Opinion
No. 27717.
February 18, 1929.
1. MORTGAGES. Bills and notes. Presumption is that notes and trust deed were executed without fraud, and that valuable consideration passed. Prima facie, presumption is that notes and deed of trust sought to be canceled were executed without fraud on part of defendant, and that valuable consideration passed to complainants for their execution.
2. BILLS AND NOTES. Mortgages. Cancellation of notes and trust deed for fraud involves extraordinary power, not to be exercised except in clear case.
Cancellation of notes and deed of trust for fraud involves exercise by court of equity of an extraordinary power which should not be exercised except in a clear case upon strong and convincing evidence.
3. BILLS AND NOTES. Mortgages. In suit to cancel notes and trust deed for fraud, evidence justified decree dismissing bill and granting foreclosure under cross-bill.
In suit to cancel notes and deed of trust on ground that they were procured through false and fraudulent representations, in which defendant filed cross-bill praying for foreclosure of deed of trust and for payment of notes, evidence held sufficient to justify decree dismissing original bill an granting prayer of cross-bill.
4. EQUITY. Statutes requiring copy of writing to be annexed to declaration or bill before evidence of writing may be introduced applies to chancery courts as well as to circuit courts ( Hemingway's Code 1927, sections 479, 531).
Hemingway's Code 1927, sections 479, 531 (Code 1906, sections 687, 734), requiring that in suits founded upon writing, original or copy of writing shall be annexed to or filed with declaration or bill, otherwise evidence of writing shall not be given on trial, applies to chancery courts as well as to circuit courts.
5. EQUITY. Statute requiring copy of writings of which profert should be made by pleader to be exhibited with pleadings applies to chancery courts ( Hemingway's Code 1927, section 532).
Hemingway's Code 1927, section 532 (Code 1906, section 735), requiring copy of any writings of which profert ought to be made by pleader to be exhibited with his pleadings, applies to chancery courts as well as to circuit courts.
6. APPEAL AND ERROR. Admitting evidence to establish notes without originals or copies having been made exhibits to pleading held harmless error.
In suit to cancel notes and deed of trust, in which defendant filed cross-bill praying for foreclosure, admitting evidence on behalf of defendant to establish notes without either original notes or copies thereof having been made exhibits to cross-bill held harmless error, where in original bill plaintiff set out deed, amounts and maturities of notes, and notes were described fully in defendant's cross-bill, and plaintiffs did not claim that notes contained any stipulation that they did not already know of.
7. MORTGAGES. Where notes contained stipulation there should be no personal liability beyond value of property covered by trust deed, personal decree was erroneous.
Where notes contained stipulation that there should be no personal liability on part of grantor under deed of trust beyond value of property covered by deed of trust, personal decree against grantor for amount of notes, interest, and attorney's fee was erroneous.
APPEAL from chancery court of Hinds county, First district, HON. V.J. STRICKER, Chancellor.
Teat Cox, for appellants.
The lower court erred in allowing the notes sued on by cross-complainant, appellee, to be introduced in evidence over the objection of the appellant without making profert of said notes in the cross-bill. This principle of law is well established in rules of procedure by the statutes of this state and needs no argument or further elaboration on the statute itself. The statute recites that a copy of any writing of which profert is made, or ought to be made, in any pleading, shall be annexed to or filed with the pleading, etc., and that evidence thereof shall not be given at the trial unless so annexed or filed. Sec. 532, Hemingway's Code of 1927, sec. 735, Code of 1906. The cross-bill is required to conform to the same strictness of pleading and to the same rule of evidence in this particular as if it were an original bill of complaint. Griffith's Mississippi Chancery Practice, secs. 380, 385.
The lower court erred in awarding a personal judgment against Mrs. Mamie Thomas. One provision of the notes was that the liability of Mrs. Mamie Thomas should be limited to and discharged by the net proceeds of the sale of the property. Therefore the personal judgment against Mrs. Mamie Thomas was in controvention of the express terms of their agreement.
