Case Name: George B. Lewis and another vs. Patrick Farrell and others
Court: Connecticut Supreme Court
Jurisdiction: Connecticut
Decision Date: 1883-06-08
Citations: 51 Conn. 216
Docket Number: 
Parties: George B. Lewis and another vs. Patrick Farrell and others.
Judges: 
Reporter: Connecticut Reports
Volume: 51
Pages: 216–222

Head Matter:
George B. Lewis and another vs. Patrick Farrell and others.
G authorized T to make a loan for him and take a mortgage to secure it in G’s name. T took the mortgage and put it on record, but did not inform G. T then- sold the notes and mortgage to the plaintiffs. G afterwards, upon a representation made to him that the mortgage debt was paid, gave a quitclaim to tlm mortgagor; it being found that be did it in good faitb and in tbe belief that tbe mortgage debt was paid. Held that G’s conduct in tlie matter, not being a repudiation of tbe mortgage as not accepted, .but a recognition of it as valid, was sufficient to warrant the conclusion that it had been legally accepted by him, without reference to the prior authority given to T to take it in. his name.
But that the prior authority was sufficient to constitute the acceptance by T his acceptance, even though he was not informed that the mortgage had been made.
T, without informing G that he had taken the mortgage, sold it and the notes secured by it, which were payable to bearer, to the plaintiffs. Held that he had power by such sale to pass a legal title to the notes. After the quitclaim was put on record F acqubed a legal title to the premises without paying any consideration therefor. Held that, not being a bona fide purchaser for value, his title could not take precedence of the equitable rights of the plaintiffs.
There were two notes secured by the mortgage, which were sold to two different parties and the mortgage was delivered to one of them. Held that the note delivered without the mortgage drew to itself its proportion of the mortgage security, and that the holder of the mortgage held it so far for the benefit of the holder of that note.
[Argued June 7th —
decided June 8th, 1883.]
Shit for a foreclosure and for other equitable relief; brought to the Superior Court. Facts found and case reserved for advice. The facts are sufficiently stated in the opinion.
J. Huntington and J. H. Webb, for the plaintiffs.
H. B. Munson and E. F. Cole, for the defendants.

Opinion:
Loomis, J.
The first question that arises in this case is, whether the mortgage made by Patrick Farrell and his wife to Garwood H. Atwood ever became a valid one by the acceptance of the mortgagee. It is found that the mortgage was made on the 10th of June, 1871, to secure two notes of $1000 and $500 executed by Patrick Farrell at the time the mortgage was given, made payable to Garwood H. Atwood or bearer on demand, the loan being made through one Tolies; and that, although the mortgage was put on record by Tolies, Atwood was in fact ignorant of its existence until January, 1880, when, upon a representation falsely made to him'bysome person interested that the debt Avhich the mortgage Avas given to secure had been paid, he executed a release of the mortgage to the Farrells, who knew at the time that the mortgage debt had not been paid.
The question of the bad faith of the Farrells, and of its effect, is to be laid out of the case for the present, as Ave are considering now only the question whether the mortgage ever acquired a valid existence. It is to be observed that Atwood, in releasing it, did not repudiate it, or deny the light of Tolies to take it in his behalf, but made the release, as it is found, " believing that the debt was paid, and relying on these representations," and that he acted "in good faith in making the release." There is here a very clear implication that he did not release the mortgage Avith any intention to express a non-acceptance of it, or to deny its validity, Avhile the " good faith " Avhich it is found that he exercised in the matter must have been a good faith toAvards parties who might have rights under the mortgage, as there could be no others Avhorn his good faith or bad faith could-affect. If there were no other facts bearing upon the question we think his conduct at this point might properly be regarded as an acceptance of the mortgage and the recognition of it as a valid one.
But we are not left to this incident for a determination of this question. It is found that sometime prior to the execution of the mortgage Atwood " had given to one Lewis N. Tolies authority to make a loan to Patrick Farrell, secured by mortgage in the name of AtAvood," and that Tolies made this loan and took- this mortgage accordingly. It is not' explained why Tolies did not at once inform AtAvood that he had made the loan and taken the mortgage, nor how it happened that within a week after taking the notes he sold them to the plaintiffs. He may have intended Avhen the loan was made to use Atwood's money for it, and have changed his mind when, a feAV days after, he found that the money could be had of the plaintiffs, who it is found, paid the full face of the notes in the purchase. This, if it be the fact, fully explains his. neglect to bring the matter of the loan and mortgage to the knowledge of Atwood. But whatever the explanation may be, we can not regard the taking of the mortgage in Atwood's name as unauthorized, and if so no personal acceptance of it by Atwood was-necessary. It was a legal mortgage when taken, and Tolies, as the bearer of the notes, and especially as the owner of them, which he is found to have been, could by his delivery of them for a valuable consideration to the plaintiffs, vest in them a good legal title to them. It is found that Tolies was the owner " unless as matter of law the fact that Atwood did not know of the existence of the notes and mortgage precludes such ownership." But clearly this could not, merely as a matter of law, affect the case, if he had authority to make the loan and take the mortgage in the first instance. He may, as before suggested, have made the loan with his own funds, intending to deliver the securities to Atwood and get the money from him, and have changed his mind on the transaction with the plaintiffs being proposed. In this case the notes would be his property until delivered to Atwood, and it is evident that Atwood never paid the money to Tolies, as in that case he would not have been ignorant of the existence of the notes. Tolies acted as Atwood's agent in taking the notes and mortgage for him, and thus they Avere legally taken, Avhile his change of mind as to the disposition to be made of them did not invalidate what Avas already valid. We entertain no doubt as to the valid title of the plaintiffs to the notes.
