The mortgage sued on is dated August 6, 1927, and reads:
"* * * That we, Mason Murphy and Mary J. Murphy, husband and wife, * * * in consideration of $1200 in hand paid do hereby sell, convey and warrant unto M.I. Pence * * * the following described premises (describing them) and the said grantors and each of them hereby relinquishes all right of * * * homestead * * * Nevertheless, if the said Mason Murphy and Mary J. Murphy husband and wife, shall pay their note for the above amount due August 6, 1928, with 6 per cent interest * * * and shall pay the taxes upon said premises before delinquent and keep the buildings thereon insured for insurable value until said note and all other claims are fully paid then this mortgage shall be void. And the grantors hereby pledge all the rents * * * to the payment of the debt secured hereby. If, however, any of these conditions are not complied with said note shall become collectible at once * * * and a receiver of the property may be appointed on the application of the mortgagee or his assigns at any time after default hereon * * * The legal holder hereof may at any time advance money to pay taxes or insurance on said property and may procure an abstract of title * * * and the amounts so paid shall be secured hereby. And this mortgage is also expressly made to secure any claim held by the mortgagee against the mortgagors or either of them for any future loans, advances or indebtedness accruing from said grantors, or *Page 161 either of them, or their assigns to said grantee or his assigns, or his beneficiaries, or any claims that may come into the hands of the said mortgagee, or his assigns, by purchase or otherwise, against said mortgagors or either of them. All money furnished by mortgagee, or his assigns, for taxes or otherwise, shall bear the same rate of interest as the principal debt secured hereby."
The note described in the mortgage is dated August 6, 1927, payable to the order of M.I. Pence on or before August 6, 1928, for $1200 with privilege of partial payments signed by Mason Murphy and Mary J. Murphy.
The note which is the subject of contention is dated March 12, 1927, for $1500, payable twelve months after date to order of B.S. Armstrong, signed by Mason Murphy, Ray Murphy and Mrs. Ray Murphy. Both notes bear endorsements by the respective payees to the order of the plaintiff dated December 7, 1927 — the Pence note without recourse, the Armstrong note without restriction. There is a written assignment of the mortgage from Pence to plaintiff dated December 7, 1927. It was stipulated that the plaintiff would testify that on December 7, 1927, Pence assigned to him in due course the $1200 note and assigned to him the mortgage; that on December 7, 1927, B.S. Armstrong assigned to plaintiff in due course the $1500 note; that plaintiff purchased the notes and mortgage in good faith, for value, before maturity, without notice of any infirmity and relied upon the terms of the mortgage as securing the notes, and but for such terms would not have purchased either of them. It was also stipulated that defendants would testify that they did not have any intention in giving the mortgage to secure the payment of the $1500 note; that part of the land described in the mortgage is their homestead; that the greater part of the money necessary to purchase it was furnished by defendant Mary J. Murphy and she refused to sign the $1200 note and mortgage until Mason Murphy, in whose name the property was at the time, agreed to convey it to her; that Mary J. Murphy got no part of the $1200 represented by the $1200 note but the money received therefrom went to pay a debt of Mason Murphy and it was for this reason that she refused to sign the note and mortgage until Mason Murphy agreed in consideration of her signing it and in further consideration that the homestead was purchased largely with *Page 162 her money to convey to her the property; that Mason Murphy delayed compliance with the agreement until February 14, 1928, when he executed to Mary J. Murphy a warranty deed of the property subject to a mortgage in the sum of $1200. It was further stipulated that defendants would testify that the mortgage was not read to or by Mary J. Murphy before she signed it; that Mason Murphy had told her that the mortgage secured only the $1200 note. It was further stipulated that the purpose and intent of plaintiff in purchasing the $1200 note and mortgage was to purchase at the same time the $1500 note and bring it under the terms of the mortgage. The court was authorized to consider the concessions as to what the parties would testify the same as testimony given by them on the stand. The record shows no objections to such proposed stipulated testimony or facts.
Plaintiff says in argument in reply:
"There is just one proposition before this court in this appeal: * * * The question is: What are the rights of the appellant, an innocent purchaser for value of the instruments involved; who in purchasing the same justifiably relied upon the solemn averments contained in the mortgage embraced herein, signed and executed by both appellees; who has changed his position to his detriment on the strength thereof, if they now be allowed to deny their binding force; and who has affirmatively pleaded estoppel against both of the appellees."
