Oswego Finance Co. v. Perkins

266 P. 47, 125 Kan. 687, 1928 Kan. LEXIS 425
CourtSupreme Court of Kansas
DecidedApril 7, 1928
DocketNo. 27,967
StatusPublished
Cited by1 cases

This text of 266 P. 47 (Oswego Finance Co. v. Perkins) is published on Counsel Stack Legal Research, covering Supreme Court of Kansas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Oswego Finance Co. v. Perkins, 266 P. 47, 125 Kan. 687, 1928 Kan. LEXIS 425 (kan 1928).

Opinion

The opinion of the court was delivered by

Burch, J.:

The action was one to foreclose a real-estate mortgage covering several tracts of land. The petition alleged the mortgage [688]*688was a first lien on certain tracts and a second lien on others. All defendants except John Judd and his wife joined in an answer praying that plaintiff’s mortgage be canceled. Judd claimed a first mortgage lien on one tract. Judd was awarded a first lien and plaintiff was awarded a second lien on the tract covered by 'the Judd mortgage; plaintiff prevailed as against the other defendants, and the defendants other than Judd appeal.

The Oswego State Bank failed, and on April 18, 1924, John E. Wagner was placed in charge. Defendant Charles S. Perkins was indebted to the bank on unsecured notes amounting to $10,739. Negotiations for settlement of the indebtedness followed. Perkins was owner of several tracts of land encumbered by mortgage, and was willing to give the bank a mortgage on all of them except his homestead. Wagner desired a mortgage on all of them, including the homestead. Wagner and Perkins inspected the tracts, and Perkins placed a valuation on them which was sufficient to pay his indebtedness and leave his homestead clear; provided he were given time. Wagner declined to take a mortgage unless it included the homestead, and placed the notes in the hands of an attorney, with direction to sue unless Perkins gave a mortgage such as Wagner desired. Perkins then consented to give a mortgage on all his land, provided he were given two years’ time in which to pay and the rate of interest were reduced to six per cent. Wagner assented to those terms. The mortgage was prepared and executed, was dated August 12, 1924, was filed for record the next day, and contained the following provision:

"Second. This mortgage is also executed upon the express condition that the above mortgagor may and does have the privilege to sell any tracts of land described herein and apply the amount received therefor first to the payment of the taxes, principal and interest upon any prior lien on said tract, and the balance to be applied on this mortgage, and this mortgage is given upon condition that said second party will release said tract when sold from the provisions of this mortgage.”

Subsequently Perkins began to scheme to defeat the mortgage, and finally chose to make use of the quoted provision to accomplish his purpose. He made warranty deeds as follows:

September 9, 1926, to John Judd, a first mortgagee, for a consideration of $1,476.56;
September 10, 1926, to H. L. Schneider, a first mortgagee, for a consideration of $4,900;
September 12, 1926, to B. P. Alger, Perkins’ aunt, for a consideration of $10, subject to a mortgage for $6,500, with accrued interest and taxes;
[689]*689September 20, 1926, to William F. Perkins, Perkins’ son, for a consideration of $8.02, subject to a'mortgage of $3,200, with accrued interest and taxes;
September 27, 1926, to Clinton A. Perkins, Perkins’ son, for $11.77, subject to two mortgages amounting to $3,600, with accrued interest and taxes;
September 28, 1926, to William F. Perkins, Perkins’ son, for a consideration of $11.55, subject to mortgage for $1,500, with accrued interest and taxes.

The deeds were filed for record by Perkins on September 30, 1926, and the recording fees were paid by Perkins. In connection with these deeds, Perkins took from the grantees option contracts to repurchase all the tracts except one of 200 acres of pasture land deeded to William F. Perkins. The option contract which Schneider gave Perkins provided for a warranty deed to Perkins on payment of $4,900, with semiannual interest at seven per cent, and taxes, until August 1,1930, and in the meantime Perkins was to have possession of the land and the profits derived from it. The other option contracts were of like tenor, except as to dates of expiration and terms of repurchase.

The bank’s mortgage had been assigned to the Oswego Finance Company, and on the day the deeds were filed for record Perkins wrote the finance company as follows:

“I have sold the several tracts of land upon which your company holds a mortgage assigned from the Oswego State Bank, and herewith hand you check amounting to $31.34, being the balance above the first and second mortgages, with accrued interest and taxes on the several tracts for which they are sold, and herewith request and demand the release according to the second clause of the said bank mortgage providing for said release, together with all papers in connection with same. . . .”

The finance company' instituted an investigation, discovered what had occurred, and on November 18, 1926, brought suit to foreclose its mortgage. The issues relating to the Judd mortgage will be left at one side for the present, and the codefendants of Judd and wife will be referred to as the defendants.

The defendants joined in an answer, and later joined in an amended answer. The material portions of the amended answer may be summarized as follows: The attorney to whom Wagner delivered the Perkins'notes for suit had full power and authority as agent and attorney of the bank to adjust the Perkins indebtedness with him; and the attorney represented he was agent and attorney of the bank and the bank commissioner. Perkins explained his financial condition to the attorney. For the purpose of deceiving and defrauding Perkins, the attorney represented he would prepare [690]*690a mortgage to the bank such that if Perkins desired to dispose of any or all of his land in any manner satisfactory to him so he could extend or adjust prior indebtedness, the bank would release its mortgage on demand. If any land were sold for more than the prior encumbrance, interest and taxes, the excess should be paid to the bank, and the bank would release its mortgage. Perkins consented to give such a mortgage. A few days later the attorney presented to Perkins the mortgage sued on, and represented it would permit Perkins to dispose of his land as he saw fit for the purpose of adjusting prior indebtedness, and the bank would be required to release its mortgage on demand at any time Perkins disposed of any tract or tracts for the purpose stated. Relying on these representations, which were made to deceive and defraud, Perkins and wife executed the mortgage. The representations were the sole consideration on which the mortgage was executed, and it would not have been executed but for the representations. Subsequently, for the purpose of adjusting indebtedness, Perkins sold and transferred by deed the lands described in the six deeds referred to above, copies of which were attached to the answer. Tender of $31.34, the sale price of the several tracts above mortgages, accrued interest, and taxes, and demand for release of plaintiff’s mortgage, were pleaded, and the prayer was for cancellation of the mortgage, for statutory damages for failure to release, and for an attorney fee.

The reply to the answer denied under oath that the attorney referred to was agent for the bank or bank commissioner, and denied the charges of fraud.

The answer opened wide the gate to admission of parol evidence concerning how the second paragraph came to be inserted in the mortgage and what the parties intended by it.

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Related

American State Bank v. Richardson
38 P.2d 96 (Supreme Court of Kansas, 1934)

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Bluebook (online)
266 P. 47, 125 Kan. 687, 1928 Kan. LEXIS 425, Counsel Stack Legal Research, https://law.counselstack.com/opinion/oswego-finance-co-v-perkins-kan-1928.