um so paid and six per cent. interest thereon. [ly personal between the insurance company And it is further stipulated and agreed that in and its patron. Ryan v. Adamson, 57 Iowa, the event of failure to pay any of said money either principal or interest within 60 days after 30, 10 N. W. 287. On the other hand, it is the same becomes due, or a failure to perform equally well settled that, where a mortgagor or comply with any of the foregoing conditions covenants to maintain insurance for the benor agreements, shall cause the whole sum of money herein secured to become due and collec-efit of the mortgagee, then a policy of insurtible at once at the option of the holder, and this ance held by him will inure to the benefit of mortgage may thereupon be foreclosed imme- the mortgagee as a matter of equitable right, diately for the whole of said money, interest regardless of whether the policy was in express terms payable to the mortgagee or not. Heins v. Wicke, 102 Iowa, 396, 71 N. W. 345; Swearingen v. Hartford Insurance Co., 56 S. C. 355, 34 S. E. 449. and costs." The breach of condition charged is that the mortgagor wholly failed to comply with the conditions of the mortgage requiring it to keep said buildings constantly insured for the benefit of the mortgagee. This latter proposition is conceded by appellee. He contends, however, that it has no application to this case for the reasons: (1) That Fry had never obligated himself to maintain insurance for the benefit of the mortgagee; (2) for the further reason that Fry's insurance, upon the undisputed facts in this record, was void from the beginning; and (3) that the policy was never delivered or tendered to the mortgagee. [3] Turning to the first reason thus urged, the record is very meager as to the precise extent of the obligation assumed by Fry as to the mortgage in suit. The deed under which Fry took his title to the land is not in the record. All that appears is in the form of admissions in the pleadings to the effect that Fry took the land "subject" to the mortgage, and that he "assumed and agreed to pay the note and mortgage sued on." This The suit was begun on May 25, 1912. The defendant appellant resists the claim of right of the plaintiff to declare the mortgage due by reason of such breach, mainly on the following grounds: (1) That upon a fair construction of the terms of the mortgage no such right of election was conferred upon the holder, at least without previous notice and demand. (2) That on April 12, 1912, Fry, the then owner of the land, did obtain a policy of insurance to the extent of $2,000 upon the buildings in question, in his own name as owner of said premises; and that such insurance as a matter of law inured to the benefit of the mortgagee by virtue of the condition of the mortgage. (3) That prior to the beginning of the action, and on May 21, 1912, the mortgagor, through its attorney, wrote a letter to the plaintiff's attorney, ful-language is somewhat indefinite. We think it ly and freely offering to obtain the necessary is sufficient, however, to indicate an assump insurance for the holder of the mortgage, or tion of the mortgage according to its terms. to permit him to do so at the defendant's The effect of the alleged invalidity of the inexpense; and that subsequently, on June 5,surance policy is considered in another divi1912, such defendant procured through Fry, sion hereof. and from the insurance company, a proviso which was to be attached, and was attached to Fry's insurance policy, whereby the same was made payable to the mortgagee as his interest might appear, and the plaintiff was notified accordingly. These offers or tenders were all rejected by the plaintiff. The defendant further denied the validity of the mortgage sued on, on the ground that it was materially altered since its execution, without the authority of the defendant; that such alteration consisted in the insertion of the following clause as part of the conditions of the mortgage: "Insurance policies to be held with mortgage." [4] II. Assuming that the defendant failed to procure valid insurance for the benefit of the mortgagee, we proceed to consider whether for this failure alone the plaintiff was entitled under the terms of the mortgage to declare the same immediately due. We have set forth above all the conditions of the mortgage upon which appellee relies. The mortgage does not in specific terms provide that a failure to maintain insurance shall render the whole mortgage due. It does provide in general terms that a failure to perform or comply with any of the "foregoing conditions or agreements" shall cause the whole sum to become due "at the option of the holder." It provides specifically that a failure to pay principal or interest for 60 days after due shall cause the whole sum to become due. It [1, 2] I. The first contention urged by the appellant is that the insurance effected by Fry on