be clear, cogent and convincing to warrant the setting aside and cancellation of written instruments and the adjudication that transactions are not what parties declare them to be. Barlow v. Scott, 85 S.W.2d 504. (12) A trustee in a deed of trust may apply proceeds of a foreclosure sale without regard to maturities of various notes, and sums advanced by the holder before the sale may be added to the lien. Henry v. Safford, 211 Mo. App. 308, 241 S.W. 951.

Dubinsky Duggan for respondents Dubinsky.

(1) Appellant stipulating at the beginning of the trial that the questions before the court were of fact and proceeding throughout the trial on that theory, is estopped to question the sufficiency of the evidence on this appeal. Meffert v. Lawson, 287 S.W. 610, 315 Mo. 1091; Paulette v. Sernes, 103 S.W.2d 573; Continental Cas. Co. v. Monarch Transfer Storage Co., 33 S.W.2d 609. (2) An oral agreement within the statute of frauds is removed from the prohibition of the statute where it has been fully performed by one of the parties, the other party having had the benefit of such performance. Burke v. Walton, 86 S.W.2d 92, 337 Mo. 781; Swon v. Stevens, 45 S.W. 270, 143 Mo. 384; Roth v. Roth, 104 S.W.2d 314, 340 Mo. 1043; Gatesworth Hotel Co. v. C.R.H. Davis Realty Co., 52 S.W.2d 1011; Buxton v. Huff, 254 S.W. 79; Carlin v. Bacon, 16 S.W.2d 40, 322 Mo. 435; Bick v. Mueller, 142 S.W.2d 1021, 346 Mo. 746; VerStandig v. St. Louis Union Trust Co., 62 S.W.2d 1094; Walsh v. Walsh, 226 S.W. 236, 235 Mo. 181. (3) The payee of a note acquires no rights against a co-maker for the payee's accommodation, and the fact that an ostensible maker of a note was an accommodation maker may be shown by parol evidence. Dickherber v. Turnbull, 31 S.W.2d 234; Eckery v. Vine, 45 S.W.2d 924; Bunch v. Phillips, 79 S.W.2d 785; Maaser v. Huehnerhoff, 59 S.W.2d 723; Long v. Schaefer, 171 S.W. 690, 185 Mo. App. 641; Long v. Mason, 200 S.W. 1062; Natl. Bank of Commerce in St. Louis v. Laughlin, 264 S.W. 706, 305 Mo. App. 8; Farmers Bank of Conway v. Miller, 8 S.W.2d 92; Peoples Bank of Glasgow v. Yaeger, 6 S.W.2d 633; Peoples Trust Savs. Co. v. Arthaud, 22 S.W.2d 860; Fischman-Harris Realty Co. v. Kleine, 82 S.W.2d 602. (4) Error cannot be assigned in the admission of respondents' Exhibit B, a warranty deed, on the grounds of a departure from the pleadings, in the absence of an affidavit of surprise by appellant. Sec. 969, R.S. 1939; Thomas v. Construction Co., 189 Mo. App. 623, 75 S.W. 258; Walton v. Carlisle, 313 Mo. 281, 281 S.W. 402. (5) There was no hearsay evidence relative to the letter, in evidence by way of secondary evidence, but if there was, an objection cannot be made to it on the ground of hearsay for the first time on appeal. Barth v. Faeth, 186 S.W. 52, 193 Mo. 402; Menard v. Goltra, 40 S.W.2d 1053, 323 Mo. 386; Wilder Natl. Tavern System v. Wilder, 18 S.W.2d 14. (6) There was no error in the excluding of the testimony of the witness Mullen as to whether or not the 1929 notes had been paid. There was no offer of proof. Byam v. Kansas City Pub. Serv. Co., 41 S.W.2d 945, 328 Mo. 813; Owens v. Thomas, 98 S.W.2d 561, 339 Mo. 532; Gricus v. United Rys. Co. of St. Louis, 237 S.W. 763. (7) The court did not err in limiting cross-examination of the witness Dubinsky. (a) The scope of cross-examination is within the discretion of the court. Gardner v. St. Louis Union Trust Co., 85 S.W.2d 86; Pogue v. Met. Life Ins. Co., 107 S.W.2d 144. (b) The general assignment on motion for new trial that the court erred in excluding competent, relevant and material evidence is not sufficient ground for review. The motion for new trial did not call the attention of the court to the limitation of cross-examination. Bartner v. Darst, 285 S.W. 449; Wilder Natl. Tavern System v. Wilder, 18 S.W.2d 