Case ID: dc_9/html/0367-01.html
Source: Caselaw Access Project
Author: {"author": "By the Court :", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

STAATS vs. BIGELOW.
    S. was the holder of a promissory note, secured by deed of trust. The trustee in said deed having died, the grantor filed a bill in this court, alleging that the note had been fully paid and satisfied, and praying to have a new trustee appointed for the purpose of releasing the incumbrance. S. filed his answer, admitting the allegations of the bill to be true; and thereupon a trustee was appointed, with directions to execute a release. Subsequent to the filing of such answer, the grantor executed another trust-deed to secure a new loan. The grantees in the last deed had no notice or knowledge that such answer had been procured by fraud: Held, that S. was estopped by such answer and release, even although the same had been fraudulently obtained, from setting up any claim as against the grantees in the last-mentioned deed of trust.
    STATEMENT OE THE CASE.
    One May hew, the owner of lot 50, in square 204, in Washington City, D. C., executed a deed of trust thereon, to secure a debt to the Connecticut General Life-Insurance Company. He afterward executed another deed of trust to Daniel L. Eaton, to secure a note for $1,000, payable to the order of the defendant, Bigelow; this note was purchased by the plaintiff after maturity for $950. The lot subsequently became the property of Bigelow.
    On the 16th day of June, 1873, Bigelow filed a bill on the equity side of this court against the plaintiff and others, alleging, among other things, that said note passed into the hands of the plaintiff, who was then the holder thereof; that it had been fully paid and satisfied; that, subsequent to the execution and delivery of the trust-deed given to secure it, the trustee had died; and that, for the purpose of obtaining a release, it was necessary to have a new trustee appointed by the court. On the 7th day of July, 1873, the plaintiff filed his answer, admitting the allegations of the bill to be true, and on the 14th day of October, 1873, a decree was passed appointing Mr. T. A. Lambert trustee in the place and stead of Eaton, with directions to execute a release as prayed.
    On the 28th day of July, 1873, George Mattingly, one of the defendants, loaned Bigelow $2,0(J0, for which he gave his note, and, to secure its payment, he, on the same day, executed and delivered a deed of trust on said lot; the trust-deed was recorded July 31,1873. This loan was made upon the.representations of Bigelow that the only incumbr anee then existing on the property was the debt to said insurance company; and upon a certificate of title to that effect this $2,000 note afterward passed into the hands of the defendants, Hitz, Warner, and Edwards, by voluntary assignment from Mat-tingly, for the benefit of his creditors, and has not been paid.
    By a decree passed in this court February 5, 1874, in a cause between the said Jonathan G-. Bigelow, complainant, and the Connecticut General Life-Insurance Company, et al., defendants, the said Life-Insurance Company being the holder of the promissory notes secured by the first deed of trust on said property, the said lot was directed to be sold, and the residue of the proceeds, after discharging the indebtedness secured by said first deed of trust, to be applied in satisfaction of the notes secured subsequently thereto. The amount of the proeeeds of said sale, as reported by the trustees appointed to sell, were $5,775; the net proceeds of said sale, as found by the auditor, $5,402.26 ; and the indebtedness secured by said first deed of trust, w-ith interest, was $4,967.61, leaving a residue of $434,85, which the auditor, in his report upon the distribution of the proceeds of sale, has awarded to .the assignees of George Mattingly.
    The plaintiff, Staats, appeared before the auditor and claimed this balance, on the ground that Bigelow had fraudulently procured his answer admitting the payment of the-note held by him, and that only a portion of it had been paid, leaving $557.11 still due. The auditor, however, distributed said balance to Mattingly’s assignees, it having been proved that Mattingly knew nothing of the fraud claimed by Staats to have been perpetrated on him by Bigelow when Mattingly made said loan, and, moreover, the decree for a release was in full force.
    By stipulation, it was agreed that the confirmation of the auditor’s report on the distribution of this balance should await the result of the present suit, which has been instituted by Staats to vacate the decree directing the release as aforesaid, and to restore to him his rights under the trust-deed executed by Mayhew to Eaton.
    It appearing at the hearing of this cause before Mr. Justice Wylie, holding the special term, that the answer of ,Staats, admitting the payment of the $1,000 note held by him, was filed on the 7th day of July, 1873; that the loan to Bigelow by Mattingly was made subsequent to the filing of said answer, without knowledge of the fraud by Bigelow, now set up by Staats, a decree was passed confirming the auditor’s report, which was adverse to the plaintiff’s claim to said fund. From this decree the plaintiff appealed.
    
      Lambert & Darlington, for complainants, submitted, the following points and authorities:
    THE DECREE.
    A decree in equity does not per se, without any further act performed, divest a title at law. Proctor vs. Ferebee, 1 Ired. Eq. Ca., 146 ; Lessee of Shepherd vs. Commissioners of Ross County, 7 Ohio, 273; Wallis’s Heirs vs. Wilson’s Heirs, 34 Miss., 357. Hence, the decree of October 14, 1873, not divesting the title in his trustee, complainant’s security remains at law.
    THE ANSWER.
    1st. The onus probandi rests upon the party claiming to have been misled. Starkie on Ev., 585, 589, 590; Green, on Ev., sec. 74, et passim.
    
    2d. In order to postpone a prior incumbrancer upon a •charge of misleading, fraud must be shown, or such gross negligence as amounts to a fraudulent intent. Case of the Thatched House Tavern, Peter vs. Russell, Eq. Ca. Ab., 321, and 2 Vern., 726; Beckett vs. Cordley, 1 Bro. C. C., 353, Evans vs. Bicknell, 6 Ves., jr., 190; Barnett vs. Weston, 12 Ves., jr., 133; Tourle vs. Rand et al., 2 Bro. C. C., 650, note 1; 1 Fonbl. Eq., Bk. 1, § 4, note n; Berry vs. Mutual Life Insurance Company, 2 Johns. Ch., 608, 610; Adams’s Equity, 150.
    3d. Courts of equity never postpone upon a charge of misleading, unless the party charged was conusant of the treaty in which the fraud was practiced. Beckett vs. Cordley, 1 Bro. C. C., 357; Ibbottson vs. Rhodes, 2 Vern., 555; 1 Fonbl. Eq., Bk. 1, § 4, note n.
    
      
      James S. Edwards for defendant:
    Staats, having filed his answer, solemnly and publicly admitting over his own signature that the note held by him had been fully paid and satisfied prior to the loan made by Mattingly, is now estopped from setting up any claim as-against Mattingly or his assignees, who are the bona fide holders of said $2,000 note for value without notice, and entirely ignorant of the fraud alleged to have been perpetrated by Bigelow in procuring Staats’s answer. It requires no-citation of authorities to sustain this well-known principle of law. The decree of the justice holding the special term should be affirmed with costs.
   By the Court :

After having made a judicial record that his indebtedness had been fully paid, and that he had no further right of incumbrance upon the property, Staats is estopped from setting up a claim of prior title against a bona fide subsequent incumbrancer. If the fraudulent means by which he was induced to release the trust-deed under which he claimed were known to Mattingly, he should have averred and proved it. But there is no attempt of the kind. Indeed, it is admitted that Mattingly had no notice of the fraud practiced upon Staats; he is therefore in the position of an innocent purchaser, and the decree in favor of his assignees must be affirmed.