Baade v. Cramer

213 S.W. 121, 278 Mo. 516, 1919 Mo. LEXIS 114

• Court: Supreme Court of Missouri
• Decided: June 3, 1919
• Status: Published

Opinion

WALKER, J.

This is a suit to quiet title to certain real estate' in the City of St. Louis, under Section 2535, Revised Statutes 1909. Upon a trial, there was a judgment for the plaintiffs, from which defendants appeal.

■ Henry Krehmeyer and his wife, Minnie, the former now deceased, were on the 27th of May, 1908, the owners in fee of the real estate, consisting of a lot on Lee Avenue, in the City of St. Louis, as tenants by the entirety. On said date Krehmeyer conveyed this lot to F. W. Herbkesmann, in trust for John F. Behrend, to secure a note to the latter for $1500, then made by gram tors to him, due three years after its date, with semiannual interest notes covering the period of the loan. This deed of trust was recorded in the Recorder’s office of the City of St. Louis.

On December 24, 1913, the Krehmeyers, through an agent, one Chas. C. Crone, sold said lot to plaintiffs and conveyed same to them by a deed of general warranty for the sum of $1850. Of this amount, $50 was then paid to Crone by plaintiffs as earnest money. Two days later, December 26, 1913, they gave Crone their check for $800, and their joint note for $1000, secured by a deed of trust on the land. Prior to this transaction one Toenges had become the owner of the $1500 note and deed of trust securing same, made by the Krehmeyers to Behrend. Upon the consummation of the sale of the lot to plaintiffs, Crone notified Toenges and requested him to surrender the $1500 note for payment and the deed of trust securing same. When Toenges complied, Crone gave him plaintiff’s note for $1000 and his personal cheek for the balance due, and a deed of trust securing the payment of the note. Crone thereupon had plaintiffs ’ deed of trust recorded. When Crone gave Toenges the recorded deed of trust and a certificate of title to the property, Toenges noticed that the deed of trust securing the $1500 note had not been released and called Crone’s attention thereto. The latter then placed this memorandum on the certificate of title opposite the entry concerning the deed of trust: “Paid C. C. C.,” and stated to Toenges that the deed of trust had then been released, but he had overlooked marking it off of the certificate. This, as was aftenvards shown, was not true. Crone had theretofore sold to Emma Cramer, one of the defendants herein, a $2000 note secured by a deed of trust purporting to have been executed by one Woerler. Thereafter, on July 25, 1914, Crone called at Emma Cramer’s residence and informed her that he then had two better deeds of trust aggregating $3000, which he would exchange for the $2000 note and deed of trust theretofore sold to her, she to pay him the difference. He showed her the Krehmeyer $1500, deed of trust which had been' paid in full December 26, 1913, by plaintiffs, but which he had retained possession of without having it released, and another deed of trust for $1500, purporting to have been executed by one John Grundo. Emma Cramer accepted these notes and deeds of trust, surrendered to Crone the Woerler $2000 note and deed of trust securing the payment of same, and gave him in addition her check for $1000'.

The principal note, which had been made by the Krehmeyers to Behrend, and indorsed in blank by the latter to Toenges is as follows:

“$1500.00. St. Louis, Mo., May 27,190-8. Three years after date we promise to pay to the order of John F. Behrend fifteen hundred dollars, value received at the office of C. C. Crone, in St. Louis, with interest at the rate of eight per cent per annum from maturity. Henry Krehmeyer. Secured by Deed of Trust. Minnie Krehmeyer.” (Indorsed): “John F. Behrend.”

On the back of same there appeared two extensions of payment in the following words:

‘ ‘ St. Louis, May 27, 1911. Payment of within notes extended for two years from May 27, 1911, provided the four interest notes dated May 27, 1911, each for forty-five dollars executed by Hy. and Minnie Krehmeyer, and payable to the order of James P. Wilton in six, twelve, eighteen and twenty-four months and given for said extension, be promptly paid when due.