114. (c) Appellant has not preserved in the record the document (appellant's Exhibit 4), which was the subject of cross-examination, and in the absence of the document, there is nothing in the record from which the court can determine whether the trial court was guilty of error in sustaining respondent's objection to the cross-examination. John Deere Plow Co. v. Riebel, 21 S.W.2d 206. (d) The renewal agreement of 1937 was admitted in evidence by the court. (e) Even if plaintiff's Exhibit 4, the renewal agreement of 1937, had been excluded, appellant has not incorporated it in the bill of exceptions and cannot complain of its exclusion. John Deere Plow Co. v. Riebel, 21 S.W.2d 206; Carthage Superior Limestone Co. v. Central Methodist Church, 137 S.W. 1028, 156 Mo. App. 671. (8) There was ample evidence to warrant a finding by the trial court that the note in suit was executed by the Dubinskys for the accommodation of appellant. (a) The agreement by appellant to release the Dubinskys on the 1929 notes, in consideration of their releasing the second deed of trust and signing new notes for the accommodation of appellant, constituted a valid agreement. Weber Implement Automobile Co. v. Boswell, 299 S.W. 152; Tucker v. Dolan, 109 Mo. App. 442, 84 S.W. 1126. (b) In consideration of the Dubinskys' agreement to release their second deed of trust and sign the new note for $36,000, appellant agreed to a novation. Babbitt v. Chicago Alton R. Co., 130 S.W. 364, 149 Mo. 349; Emerson-Brantingham Implement Co. v. Sawyer, 242 S.W. 1007, 210 Mo. App. 535; Heinrich Chemical Co. v. Welch, 300 S.W. 1001; Elliott v. Qualls, 130 S.W. 474, 149 Mo. App. 482; Wagner Motor Co. v. Spain, 278 S.W. 805; Central Mo. Trust Co. v. Taylor, 289 S.W. 658; Long v. Mason, 200 S.W. 1062, 273 Mo. 266; Farmers Bank of Billings v. Oetker, 31 S.W.2d 568. (c) Parol evidence was admissible to show the real purpose of the renewal agreement and renewal notes, which was to enable appellant to keep the loan in its then status on its books and in its reports to the Insurance Departments of the States of Massachusetts and Missouri. Poplin v. Brown, 205 S.W. 411, 200 Mo. App. 255; Wood v. Matthews, 73 Mo. 477; Mutual Life Ins. Co. of Illinois v. McKinnis, 15 S.W.2d 395; Service Purchasing Co. v. Brennan, 42 S.W.2d 39, 226 Mo. App. 110. (9) There was ample evidence of the authority of appellant's agents to contract with respondents Dubinsky, and of knowledge and ratification of the agreements by the company. (a) J.H. Farish was the general agent of appellant and in charge of all its loan business in St. Louis. Farm Home Savs. L. Assn. v. Stubbs, 98 S.W.2d 320, 231 Mo. App. 87; Meyer v. Dubinsky Realty Co., 133 S.W.2d 1106; Berry v. Wood, 62 Mo. App. 41; City of Springfield v. Koch, 72 S.W.2d 192; Robertson Canning Co. v. Davis, 138 S.W.2d 82; Hill v. Wertheimer-Swartz Shoe Co., 51 S.W. 702, 150 Mo. 483; Alexander v. Scott, 129 S.W. 199, 150 Mo. App. 213; Guaranty Veterinary Co. v. Kessler, 239 S.W. 159; Walnut Park Loan Inv. Assn. v. Hennekens, 121 S.W.2d 179; Platte Valley Drain. Dist. of Worth County v. Natl. Surety Co., 295 S.W. 1083, 221 Mo. App. 898; Weber Implement Automobile Co. v. Goswell, 299 S.W. 152; Swift Co. v. Madden, 35 S.W.2d 59; Seymour v. Tobin Quarries, 123 S.W.2d 628, 233 Mo. 573; Dovino v. General American Life Ins. Co., 127 S.W.2d 732. (b) Carl V. Mullen was appellant's general agent in charge of all of its loan business. He, as general agent of the corporation, had full authority to enter into and authorize the agreements with respondents Dubinsky. The evidence shows that he authorized and approved the contract and agreement made by Farish, and appellant is bound thereby. James H. Forbes Tea Coffee Co. v. Baltimore Bank, 139 S.W.2d 507, 345 Mo. 1151; Wilson v. Chicago Bonding