Case Name: Breckinridge vs Moore, &c.
Court: Kentucky Court of Appeals
Jurisdiction: Kentucky
Decision Date: 1843-06-01
Citations: 3 B. Mon 629
Docket Number: 
Parties: Breckinridge vs Moore, &c.
Judges: 
Reporter: Kentucky Reports
Volume: 42
Pages: 629–645

Head Matter:
Breckinridge vs Moore, &c.
Error to the Fayette Circuit.
Chancery.
Case 156.
June 1.
Bill of complainant.
Vendor and, vendee. Champerty. Bills of exchange. Comity.

Opinion:
Judge Beech
delivered'the opinion of tlie Court.
In January, 1840, Breckinridge executed his note to John Steele for one thousand dollars, payable to said Steele or order on the 1st January, 1841. The note was dated at Nashville and signed by Breckinridge as being of Fayette county, Kentucky.
In April, 1840, the note was assigned by Steele to Moore, who obtained judgment thereon against Breckinridge, in the Fayette Circuit Court.
Breckinridge then exhibited his bill against Moore and Steele and obtained an injunction against the judgment. He alledges in his bill, that the note in question and two blooded mares, estimated at $500, were given in consideration of the purchase by him of a tract of land of Steele; that the trade was made, mares delivered, and note executed in Nashville, Tennessee, and solely upon the representations of Steele in reference to the land. The land was represented by him as lying in Boone county, Kentucky, near the Big Bone Lick, and containing about 4500 acres, and entered in the name of Eggleston and Todd, and adjoining the lands of Thomas Connely, and the grant to Eggleston and Todd referred to for the boundaries; that he had derived title to the land through a deed made to him by the Clerk of the Circuit Court of Hopkins county, Kentucky, as Commissioner. The foregoing representations being part of the recitals in the deed made by Steele to Breckinridge, at the time of the trade. It is further alledged by Breckinridge, that Steele represented he had been on the land a few years before; that he had a regular chain of title from Eggleston and Todd, and had also peacable possession of the land. He charges that the representations thus made by Steele, were false and fraudulent; that he had no title to any portion of the land patented to Eggleston and Todd; that the deed from the Commissioner did not even purport to convey any portion of the land in the grant of Eggleston and Todd but 2000 acres in the name of Richard Eggleston; that the grant to Eggleston and Todd was to Edward Eggleston and Robert Todd; that there was no grant to Richard Eggleston, and he had owned no land as described in the déed of the Commissioner to Steele; that the claim of Eggleston and Todd was covered by adverse claims and had long been so held, except a small portion held by their heirs; that so far as related to the land in the bounds of Eggleston and Todd's grant, the deed from Steele was utterly void; that Steele was insolvent and resided in Tennessee; that he had assigned the note to Moore, Broaddus & Co. who in the name of 'R. S. Moore, the defendant, and one of the firm, had recovered the judgment in question; that all the alledged facts were in the knowledge of Steele and Moore. It is also .alledged by Breckinridge, that he had never seen the land — knew nothing in relation to it, or of the title of Steele, except from his representation. He prays a perpetual injunction and a rescission'-of his contract with Steele, and brings into Court and tenders to Steele and Moore the deed made'to him by the former.
The Answers of Steele & Moore.
Steele and Moore answered, both denying the material allegations of fraud, and both rely, as evidence of what the representations were by Steele, as to his title and as to the particulars of the trade between Steele and complainant, upon an article of agreement, which Steele states, "to save a law suit and all misunderstanding, he was induced to write and have signed," and which they file as an exhibit, and pray to have read as evidence. Steele denies that he ever saw or was upon the land sold to complainant. Moore states that the note in contest was traded to Moore, Broaddus & Co. by Steele; that he was himself a member of the firm, and that the assignment was filled up in his name to facilitate the collection. He denies that it was known by him or the other members of the firm, when they traded for the note, for what consideration it was executed, but insists that it was traded for in good faith, for value received, and. was a fair business transaction. It is not controverted that the note was executed by the complainant in consideration of the land sold by Steele to him.
Amended answers.
Decree of the Circuit Court.
Questions for consideration.
Amended answers are subsequently filed by each of the defendants, in which they aver that the whole trade and transaction, from which the note in contest originated, took place in the State of Tennessee, where the defendants and all the members of the firm of Moore, Broaddus & Co. then and still reside. Defendant, Moore, denies that he or said firm had notice of any defence to the note, or objection to its payment on the part of complainant, and alledges "that the note was negotiated to him or his firm in the State of Tennessee, and that by the statute and laws of Tennessee the said negotiation and indorsement of said note gave it the effect of a bill of exchange or other mercantile instrument, and prevent and bar all the defence set up by complainant, as against the present holder thereof, as by said laws he will be able and ready to show."