“St. Louis, May 27, 1913. Payment of within note extended for three years from May 27, 1913, provided the six interest notes dated May 27, 1913, each for forty-five dollars executed by Minnie Krehmeyer and payable to the order of James P. Wilton in six, twelve, eighteen, twenty-four, thirty and thirty-six months and given for said extension, be promptly paid when due.”

The interest notes given upon the extensions of the payment of the principal note, except as to differences in their dates and times of payment, are as follows:

“$15, St. Louis, Mo., May 27, 1913. TAventy-four months after date I promise to pay to the order of James P. Wilton forty-five dollars, value received at office of C. C. Crone, in St. Louis,-with interest at the rate of eight per cent per annum from maturity. Secured by deed of trust. Minnie Krehmeyer.” Indorsed: “Without Recourse on Me. James P. Wilton.”

August Baade, one of the plaintiffs, testified as follows: That he and his wife bought the property described in their petition from Mrs. Krehmeyer through her agent, C. C. Crone; that a warranty deed was executed to them by Mrs. Krehmeyer, December 25, 1913, in which the deed of trust theretofore executed by her and her husband on May 27, 1908, was not mentioned. That the price paid for said property by them was $1850, made up of $850 in cash and a deed of trust executed by them to Mrs. Krehmeyer at the time of the purchase of the property to secure the payment of a principal note in the sum of $1000; that C. C. Crone, as the agent of Mrs. Krehmeyer in the sale of the property, agreed to release the $1500 deed of trust executed by Mr. and Mrs. Krehmeyer, and to pay off the note then held by Toenges with the $850 in cash paid by plaintiffs to Crone and the $1000 note and deed of trust executed by them; that the first knowledge they had of Crone’s failure to release the $1500 deed of trust was in May, 1915, when various fraudulent transactions .of Crone were brought to light.

Toenges’ testimony in regard thereto is as follows: That he. had been the owner from April, .1913, of the $1500 note executed by Minnie and Henry Krehmeyer, dated May 27,1908; that he surrendered all of the papers pertaining to said loan with the exception of the principal note to C. C. Crone on December 22, 1913, and later on January 22, 1914, surrendered said principal note to C. C. Crone in exchange for the $1000 deed of trust executed by the Baades (the plaintiffs), and $500 in cash. That he was the owner of the $1500 Krehmeyer note on May 27, 1913, when payment of same was extended for a period of three years from May 27, 1913, and that an indorsement to that effect was placed on the principal note and six semi-annual interest notes executed by Minnie Krehmeyer, were delivered to him and he consented to said renewal. That, after said renewal, he collected one interest note, and on January 22, 1914, surrendered the remaining five interest notes with the principal note to C. C. Crone. That when he received the $1000 note of the Baades from Crone, he also received a certificate of title in which the $1500 deed of trust was still shown as unreleased on the record, and upon objection to same by him, and a demand that it be released, Crone indorsed on said certificate of title opposite said memoranda of deed of trust: “Paid C. C. C.”

Mrs. Krehmeyer, one of the original payees in the $1500 note, testified as follows: That she was the widow of Henry Krehmeyer; that they had owned the property described in plaintiffs’ petition and that she was the owner of same on May 27, 1913, and at1 the time of sale to August and Anna Baade, on December 24, 1913. That she and her husband had executed the note for $1500 dated May 27, 1908, and identified their respective signatures to same. That on May 27, 1913, she requested an extension of the time of payment of said $1500 note for a period of three years and executed renewal interest notes for the sum of $45 each and identified as hers the signature to each of same. That she paid said interest notes as they came due every six months. That she did not indorse any extension on the principal note, nor authorize same to be done.

The testimony of Emma Cramer who purchased the $1500 note of the Krehmeyers from Crone, was as follows: That on June 24, 1914, she was the owner of a $2000 note secured by deed -of trust executed by one Woerler; that on July 25, 1915, at the request of C. C. Or one, she exchanged the Woerler note and deed of trust and $1000 in cash for two notes of $1500 each, one executed by John Grundo, and the other by Mrs. Krehmeyer and secured by deeds of trust; that at the time of said purchase C. C. Crone made out a statement of the transaction, which statement witness identified. Witness further stated that at the time, July 25, 1914, she had no knowledge of any payment of the $1500 Krehmeyer nóte, nor did she- have any knowledge of any transaction between Mr. C. C. Crone and Mr. Toenges in relation to same.