Surety Co., 214 S.W.2d 371; Concrete Steel Const. Co. v. Natl. Asphalt Refining Co., 2 S.W.2d 157; Greenfield v. Witte Hdw. Co., 175 S.W.2d 275, 189 Mo. App. 576; Scrivener v. American Car Fdry. Co., 50 S.W.2d 1001, 330 Mo. 408. (10) In an equity case, where documentary evidence is not decisive of the issues and the credibility of witnesses is particularly important, the court will defer to the findings of the trial chancellor, unless the court is clearly convinced that the findings are erroneous or opposed to the substantial evidence. Rhodes v. Rhodes, 119 S.W.2d 247, 342 Mo. 934; Shumate v. Hofner, 147 S.W.2d 640; Conrad v. Diehl, 129 S.W.2d 870, 344 Mo. 870; Shaw v. Hamilton, 141 S.W.2d 817, 346 Mo. 366. (11) There was no error in giving credit on the note in suit for the full amount of the proceeds of sale of the property securing payment of the notes. Error, if any, in giving such credit, was self invited and affords appellant no ground of complaint. Mt. Vernon Car Mfg. Co. v. Hirsch Rolling Mill Co., 227 S.W. 667, 285 Mo. 669; Meffert v. Lawson, 287 S.W. 610, 315 Mo. 1091; Hyatt Inv. Co. v. Buehler, 16 S.W.2d 219, 225 Mo. 151; South Side Bank of Kansas City v. Ozias, 155 S.W.2d 519. (12) In equitable causes, all evidence must be presented to the appellate court for review, and in the absence of all the evidence, sufficiency of the evidence to support the decree is presumed. Appellant, in violation of its own theory of preserving documentary evidence for review, has failed to set out in its abstract of record plaintiff's Exhibit 4, shown by the abstract to have been received in evidence. The omitted exhibit will be presumed to support the decree of the trial court on appeal. Maplegreen Realty Co. v. Miss. Valley Trust Co., 141 S.W. 621, 237 Mo. 350; Hynds v. Hynds, 161 S.W. 812, 253 Mo. 20; Brown v. Eagle-Pilcher Lead Co., 136 S.W.2d 708; State ex rel. City of Maplewood v. Southern Surety Co., 19 S.W.2d 691, 323 Mo. 150; Smith v. Holdoway Const. Co., 129 S.W.2d 894, 344 Mo. 862; First Natl. Bank Trust Co. of King City v. Bowman, 15 S.W.2d 842, 322 Mo. 654; State v. Bank of Southeast Missouri, 107 S.W.2d 1; 4 C.J. 777, 786. (13) Written matter and documents which are not preserved for review by incorporation in the bill of exceptions must be stricken from the record. Sec. 1229, R.S. 1939; Sec. 1063, R.S. 1939; State ex rel. McSweeney v. Cox, 289 S.W. 863, 315 Mo. 1332; Betzler v. James, 126 S.W. 1007, 227 Mo. 375. (14) The failure of appellant to preserve documentary evidence in the case by incorporation in the bill of exceptions prevents review of the evidence. Cases cited Point (12). (15) There must be a timely objection, with specific reasons, to preserve for review any error in the admission of evidence. There is no error in refusing to strike out testimony in the absence of objection to the questions eliciting the testimony. Rockenstein v. Rogers, 31 S.W.2d 792, 326 Mo. 468; Doherty v. St. Louis Butter Co., 98 S.W.2d 742, 339 Mo. 996; Wolfson v. Cohen, 55 S.W.2d 677; Gilcrist v. Kansas City Rys. Co., 254 S.W. 161; Barlow v. Shawnee Inv. Co., 48 S.W.2d 35, 229 Mo. App. 51; Menard v. Goltra, 40 S.W.2d 1053, 323 Mo. 386; Toedtman v. Grass, 116 S.W.2d 153; Home Exchange Bank v. Koch, 32 S.W.2d 86, 326 Mo. 369. (a) There can be no complaint of error in the admission of testimony on the ground of a violation of parol evidence rule, when the documents claimed to be in conflict with the parol evidence have not been preserved for review by bill of exceptions. John Deere Plow Co. v. Riebel, 21 S.W.2d 206; Carthage Superior Limestone Co. v. Central Methodist Church, 137 S.W. 1028, 156 Mo. 671. (b) There must be an offer of proof to preserve for review any error in excluding evidence. Byam v. Kansas City Pub. Serv. Co., 41 S.W.2d 945, 328 Mo. 813.