The Court dissolved complainant's injunction and dismissed his bill, and by writ of error, he has brought the case before this Court for revision.
The first question obviously arising for consideration is, whether the transaction between the defendant, Steele, and complainant, in the sale of the land and procuring the note in contest, was or not, on the part of the former, fraudulent, and such as to render the note void? The deed from Steele to complainant; the note and the article of agreement, referred to by the defendants, all bear date on the same day, and it is admitted that the deed and article of agreement, as also the answer of defendant, Steele, are all in his hand writing. The deed is drawn in the usual form, and recites, "that for and in consideration of the sum of $1500, to me in hand paid, I have this day bargained and sold, and by these presents do bargain, sell and convey unto the said Breckinridge, all that tract or parcel of land, situate and lying in Boone county, near the Big Bone Lick, Kentucky, and containing about four thousand five hundred acres, be the same more or less, and entered in the name of Eggleston and Todd, and adjoin ing the lands of Thomas Connely and others, and for the calls of said tract of land I refer the said Breckinridge to the grant registered at Frankfort, Kentucky, in the name of Eggleston and Todd, which beginning and call will correspond to my title, which I now convey to him."
The deed then recites that said tract of land was purchased by one Neil McLean, and after passing through different persons, was sold under a decrée of the Hopkins Circuit Court, Kentucky, with other tracts, by a Commissioner, and purchased by him, the defendant, Steele, to whom the Commissioner conveyed the land sold in Boone county, " and for as much land as was sold according to said deed, I hereby sell and convey to said Breckinridge."
We have not deemed it necessary to state all the recitals in the deed, but only such as will render apparent the land sold and the character of the deed. It is declared to be a special deed; that he only sells his special title, and is to warrant against all persons claiming under him, but against no other claims.
The record of the Chancery suit in the Hopkins Circuit Court, in which the decree referred to in -the foregoing deed was rendered, together with the Commissioner's deed to Steele, are made exhibits in this case. From an inspection of that record, it results, that in 1818, McLean purchased, for the direct tax, two thousand acres of land, on Big Bone, in Boone county, returned and sold as the claim of Richard Eggleston, and for which McLean obtained the collector's deed in 1821.
There was no other land in Boone county named in said suit or decreed to be sold or conveyed to defendant, Steele, except the 2000 acres of Richard Eggleston, so purchased by McLean. The Commissioner's deed to Steele was made in 1832. It is evident then that the recitals in Steele's deed to complainant, and which were written by the said Steele himself, are a gross misrepresentation of his claim as derived from the Commissioner's deed, not only as to its extent but character. But again — the grant to Eggleston and Todd is an exhibit in this case, from which it appears that Edward Eggleston is the patentee, instead of Richard; that it'contains four thousand seven hundred acres, and the proof is that the land lies in the county of Boone, a few miles from Big Boorie creek and adjoining a survey of Thomas Connely.
The tract described in the deed from Steele to complainant corresponds, therefore, with the description of the land embraced in this grant and with the proof of its location ; and as the proof is that there was no claim of land in Boone County, on Big Bone, in the name of Richard Eggleston, it follows that Steele had no title or color of title to any portion of the land, which, by his deed he sold and conveyed to complainant, unless this claim of Richard Eggleston may be presumed in some way to be connected with, or as being part of the grant to Eggleston and Todd. In bis deed, letters to the complainant upon the subject, and answers, he seems to regard it in that light. But although we should indulge in a charitable presumption to that effect, still the misrepresentation in the deed would be palpable, as he sells the whole tract in the grant to Eggleston and Todd, and as containing forty-five hundred acres, when his title through the Commissioner only calls for two thousand acres. He does not intimate in his deed that there was only two thousand acres, or that there was less than four thousand five hundred acres, except after stating his purchase from the Commissioner, and conveying clearly the idea, by every thing in the deed preceding, that he purchased the whole claim of Eggleston and Todd, he says, "and for as much land as was sold according to said deed," alluding to the Commissioner's deed, "I hereby sell and convey to said Breckinridge." This limitation, thrown in in this delusive manner, is not, we think, calculated in the slightest degree, to relieve him. A fair construction of his deed is, that he had purchased the claim of Eggleston and Todd, which he sold and conveyed to Breckinridge: but, even if it be assumed, as contended by his censel. that Richard Eggleston was the heir of Edward, and had two thousand acres in the claim of Eggleston and Todd, and that Steele only sold that much to Breckinridge, still he will stand convicted, by the facts in the case, of fraud. Breckinridge alledges, that among other things, Steele