The lower court committed manifest error in dismissing complainant's bill and denying the relief therein sought. The appellants contend that the notes and the deed of trust, which were sought to be cancelled by the original bill were executed by the appellants only on consideration that the appellee would extend a reasonable line of credit to the Merchants Dry Goods Company in the future and thereafter permit the Merchants Dry Goods Company to buy additional goods from the appellee on credit. The appellees, of course, disputed this contention in the lower court by their one and only witness, Mr. Pillsbury, who was secretary of the appellee company. Mr. Pillsbury said that the consideration for the execution of the notes and deed of trust was the extension of time from the date of execution thereof to its due date.
N.R. Thomas testified that Pillsbury's statement was untrue and that he told Pillsbury that he did not want further time but that he wanted more credit for his company, and more goods shipped immediately. Thomas further testified that the additional credit and goods was the true consideration for the execution of the notes and trust deed. Mrs. Mamie Thomas, is a Syrian woman who can neither read nor write English, nor read her own name when written but executes all of her papers by means of an "X." She stated in her testimony that she signed these papers on the strength of Mr. Pillsbury's promises for the appellee to ship the company of N.R. Thomas, more goods.
Mitchell Thomas testified for the appellants that two hundred dollars was given Mr. Pillsbury at the time of his said visit here and that Mr. Pillsbury told him that after the notes and trust deed were signed up that he was going to ship certain merchandise to them on request.
Immediately after signing the notes and trust deed, the Merchants Dry Goods Company ordered a shipment of slippers from the appellee on December 3, 1926, one day after the execution of the notes and trust deed sought to be cancelled, and on December 8, six days thereafter, the shipment was refused by the appellee. On the day of the receipt of the refusal of the appellee to ship the goods, Thomas wrote them to the effect that the deed of trust was given only upon the the condition that the goods would be shipped on open account to the Merchants Dry Goods Company.
Mrs. Thomas employed an attorney to write the appellees that she denied liability on the note and denied the validity of the trust deed because of the manner in which the same had been procured. It is our contention that the testimony of these witnesses, together with the implicit reliance upon the promise of the agent of the appellee, is very forcefully brought to the attention of the court by the candid and open manner in which the appellants called attention of the appellees to the breach of their agreement.
The appellees did not even so much as make a reply to the contentions of the appellants, but let the entire matter go by unnoticed until the notes became due and a foreclosure could be had thereon. It is inconsistent on the part of a reputable concern, that appellee claims to be, when so challenged on the integrity of their agreements, and so pointedly shown and charged with exercising bad faith in the performance or the failure of the performance of their agreements, that they remain silent and did not even attempt to adjust the differences with the appellants or seek to right the impression that they were to actually extend the credit to the Merchants Dry Goods Company as appellants contend. The appellees were notified immediately of their breach and are now estopped to say that if the extension of time was actually the real consideration for the execution of the notes, that upon being so early advised of the understanding of the appellants that credit was to be extended his company that they could not have immediately thereafter sought recourse against the Merchants Dry Goods Company for the amount of the indebtedness so secured. Only a short period of time had elapsed since the execution of these instruments and appellees were left open to assert their rights against the Dry Goods Company. If this was the only consideration of the execution of the notes, and appellants were dissatisfied, we say that the appellees are estopped to say that they jeopardized their rights or misunderstood the agreement to be exactly as appellants contend. Instead of showing their good faith with the appellants by making a reply thereto, they placed the notes and trust deed in the hands of their attorney to await the maturity thereof with instructions to foreclose immediately thereafter.
We call the attention of the court to the fact that the notes which appellants executed to the appellees were made non-negotiable before being placed in their hands. This would clearly substantiate the view of the appellants that the notes were not given simply for an extension of time, and if they had been, upon their execution, it would have made no difference to the appellants that they be actually negotiated and placed in the hands of an innocent purchaser.
