Appeal from the Circuit Court of DuPage county; the Hon. MEL
ABRAHAMSON, Judge, presiding. Affirmed.
JUSTICE CROW DELIVERED THE OPINION OF THE COURT.
This is a suit filed in January, 1956, by the plaintiff, Dorothy L. Krueger, to foreclose a second mortgage trust deed on certain real estate in Elmhurst, Illinois allegedly executed by the defendants Daniel M. Dorr and Grace E. Dorr, his wife, on August 30, 1949 to secure a note of even date, payable to bearer, in the original principal amount of $5,000 payable $60 or more per month, beginning December 1, 1949, upon which certain payments ($240) had been made, leaving an alleged unpaid principal balance of $4,833.57, with interest at 6% from March 1, 1950 (the date of the last payment) to November 1, 1952, (the date the final payment was due), and at 7% from November 1, 1952.
The complaint, so far as now material, alleges that the note and second mortgage trust deed were originally given to Superior Home Builders, Inc., a corporation, as, or to secure an indebtedness for, a part of the purchase price of the real estate, located at 169 Grace Avenue, Elmhurst, and that the note and second mortgage trust deed were thereafter sold by Superior Home Builders, Inc. to the plaintiff herein, for value the plaintiff purchased the same before any payment was due thereon. Copies of the purported note and second mortgage trust deed were attached as exhibits to the complaint.
The other defendant, Chicago Title and Trust Company, is the trustee under the alleged second mortgage trust deed for the benefit of the holder of the note.
The answer of the defendants Daniel M. Dorr and Grace E. Dorr, his wife, so far as now material, denies that they were indebted to Superior Home Builders, Inc. for $5,000 on August 30, 1949; denies that they executed the note and second mortgage trust deed; alleges that the signature of the defendant Grace E. Dorr allegedly appearing on the note and trust deed is not her true signature, was not affixed thereto by her or with her consent, knowledge or authority, that she has no knowledge with reference to the execution thereof, and that she did not appear before the Notary Public who purports to have acknowledged her signature to the trust deed; and denies the plaintiff purchased the note and second mortgage trust deed or is a bona fide holder thereof. They admit that payments of $240, being four $60 monthly installments, have been made on the note, but state that they have no knowledge as to the application thereof; they deny they have defaulted in making payments on the note, or that they are legally obligated to make payments thereon, or are indebted to the plaintiff in any sum, or that the plaintiff is entitled to any relief; and they ask that the note and second mortgage trust deed be found to be null and void.
The cause was referred to a Master in Chancery, and, after evidence taken, he found in favor of the plaintiff on all points, and overruled the objections of the defendants Dorr to the Report.
The Chancellor thereafter overruled the exceptions of the defendants Dorr to the Master's Report, approved and confirmed the Report, and a decree of foreclosure and sale was entered, from which this appeal is taken by them.
It appears that Daniel M. Dorr and Grace E. Dorr, as the purchasers, signed a purported written contract dated August 30, 1949, to purchase the property from Superior Home Builders, Inc., as the seller, the contract providing that the purchasers would pay the sum of $28,000 as the purchase price $4,000 earnest money upon execution of the contract, a note for $5,000, and the balance of $19,000 as work on the building progressed, the purchasers either to place that $19,000 balance in escrow or obtain a mortgage loan therefor, and the escrowee or mortgagee to pay such balance to the seller. The defendants Dorr admitted they signed that contract but said they signed it in blank. The defendants Dorr apparently took title to the premises about August 30, 1949, and on the same day executed a first mortgage loan application, which recited $28,000 as the purchase price for the property, and a first mortgage for $19,000 to the Lawn Savings and Loan Association of Chicago, securing a note of like amount of even date, and a letter of authorization to the mortgagee to disburse the funds to Superior Home Builders, Inc., or on its orders. That first mortgage and note are not in issue here, although they appear in the evidence, and the defendants Dorr admit signing those instruments the application, note, mortgage, and letter of authorization relating to that $19,000 first mortgage, which represented that much of the purchase price under their contract with Superior Home Builders, Inc., and the proceeds of which first mortgage were evidently paid to Superior Home Builders, Inc., or its order, upon directions of the mortgagors. The defendants Dorr admit those instruments relating to that first mortgage were filled out when executed and were not signed in blank. The second mortgage trust deed, which is in issue in this case, purports to bear date also of August 30, 1949, and is for $5,000. The mortgagors purport to be Daniel M. Dorr and Grace E. Dorr, his wife, with the Chicago Title and Trust Company as trustee, that mortgage and note bear the purported signatures of Daniel M. Dorr and Grace E. Dorr, there is a certification of identification by the trustee on the note and mortgage, and those defendants admit Daniel M. Dorr signed those instruments, but say they were in blank when he signed, and they deny Grace E. Dorr signed them at all. The second mortgage trust deed is on an apparently regular printed form of Chicago Title and Trust Co., with certain necessary blank places filled in by typewriter. The acknowledgments on both the first and second mortgages were taken purportedly before Sue Brodahl, a Notary Public, on August 30, 1949, and the acknowledgment on the second mortgage trust deed is in the customary statutory form.