Under the stipulation the matters to which the parties would testify must be accepted as in the record without objection. As there is no conflict in the testimony it must be found as facts that the mortgage was not read to the defendant wife; that defendant husband told her that the mortgage secured only the $1200 note; that they had no intention in giving the mortgage to secure the payment of the $1500 note, and that the mortgaged premises included their homestead; that the defendant wife had, as between her and the husband, an equitable interest in the property because of furnishing the greater part of the purchase price; that she refused to sign the $1200 note and mortgage until the husband, in whose name the property was at the time, agreed to convey the property to her. It is a just inference from this undisputed evidence that the defendants understood that the *Page 163 mortgage did not secure the $1500 note. The language of the mortgage would justify the ordinary reader in concluding that its purpose was to secure the payment of the $1200 note named in the condition, the repayment of advances necessary for the protection of the security and future advances to which the parties might agree. The use of printed forms for promissory notes and mortgages is so universal that we may take judicial notice of the custom. The mortgage is well adapted in its phraseology to misapprehension. It is a just inference also that the inducement to the defendant wife to sign the $1200 note which was given for money with which to pay a debt of the husband was to withdraw the property from his dominion and from liability for his debts.
The defendant wife was in no wise indebted upon the $1500 note. It was signed by the husband and two others and presumptively upon its face he would be principal for one-third and surety for the other two-thirds. By the clause in controversy, as plaintiff would have it construed, the wife subjects her property to liability as surety for her husband's debts manifestly contrary to her intention — not merely for his just and acknowledged debts but for all "claims" against him (if acquired by the mortgagee or his assignee). The "claims" against the husband might arise from his voluntary act, or might be incurred involuntarily. They might arise upon contract or in tort. They might be based upon his liability as principal or as surety. The clause is not limited to any particular person as assignee but any usurer or speculator however remote might acquire the $1200 note and mortgage and a "claim" against the husband and enforce the "claim" against the property of the wife and this in the face of her manifest intention to withdraw her property from any liability for the husband's debts. If this clause is sustained a little addition to it by which the wife would incur general personal liability for such claims might be added and would be sustained under similar circumstances. The wife would, on plaintiff's contention, be subjecting her property (in this case the home of her family) to liability to any unforeseen and uncontemplated "assign" of the mortgage which she was giving for any "claim" against her husband that might be acquired by such an "assign."
Under the stipulation the plaintiff must be considered as *Page 164 testifying that his intention in purchasing the $1200 note and mortgage was "to purchase at the same time the $1500 note and bring it under the terms of the mortgage." The plaintiff stands, therefore, in the position of a confessed speculator at the expense of the property of the defendant wife for a liability not hers and which she had no intention of assuming.
The mortgage was to Pence and did not in his hands secure the $1500 note in question. Pence had no interest in that note. Plaintiff as assignee of Pence acquired no interest in the $1500 note, or in the mortgage as security for that note. He under that assignment stepped into Pence's shoes as owner of the $1200 note and the mortgage securing that note.
Armstrong had no interest in the mortgage. Plaintiff as purchaser of the $1500 note from Armstrong acquired only Armstrong's title to the note. He as assignee of Armstrong acquired no interest in the mortgage.
Plaintiff's asserted right to tack the $1500 note to the mortgage rests upon the clause "and this mortgage is also expressly made to secure any claims held by the mortgagee against the mortgagors or either of them for any future loans, advances or indebtedness accruing from said grantors or either of them or their assigns to said grantee or his assigns, or his beneficiaries, or any claims that may come into the hands of the said mortgagee, or his assigns, by purchase or otherwise, against said mortgagors or either of them." If the latter provision of this clause, under which the plaintiff must claim, gave to the plaintiff the right to tack the $1500 note to the mortgage it was because it was a "claim" against the husband which was acquired by an assignee of the mortgage. The clause is in the nature of a mere power. The plaintiff claims to have exercised that power in his interest and his claim to equitable relief is in substance for the enforcement of the power and of its exercise and the establishment and foreclosure of the lien which he claims to have resulted to him therefrom.
Plaintiff as assignee of Pence obtained no right to foreclose the mortgage for the Armstrong note and as purchaser of the Armstrong note acquired no right from Armstrong to foreclose the mortgage in which Armstrong had no interest. So far as the present case is concerned plaintiff is merely an assignee of the mortgage. Like any other assignee he might have made inquiry *Page 165 of the parties to the contract concerning equities and may not claim exemption from equities because he elected not to make inquiry. The coercive and oppressive clause on which he relies did attract his attention and should have excited his suspicion.