April 12th did, as a matter of law, inure to the benefit of the holder of the mort-also provides specifically that a failure to pay gage, and did therefore comply with all the taxes or special assessments before they beconditions of the mortgage. It seems to be come delinquent shall give the mortgagee the settled that a mere mortgagee has no interest right "at his option" to declare the mortgage in a policy of insurance issued to a mort- due. It provides that the mortgagor shall gagor upon the mortgaged property, unless keep the buildings insured for the benefit of such interest be created by some covenant or the mortgagee in a company to be approved condition between mortgagor and mortgagee by the mortgagee. "Failing so to do, the in relation thereto. In the absence of such mortgagee may insure the same and this covenant, the contract of insurance is strict-mortgage shall stand as security for premi um so paid and 6 per cent. interest thereon." must be construed to refer to those specified The contention of the appellant is twofold: in the preceding lines. In other words, the (1) That the mortgage specified the agreed specifications control the scope of the terms remedy available to the mortgagee in case following. It will be noted that a specific the mortgagor should fail to furnish satis- remedy is stipulated for in case of the failfactory insurance. It was that the mortgagee ure of the mortgagor to procure insurance, might insure at the expense of the mortgagor viz., "the mortgagee may insure the same," and the mortgage should stand as security etc. There is no suggestion of an optional for the premium; that this remedy was ex- remedy in this specification. A comparison clusive; that no right was conferred upon of this specification with that which relates the mortgagee to declare the mortgage due to the payment of taxes is significant. Such for such breach. (2) That if such remedy specification relating to failure to pay taxes was not exclusive then the mortgage confer- is that: red upon the mortgagee the option of two remedies and that he was bound to notify the mortgagor of his election before he could declare the mortgage due. We reach the conclusion that the first contention of the appellant at this point should be sustained. The remedy thus stipulated for was apparently adequate. Its exercise by the mortgagee would automatically cure the breach. The mortgagor could not thereafter perform such condition because already performed by the mortgagee. True, the mortgagor could immediately pay the mortgagee the amount of the premium expended, but the provision of the mortgage does not require immediate payment; nor does it make immediate payment a condition the breach of which could render the mortgage due. Contracts will not be construed in favor of harsh results unless their express terms require it. To declare due instanter a $12,000 mortgage which by its terms would not be payable for five years is a drastic remedy. "The holder hereof shall have the right at his option to declare the whole sum of money herein due and collectible at once or he may pay such taxes and assessments and be entitled to interest at the rate of 6 per cent. per annum and this mortgage shall stand as security." To sustain the appellee's contention would be to read a like provision with the foregoing into the specification relating to the failure to procure insurance. In the case of Swearingen v. Lahner, 93 Iowa, 147, 61 N. W. 431, 26 L. R. A. 765, 57 Am. St. Rep. 261, a mortgage was declared It was held due for failure to pay interest. that no notice of election was necessary as a condition to bringing suit. But no question of option was involved in that case. was the only remedy which the plaintiff had for the collection of his interest. It follows therefore that the plaintiff was not justified under the terms of the mortgage in declaring the same due for the breach of conditions specified. A suit III. We think the record discloses further reason why the plaintiff was not entitled to declare the mortgage due. Fry did procure an insurance policy. According to his testi instructions to forward to the mortgagee. This was, however, not drawn payable to the the plaintiff tending to show that Fry did not mortgagee. Some evidence was offered by intend that his insurance should operate to the benefit of the mortgagee. The record as a whole, however, does not leave room to doubt the good faith of Fry. Upon the record as made it is quite clear that the insurance procured by Fry, if valid, would have inured to the benefit of the mortgagee if a loss had occurred. Appellee relies at this point upon Moore v. Crandall, 146 Iowa, 25, 124 N. W. 812, 140 Am. St. Rep. 276, and contends that it is decisive. The two cases are clearly distinguish-mony, he left it with the insurance agent with able. In the Moore Case the mortgage contained a specific provision giving the mortgagee the