Julius H. Drucker for respondents Cohen.

(1) Any error of the trial court in allowing full credit for the proceeds of sale of the real property on the note secured thereby, was invited by appellant's failure to present any evidence to show their right to apply and the actual application of the proceeds of sale to other notes or obligations of respondents. Meffert v. Lawson, 287 S.W. 610, 315 Mo. 1091; Bullock v. Gee Land Co., 148 S.W.2d 565; Farmers Mut. Fire Assn. of Shelby County v. Hunholt, 81 S.W.2d 977; South Side Bank of Kansas City v. Ozias, 155 S.W.2d 519. (2) The documentary evidence received in evidence in the trial court has not been preserved for review by bill of exceptions, and must be stricken from the record. Sec. 1229, R.S. 1939; State ex rel. McSweeney v. Cox, 289 S.W. 863, 315 Mo. 1332. (3) To obtain a review of the sufficiency and weight of the evidence, appellant must preserve all of the evidence which was before the trial court for review in this court. In the absence of all the evidence, the decree of the trial court will be presumed to be correct. First Natl. Bank Trust Co. of King City v. Bowman, 15 S.W.2d 842, 322 Mo. 654; State v. Bank of Southeast Missouri, 104 S.W.2d 1; Presbyterian Orphanage of Missouri v. Fitterling, 114 S.W.2d 1004, 342 Mo. 299.

This action was commenced as a suit on a note (of $36,000) for a balance due of $15,298.81. Defendants Dubinskys' answer sought affirmative equitable relief. (Cancellation and injunction.) Plaintiff's reply set up the Statute of Frauds in addition to making a general denial. Defendants Cohens' answer was a general denial, but they actually admitted liability for some amount. The court entered a decree giving the Dubinskys all the relief sought and finding a balance due of $6000 against the Cohens only. Plaintiff has appealed and contends that all defendants are liable for the full amount sued for and interest.

Defendants have filed a motion to strike certain exhibits (being all the written documents offered in evidence by any of the parties) on the ground that they were not included in the bill of exceptions allowed and filed in the trial court and that the bill contained no "direction to the clerk to copy the same." Defendants have filed a counter abstract showing these facts and plaintiff admits that this is true in his suggestions in opposition to the motion. These documents therefore cannot be considered because they were not in the bill when allowed and there was no compliance with the provisions of Section 1229, R.S. 1939 (sec. 1063, Mo. Stat. Ann. 1361) so as to make it possible to put them in later. [See State ex rel. McSweeney v. Cox, 315 Mo. 1332, 289 S.W. 869; O'Malley v. Continental Life Ins. Co., 343 Mo. 382, 121 S.W.2d 834.] The motion to strike is sustained.

Defendants have also filed a motion to affirm or dismiss for failure to preserve all the evidence (meaning the written documents stricken) and for other matters going to the merits. Defendants cite our Rule 13. However, it only requires setting out the substance of documentary evidence concerning which there is no controversy. Since there is enough in the record to show at least some of the material substance of these admittedly executed documents and since the whole record (even without them) so plainly discloses that the result reached by the trial court was wrong, as to all defendants, this motion will be overruled.