ííotetiat,le I. The extensions of the time of payment of the original note for $1500 made by the Krehmeyers to John F.' Behrend, and by him indorsed in blank to Robert L. Toenges, were made before the maturity of no^e- The giving of thé interest notes to cover the periods of extension constituted a sufficient consideration for the agreement to extend the time of payment. [Johnson v. Grayson, 230 Mo. 380; Nelson v. Brown, 140 Mo. 580; Mer. Ins. Co. v. Hauck, 83 Mo. 21; Stillwell v. Aaron, 69 Mo. 539; Hosea v. Rowley, 57 Mo. 357.] The term of the last extension had not expired when Emma Cramer obtained the note from C. C. Crone. She purchased it for value with no knowledge of .its having been paid,- and was authorized in concluding that Crone was the prima-faeie owner of same, or in the absence of any evidence on the subject, that he held it in good faith for the owner with authority to dispose of it, as indicated by its indorsement in blank and the fact that it was not overdue. This conclusion is supported by the rule, that where a negotiable note is indorsed in blank by the payee, the holder of same is prima-faeie the owner, and is presumed to have taken it in good faith, for value, before maturity, without notice; and by the correlative rule, that a bona-fide purchaser for value with no knowledge of the infirmity of the title of the holder of .the note and all ■ the indicia of ownership and the right to dispose of same appearing thereon, takes it burdened with no equities'and is a holder in due course under the uniform rulings of the courts, and by express statutory declaration, despite the fact 'that it may have been fraudulently obtained or was thus being disposed of. [Sec. 10022, R. S. 1909; Horton v. Bayne, 52 Mo. 531; Corby v. Butler, 55 Mo. 398; Greer v. Tosti, 56 Mo. 307; Bennett v. Torlina, 56 Mo. 399; Merrick v. Phillips, 58 Mo. 436.] Upon its being shoAvn that .the note had been paid and that the possession and disposal of same by Crone was. fraudulent, it became incumbent upon ^Emma Cramer to sustain her prima-faeie title by evidence that in ignorance of its defects she obtained the note in good faith, for value. [Sec. 10029, R. S. 1909; Heim v. Vette, 167 Mo. 389; Famous Shoe Co. v. Crosswhite, 124 Mo. l. c. 39; Fitzgerald v. Barker, 96 Mo. 661; Mayes v. Robinson, 93 Mo. 114; Hamilton v. Marks, 63 Mo. 167; Miller v. Bank, 193 Mo. App. 498.] The testimony introduced by her in this behalf was ample to establish these facts and was not attempted to be controverted. It, therefore, became conclusive.

indorsement. II. But, it is urged by plaintiffs, that no eAddence aliunde the note was introduced to prove the indorsement. This point is first raised in plaintiffs’ brief. The petition alleged that Emma Cramer was the owner', ]j0j¿er or' COntrol of the note and deed of trust, and that she refused to deliver same to plaintiffs that it might be canceled, and that they had no knowledge of the nature of her claim. In her answer in this behalf, she simply admits ownership and the possession of the note with the indorsements of extension thereon, that she became the owner thereof in due course for the sum of $1500, with the deed of trust securing same, and that she was then the owner, and that the note was due and remained unpaid. There was no reply filed. On the trial, plaintiffs proffered no proof in regard to the indorsement, and defendant, Emma Cramer,- introduced the note with the indorsements thereon, but offered no other evidence in regard thereto. No objection was interposed to this manner of proof, nor was the authenticity of the indorsement otherwise attempted to be questioned. The rule that while the holder of an under-due negotiable promissory note, indorsed in blank, is prima-facie the owner thereof under Section 10004, Revised Statutes 1909, it devolves upon such holder to prove the indorsement of same by evidence aliunde the indorsement (Nance v. Hayward, 183 Mo. App. l. c. 219, and numerous cases there cited), was not violated by the course pursued in this case. This for the reasou that the indorsement was treated by. the plaintiffs both in their pleading and in the course of the trial, as. a conceded fact, and was not in issue in the case (Worrell v. Roberts, 58 Mo. App. 197), and cannot be considered here for the first time as having been controverted.

