Source: https://supreme.justia.com/cases/federal/us/102/442/
Timestamp: 2019-04-21 08:14:52+00:00

Document:
1. A party who, before its maturity and for a valuable consideration, purchases mercantile paper from the apparent owner thereof acquires a right thereto which can only be defeated by proof of bad faith or of actual notice of such facts as impeach the validity of the transaction.
2. A., to secure the payment of his note to B., executed to C. a deed of trust of land of even date therewith, which was duly recorded. A. afterwards conveyed the land to D., and it became the property of C. through sundry mesne conveyances duly recorded, each of which, including that to C., recited that the land was subject to the deed of trust. C. then, to secure the payment of certain bonds, made a deed of trust of the land, which was duly recorded, and subsequently there was filed for record an instrument executed by him purporting to release to his grantor "all the right, title, interest, claim, and demand" which he, C., had acquired by virtue of the trust deed executed to him by A. to secure the note. The release did not acknowledge the payment of the note. C. thereafter made another deed of trust. E. was, long prior to the execution of the conveyances, except the deed of trust and that from A. to D., the lawful holder of A.'s note, it having for a valuable consideration been duly assigned to him before its maturity. Held that E. was entitled to the lien created by A.'s deed of trust.
3. The Court adheres to the rule announced in Brine v. Insurance Company, 96 U. S. 627, touching the statutory right of redeeming mortgaged lands in Illinois after a judicial sale under a decree of foreclosure of a mortgage or deed of trust.
The appellants complain of the decree of the circuit court because it adjudged that the complainant, Janet Smith, as administratrix of David Smith, deceased, had a lien on the lots described in the bill by virtue of the deed of trust purporting to have been made by George N. Williams to Obadiah Jackson on the first day of October, 1868, and because it adjudged that lien to be prior to the lien in favor of Joseph Swift and Edwin Swift and that in favor of Elizabeth Carroll and Ellen Carroll. There are other objections to the decree, but the two mentioned are the most important, for they strike at all the relief sought by the complainant's bill.
Both the defendants below (now appellants) and the complainant claim under Charles C. Waite, who, it is agreed, was the owner of the lots on the first day of October, 1868. On that day, Charles C. Waite made his deed of the lots to one George N. Williams, which was duly recorded on the twenty-fourth day of the same month. To secure the payment of part of the purchase money, Williams gave two promissory notes, both dated Oct. 1, 1868, payable to the order of Charles C. Waite -- one for $6,000, payable in one year from its date, and the other for $30,000, payable four years after its date, with interest at the rate of eight percent, payable semiannually. On the same day (October 1), Williams made and delivered his deed of trust of the lots, sold to him by Charles C. Waite, to Obadiah Jackson to secure payment according to the tenor of the promissory notes he had given. This deed was duly acknowledged and recorded concurrently with Waite's deed to him. In effecting the sale from Waite to Williams and in taking the notes and security for the payment of the purchase money, Jackson was the attorney and agent for the vendor, and during some years thereafter, the interest on the $30,000 note appears to have been paid through him. The $6,000 note was paid at its maturity. The other note came into the hands of Waite, the vendor, then living in New York, and he soon afterwards transferred and endorsed it to the order of his brother, Silas M. Waite, who subsequently, and before it fell due, endorsed it generally in blank to Obadiah Jackson. Thus, Jackson became clothed with apparent ownership of the note and with apparent power to transfer it by his endorsement.
or order; by Silas M. Waite to Obadiah Jackson or order, followed by an endorsement by Obadiah Jackson in blank. There was also on the margin of the note the following: "This note secured by trust deed of even date herewith, duly stamped."
Thus far, the facts appear without any real controversy, and unless there is something in the case to qualify them, they unquestionably establish that on the 18th of April, 1871, Smith became the bona fide holder of the $30,000 note for value paid, and as such entitled to the benefit of the deed of trust given by Williams to Jackson to secure its payment. Though he took it only as a collateral security for a loan made to Jackson at the time, he was entitled to the protection of a purchaser for value without notice of anything to impeach his right.
Conceding, what appears to be more than probable, that Jackson was not in fact the owner of the note when he transferred it to Smith, that he simply held it as agent or attorney of S. M. Waite for collection, and that in transferring it to Smith he perpetrated a fraud upon the true owner, it is still certain that he was clothed by Waite with power to transfer the ownership as he did. Waite's endorsement of the note to him gave him that power; and though its exercise was a fraud, if Smith advanced his money in good faith, relying upon Jackson's apparent ownership, he was justified in so doing, and S. M. Waite, who enabled Jackson to negotiate the note, thereby lost his title. He was bound by Jackson's act.
face as to show that it belongs to some other person than the one who offers to negotiate it, the purchaser will be presumed to have knowledge of the true owner, and his purchase will not be held to be bona fide. Fowler v. Brantly, 14 Pet. 318. Nothing of this kind existed in the present case. Everything upon the note tended to show that it belonged absolutely to Jackson when Smith bought it. And we fail to discover anything in the entries of interest payments or in any other circumstances that should have aroused even suspicion to the contrary.