right to declare the mortgage due for the failure of the mortgagor to effect insurance as required. Such specific provision is absent from the mortgage before us. We would not be justified in reading such provision into the mortgage before us by mere construction. The appellee relies at this point upon the provision that a failure to comply with any of the "foregoing conditions or agreements shall cause the whole sum of [5] It is urged by the plaintiff, however, money herein secured to become due and col- that the policy procured by Fry was wholly lectible at once." The argument is that this void because it erroneously stated the incumprovision is sufficiently comprehensive to in- brance upon the property to be $12,000 only, clude the failure to procure insurance. The whereas there was a second mortgage of provision here quoted from the mortgage is $7,500 thereon. As against this, the testipreceded therein by three spécifications of mony for the defendant is to the effect that breaches of condition which shall render the this omission was not fraudulent or intentionmortgage due at once. These are: (1) Fail- al, and that the insurance agent who preure to pay taxes before delinquent; (2) fail- pared Fry's application and policy knew of ure to pay installments of principal when the $7,500 mortgage and as a notary public due; (3) failure to pay interest when due. had taken Fry's acknowledgment thereto. Failure to procure insurance is not thus spec- Without passing upon the ultimate validity ified. Under the familiar rule of "ejusdem of the policy, it is enough to say that the recgeneris" as well as that of "expressio unius," ord discloses a good-faith attempt upon the gaged premises to comply with the require-pear that the appellant company sent its ments of the mortgage in the matter of in- agent, Garth Carrier, to New Virginia to surance, and that none of the objections "close the deal" with Loper. He carried which are now urged as a ground for declar- with him a note and mortgage for $12,000 ing the mortgage due were made at any time duly executed by the appropriate officers of before the commencement of suit. It is only the appellant company, and this was to be elementary justice to hold that, when a mort- delivered to Loper upon receiving from Loper gagor actually procures insurance in some a deed of the land. The mortgage thus ofform in a good-faith attempt to comply with fered to Loper was not satisfactory to him the requirements of the mortgage, a mort- in its conditions as to insurance, and he regagee cannot arbitrarily declare a default fused to execute a deed of the land unless without giving to the mortgagor notice of his a change were made in the mortgage. Thereobjection and a reasonable opportunity to upon Carrier agreed with him upon a change, meet it. Such was the holding in Provident and agreed to insert therein, and did insert Sav. L. Assur. Soc. v. Georgia Ind. Co., 124 therein, the clause already pointed out: "InGa. 399, 52 S. E. 289. surance policies to be held with mortgage." With such insertion, Loper accepted the mortgage and delivered the deed to Carrier, who carried the same to his principal. The act of Carrier was done in good faith in the belief that he had authority to do it. It is now urged that he had no such authority, and that the alteration therefore destroyed the validity of the mortgage as such. Such a holding is especially appropriate where the requirement for insurance is so indefinite as in this case, implying a future conference of the parties. Not only was the mortgagor given no opportunity to meet objections to Fry's insurance, but there was an active purpose on the part of plaintiff to begin the suit before the alleged default could be cured. Before the suit was begun and the default declared, the attorney for the mortgagor wrote to the attorney for the mortgagee offering in effect to do whatever the mortgagee might desire and offering that the mortgagee might take out the insurance and that he (the attorney) would pay for the same. No answer was returned to this letter until more than 10 days later. In the meantime the suit had been begun. At the time this letter was received by the attorney for the mortgagee who had the mortgage in his custody, negotiations were pending between the mortgagee Loper and the plaintiff herein (a brother-in-law) for the sale of the mortgage. As between the purchaser and the seller, the mortgage was considered more valuable and salable with the specified breach of condition entitling the holder to an immediate foreclosure than it would be if required to run for five years according to its terms. We hold therefore that, inasmuch as Fry procured his insurance in good faith, he was entitled to some notice of the mortgagee's objection thereto and a reasonable opportunity to meet such objections before the mortgagee could declare the mortgage due for such alleged default. There are