In Stillwell v. Patton, 108 Mo. l. c. 363, it was contended by appellant that the court erred in not instructing the jury in addition to other formal requirements necessary to a recovery, that they must find that the original payee had indorsed or assigned the note to the plaintiff. It appeared that this fact had not been pleaded and the real issues were, therefore, only to be determined by an examination of the evidence. The court, in discussing the question, said: “There is an abundance of evidence that the payee of the note and ber husband indorsed and delivered the same to Still-well. This is shown by the evidence produced on both sides, and the fact is controverted by no one. It passed as 'a conceded fact in the case, and, hence, no instructions were asked on this subject by either party. The question is evidently made for the first time in this court. As the assignment was duly proved and not questioned on the trial, the omission in the instruction does not constitute reversible error.”

In Morris v. Case, 4 Kan. Ct. App. 691, under á state of facts similar to those at bar, the court held in effect, that the failure ■ by the plaintiff to atempt either by plea or proof to controvert the indorsement may be construed to mean that an absence of indorsement or a failure to establish same was not relied on to sustain the action. The contention, however, may be disposed of under a more general rule of procedure. Not only within the contemplation of the statute (Sec. 2081, R. S. 1999.), but under repeated judicial rulings, is it established that a review upon appeal will be limited to question's arising in the trial court, which have been properly saved for consideration. [In re Birmingham Drain. Dist. v. Railroad, 266 Mo. 60, 178 S. W. 893; In re Aiken, 262 Mo. 403, 171 S. W. 342; Kirksville v. Ferguson, 262 Mo. 661; Ice Co. v. Kuhlmann, 238 Mo. 685.] The application of this rule is appropriate here and constitutes a sufficient basis for a ruling adverse to plaintiffs’ contention.

The trial of the case without a reply, no objection to its absence being interposed, and the consequent presumption that it was filed and constituted a general denial (McMurray v. McMurray, 258 Mo. l. c. 416; Brewster v. Land Imp. Co., 247 Mo. l. c. 226; Bird v. Fox, 193 S. W. [Mo.] 941) does not militate against the correctness of the conclusion that the quantum óf proof necessary to establish the authenticity of the indorsement was in any wise made an issue in the case As stated, neither the petition nor the answer referred expressly or by implication to the indorsement, except so far as defendant Emma Cramer’s allegation of the ownership of the note can be so construed. There was, therefore, nothing in this regard to which the general denial could be made applicable. In short, the authenticity of the indorsement was not in issue.

Trust.°f III. A review of the facts in the cases cited by plaintiffs in support of the contention that the payment of the $1500 note extinguished the deed of trust securing same, and that the failure to enter satisfaction on the record did not keep the deed of trust in ex-istenoe, shows that the rule as announced in these cases has no application where an innocent purchaser for value, before maturity, acquires the ownership of a note secured by deed of trust, as at bar. Upon the making and delivery of the note and the execution of the deed of trust to secure same, the latter became an accessory or incident to the former; or as Lord Mansfield said, in Martin v. Weston, 2 Bur. 1. c. 979, cited with a approval in Lipscomb v., Talbott, 243 Mo. l. c. 31: “A mortgage is a charge upon the land; and whatever would give the money, will carry the estate in the land along with it, to every purpose. The estate in the land is the same thing as the money due upon it. It will be liable to debts: it will go to executors. The assignment of the debt, or for-’ giving it, will draw the land after it, as a consequence; nay, it would do it, though the .debt were for given, only by parol; for the right to the land would follow, notwithstanding the Statute of Frauds.”

