Opinion
December 5, 1938.
1. — Bills and Notes. Allegedly fraudulent statement, made after execution of notes and deed of trust, in action on same, held insufficient to sustain defense of fraud.
2. — Evidence. Recitals in trustee's deed are prima facie true.
3. — Appeal and Error. In suit tried in equity, where trustee's deed was not in printed record, but chancellor saw deed, Court of Appeals will assume, that statements therein in amount of bid on foreclosure were in harmony with evidence of trustee and successful bidder.
4. — Bills and Notes. Where employee of life insurance company was given salary increase from $200 to $350 per month, amount of increase to be applied as payment on notes given as part purchase price of farm from his employer, but employee made cash payment before salary increase, and paid $1000 or $1500 after his employment terminated, took possession of deed, and treated farm as his own, endeavored to sell farm, finally offering to convey it to insurance company in payment of his debt, the transaction was not merely colorable and in violation of statute regulating insurance companies so as to be defense on notes.
Appeal from Circuit Court of Cass County. — Hon. Leslie A. Bruce, Judge.
AFFIRMED.
H.E. Sheppard and J.A. Silvers for respondent.
(1) The plaintiff is neither a holder in due course nor vested with the rights of such holder in respect to the notes in suit and, therefore, took such notes subject to all defenses. Thompson v. Abbott, 61 Mo. 176; Ean's Administrator v. Exchange Bank of Jefferson City, 79 Mo. 182; Ingram v. Prairie Block Coal Company, 5 S.W.2d 413, 319 Mo. 644; Manny v. National Surety Company of N.Y., 103 Mo. App. 716, 78 S.W. 69. (2) The fraud perpetrated by the International Life Insurance Company in making a misrepresentation of law, coupled with the existence of a fiduciary relation whereby the defendants were induced to execute the notes in suit, bars plaintiff's right of recovery in this action. Easton-Taylor Trust Company v. Loker, 205 S.W. 87; Thompson v. K.C., C.C. St. J. Ry. Co., 27 S.W.2d 58, 224 Mo. App. 415; Security Savings Bank v. Kellems, 274 S.W. 112; Same Case, 9 S.W.2d 967. (3) The contract between plaintiff and defendants had for its purpose the violation of Section 5684, R.S. 1929, and is, therefore, absolutely void although said statute was not pleaded. Sec. 5684, R.S. 1929; 6 R.C.L. 699; Downing v. Ringer, 7 Mo. 585; State ex rel. Conn. Fire Ins. Co. of Hartford, Conn., v. Cox et al., 268 S.W. 87, 306 Mo. 537; Shohoney v. Quincy, Omaha Kansas City Railroad Company, 231 Mo. 131, 132 S.W. 1059. (4) The parties to this suit are not in pari delicto and defendants should be granted the relief prayed for in their second amended answer. White v. McCoy Land Company, 87 S.W.2d 672, 229 Mo. App. 1019; Wenninger v. Mitchell, 122 S.W. 1130, 139 Mo. App. 420. (5) Even though the court should find that plaintiff is entitled to recover in this case, the amount of the judgment herein is erroneous and should not be allowed to stand. Reed v. Inness, 102 S.W.2d 711.
C.E. Groh, James A. DeArmond and Crouch Crouch for appellants.
(1) Plaintiff's demurrer was correctly sustained. The contract between the parties hereto was evidenced by writing, plain, clear, unambiguous, and complete on its face, executed by the defendants, and so admitted by them. Parol evidence offered by defendants was not admissible to impeach such contract, vary or contradict its terms, or the import thereof. Such evidence was properly disregarded by the court in rendering his decision in the case. J.B. Colt Company v. Gregor, 328 Mo., l.c. 1216, 44 S.W.2d 2, l.c. 6; Ewing v. Clark, 76 Mo. 545; Employers Indemnity Corporation v. Garrett, 327 Mo. 874, 38 S.W.2d 1047, l.c. 1053; Murphy v. Holliway, 223 Mo. App. 714, 16 S.W.2d 107; Voight v. Blanton Company, 46 S.W.2d 527. (2) The court applied the established rule as the measure of plaintiff's recovery in this case, that is, the amount due on the notes sued on, less payments made. Reed v. Inness, 102 S.W.2d 711. (3) The charge that a fraud was committed against defendants by the International Life Insurance Company was not pleaded sufficiently to justify the court in permitting evidence thereon, or pleaded or evidenced sufficiently to connect plaintiff therewith. Where fraud is relied on as a cause of action or defense, it must be pleaded, and if properly alleged the adversary must have been guilty of perpetrating the fraud. Louis W. Thompson Company v. Conron-Gideon, Special Road District, 19 S.W.2d 1049, l.c. 1053; Hardwicke v. Hamilton, 121 Mo. 465; Day v. Graham, 97 Mo. 398; Stines v. Franklin Company, 48 Mo. 167; Gash v. Mansfield, 28 S.W.2d 127. (4) The court properly ruled on plaintiff's demurrer also because: If actionable fraud had been committed against defendants by the International Life Insurance Company by its officer and agent, Carter, the same was perpetrated in 1926, and was barred by limitation at the time this suit was brought, March 30, 1933. Subdiv. 5, sec. 862, R.S. 1929. (5) The court properly ruled on plaintiff's demurrer because: Oral agreements sought to be interposed as defense to plaintiff's cause of action, prior or subsequent to the execution of the notes sued on, constituted no defense for the following reasons: (a) Prior agreements, if any, were merged in the written agreement. (Citations under Point 1.) (b) Subsequent and prior oral agreements, for employment of defendant, Rees W. Barton, for five years, if any, were not enforceable under the laws as alleged in plaintiff's reply. Sec. 2967, R.S. 1929; Kelly v. Fertilizer Company, 153 Mo. App. 120; Waller v. Tootle-Campbell Dry Goods Company, 59 S.W.2d 751, l.c. 754; Diamon v. Wells, 226 S.W. 1016, l.c. 1018.