various reasons why this contention cannot be sustained. It will be noted that the alteration complained of was made before delivery and not after. It was made by the appellant's agent, and while the mortgage was properly in his custody and in his control. His custody and control was that of his principal. While it continued, the paper was not in force or effect. It was subject to withdrawal or change or obliteration. Loper had no control over it. The change actually made by Carrier, therefore, was not an alteration of an instrument in the strict legal sense. Tharp v. Jamison, 154 Iowa, 77, 134 N. W. 583, 39 L. R. A. (N. S.) 100. If he had not afterward delivered the instrument in its changed form, the mere alteration would have been as harmless as white paper. The real question therefore presented under the evidence is, not whether Carrier had authority to make the change in the paper, but whether he had authority to deliver it in its changed form. [7] The extent of the authority of an agent is often difficult to define in exact terms, even as between principal and agent. As a practical fact, it is usually to be ascertained by fair implication, rather than by exact words used between principal and agent. [6] IV. Was the mortgage in suit rendered [8] It is shown that Carrier was not an nugatory by a material alteration therein aft-officer of the corporation, but was a mere er its execution? The facts upon which this employé. This, however, is not conclusive contention rests are brief. It appears that on the question of authority. Only Carrier, on and prior to February 29, 1912, some negotiations were pending (perhaps a contract) between appellant herein and one Osborn Loper, whereby this appellant was purchasing said land from Loper, and was executing back the $12,000 mortgage for a part of the purchase price. It does not appear from the record to what extent these negotiations had proceeded. If a contract of purchase and sale had been actually executed, its terms are not made to appear. It does ap himself, testified at the trial that he was without authority to deliver the mortgage in its changed form. Such testimony was manifestly based upon his mere opinion or conclusion. His present opinion is not persuasive in the presence of the fact that at the time of the transaction he believed in good faith that he was acting within his authority. Loper had no way of ascertaining the exact extent or limitations of his authority unless they were communicated to him. Inasmuch as Carrier was concededly the agent of the We are clear therefore that the appellant appellant for some purpose and to some ex-is in no position to complain of the change tent, Loper had a right in good faith to rely, within reasonable limits, upon his apparent authority. made in the mortgage by its own agent before delivery. Considerable space is devoted in the argument to the point whether the alteration was material, if not authorized. In view of what we have already said, we need not and III hereof, it must be held that the suit was prematurely brought, and the decree entered below must be reversed for such reasons. Reversed. LADD, WEAVER, and PRESTON, JJ., concurring. [9] The appellant as a corporation was, necessarily, represented by some agent in every transaction. Carrier was its only rep-discuss that feature. resentative present in this transaction. It For the reasons indicated in divisions Il is urged that he was there with authority only to deliver the particular mortgage in the form in which it had been previously executed; but this is a mistaken view of the record. He was there, not only to deliver the mortgage to Loper, but also to obtain from Loper a deed to the appellant. The mortgage when executed was tentative only. It covered the land of Loper, not the land of the appellant. It was not intended to be delivered or to become effective unless Loper should first execute and deliver a deed of the land. Carrier was there to "close the deal." He testified as to the change in the mortgage as follows: "Had no difficulty in getting the deal through with him except this change. He refused to sign the mortgage (deed) until he was satisfied with that. Loper wanted it. Before he would close the deal, I had to write that in the mortgage." These, then, were the negotiations which resulted in the delivery of the deed by Loper to the appellant. Carrier could not have obtained the deed for appellant without such change. There is no question of the good faith of either Carrier or Loper at this point. [10] It is doubtless true that the change in the mortgage created a legal defect in the instrument, and perhaps in the recording thereof, because there was no acknowledgment of it in its changed form. If any question of constructive notice had arisen, it might have proved embarrassing to Loper on that account. In that sense, Carrier exceeded his authority; but such excess of authority created no equity in favor of appellant, while it elected to retain the benefits of the transaction. Nor do we think that the defect of recording and of constructive notice could extend any further than to eliminate in legal effect the inserted clause from the record. Granting, even, that the appellant could have repudiated the transaction when it discovered that Carrier had exceeded his au thority, it could only do so by restoring to Loper the benefits received. 