Commercial & Savings Bank v. Cassem

McCO'Y, J.

It appears from the record -that Wayne" & Hil.liard- executed and delivered to' respondent their certain promissory note for $2,000 for borrowed money, that before respondent would make said loan and accept said note it required Wayne & .Hilliard to secure a personal guaranty of the payment, and that in pursuance thereof appellant executed and signed the following guaranty indorsed upon the back of said note: “For value received, I hereby guarantee the payment of the within note, and consent to any extension of time of payment or • any renewals of .this ¡note, and waive demand, protest, and nonpayment thereof.” Respondent, claiming that the makers of said note have wholly failed to pay the same, or any part thereof, after demand, brought this suit to recover from appellant the amount of principal and interest due on said note under said written contract of guaranty. Appellant contends that, at the time of the transaction of the giving of said note, and the signing of said guaranty, it was agreed between respondent, said Wayne & Hilliard, and appellant, as ,a part of said transaction, that respondent should take from said .makers of said $2,000 note mortgages upon certain real and personal property, owned by said makers of said note, securing the payment thereof, and which real and personal property so agreed to be mortgaged was more than sufficient to satisfy said note, and that respondent failed and neglected to take said mortgages securing said note, and that appellant, after discovering tsuoh failure, demanded that respondent secure such mortgages, or release him from said, guaranty. On the other hand, respondent claims that, ,at the time said $2,000 note was given,. said ..'YVay-ne & Hilliard were also indebted to respondent in the sum of $3,000, evidenced by a promissory note, and that the agreement was, between the maker-s of said notes, appellant .and respondent, *297 that mortgages should be taken upon the real and personal property of the said makers of said notes securing both notes, and that mortgages were so taken ¡by and with the consent of appel.lant, in the name of one Morrow, vice president of respondent, as trustee for the owner of said .notes; while appellant contends that, at the time he executed the guaranty of payment of the $2,000 note, he knew nothing of the $3,000 note. ■ After the failure of Wayne & Hilliard to pay either of said notes, they, by deed and 'bill of sale, apparently conveyed the full and complete .title to said real and personal property to Morrow, who now still holds title and possession of said mortgaged property. It is the claim of appellant that the said deed and bill of sale of said mortgaged property were executed and delivered in full satisfaction and payment of both said notes, thereby fully satisfying and releasing all obligation of appellant under said contract of guaranty; while, on the other hand, respondent, admitting the execution and delivery of said deed and bill of sale, claims the same were not taken in satisfaction and payment of said notes, but were taken by and with the consent of appellant as substitution of securities, and that said Morrow is still holding said mortgaged property only as security for the payment of said notes.

[1] At the conclusion of the evidence the court, among other things, in substance, instructed the jury: “That there was but one question for the jury to determine, and upon which their verdict would depend, and that' is whether or not a certain deed and bill of sale were given and executed in full settlement, and satisfaction, and payment of the two notes, or whether the deed and bill of' sale were merely taken and understood by the parties to be, not absolute transfers in satisfaction of the notes and mortgages, but merely as security to be held until the notes were paid. In law a deed or bill of sale which on its face purports to transfer absolute title may be shown to be not an absolute transfer of . title, but may be shown to> have been made and delivered for the' purpose of securing a debt. I think in this case, inasmuch as the defendant has set this up as a defense, unless lie can show that defense, he is- liable upon his guaranty, because a guaranty carries with it its obligations fixed by law, and it does not make any difference whether he gets a dollar out of it or not, when he *298 puts his name upon a note 'he is responsible for it. So the burden is upon himi to show- that iby -some transaction he has been released from payment, and in order to show that in this case, he says that the notes were settled and paid by the transfer of this property in this deed and bill -of sale. I think the burden of proof is upon him to show- that -that was the fact by a fair preponderance of the evidence. If the -evidence -on the part -of defendant sho-ws by a fair preponderance of it that this deed and -bill of sale were taken- with -the understanding- and for the purpose of settling- this claim' and paying' these n-o-tes, wiping ou-t the. debt, -then the plaintiff cannot recover, and ymur verdict should be for defendant. If, upon the other hand, -the evidence fails to show that, by a fair -preponderance of it, then I think the plaintiff should recover.”