Instead thereof it is apparent and very significant that the appellees permitted the appellants to impose on them the harsh effect of making the notes non-negotiable to keep them out of the hands of an innocent purchaser and to make them fulfill some executory promise which formed the consideration thereof. We submit that this is the only reasonable deduction that can be drawn from such action of the parties.
R.H. and J.H. Thompson, for appellees.
The testimony for complainants was too vague and uncertain as to the consideration of the notes and deed of trust to justify a finding that the consideration was other than the extension of time to the corporation within which to pay its debts to Rosenberg Son, a consideration that did not fail. Hence it cannot be reasonably claimed that there has been a total failure of the consideration for which the notes were given.
The testimony of Nick R. Thomas, the President of the corporation, who caused his mother, Mamie Thomas, to execute the notes and deed of trust is to the effect that the corporation was to be granted additional credit, without specification as to its amount or when it was to be granted; he simply states that he assumed additional credit was to be granted to him, possibly meaning the corporation. The witness affirms that Rosenberg "promised to give us" additional help. No specification as to the amount or nature of the help. That "they were to ship us an order that day." Still vague and uncertain as to its amount. Again, "he (meaning no doubt Rosenberg Son) was to ship us an additional line of shoes at that time." No amount fixed. That Mr. Pillsbury (Rosenberg Son's agent) told Mrs. Thomas that he was going to help us out and ship shoes to us. Still no amount, still vague and uncertain.
The next witness for complainants was Mrs. Mamie Thomas. Her testimony is exceedingly weak. She did not know anything about the transaction between her son Nicholas R. Thomas and Rosenberg Son. The only thing said to her by Rosenberg Son's representative was that he wanted her to sign the papers and that he wanted to help her boy. She does testify that she signed the papers "to help my boy get some goods," that Rosenberg Son's representative said to her "sign the paper, I like your son to buy more goods, he is a wonderful boy, that is all," meaning all he said.
The testimony of witness Pillsbury is clear, distinct and straightforward; it fully contradicts every pretense of proof as to an agreement to extend further credit as a consideration for the execution of the notes and deed of trust.
The chancellor saw the witnesses while testifying; he observed their demeanor; the changes of their countenances; their gasping and other evidences of integrity or the want of it, sure evidences of truth or falsehood impossible to be reduced to writing and brought before this court. The chancellor believed Pillsbury's testimony on the main issue to be true and discredited that of the witnesses who in whole or part contradicted it. Appellants assign as error the action of the court below in overruling apellants' objection to the notes as evidenced. The objection was that neither the original notes nor copies of them were filed with or as parts of the cross-bill and the contention of the appellants is rested upon sec. 734, Code of 1906, providing that in actions founded on any writing a copy thereof shall be annexed thereto or filed with the declaration and evidence thereof shall not be given on the trial unless so annexed or filed. This statute is found, in the code chapter entitled "Circuit Courts" and section 687 of the chapter makes all things contained in it, not confined by their nature or by express provision to particular courts, applicable to all courts, but we submit that section 734, Code of 1906, by using the terms "declaration" and "actions" limited its application to suits at law. In no event does the statute apply to a cross-bill in an equity suit; this is especially true under the facts shown of record in this case. The purpose of the statute was to give defendants sued upon a writing an inspection of it for information enabling them to prepare their defenses. Where defendants to a cross-bill in equity plead the writing sought to be enforced by the cross-bill in their original bill, know its contents, the purposes of the statute have no application. Should this court decide that the statute has application to this case, an error in admitting the notes in evidence was a harmless one. It was harmless because if the notes had been excluded as evidence the cross-complainants, appellees, would have been entitled to a decree foreclosing the deed of trust, since the notes were sufficiently pleaded by the appellants in their original bill to give every fact necessary to be known in order to render such a decree. The recitals of the deed of trust, an exhibit to the bill and made a part of it, aided in giving complete data concerning the contents of the notes.