1. PEOPLE'S NAT. BANK OF INDEPEND- tee [Ed. Note.-For other cases, see Mortgages, Cent. Dig. §§ 67-82; Dec. Dig. § 33.*] 2. BANKRUPTCY (§ 396*)-EXEMPTIONS-STATE STATUTES. Under the direct provisions of Bankruptcy Act (Act July 1, 1898, c. 541, 30 Stat. 548 [U. S. Comp. St. 1913, § 9590]) § 6, the state laws govern on the question of exemptions. [Ed. Note.-For other cases, see Bankruptcy, Cent. Dig. §§ 659-668; Dec. Dig. § 396.*] 3. HOMESTEAD (§ 167*)-PRE-EXISTING DEBTS. of Code, § 2972, declares that the homestead band or wife, is exempt from judicial sale. Secevery family, whether owned by the hustion 2976 subjects the homestead to debts antedating the purchase of the homestead. Section 2974 declares that no conveyance of a homeother spouse joins. The owner of a homestead, stead by a married owner is valid unless the who was indebted, conveyed it to a third person, who at the same time agreed to reconvey to the owner's wife upon her payment of cerin possession during the interim. tain indebtedness, and that she should remain Held, that the homestead exemption was not lost, for the conveyance and contract constituted a mortgage, and a creditor who recovered a judgment against the husband and wife after the conveyance on a debt contracted before conveyance cannot assert a lien on the homestead on the theory that the conveyance created a new interest in the wife. [Ed. Note.-For other cases, see Homestead, Cent. Dig. §§ 331, 332; Dec. Dig. § 167.*] 4. BANKRUPTCY (§ 196*) - STATUTES - CON STRUCTION. [11] It is well settled in this state that a principal cannot repudiate the acts of its own agent as for excess of authority, while hold- Bankruptcy Act, § 67f, providing that all ing to itself the beneficial fruit of the trans-judgment liens that attach to property within action thus repudiated. The appellant has It not repudiated the transaction in that sense. four months prior to the filing of the petition become void, applies not only to property which passes to the trustee, but to exempt property retained by the bankrupt. [Ed. Note.-For other cases, see Bankruptcy, Cent. Dig. §§ 306-316; Dec. Dig. § 196.*1 5. BANKRUPTCY (§ 196*) - STATUTES - CON STRUCTION. Bankruptcy Act, § 67f, providing that all judgments obtained against an insolvent within four months prior to the filing of the petition shall be deemed null and void if he is adjudged | a bankrupt, and the property affected shall be deemed discharged, and shall pass to the trustee, applies to all property which passes to a trustee, even though the trustee refuses to accept it. mentioned for said deed was that C. W. Van Orsdol was to pay off and discharge certain mortgages and judgments that were against said premises, two of the mortgages having been foreclosed at the time, and execution issued thereon; that on the same date-to wit, [Ed. Note.-For other cases, see Bankruptcy, November 2, 1907-that the deed from Larnard Cent. Dig. §§ 306-316; Dec. Dig. § 196.*] Maxson and wife was made to C. W. Van 6. BANKRUPTCY (§ 150*)-DUTY OF TRUSTEE. Orsdol. C. W. Van Orsdol gave back a contract to Ethel Maxson, the wife of Larnard Maxson, It is the duty of the trustee to refuse to a copy of which contract is attached to plainaccept property scheduled as an asset, which tiff's petition and marked Exhibit A; that the he deems not beneficial to the creditors, and, said Larnard Maxson and wife, Ethel, remained where he refuses to accept it, the property reverts to the bankrupt, and creditors cannot tinued to farm the land as before, and have rein the possession of said premises, and conthereafter recover the property from the bank-mained thereon until this date, and are now in rupt; their remedy being to apply to the court to require the trustee to take possession of the property. [Ed. Note.-For other cases, see Bankruptcy, Cent. Dig. § 228; Dec. Dig. § 150.*] 7. BANKRUPTCY (§ 315*)-DEBTS PROVABLE. A debt evidenced by a judgment is provable in bankruptcy. [Ed. Note.-For other cases, see Bankruptcy, Cent. Dig. §§ 488, 491; Dec. Dig. § 315.*] 8. BANKRUPTCY (§ 438*)-SUBJECTING LAND TO PAYMENT OF JUDGMENT-LACHES. Where plaintiff made no objections to the refusal of the trustee in bankruptcy to take possession of lands scheduled by defendants as part of their assets, and defendants, after their discharge, improved the land, thereafter selling their contract rights in the property to a bona fide purchaser, plaintiff cannot, through a court of equity, subject the land after a lapse of six years to the lien of his judgment against defendants, which was scheduled as one of their liabilities. [Ed. Note.