This action was brought March 30, 1933, by the Missouri State Life Insurance Company to recover the balance alleged to be due on notes executed by the defendants to International Life Insurance Company on August 16, 1926. Defendant, Rees W. Barton, husband of his codefendant, was employed by the latter company in 1922 and continued in its employ until its property was purchased by the former company in August, 1928. Barton continued in the employ of the Missouri State Life until he was discharged by it in March, 1929.
The pleaded defense was fraud in the procurement of the notes; the prayer was for the cancellation of the notes. The cause was tried by both parties upon the theory it was in equity. The judgment was for the plaintiff for $1398.66, from which defendants have appealed.
Rees W. Barton testified he was employed as above stated; that in 1926 he went to see A.H. Carter, head of the investment department of the International Life Insurance Company, concerning increase in salary; that Carter proposed if he, Barton, would buy a farm in Chariton County, Missouri, owned by the company, his salary would be increased from $200 to $350 per month and that from such salary he could pay $150 each month on the purchase price; that he purchased the land for $10,000, $500 of which was paid in cash, the balance, $9,500, evidenced by notes executed by himself and wife, which notes were secured by deed of trust.
"Q. At the time you made this deed and you and your wife executed exhibit 12 were either you or your wife familiar with this farm? A. No, sir.
"Q. Now, after that did you have any conversation with Mr. Carter about a contract, a written contract of employment? A. Yes, sir.
"Q. Tell us about that? A. He said he couldn't give a contract for only one year at a time, but he said he would hire me until the farm was paid for.
"Q. Did he tell you about the law prohibiting him making it for longer? A. Yes, that is what he said, the insurance department.
"Q. Did you make any investigation to know whether or not that was true? A. No, sir.
"Q. Did you consult any attorney about that? A. No, sir.
"Q. State whether or not you relied on that statement of Mr. Carter? A. I did. I worked for the company and I relied on what he told me about my job.
"Q. How long did this situation work out according to your agreement? A Well, it worked out until the end of the International regime, until Mr. McReynolds and Mr. Tombe came."
Barton further testified that in 1931 he was induced to pay $1300 on the notes by the promise of the president of the Missouri State Life to reemploy him, and that the promise was not kept.
The defendant, Artie E. Barton, testified she executed the deed of trust and that she had no knowledge of the transaction except what her husband told her.
The claim that fraud in obtaining the notes was shown is based upon the questions and answers quoted supra, particularly on the question, "Did he (Carter) tell you about the law prohibiting him making it for longer," and the answer, "Yes, that is what he said, the insurance department."
The meaning of the answer is not clear. The question called for a direct answer, yes or no, and not for what Carter said. If Carter stated the law prohibited the employment of Barton for a period of more than "one year at a time" the statement was false. But if Carter referred to the rules of the insurance department then the statement was not, so far as the record shows, untrue. But if Carter on the occasion referred to in the answer had said the law prohibited the making of a five-year contract of employment we would, nevertheless, not disturb the judgment. This because Barton testified the statement was made after the execution of exhibit 12, the deed of trust. The statement, therefore, whether true or false, was not sufficient to sustain the defense of fraud.
The deed of trust was foreclosed by public sale in the manner provided therein. Rees W. Barton was a bidder at the sale. He testified his last bid was $4400; that a representative of the Missouri State Life then bid $4450 and that that bid was accepted by the trustee who made the sale. The credit allowed on the notes from the proceeds of the sale was $3999, less the cost of foreclosure. M.M. Beavers, the trustee who made the sale, testified C.C. Jennings, for the Missouri State Life, bid $3999, and that that was the highest bid.
C.C. Jennings testified he bid $3999; that the last bid made by Barton was $3998. The trustee's deed, the recitals of which are prima facie true, was introduced in evidence but is not in the printed record. The chancellor saw that deed and we therefore assume the statements therein in respect to the amount of the bid were in harmony with the evidence of the trustee and the successful bidder. The preponderance of the evidence shows the bid was $3999.
The insistence that the transaction was in violation of the provisions of section 5684, Revised Statutes 1929, is based on the fact that the salary of Rees W. Barton was increased from $200 to $350 per month, and that the amount of the increase was to be applied as payments on the notes. The down payment of $500 was made before Barton was paid an increase in salary; and he paid $1000 or $1500 after the termination of his employment in March, 1929. Upon receiving the deed he took possession of and thereafter cultivated the farm, endeavored to sell it to a third person, and finally offered to convey it to the insurance company in payment of his debt. These acts are not consistent with the claim that the transaction was merely colorable, not bona fide.
After this suit was brought, plaintiff became the owner of the notes, and by leave of court "was substituted as party plaintiff." The judgment is affirmed. Sperry, C., concurs.
The foregoing opinion of CAMPBELL, C., is adopted as the opinion of the court. The judgment is affirmed. Shain, P.J., and Bland, J., concur; Kemp, J., not sitting.