Argued orally by J.A. Teat, for appellant.
Appellants filed their bill against appellees in the chancery court of Hinds county to cancel, set aside, and hold for naught three promissory notes which appellants had executed and delivered to appellee B. Rosenberg Sons, Inc. (who, alone, for convenience, will be hereinafter referred to as appellee, as the other appellee, the trustee, is without interest), and a deed of trust executed by appellant Mrs. Mamie Thomas, on her home in the city of Jackson, in Hinds county, to secure the notes, upon the ground that the notes and deed of trust were procured by appellee through false and fraudulent representations, and also upon the ground that no consideration passed to appellants for the execution of the notes and deed of trust. Appellee answered the bill, denying its material allegations, and made its answer a cross-bill, setting out the maturity of the notes, default in their payment, and prayed for a foreclosure of the deed of trust for the payment of the notes, interest, and attorney's fees provided for in the notes. Appellants answered the cross-bill, denying its material allegations. There was a trial on the original bill, answer, and cross-bill, and answer to the cross-bill, and proofs, resulting in a final decree dismissing the original bill, and granting the prayer of the cross-bill. From that decree, appellants prosecute this appeal.
Appellants argue, with a good deal of reason and force, that the chancellor's finding of facts that the execution of the notes and deed of trust involved was not procured by fraud, and that a valuable consideration passed to appellants for their execution, was against the overwhelming weight of the evidence, and therefore the decree should be reversed, and a decree rendered by this court for appellants.
The notes and deed of trust sought to be canceled are valid on their face. Appellants admit that they were executed by them. They embody a solemn contract entered into between appellants and appellee. Prima facie, the presumption is that they were executed without fraud on the part of appellee, and that a valuable consideration passed to appellants for their execution. The cancellation of such a contract involves the exercise by a court of equity of an extraordinary power, which ought not to be exercised except in a clear case upon strong and convincing evidence. 9 C.J., section 195, pp. 1255, 1256; Ayres v. Mitchell, 3 Smedes M. 683; Plant v. Plant, 76 Miss. 560, 25 So. 151; Christian v. Green (Miss.), 45 So. 425 (not officially reported); Blomquest v. Gardner, 95 Miss. 307, 48 So. 724.
At the time of the execution of the notes and deed of trust, appellant N.R. Thomas was a large stockholder in, and manager of, the Merchants' Dry Goods Company, doing business in the city of Jackson, in Hinds county. The Merchants' Dry Goods Company was indebted to appellee in the sum of one thousand three hundred dollars, overdue. The latter was urging payment of the indebtedness. E. Pillsbury, appellee's credit man, was on the ground, urging that the indebtedness either be paid or secured. Appellants and another witness, whose evidence was corroborated by certain surrounding facts and circumstances, testified positively that the sole consideration for the execution of the notes and deed of trust was, not an extension of the time of payment of the indebtedness of the dry goods company to appellee, but that appellee extend to the Merchants' Dry Goods Company a further line of credit, which appellee, immediately after the execution of the notes and deed of trust, refused to do, and that as a result, in a few days thereafter the Merchants' Dry Goods Company went into bankruptcy. On the other hand, appellee's credit man, Pillsbury, who represented appellee in negotiating the transaction resulting in the execution of the notes and deed of trust, testified as positively, and his testimony was also corroborated by certain other surrounding facts and circumstances, that the sole consideration of the execution of the notes and deed of trust was that the Merchants' Dry Goods Company might get an extension of the time of payment of the indebtedness to appellee, and thereby be able to go on in business.
The cause was heard on the oral testimony of the witnesses, not on depositions; therefore the chancellor saw the witnesses when they were giving their testimony; he had an opportunity of observing their demeanor on the witness stand, the manner of giving their testimony, which considerations are often entitled to great weight in deciding issues of fact; while the supreme court, in passing on issues of fact, has before it only the testimony of the witnesses in writing, and therefore, in determining issues of fact, is without that aid. We think there was sufficient evidence to justify the decree.