The next question is, AAdiat effect the release of the mortgage has upon the rights of the plaintiffs. The finding on this point is, that on the 21st of January, 1880, " some person or persons falsely and fraudulently informed said Atwood that the note was paid, he supposing that there was but one note and that of $500; and that thereupon, without receiving any consideration, believing that the debt was paid, and relying on these representations, he in good faith executed the quitclaim deed to Patrick and Mary Farrell. The said Patrick and Mary Farrell, at the time, knew that the notes owned by the plaintiffs were .due and outstanding and unpaid." It is very clear here that the Farrells were guilty of a fraud which precludes'them entirely from taking advantage of the release. Who the " person or persons " were who made the false representations does not appear, but they must unquestionably have been some persons interested or agents of such persons. A gross fraud was clearly intended which should exclude from the favor of the court every person to whom it could be brought home.
But this release was put upon record, and any person afterwards acquiring an interest in the premises as a bond fide purchaser for value and without notice of the fraud, would hold the interest so acquired against the plaintiffs. Let us therefore see what interests were'acquired after January 21st, 1880.
It is found that Francis A. Atwood had taken a mortgage of one of the pieces of land embraced in the mortgage to Harwood H. Atwood, prior to the execution of the latter mortgage, to secure a note of 11000. This mortgage was made on the 18th of Januaiy, 1871, while the latter, upon both pieces, was made on the 10th of June, 1871. It does not appear that this mortgage has ever been discharged or the mortgage debt paid. If so, it must stand as a prior incumbrance on the single piece of land covered by it. But the pleadings are silent concerning this mortgage. • Paragraph four of the complaint alleges that "the defendant, Francis A. Atwood claims some interest in said premises, ivMch interest accrued after said mortgage to said Garwood S. Atwood, the nature and extent of which is to the plaintiffs unknown."
The answer of Francis A. Atwood admits this to be true, only alleging in addition that his interest is an absolute title in fee simple, so that he seems to predicate his, title solely on a subsequently acquired interest.
It is also found that on the 8th of June, 1871, two days before the plaintiffs' mortgage was executed, Patrick and Mary Farrell mortgaged the whole premises to the Water bury Sayings Bank to secure a loan of $3000; and that on the 3d of June, 1872, after tlie plaintiffs' mortgage, the Farrells mortgaged the entire premises to David M. Cowles and Daniel Curtis, to secure a loan of $1500 ; this last mortgage being made subject to the Francis A. Atwood mortgage of $1000, the Waterbury Savings Bank mortgage of $3000, and the Garwood H. Atwood mortgage of $1500. It is then found that on March 2d,. 1882, Cowles and the executor of Curtis quitclaimed the premises to Francis A. Atwood; that Patrick Farrell and his wife on the same day made a like quitclaim; and that on the 30th of March, 1882, the Waterbury Savings Bank also quitclaimed to Francis A. Atwood all its interest. The effect of all these releases, if the mortgage held by the plaintiffs is to be regarded as can-celled, was to vest an absolute title in Francis A. Atwood, which title he claims to hold.
But it is found that "no evidence was offered to show that the said- Francis A. Atwood paid any consideration for these deeds." They were therefore releases of the legal title held by these parties, so as to vest a clear and absolute legal title in him, with no payment or other consideration moving from him. In these circumstances, supposing him to have acted in good faith in the matter, he was not a bona, fide purchaser for value, and the rights which he thus acquired can not take precedence of the equitable rights of the plaintiffs. This principle is too well settled to require the citation of authorities.
At the time the plaintiffs purchased the notes from Tolies he delivered to Mrs. Tuttle, one of the plaintiffs, the mortgage by which they were secured. No assignment .of it was necessary; the notes in equity drew to themselves the security. Mrs. Tuttle, in taking the mortgage, held it for the benefit of both the plaintiffs, and it is now to be regarded as their joint property. All rights in the premises accruing subsequently to the taking of the mortgage, with the equity of redemption in the Farrells, having been conveyed to Francis A. Atwood, he stands as the sole party to be foreclosed.
We therefore advise the Superior Court to pass a decree setting aside the release given by Garwood H. Atwood on the 21st of January, 1880, and foreclosing the right of Francis A. Atwood to redeem the premises unless he shall, within such time as the court shall limit, pay the two notes held by the plaintiffs with interest; his own right, if any he has, as a prior mortgagee of one of the pieces of land not to be affected by the foreclosure. Also that Garwood H. Atwood convey to the plaintiffs the legal title to the premises acquired by the mortgage to him, or on Ids failure to do so that the legal title become vested in them.
In this opinion the other judges concurred.