The existence and execution of the note sued on was admitted by the Dubinskys' answer. It was also stated herein that this note was "secured by a parcel of property known and numbered 3309-21 Washington Boulevard, in the City of St. Louis." It was admitted at the beginning of the trial that this note (dated June 1, 1932) was in renewal of the original deed of trust on this property, and the notes secured thereby, made May 31, 1929, given to secure payment of a total debt of $45,000; and that the property was conveyed by the Dubinskys to the Cohens by a deed dated June 17, 1929, subject to this first deed of trust, securing the sum of $45,000, which the Cohens assumed and agreed to pay. The renewal agreement was executed July 7, 1932, (renewal notes were dated back) and renewed $40,000 unpaid balance of the debt secured by the deed of trust, which provided for annual principal payments of $2500. The Cohens paid the $2500 principal note due May 31, 1930, and also the $2500 principal note due May 31, 1931, leaving the debt of $40,000 at the time of the 1932 renewal. The deed of trust was [730] foreclosed on January 13, 1939, and plaintiff bid in the property for $30,000. The parties had conflicting evidence as to the value of the property at different times. Mr. Dubinsky was in the real estate business and had been for many years.

Plaintiff's evidence did show that the renewal agreement recited: "The said parties for themselves and for their respective heirs, administrators, executors, successors or assigns, hereby mutually agree that the time for the payment of the said principal sum still remaining unpaid, to-wit, forty thousand dollars, shall be paid in the amount and at the times as follows, to-wit:" and that the agreement then described "four one thousand dollar notes, each payable annually after June 1, 1932, and the fifth note for thirty-six thousand dollars, due June 31, 1937." It was further shown that plaintiff continued to hold all of the original notes secured by the deed of trust, and that each of them had an endorsement made on the back referring to the terms of this extension agreement, dated July 7, 1932.

It was also shown that the renewal agreement contained the following further provisions:

"And first and second parties hereby covenant that they will pay the said notes, both principal and interest, in the amount and at the times hereinbefore specified, and that they will perform and preserve all of the covenants, agreements, stipulations and conditions on the part of the maker of said deed of trust, in all respects as if the said notes in the amount and due at the time aforesaid, had been inserted in said deed of trust. It is expressly understood and agreed that simultaneously with the execution and delivery of the principal and interest notes called for under the terms of this agreement, there shall be endorsed on the notes now held by Third party a notation to the effect that same are held subject to all the terms and conditions of this agreement, and that upon the payment of the notes called for in this agreement, both principal and interest, the notes now held by the Third party, together with the deed of trust, are to be surrendered to First and Second parties." (Our italics.)

Defendants' answer alleged that "these defendants were not the owners of said real estate on June 1, 1932, and had not been the owners of said real estate (securing the note) for several years prior thereto;" that it "was executed as an accommodation for the benefit of the plaintiff herein and was so executed at the suggestion of said plaintiff for its accommodation;" and that "at the time of the execution of said note the said plaintiff agreed that at the maturity of said note that if the said note was not paid by the owners of the real estate aforementioned, that the said plaintiff could cancel said note in so far as it affected these defendants, and that the plaintiff would not at any time attempt to collect from, or hold these defendants liable on said note." The conceded facts show that the renewal note sued on was given for the Dubinskys' own debt for money loaned to them by plaintiff before they sold and conveyed the property to the Cohens. The only evidence of such a promise, as alleged in this answer, was Mr. Dubinsky's testimony (corroborated by his clerk) concerning a conversation with plaintiff's loan correspondent Mr. Farish. He had been negotiating with Mr. Farish to get a renewal with only the Cohens signing the extention agreement and notes. (He said he offered to release the Cohens from a $5150 second mortgage if that could be done, but there is no reference to this in his answer.) He said that on July 7, 1932, he first refused to sign the renewal papers, but that Mr. Farish "had a letter that he held in his hand and in it it said that the company, he said, had agreed to renew the loan;" that he said "the company wouldn't hold me liable or responsible at any time in the future in any way if I would give up this second deed of trust, and thereby relieve Mr. Cohen of the liability of $5,150, and that company so has informed him, and that for this matter of the surrendering of the note and not having to go out and appraise and redescribe this loan to the Insurance Department, that they would;" and that "I finally agreed to become an accommodation maker."