The right at law which plaintiff obtained from Armstrong as purchaser of the $1500 note was the right to a personal judgment against the defendant husband for the amount of the note. That right was recognized in the court below and the plaintiff has judgment against the husband on the note. He has come into a court of equity to obtain affirmative relief which he could not obtain at law — relief by way of enforcement of the power and its execution and of resulting lien and foreclosure of the lien. This relief only a court of equity can give. The defendants are not demanding affirmative relief. They are merely resisting the exercise by a court of equity of its power to grant peculiar equitable relief. As said in Pope Mfg. Co. v. Gormully,144 U.S. 224, 236, 36 L. Ed. 414, 419:
"But whether this contract be absolutely void as contravening public policy or not, we are clearly of the opinion that it does not belong to that class of contracts, the specific performance of which a court of equity can be called upon to enforce. To stay the arm of a court of equity from enforcing a contract it is by no means necessary to prove that it is invalid; from time to time immemorial it has been the recognized duty of such courts to exercise a discretion; to refuse their aid in the enforcement of unconscionable, oppressive, or iniquitous contracts; and to turn the party claiming the benefit of such contract over to a court of law. This distinction was recognized by this court in Cathcart v. Robinson, 30 U.S. 5 Pet. 264, 276, [8: 120, 124], wherein Chief Justice Marshall says: `The difference between that degree of unfairness which will induce a court of equity to interfere actively by setting aside a contract, and that which will induce a court to withhold its aid, is well settled. Mortlock v. Buller, 10 Ves. Jr. 292; Day v. Newman, 2 Cox. Ch. Cas. 77. It is said that the plaintiff must come into court with clean hands, and that a defendant may resist a bill for specific performance, by showing that under the circumstances the plaintiff is not entitled to the relief he asks. Omission or mistake in the *Page 166 agreement, or that it is unconscientious or unreasonable, or that there has been concealment, misrepresentation or any unfairness, are enumerated among the causes which will induce the court to refuse its aid.'"
This doctrine while more frequently applied in suits strictly for specific performance is a general doctrine of equity and not one confined to that particular remedy.
In DeWeese v. Reinhard, 165 U.S. 386, 389; 41 L. Ed. 757, 758, it is said:
"But it is contended by appellant that his suit is something more than one to restrain the action at law; that it is a suit to quiet his title and to hold the appellees as trustees of the legal title for his benefit; that the restraint of the law action is simply incidental to and in furtherance of the main relief, which is the quieting of his title. Assuming for the purposes of this case that his contention in this respect is correct, we agree with the Court of Appeals that the showing in his bill is not one that appeals in the slightest degree to the conscience of a chancellor. The theory upon which the appellant proceeds is substantially that because he has not a legal title a court of equity must enforce and establish his right, or, in other words, that the lack of a legal title creates an equitable duty. We are unable to assent to this contention. Something more than the absence of legal title is necessary to call into action the process of a court of equity. The right, whatever it may be and from what source derived, must be not only one not protected by legal title, but in and of itself appealing to the conscience of a chancellor. A court of equity acts only when and as conscience commands, and if the conduct of the plaintiff be offensive to the dictates of natural justice, then, whatever may be the rights he possesses and whatever use he may make of them in a court of law, he will be held remediless in a court of equity."
In McKnight v. Taylor, 1 Howard 161, 168, it is said:
"* * * nothing can call a court of chancery into activity but conscience, good faith, and reasonable diligence; and where these are wanting, the court is passive and does nothing."
"It is not alone fraud or illegality which will prevent a *Page 167 suitor from entering a court of equity; any really unconscientious conduct, connected with the controversy to which he is a party, will repel him from the forum whose very foundation is good conscience." 1 Pom. Eq., 4th Ed., Section 404.
It was held by Lord Hardwick 180 years ago:
"Fraud may either be dolus malus, a clear and express fraud, or fraud may arise from circumstances, and the necessity of the person at the time. There are also hard unconscionable bargains, which have been construed fraudulent, and there are instances where even the common law hath relieved for this reason expressly. * * * In these cases too, fraud has been constantly presumed, or inferred from circumstances, and conditions of parties; weakness and necessity on one side, and extortion and avarice on the other, and merely from the intrinsic unconscionableness of the bargain." Earl of Chesterfield v. Janssen, 1 Atkyn's Reports 301, 351, 352.
Of course, fraud must be proved and not presumed, but the doctrine that a transaction may be intrinsically so unconscionable and oppressive as in the absence of explanation to furnish its own intrinsic proof of overreaching or fraud is as sound today as it was in Lord Hardwick's time. See 21 C.J. 111; 10 R.C.L. 322.
It is said in Baker v. Massey, 50 Iowa 399, 403, quoting from Kerr on Fraud and Mistake:
"`If a man, through misapprehension or mistake of the law, parts with or gives up a private right of property, or assumes obligations upon grounds upon which he would not have acted but for such misapprehension, a court of equity may grant relief if, under the general circumstances of the case, it is satisfied that the party benefited by the mistake cannot, in conscience, retain the benefit or advantage so acquired.'"