represented to him, before the trade, that he had seen and been upon the land. He does not, in his answer, directly deny the allegation, but still states that he had never seen nor been upon the land. It is unequivocally proved by two witnesses, that he had seen the land a year or two before he sold to Breckinridge, and if not upon it, he was at the house of the witnesses, which was within forty yards of the claim of Eggleston and Tood ; that the land, and lines and corners, were pointed out to him by the witnesses, who informed him, at the same time, that the claim, except a small portion, was covered by adverse titles, under which it had been possessed and held for more than twenty, and in some instances, more than thirty years; that the small portion not thus held and covered by adversary claims, was held under the claim of Eggleston and Todd; that these facts were communicated at the time to Steele. The testimony of one of these witnesses proves, that he had known the land for forty years, and that no portion of it had ever been claimed or possessed under the purchase by McLean, or under the claim of defendant, Steele, except that at the time alluded to, when said Steele was at witness' house, he claimed the land. These facts, so fatal to the title of Steele, and which he no where intimates that he communicated to Breckinridge, but which he suppressed and concealed, render the transaction, on his part, fraudulent, unless he is protected by the "article of agreement," upon which the defendants rely, and which defendant, Steele, says "he was induced to write and have signed to save a law suit and all misunderstanding." This instrument is in the hand writing of Steele; was executed after the deed, but on the same day, and is signed by him and Breckinridge. The possession was retained by Steele. It recites "that he had that day sold and conveyed to Breckinridge all his title and claim to the following described land, viz: all that tract or parcel of land, lying in Boone county, Kentucky, and near the Big Bone Lick, and adjoining the lands of Thos. Connely and others. Said Steele claims said tract of land, and represents the following title." He then states that McLean purchased it on speculation, when sold for the direct tax, and after following it minutely through divers persons, that he had brought suit in Hopkins county, Kentucky, had it sold, and became himself the purchaser, and obtained a deed ; that he had sold the land toBreckinridge, who had agreed to take it on his title, without warranty, as he had taken Breckinridge's two blooded mares without warranty. In this instrument nothing is said of Eggleston or of Eggleston and Todd. It is silent as to the number of acres — nor does it contain the important facts, that he had seen the land, and that the whole tract'was and had been for many years, held adversely to his claim. Taking the whole instrument together, we are clearly of opinion, that it can have no bearing or influence upon this case favorable to the defendants; that it does not improve the character of the transaction.
Avendoris bound to disclose to his vendee all material facts in his knowledge in relation to the thing sold; failing to do so or in misrepresenting, he is guilty of fraud.
A bond given as the consideration of land, adversely held at the time of sale, is not collectable, being against the law made to prevent champerty.
The conclusion to which we arrive, then is, that the claim sold by defendant, Steele, to complainant, was at the time worthless, and that Steele was apprized of the fact; that he misrepresented his claim, and did not disclose material facts in his knowledge in relation to it; that for these reasons the whole transaction is fraudulent and void.
The transaction is, however, void for another reason. It was a clear and palpable violation of the law of Kentucky against champerty, as the land at the time of the sale was adversely held.
But the defendant; Moore, contends that he is not subject to the equity thus established against his co-defendant, and whether he has or not shown himself exempt from its effect is the important question remaining for consideration.
It is conceded that the whole transaction took place in the State of Tennessee, and therefore, it is contended that the note in contest was payable in Tennessee, as no particular place of payment is fixed by the parties; and that the rights of the holder of the note depend upon the laws of that State. Assuming for the present, that these positions are tenable, it devolves upon the defendant, first to establish what the laws of Tennesse are in reference to this note, or to notes of similar import. This may be done in the mode prescribed by Congress or according to a statute of Kentucky. Neither mode has been strictly pursued: but we find in the record what the Secretary of State of the Commonwealth of Kentucky certifies to be truly copied from a printed book on file in his office, entitled, "a compilation of the statutes of Tennessee of a general nature," &c. Had this book purported to have been "printed under the authority" of the State of Tennessee, it would then have been evidence according to the statute of Kentucky: (1 Stat. Law. 187; 7 Monroe, 584:) but as the book is certified to be on file in the office of the Secretary of State, it may be presumed to have been officially received from the Executive of Tennessee; and as it does not appear that any exception was taken to the copy in the.. Court below, we are disposed to regard it as evidence of the law of Tennessee.