Mr. Dubinsky took the renewal agreement and notes home and had his wife sign them and brought them back the next day. Mr. Dubinsky also admitted that he signed another renewal agreement for extension of this same debt in 1937. However, when plaintiff's attorney attempted to examine him further about this 1937 renewal and the circumstances under which it was given, the court, upon objection by his counsel, refused to permit it. The court also refused to permit testimony by Mr. Farish concerning the 1937 renewal. [731] Plaintiff had evidence of its officer (Mr. Mullen) in charge of mortgage loans, that no letter was ever written containing any statement such as Mr. Dubinsky said Mr. Farish told him was contained in a letter from the company at the time he signed the renewal agreement. Plaintiff offered in evidence its entire file of correspondence between it and Mr. Farish concerning the 1932 renewal, but this was excluded upon objection that they were self serving. (Certainly they must not have shown anything favorable to the Dubinskys' theory.) Plaintiff was not even permitted to show the amount due upon the original mortgage debt. Testimony concerning the original notes was excluded on the objection that only the $36,000 (1932) note was sued on and that nothing else was involved. Plaintiff did have testimony that $9,298.83 of the foreclosure bid was credited upon other obligations of the makers of the notes but did not show what these were.

The court's decree made findings of ownership of the mortgaged property by the Cohens and of the execution of the $36,000 note sued on by them and the Dubinskys. The court made further findings therein, as follows:

"The Court doth further find that at the time of the execution of the said note in the sum of $36,000.00, that the defendants, Jack Dubinsky and Ethel Dubinsky, executed said note without any consideration passing to either of them or both, and was executed by them as an accommodation for the benefit of the plaintiff herein, and was so executed at the suggestion of said plaintiff for its accommodation;

"The Court doth further find that at the time of the execution of said note, that the plaintiff agreed that at the maturity of said note, that if said note was not paid by the defendants, Ray Cohen and Hyman Cohen, as the owners of said real estate aforedescribed, that the plaintiff would cancel said note in so far as it affected the defendants, Jack Dubinsky and Ethel Dubinsky, and that the plaintiff would not attempt to collect from or hold these defendants, Jack Dubinsky and Ethel Dubinsky liable on said note."

The decree also found that the Cohens were entitled to credit for the full amount of the foreclosure bid. The order of the decree was that the note sued on be cancelled and that plaintiff be permanently enjoined from transferring it and that the Dubinskys be discharged. It also entered judgment against the Cohens for only $6000.

The quoted findings are without any support in the evidence. The decree is clearly wrong. In the first place, there was no evidence to show that Mr. Farish had any authority to make an agreement to release the maker of a note owned by plaintiff. He was not shown to be an officer or even an employee of plaintiff, but was a loan correspondent who received compensation for loans by commissions apparently paid to him only by the borrower. It does not appear what was actually stated in any letter from plaintiff which Mr. Farish had on July 7, 1932, but only what it is claimed that Mr. Farish said about it. No one claimed to know who wrote or signed any such letter. Since no authority to make such an agreement for plaintiff was shown, the applicability of the Statute of Frauds is not presented for decision. However, see Wendover v. Baker, 121 Mo. 273, 25 S.W. 918; Davis v. Holloway, 317 Mo. 246, 295 S.W. 105; Gates Hotel Co. v. C.R.H. Davis Real Estate Co., 331 Mo. 94, 52 S.W.2d 1011. Likewise, the testimony about the second mortgage is immaterial in the absence of any showing of authority of Mr. Farish to make such an agreement.

The second reason why the decree is clearly wrong is that no one can be an accommodation maker of a note given for his own debt. The Negotiable Instruments Law (sec. 3045, R.S. 1939; sec. 2658, Mo. Stat. Ann. 661) provides that "an accommodation party is one who signed the instrument . . . without receiving value therefor, and for the purpose of lending his name to some other person." Here the original debt was the Dubinskys' own debt and they were already liable for its payment without signing the renewal note sued on, given to extend the time of payment. It is true that an accommodated party cannot recover from the accommodation party, but "the accommodated party, in a legal sense, is the person to whom the credit of the accommodating party is loaned." [Farm Home Savings Loan Assn. v. Theiss, 342 Mo. 40, 111 S.W.2d 189; Overland Auto Co. v. Winters, 277 Mo. 425, 210 S.W. 1.] The Dubinskys loaned no credit to plaintiff. The loan was entirely the other way; Dubinskys got plaintiff's money and never paid it back. [See 8 Am. Jur. 207, sec. [732] 454 et seq. and cases cited; 11 C.J.S. 293, secs. 741-42, and cases cited; see also Greenwade v. First National Bank (Ky.), 41 S.W.2d 369, holding extension of time only to be sufficient consideration to take endorsers (already liable) out of the category of accommodation endorsers; also see Chaonia State Bank v. Sollars, 190 Mo. App. 284, 176 S.W. 263.] We hold that the conceded facts of this transaction show that plaintiff could not be the accommodated party under the Negotiable Instruments Law, and that the Dubinskys were not and could not be accommodation parties as to it.