The defendants Dorr seek relief on this appeal upon the following claims: (1) the $5,000 note and second mortgage trust deed were forgeries so far as Grace E. Dorr is concerned and the documents were void; (2) that mortgage and note were signed in blank by Daniel M. Dorr and are void; (3) there is no evidence to sustain the finding that the Dorrs were indebted to Superior Home Builders, Inc. in the sum of $5,000 or any part thereof; and (4) the plaintiff was not an innocent holder for value of that note and mortgage since they were acquired by the plaintiff in January, 1956, from William Kracke, at which time they were in default as to principal and interest.
The plaintiff's theory is that the $5,000 second mortgage note and trust deed were given as part of the purchase price of the real estate, they were executed by both the defendants Dorr, the payments thereon were made by those defendants, and those defendants are indebted for the balance due thereon as alleged in the complaint. The plaintiff urges that the Notary Public's certificate of acknowledgment on the second mortgage trust deed can be overcome only by clear, convincing, and satisfactory proof offered by disinterested witnesses, and that the findings of fact of a Master, when approved by the Chancellor, should not be disturbed by a reviewing court unless they are contrary to the manifest weight of the evidence.
The defendant Daniel M. Dorr testified that he signed the $5,000 second mortgage trust deed and note purportedly secured by it, but says both instruments were blank when he signed them and that the salesman for Superior Home Builders, Inc. took them with him after they were signed; he did not sign Mrs. Dorr's name to them; Mrs. Dorr's purported signatures on that note and mortgage looked like hers but he could not swear that such were; he never appeared before Sue Brodahl, a Notary Public; one Herman Gorschov, who was then connected with Superior Home Builders, Inc., had quoted him a price for the property of $24,000; he and Mrs. Dorr signed the purchase agreement with Superior Home Builders, Inc. in blank; he did not pay the $4,000 earnest money or any part thereof mentioned in the contract; he closed the purchase of the property with one Joseph M. Brickman, who was then associated with Superior Home Builders, Inc., in August, 1949; in the final closing agreement with Brickman he (Dorr) agreed to give a (first) mortgage in the sum of $19,000, the application, note, mortgage and letter of authorization for which he and Mrs. Dorr admittedly signed. As to the balance of $5,000, that is, the difference between that $19,000 (first) mortgage and the $24,000 purchase price which he testified to, he was to do some work drawing plans for Superior Home Builders, Inc., buying furniture, etc., that would pay the $5,000, Dorr being an architect licensed and practising as an Illinois architect for 15 years; when he moved into the property the house was not yet completed and, despite his many complaints, he completed it he painted and decorated the entire inside, put rubber tile in the kitchen and countertops on the sink, had the floors sanded and put fireplace mantle tops on for both the basement and the first floor, finished up the quarter round around the basement, furnished and installed electric fixtures all over the house, hauled sixty yards of black dirt, and painted the exterior a second coat of paint; that he had no understanding with Superior Home Builders, Inc., or Brickman, that he (Dorr) was to do any of that work himself and be given an allowance on the sale price for such work. He further testified, however, that the only thing he did toward earning or paying the foregoing $5,000 was to go up to Mr. Brickman's brother's new home and have a floor covering concern measure the place for carpeting, and that he paid $6 on this account evidently Superior Home Builders, Inc. did not refer to him any particular plans, drawing work, etc., as, according to him, was contemplated. He also said three payments of $60 each had been made by him on the note, but none had been made since March, 1950, when he stopped paying. Though he did not recall to whom the payments were made it is possible they were made to the plaintiff, and he made the payments after he was notified by the plaintiff that she was the holder of the note.