In its cross-bill to foreclose, the appellee failed to attach thereto either the original notes, or copies thereof. To appellant's original bill, however, there was attached a copy of the deed of trust, given to secure the notes, in which the date of the notes was set out, the amount of each, their maturity, and the rate of interest they bore. In their original bill appellants called on appellee to produce the notes. In its cross-bill appellee set out substantially the same description of notes as is embodied in the deed of trust. On the trial appellant N.R. Thomas was the first witness introduced by appellants. On his cross-examination the notes were produced by appellee, and proven by this witness, and by appellee introduced in evidence over the objection of appellants, upon the ground that neither the original nor copies of the notes were attached to appellee's cross-bill.
Appellants' position is that for that reason the court erred in admitting evidence for the purpose of establishing the notes. Section 734, Code of 1906 (section 531, Hemingway's Code of 1927), which, by virtue of section 687, Code of 1906 (section 479, Hemingway's Code of 1927), applies to the chancery courts, as well as to the circuit courts, requires that, in all suits founded upon any writing, the original or copy of the writing, with the names of the subscribing witnesses, if any, shall be annexed to, or filed with, the declaration or bill; otherwise, evidence of such writing shall not be given on the trial. And the same is true of section 735, Code of 1906 (section 532, Hemingway's Code of 1927), which requires a copy of any writings of which profert ought to be made by the pleader, to be exhibited with his pleadings. Griffith's Chancery Practice, section 190. The appellants' contention that the court erred in admitting evidence on behalf of appellee to establish the notes, without either the original notes or copies thereof having been made exhibits to appellee's cross-bill, is well-founded; but we are of the opinion that the error was without harm to the appellants, for the following reasons: In their original bill appellants set out the date of the three notes, their amounts, and maturities, and attached to their bill was a copy of the deed of trust, sought to be canceled and have set aside along with the notes, in which the notes were described in the usual manner contained in deeds of trust. In appellee's cross-bill the notes were also described as fully as they were in the original bill, and the copy of the deed of trust attached to the original bill. The original bill sought to cancel the notes upon two grounds alone, namely, fraud and that they were without consideration. Appellants made no pretense of having any other defense to the collection of the notes by appellee. Furthermore, the first witness who testified was appellant N.R. Thomas, who was a witness on behalf of appellants.
On his cross-examination the original notes were produced by appellee, and handed to the witness, who proved their execution, and thereupon they were introduced in evidence by appellee. There is nothing in the record in this case to show that any different case would have been made by appellants if the notes, or copies thereof, had been exhibited with the cross-bill. When the notes were introduced in evidence, they showed the stipulation that there should be no personal liability on the part of appellant, beyond the value of her property covered by the deed of trust. Appellants did not claim surprise when the notes were introduced in evidence. They did not claim that the notes contained any stipulation whatever that they did not already know of. In other words, there is nothing in this record to show that appellants were prejudiced in any manner whatever by the failure on the part of appellee to exhibit the notes, or copies thereof, with its cross-bill. Appellants do not claim that a different case would have been made if the notes and deed of trust had been exhibited with the cross-bill. It appears, therefore, that it would be fruitless for the decree in this case to be reversed on that ground. The doctrine of harmless error applies. If the decree were reversed on that ground, the case would go back to the chancery court, where there would be another trial with the same result.
A personal decree was rendered against appellant Mrs. Mamie Thomas for the amount of the notes, interest, and the attorney's fee. This was error, and the appellee confesses the error, claiming that the decree was so written by inadvertence. To that extent the decree is reversed, but in all other respects it is affirmed, and a final decree will be entered here in favor of appellee, with that modification.
Reversed in part and affirmed in part, and judgment entered here.
Reversed. Affirmed.