We are of the view that the latter -part -o-f this instruction, which cast u-p-o-n defendant the burden of showing that said deed and bill of sale were transfers of absolute title, was erroneous and highly prejudicial to. defendant. ' When defendant had offered in evidence the deed and bill of -sale purporting to -convey absolute title, and had produced as a witness one of the grantors of said deed and bill of sale, who testified and said instruments were executed and delivered by him in settlement of the notes and mortgages, which deed and bill of sale settled the transaction so far as the -mortgagors were -concerned, this made out and constituted a strong' and -complete prima facie defense in favor of defendant, and t-he burden- of proof, on this issue, then shifted to plaintiff to -.show by clear and -convincing- proof 'that said instruments were not in fact absolute transfers of title.

[2] The presumption of law is that instruments of this character, absolute in form, are what they purport, on their faces, to be. This presumption prevails until over-come by clear and convincing proof. It was respondent who affirmed that said instruments were other than what they purported to be. It is a wellostblished rule that one claiming' an instrument, absolute on its face, to be in fact a mortgage has the burden of showing that fact by clear and convincing proof. Larsen v. Dutiel, 14 S. D. 476, 85 N. W. 1006 ; Jones v. Jones, 20 S. D. 632, 108 N. W. 23 ; McGuin v. Lee, 10 N. D. 160 , 86 N. W. 714 ; Jasper v. Hazen, 4 N. D. 1 , 58 N. W. 454 , 23 L. R. A. 58; Turnipseed v. Cun *299 ningham, 50 Am. Dec. 196 , note; Perot v. Cooper, 17 Colo. 80 , 28 Pac. 391 , 31 Am. St. Rep. 258 ; Kellogg v. Northrup, 115 Mich. 327 , 73 N. W. 230 ; Hays v. Carr, 83 Ind. 284 ; Henley v. Hotaling, 41 Cal. 22 ; Schmidt v. Barclay, 161 Mich. 1 , 125 N. W. 729 , 20 Ann. Cas. 1194.

[3] Appellant contends that the trial court erred in not submitting to the jury the question as to whether or not the guaranty sued upon ever became binding upon appellant, or whether appellant signed said guaranty only upon condition that it be secured (by a mortgage on the real and personal property in question. We .are of the opinion that these were issues concerning which there was a material conflict in the testimony, and which should have been submitted under instructions; but no exceptions of any character were taken by appellant to the instructions given, and therefore, however erroneous in. airy particular, reversible error cannot now -be predicated thereon, .as, in the absence of proper exceptions, the instructions, right or wrong, became the law of the case.

[4] Appellant called as a witness said Wayne, one of the said mortgagors and owners of the said mortgaged property at the time the same was alleged to have been transferred by said deed and bill of sale to said Morrow. W ayne testified that he knew the value of said property, and was then asked to state the market value of said real and personal property, referred to and described in said deed and 'bill of sale, at the time it was turned over under said instruments, to which question respondent objected on the ground of its being immaterial. The objection was sustained, and appellant excepted, and now urges such ruling as error. We are of the opinion that the value of the property at the time of the making and delivery of said deed and bill of sale was material evidence, and should have been admitted. There was a conflict between the testimony of Wayne and one Kibbee, president of plaintiff, who transacted the business of taking said' deed and bill of sale on behalf of .plaintiff. Wayne testified that said- deed and bill of sale were given in settlement of the notes in question, that that settled the transaction; so far as the mortgagors were concerned. Kibbee testified that the deed and bill of sale were taken, not in settlement, but as security only, as a substitution of security, in place of the mortgages. If the *300 value of this mortgaged property had been shown to be considerably less than the amount due oil said mortgage indebtedness, then that fact would strongly tend to corroborate Kibbee; but, on the other handy-if the'value of the property was considerably in excess of the amount of the indebtedness, then it would strongly tend to corroborate Wayne. On the question whether a deed, absolute in form, is .in fact a mortgage, the question whether the price is adequate is .entitled to great weight. Schmidt v. Bar-Hay, supra, and note at end of case. In this case the price was the mortgage indebtedness.

The judgment and.order appealed from are reversed, and the cause remanded for new trial.