Joseph M. Brickman testified that he was associated at the time with Superior Home Builders, Inc.; he approved of the sale of the real estate to the Dorrs on behalf of Gorschov, a salesman who was with the company at that time; Gorschov, to the best of his knowledge, is now dead. He recalls, independently, that Dorr was to pay $28,000 for the place. At the time Dorr signed the contract the building was not yet completed; Gorschov, Dorr, and he were present; Dorr said that he had limited funds and he desired to work out an arrangement whereby he could get the property with a minimum amount of cash and do some of the completion of the building himself; Dorr said he wanted to put in approximately $1,000 or $1,500 cash and do his own painting, tile work, and electric fixtures; being an architect, he (Dorr) had contacts in these various trades whereby he could save money and get a better selection than what the building called for "under our stated price," he (Brickman) finally agreed with Dorr to take a minimum amount of money; he thought Dorr paid $750 down; he agreed on an allowance to Dorr for the work Dorr was to do at Dorr's expense as the differential between the downpayment and the $4,000 earnest money, or in lieu of the $4,000 down payment; the allowance for such work was around $2,500 to cover painting, lighting fixtures, railing, tile and tile floors and kitchen cabinets; there are no records of what those purported allowances were, nor does the contract set forth such allowances; in addition, according to Brickman, Dorr was to execute a first mortgage in the amount of $19,000 and a second mortgage in the amount of $5,000; the $4,000 earnest money mentioned in the purchase agreement was not received by Superior Home Builders, Inc., and the provision for the $4,000 was not in the contract when it was signed. Brickman said that in his discussions with Dorr there definitely was reference to a second mortgage. Brickman said Sue Brodahl, the Notary Public, was employed by Superior Home Builders, Inc. in 1949 but he did not know where she was now.
Daniel M. Dorr then further testified that he did not pay Mr. Brickman or Superior etc. $750 or anything down on the purchase of the house; Brickman told him that he (Brickman) would fix up the mortgage deal so that Dorr would not have to pay one single penny down; he was to get the house for the $19,000 first mortgage and the house was to be completed and he was to make the selections of the materials for the color of the tile in the kitchen and the counter tops; he wound up by paying for everything, which wasn't in the original agreement; the tile in the bathroom was paid for by Superior Home Builders, Inc.; he did not have a conversation with Gorschov about the difference between $19,000 and $24,000, and Gorschov was not present at the particular meeting at which Brickman and Dorr worked out the details.
The evidence shows the plaintiff Dorothy L. Krueger bought the second mortgage trust deed and note for $2,500 sometime before the first monthly payment was due thereon; she thereafter sold it to a customer, and she thereafter reacquired it in January, 1956 for value after the customer died. She or her office filled in some blanks in that note and mortgage and recorded the mortgage. She did not know the Dorrs or the circumstances as to the execution of the note and second mortgage. She has been engaged in the real estate and mortgage business for some years, d/b/a D.L. Krueger Co., and acquired the note and mortgage in the regular order of business. The only blanks in the second mortgage note and trust deed which she or her office filled in were as to the place of payment (her name and address), the document number of the previously recorded first mortgage to Lawn Savings and Loan Association, the letter "s" following "hand" and "seal" at the bottom of the mortgage in the phrase "Witness the hands and seals of Mortgagors, the day and year first above written," and in the acknowledgment on the mortgage the letter "s" following "person" and "name" and the word "are" in the phrase "the same persons whose names are subscribed." On October 19, 1949 the plaintiff notified the defendant Daniel M. Dorr by letter to his residence of her purchase of the second mortgage note and trust deed, and sent him with the letter a duplicate copy of the note for him to mail in with each payment and on which the payments were to be recorded. On November 11, 1949 she received a letter on the business stationery of Daniel M. Dorr enclosing a check for an insurance premium on certain insurance on the improvements. The $60 monthly payments for December 1, 1949, January 1, February 1, and March 1, 1950 were made on the note and mortgage, leaving a $4,833.57 principal balance, and no payments have been made since. ...