Law of Tennessee in regard to notes payable 'to order.'
To make a bill of exchange, which was obtained fraudulently, binding on the drawer in the hands of a purchaser, it must appear to have been obtained in the ordinary course of business, "upon some present consideration, paid in money or property, some subsisting debt satisfied,or some responsibility incurred in consequence of the transfer."
Under this law the note before us, which is made payable to the order of John Steele, is elevated t.o the dignity of a bill of exchange.
Regarding the note then as entitled, from its date, to the character of a bill of exchange, does it shield the defendant, Moore, fiom the effect of the equity established against Steele. As the complainant alledges and proves that the note was fraudulently obtained, and charges that the fraud was within the knowledge of the defendant, Moore, to protect himself he must show that the note was taken by him in the usual course of trade, and for a fair and valuable consideration: (Chitty on Bills, 87; 3 Kent's Com. 81;) Early vs McCart, (2 Dana, 416; 10 Wendall, 86; 9 Ibid, 170; 20 Johnson, 637; Ibid, 102.) The rule is also laid down in the authorities referred to, that the valuable consideration is not merely such as would have been good between the parties, the assignor and assignee in this case, but that there "must have been some present consideration paid in money or property; some subsisting debt satisfied, or some new responsibility incurred in consequence of the transfer." Has the defendant, Moore, brought himself within this rule? We think not. He states, in general terms, in his answer, that he traded for the note in good faith and for a valuable consideration. He takes the testimony of a single witness upon the subject of the transfer of the note. This witness was a Clerk in the employ of Moore, Broad dus & Co. when they negotiated for it, and may be presumed to have known what consideration passed, and all the particulars in relation to the trade. He says he knows that Moore, Broaddus & Co. traded for the note; that "it was for a fair and valuable consideration, and that they had no notice of any defence to the note." Again, he says, "the sale of the note was made for a full consideration, as I believe ; I know they traded for it in good faith." This is all the evidence, as to the negotiation and a valuable consideration in reference to this note. .The defendant should have proved what the consideration was and the particulars of the trade, so that .the Court could have determined whether the assignee obtained the note in good faith, and whether the consideration was fair and valuable, and such as would protect him against the equity of complainant against Steele. He had notice before suit was brought, that the complainant relied that the note was obtained and put in circulation by fraud. He is, therefore, without apology for failing to prove the actual consideration paid, and all the circumstances attending the purchase of said note, and more especially as it is not suggested that the proof was not in his power.
Contracts for the sale of land in Kentucky, tho' taking place in another state, are governed by the laws of Kentucky, especially when by the courts of Kentucky the consideration is sought to be recovered.
A purchaser of land, adversely held, not knowing of such adversary holding is not in pari delicto.
But there is still another view of the case in which the defendant, Moore, must be regarded as subject to the equity set up against the defendant, Steele. The transaction between complainant and Steele, it is true, took place in the State of'Tennessee, but it was for the sale of a-'tract of land in the State of Kentucky. Does the lex loci contractus or the lex rei sitae govern this contract? The rule is settled, that real contracts, or contracts in relation to land, must be governed by the lex rei sitae-. (Story's Con. Law, 301-2.) The note in this case is part of the contract and should be governed by the laws of Kentucky in relation to sales of land, more especially as the holder seeks the aid of those laws for its collection.
The whole transaction between complainant and Steele was in direct violation of the statutory and established law of Kentucky. The contract, as we have.seen, was in violation of our statute against champerty. Nor were the parlies, as to its violation, in pari delicto. Steele knew that the land was held adversely. The complain ant was ignorant of the fact. But contracts violating the laws of a country where they are sought to be enforced are deemed nulliiies, though valid by the law of the place where made: (Story's Con. Laws, 203-4-5.) No nation is bound to recognize or enforce any contracts which are injurious to their own interests, or to those of their own subjects. In this case we are asked to enforce the collection of this note, constituting part of a contract made in violation of our own laws. We apprehend no case can be found where such aid and comity have been extended.
June 8.
Pindell for plaintiff: Robinson fy Johnson for defendants.
Tn this view of the case, the consideration paid by defendant, Moore, becomes matter of no importance.
In view of the whole case, we are clearly of opinion that the decree is erroneous.
The decree is, therefore, reversed, and the cause re. manded, with directions to perpetuate complainant's injunction, and to render a decree against the defendant, Steele, for the $500 for the tw.o mares, and to rescind and declare void the contract in relation to the purchase of the land.