It is also true, as contended by the Dubinskys, that when the Cohens purchased the mortgaged property and assumed and agreed to pay the mortgage, then the Cohens became the principal debtors and the Dubinskys' relation changed to that of sureties, so that plaintiff after knowing of such relation, would release the Dubinskys if it extended the time of payment without their consent. [Pratt v. Conway, 148 Mo. 291, 49 S.W. 1028; Regan v. Williams, 185 Mo. 620, 84 S.W. 959; Bloss v. Gray, 225 Mo. App. 419, 37 S.W.2d 975; Ruskamp v. Fetchling (Mo. App.), 101 S.W.2d 524; 37 Am. Jur. 357, sec. 1057; 41 A.L.R. 277 note; 41 C.J. 735, sec. 786.] However, their consent to an extension was not necessary to make the Dubinskys liable (because they were then already liable to plaintiff for the debt) but such consent was only necessary to prevent their release. Then when they did consent by signing extension notes and the extension agreement, their existing liability for the debt merely continued as it already was, unreleased.

[5, 6] Furthermore, it appears from the recitals of the extension agreement read in evidence that the extension notes were to be in effect collateral security for the original notes, secured by the trust deed which was not released, and that these were not to be surrendered until the extension notes were paid. A notation was put on these original notes that they were held subject to the terms of the extension agreement. Thus it is clear that the extension notes were not in payment of the original notes but that payments on them were only to be credited on the original notes when made. [See 10 C.J.S. 770, sec. 279; 8 Am. Jur. 446, sec. 792; 52 A.L.R. 1417, annotation, in which many Missouri cases are cited.] Thus the action of the trial court in refusing to receive evidence as to the amount due on the original notes was clearly wrong, and made it impossible for plaintiff to prove the amount for which suit was brought. When the Dubinskys filed an answer containing an equitable cross claim seeking affirmative equitable relief, it converted the action to one in equity. [Wendover v. Baker, supra.] This answer alleged that there was no consideration for the extension note upon which suit was brought. This opened up the whole matter and made evidence admissible as to the entire transaction. Although plaintiff did not properly include all offered documents in the bill of exceptions, enough appears to show the facts essential to decide the issue of liability. Since this case is in equity, we may consider all evidence properly preserved in the record, regardless of the trial court's rulings, determine what judgment should be rendered and direct the trial court to enter it. [Rice v. Shipley, 159 Mo. 399, 60 S.W. 740; Graham v. Karr, 331 Mo. 1157, 55 S.W.2d 995; Aden v. Dalton, 341 Mo. 454, 107 S.W.2d 1070.] If all essential documents had been properly preserved, it might have been possible to determine even the amount due. [Central States Life Ins. Co. v. Bloom, 345 Mo. 982, 137 S.W.2d 517.] However, since the Dubinskys' evidence failed to show any ground upon which they could have been released from their original debt or escape liability therefor, we hold that they are liable. (The Cohens admit liability.) Therefore, the only issue for determination is the amount due.

The decree is reversed and the cause remanded for further proceedings not inconsistent with the rulings herein made. Bradley and Dalton, CC., concur.

The foregoing opinion by HYDE, C., is adopted as as the opinion of the court. All the judges concur.

Summaries of

Columbian Natl. Life Ins. Co. v. Dubinsky

Supreme Court of Missouri, Division One
Apr 16, 1942
349 Mo. 299 (Mo. 1942)
Case details for

Columbian Natl. Life Ins. Co. v. Dubinsky

Case Details


Court:Supreme Court of Missouri, Division One

Date published: Apr 16, 1942


349 Mo. 299 (Mo. 1942)
160 S.W.2d 727

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