-For other cases, see Bankrutpcy, Cent. Dig. § 626; Dec. Dig. § 438.*] Appeal from District Court, Buchanan County; G. W. Dunham, Judge. Action in equity by the holder of a judgment obtained prior to bankruptcy of debtors, who were husband and wife, to have the judgment decreed to be a lien upon the homestead; also upon the 80 acres outside the homestead. From a decree for the defendants, plaintiff appeals. Affirmed. Cook & Cook, of Independence, for appellant. Hasner & Hasner, of Independence, for appellees. PRESTON, J. I. The stipulation or agreed statement of facts made at the trial states the case as concisely as it could be stated. It is as follows: It is admitted that on May 13, 1896, Sarah P. Maxson and husband deeded to Blanche Bennett and Larnard Maxson the premises described as Exhibit A, attached to plaintiff's petition; that Blanche Bennett and Larnard Maxson were brother and sister; that on May 13, 1896, Larnard Maxson went into possession of said premises; that he was a married man, and continued to live on said premises from May 13, 1896, until the present time; that on March 28, 1901, Larnard Maxson purchased from Blanche Bennett and her husband her undivided one-half interest in said land, and thereafter was the owner of the whole of said land until the same was conveyed, as hereafter appears in this admission; that on November 2, 1907, Larnard Maxson and wife executed a warranty deed to C. W. Van Orsdol of the premises described in Exhibit A, attached to plaintiff's petition; that the only consideration possession of said land; that on March 26, 1908, Ethel Maxson and Larnard Maxson filed their voluntary petition in the United States District Court of the Northern District of Iowa, to be adjudged bankrupts, and they were each of them adjudged bankrupts on the 26th day, of March, 1908; that in the petitions of bankruptcy the People's National Bank, the plaintiff in this case, was scheduled as a creditor holding a judgment in the district court of Buchanan county, Iowa, being the judgment that the plaintiff is seeking to enforce in this case, and referred to in paragraph 2 of the plaintia's petition; that the said Ethel Maxson also scheduled as an asset belonging to her estate the contract held by her from C. W. Van Orsdol, being the contract a copy of which is attached to plaintiff's petition and marked Exhibit A; that thereafter, at a meeting of the creditors duly called by the referee, M. W. Harmon, C. M. Roberts, who was at the time cashier of the People's National Bank, was elected trustee of the estates of Ethel Maxson and Larnard Maxson; that the said C. M. Roberts, as trustee, at no time filed in the office of the recorder of deeds of Buchanan county a certified copy of the decree of adjudication of the bankruptcy of either Ethel or Larnard Maxson; that the said C. M. Roberts, as trustee of Ethel and Larnard Maxson, set apart, upon the petition of the said Larnard Maxson and Ethel Maxson, as a homestead in said premises the property described in paragraph 6 of the plaintiff's petition; that the said C. M. Roberts, as final report, and was discharged as trustee in said trustee, closed up said estate, made his both estates; that Ethel Maxson was discharged September 19, 1908, and her husband on the 3d day of April, A. D. 1911, from all debts and claims which are made provable by the acts of Congress against their estates, and which existed on the 26th day of March, A. D. 1908, upon which day the petition for adjudication was filed by them, excepting such debts as are by law excepted from the operation of a discharge in bankruptcy, as appears from the certified copy of the discharge in bankruptcy given by Lee McNeely, clerk of the United States District Court, witnessed and certified on the 2d day of May, 1913, and which is hereby introduced in evidence, and it is agreed that the discharge granted to Ethel Maxson is in all respects the same, and in the same words and figures as in the discharge of Larnard Maxson, which is herewith introduced in evidence; that since the adjudication in bankruptcy Ethel Maxson has made permanent improvements upon the premises described in plaintiff's petition of the value of $1,292.95, all of which are on the homestead forty, except the following items: $86.40 for woven wire fence, 700 posts, $92.50, 700 pounds of barbed wire, $22.75, all of said improvements being in the nature and kind as shown in defendant's Exhibit B, which is introduced in evidence; that on January 7, 1913, Ethel Maxson and her husband assigned to the Northern Iowa Land Company all their right, title, and interest in and to the contract existing between said Ethel Maxson and C. W. *For other cases see same topic and section NUMBER in Dec. Dig. & Am. Dig. Key-No. Series & Rep'r Indexes |