Under the facts at bar, the general rule thus announced is applicable, that the assignment of a note passes the interest in a deed of trust given to secure the payment of same. While it is true that the security can have no separate existence apart from the debt and expires when the latter is paid, payment is not presumed to have been made where the facts are, as in the instant case, and so far as the innocent holder for value is concerned, upon the transfer to her of the note, the deed of trust passed as an incident thereto, free from all defenses except such as could he made against the note (Morrison v. Roehl, 215 Mo. l. c. 553; Borgess Inv. Co. v. Vette, 142 Mo. l. c. 573; Devens v. Van Valkenburg, 192 Mo. App. 215), and is not affected by subsequent notice of equities or defense of other parties. [Fitzgerald v. Barker, 96 Mo. l. c. 663; Mayes v. Robinson, 93 .Mo. 114; Hagerman v. Sutton, 91 Mo. l. c. 533.]

Extension. IV. The contention is made that the extensions in the time of payment of the $1500 note were invalid, because Mrs. Krehmeyer, one of the original makers. testified that she did not indorse or authorize ,, . . , , , „ ,, . . , , , „ the indorsement on such note ot the memoranda of the extensions. She did testify, however, that it was at her and her husband’s solicitation, as original makers, that the times of payment were extended, that the extensions- were granted in accordance with their agreement made with the original payee, and that the memoranda on the note correctly stated the conditions of such extensions. Made in good faith and based, as we have heretofore stated, upon a sufficient consideration this agreement constituted a valid and subsisting contract. Absent the memoranda, the extension-could have been established by parol testimony (Heywood v. Perrin, 10 Pick, 228); and if the agreements to extend had been verbal, they would have constituted an effectual bar to an action on the note, brought within the extended time (Fisher v. Stevens, 143 Mo. 181; Black v. Epstein, 93 Mo'. App. 459). It has been held elsewhere, in harmony with our ruling as to the accessory relation of a deed of trust to the note it is given to secure, that an agreement for an extension of time to pay the note may be made verbally and independently of the mortgage (Condon Natl. Bk. v. Rogers, 60 Ore. 389, 31 Ann. Cas. 101). In view of the fact that the indorsements of the extensions spoke the truth, there is no merit in the contention that they are invalid because not manually made or immediately directed by the makers. To all intents and purposes, they were the acts of the makers as well as of the original payee, and are to be so regarded.

aturity. V. It is further contended, somewhat timorously, that the extensions of the time of payment did not defer the maturity of the note, and that it became due ag stated on its face. The validity of the contract to extend being conceded, as it must be in the presence of the facts, every successive taker of the note was bound to take notice of the agreement and was required not only to look to its face for the time pf its maturity, but to the indorsements thereon, to determine whether or not any agreement or extension of time had been made in regard to its payment L Coffin v. Spencer, 39 Fed. 262.] As was said in effect, in Whitehouse Bank v. White, 136 Tenn. 634, 191 S. W. 332, while a note as executed is stipulated to mature on a day fixed and certain, if the maker and the payee agree to an extension of its payment, a new date of maturity is fixed no less certain than the original note. This contention is therefore overruled.

Parties113 VI. The moving cause of this controversy is not due to an intentional wrong sought to be perpetrated by either of the parties. They dealt in good faith and gave full value for what they received. Under such circumstances, when one of two innocent persons must suffer for the wrongful act of another, he must suffer who placed the party doing the wrong in a position to do it. [Neuhoff v. O’Reilly, 93 Mo. 164.]

The plaintiffs knew, or could have known, by the exercise of that care which should characterize a transaction of this nature, of the existence of the deed of trust securing the note which they paid in effecting the' purchase of the property. Clothed with this knowledge, or with opportunity to obtain same in the fact that the deed ■ of trust was upon record, they were remiss in not securing its release, but with confidence in the integrity of Crone, left the matter to be attended to by him. That he was afforded an opportunity to, and did, betray this trust is due wholly to their omission. Under no authorized construction of the facts can the defendant Emma Cramer be chargeable with any participation in or knowledge of his fraudulent transactions. It, therefore, becomes our duty to reverse and remand this case, that it may be proceeded with in accordance with the views herein expressed. It- is so ordered.

All concur.