We are unable, therefore, to comprehend how it can be maintained, as the appellants contend, that the note did not belong to the complainant, but belonged to Silas M. Waite. Whatever may have been the fact before its endorsement to David Smith and even after its endorsement to Jackson, Waite was estopped from asserting any claim to it by its transfer to Smith. It is true Waite is not a party to this suit. The decree does not bind him. But there is enough without the decree to estop him. He was examined as a witness for the appellants on the 12th of May, 1877. Then, if not before, he was informed that the note had been transferred to Smith, and that Smith's administratrix was proceeding to collect it. Plainly, then, it became his duty to assert his claim to it, if any he then had. He could not innocently lie by without intervention or any action to vindicate his claim while she was proceeding to enforce the trust. His laches, if he had any right, was inexcusable. But he made no movement in this case, and, so far as it appears, none elsewhere.
Without further remark upon this part of the case, we think we have said enough to warrant the conclusion at which we have arrived that the complainant's intestate, on the 18th of April, 1871, became the owner of the note and thereby entitled to the benefit of the trust declared in the deed of Williams to Jackson.
such person as Williams, then Waite's deed to Williams was a nullity, for there was no person to take, and, as all the rights which the appellants assert come from Waite through Williams (as will appear hereafter), they have no interest in resisting the demand of the complainant, and are not entitled to be heard in the case. And so, as all the rights they assert are by virtue of a deed subsequently made by Williams (a deed hereafter to be noticed), it is not easy to see how they can have any standing; or, if Williams was but another name for Jackson, and Waite's deed was made to Jackson under the name of Williams, then the note, though signed by the name George N. Williams, was Jackson's note, and the trust deed signed by the same name would be construed as a declaration of trust for the security of the note, equivalent to a covenant to stand seised to uses for the holder. But we are of opinion that Williams was not a myth. Beyond doubt, Waite's deed was made to a person calling himself Williams, and made to the same person who signed the note and signed and acknowledged the deed of trust. Whether that was his real name or not is immaterial. He appeared before the notary and acknowledged the deed as his. He was not Jackson, it is clear. The evidence that the witnesses called in 1877 knew no such person as George N. Williams, in a city containing several hundred thousand inhabitants, is hardly worthy of respect as proof that no such person was in Chicago in 1868. The existence of the lien, or of the trust declared by the deed, is not to be disprove by such evidence.
warranty deed to Mary P. Moody for the consideration of $60,000, subject to the deed of trust to secure the payment of the $30,000 note which the grantee agreed to assume and pay as part of the consideration of the purchase. This deed was recorded Oct. 24, 1868.
On the 17th of May, 1871, Mary P. Moody, by warranty deed, recorded May 25, 1871, conveyed the lots, for the consideration of $45,000, to Charles V. Dyer, subject to the trust deed aforesaid, describing it as given to secure to note for $30,000, which amount, with interest from date, the grantee covenanted to pay as part of the consideration.
Afterwards, on the first day of June, 1872, Charles V. Dyer and wife, by deed of that date with warranty, conveyed the lots to Obadiah Jackson aforesaid, expressly subject "to a trust deed given by George N. Williams to Jackson, dated Oct. 1, 1868, . . . to secure a certain note on which is due $30,000 and interest." This deed was filed for record June 18, 1872.
On the same day, Aug. 3, 1872, there was filed for record an instrument purporting to be a release by Jackson, to Charles V. Dyer, for the consideration of one dollar, of the right, title, interest, claim, and demand of him, the said Jackson, which he had acquired by virtue of the trust deed given to him by Williams to secure payment of the $30,000 note. This release was dated Oct. 2, 1871. It was not acknowledged until Aug. 3, 1872, the day when the deed of trust to Perkins was filed for record, nor did it acknowledge the payment of the note.
lien of the trust deed to Jackson, given to secure the payment of the note for $30,000, was long prior in time to the liens of the Messrs. Swift, and Elizabeth and Ellen Carroll, and it was certainly in existence on the 18th of April, 1871, when that note was endorsed to Smith, the complainant's intestate.
the instrument was made. Jackson told him, indeed, it was the date when the debt was paid; but he was not authorized to rely upon Jackson's assertion, more especially when he had before him, in Dyer's deed of the lots to Jackson, the acknowledgment that the note was unpaid on the first day of June, 1872, nine months after the time when Jackson affirmed it had been paid, and had in view also Jackson's assumption, at that time, to pay it. The evidence leaves no doubt that the release was not made until August, 1872, when it was put upon record. Then Jackson, being the owner of the lots subject to the operation of the Williams deed of trust, was in such a situation that he could not, without an abuse of his trust, destroy the rights of the holder of the note. It is impossible, therefore, to maintain that there was not enough on the face of the recorded title under which the Swifts claim, and in the facts attending the execution of the release, to make it their duty to inquire whether the Williams note had been in fact paid -- enough to apprise them that the holder of that note could not be postponed or injured by the fraudulent release.
in fact paid. They revealed a plain abuse of his trust by Jackson, from which, with the knowledge of it that they must be presumed to have had, they could derive no advantage. In the fact of it, they could not obtain a priority over the earlier equity held by Smith.
ordered to sell as master. He was required to make a report to the court, to pay into court any surplus arising from the sale, there to abide the court's order. The decree also contemplated a report of the sale by the master, and a confirmation of it by the court. The sale, therefore, as ordered, was in all respects a judicial sale, instead of a sale by the trustee under the power conferred by the deed. Hence it comes within the rule declared in Brine v. Insurance Company, and the right to redeem should have been preserved in the decree.
For this error, as well as for the mistake in the amount adjudged to be due the complainant, the decree must be reversed. In all other particulars, the decree was correct.

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