See also Bottorff v. Lewis, 121 Iowa 27.
"Any contract which has for its object the practice of deception upon the public, or upon any party in interest as to the ownership of property, the nature of a transaction, the responsibility assumed by an obligation, or which is made in order to consummate a fraud upon the people or upon third persons, is *Page 168 void. Greenh. Pub. Pol. 136, 152." Merrill v. Packer, 80 Iowa 542, 545.
Public policy has been "stated to be that whatever tends to injustice or oppression, restraint of liberty, and natural or legal right, or to the obstruction of justice, or to the violation of a statute, and whatever is against good morals, when made the subject of a contract, is against public policy and void. It is said that they are not contracts, but unlawful agreements, which are void in their inception." Tarbell v. Rutland R. Co., 51 A. 6, 73 Vt. 347, 56 L.R.A. 656, 87 Am. St. Reports 734.
See Griswold v. Illinois Central Ry. Co., 90 Iowa 265, 269; Disbrow v. Supervisors, 119 Iowa 538, 539. See also as to the tendency of the contract to foster litigation Ryan v. Miller, 139 S.W. 128, 236 Mo. 496; Wilson v. St. Louis W.R. Co. (Mo.), 25 S.W. 527; Illinois Land Loan Co. v. Speyer (Ill.), 27 N.E. 931; 2 Pom. Eq., 4th Ed., Section 936; 11 C.J. 238; 5 C.J. 892; 5 R.C.L. 278, 283.
The policy of the law is to shield the homestead from liability for the debts of the spouses whose home it is. The law prescribes the conditions under which the homestead may be subjected to the payment of debts. The law does not permit one spouse to grant to the other a power of attorney such as to enable the grantee of the power to subject the homestead to liability for debts. Keeline v. Clark, 132 Iowa 360; Gagliardo v. Dumont, 54 Cal. 496; Wallace v. Travelers Ins. Co. (Kan.), 38 P. 489, 26 L.R.A. 806, 45 Am. St. Reports 288. See Morris v. Sargent, 18 Iowa 90.
A waiver of homestead rights is contrary to public policy and void. Rutt v. Howell, 50 Iowa 535; Maguire v. Kennedy, 91 Iowa 272.
We do not have here the case for instance of one who sets up another in business, or one who finances another in some enterprise, or a landlord who puts a tenant in possession of agricultural lands in which it might be desirable and in the interest of both parties to make a bona fide agreement by which he should do all the financing and keep the obligations and security in his own hands. No purpose of the clause under consideration here, especially in view of the circumstances disclosed, other than to oppress and coerce may be reasonably inferred. *Page 169
The mortgage does not purport to secure the payment of other indebtedness of the mortgagors, or either of them, to or held by the mortgagee at the time the mortgage was executed unless such effect be given to the words "until said note and all other claims are fully paid." There is no assertion that the mortgagee at the time the mortgage was made held any other claims against either of the mortgagors.
In this respect the present case differs from Turnis v. Ballou,201 Iowa 468, and Corn Belt Savings Bank v. Kriz, 207 Iowa 11, in which the mortgages stipulated that they should stand as security "for any other indebtedness the mortgagee may hold or acquire against the said mortgagor" or either of them, etc. The indebtedness which the respective mortgages were in those cases held to secure was payable to and held by the respective mortgagees at the time the mortgage was given.
Plaintiff argues that he relied upon the clause in question and in such reliance purchased the mortgage and the note specified in it, and also the $1500 note but he was merely relying on his interpretation of a contractual stipulation and on his opinion that a court of equity would enforce it in his behalf. He was merely mistaken in his interpretation and assumption. There was no estoppel. Schoonover v. Osborne, 117 Iowa 427; Holcomb v. Boynton, 151 Ill. 294, 37 N.E. 1031.
On this record, whether we say that on a proper construction of the mortgage it does not envisage the purchase and tacking to the security outstanding liabilities of the mortgagors or that the construction which plaintiff asserts would, if correct, make the mortgage inherently or under the facts of the case fraudulent or against public policy or repugnant to the policy of the homestead laws of the State, the plaintiff's case is so unconscionable as to repel him from a court of equity.
For similar cases see Belton v. Bank, 186 N.C. 614,120 S.E. 220; Monroe County Bank v. Qualls (Ala.), 125 So. 615. — Affirmed.
De GRAFF and ALBERT, JJ., concur.
EVANS and KINDIG, JJ., specially concur.