Court Opinion

ID: 7276288
Source: CourtListenerOpinion
Date Created: 2022-07-25 19:59:51.200606+00
Date Added: 2024-06-11T14:37:31.781088
License: Public Domain

Mr. Justice Shepard
delivered the opinion of the Court:-
There is no occasion to discuss the evidence offered to show that the execution of the contract, note and trust deed was obtained by Slater through fraud practiced upon complainant. Bobert Y. Slater testified as a witness, but it does not appear from the record that he answered the bill; and there has been no appearance for him on this appeal. As*55suming that the complainant is entitled to relief as against Slater, the question for determination is, whether Mrs. Dann and Hufty are to be regarded as tona fide holders of the complainant’s note through their transactions with Slater.
The proof shows that Mrs. Dann came into the possession of the note shortly after its utterance and before any real suspicion seems to have arisen in the mind of Brewer that he had been imposed upon by Slater. She paid a valuable consideration, and it is not contended that she had actual knowledge of any fact sufficient to lead her to doubt the consideration of the note, or the fairness of the means by which Slater had obtained it. Nor does it appear that Hufty had actual knowledge of the facts of the transaction, or that there was any claim of imposition therein affecting the obligation of the note, either when he effected the loan by Mrs. Dann, or at the time when he himself became the owner of the note subject to the lien of Mrs. Dann. An attempt was made, however, to show such relations between Hufty and Slater, commencing before the execution of the Brewer note and existing throughout the later transactions, as warrant the inference of Hufty’s knowledge of the fraud practiced upon Brewer and the consequent defect in his note. And the knowledge thus inferred, it is contended, must be imputed to Mrs. Dann because Hufty was her attorney and agent in the transaction with Slater. From, the evidence relied on, it appears that Slater and Hufty occupied offices on the same floor and very near each other; that they were both engaged, more or less, in dealing in tax titles, certificates of sale, and removal of tax liens, and so forth. There was evidence tending to show some intimacy between them, and that they were both interested in the tax sales of the property of the Moxley estate; at any rate, Hufty represented Slater’s .interest in the same. Slater was not an attorney; Hufty was, and frequently represented Slater, though not in all of his cases. It does not appear that he represented or advised Slater in his transactions with Brewer, and there is nothing in that transaction to suggest special need of legal assistance. It was in the ordinary course of Slater’s own business *56which, it would seem, he was thoroughly competent to conduct through that stage. None of the papers executed by Brewer was written by Hufty and it is not pretended that he was present at any interview between the contracting parties. It is true that he was a co-trustee with John. G-. Slater, the father of Robert T. Slater, in the deed of trust; but it was not made to appear that he had been informed of that intention beforehand and had consented thereto, or that he knew it afterward before he saw the indorsement on the margin of the note in the course of the negotiation of the loan of Mrs. Dann to Slater.
The position of the holder of negotiable paper for value is a strong one, and he cannot be displaced by mere circumstances of suspicion growing out of the unpopular business or even the ill reputation of his assignor. Swift v. Smith, 102 U. S. 442, 444; Goodman v. Simonds, 20 How. 343; Goetz v. Bank, 119 U. S. 551, 561; King v. Doane, 139 U. S. 166, 173.
Hufty not only denied in his answer but also in his testimany as a witness, during the taking of which he was subjected to a searching cross-examination without substantial effect, that he had any knowledge of the transactions between Brewer and Slater, save as shown on the face of the note and the trust deed, or that he had heard anything to^ cast suspicion upon their fairness before his interest had been acquired. There is nothing to cast the shadow of a doubt upon the testimony of Mrs. Dann that she lent Slater $1,000 upon Huffy’s advice and received the note as collateral security in perfect good faith. The fact that the note was first dealt with on her behalf by Hufty is a circumstance tending in some degree, though slight, to corroborate his claim of innocence in the transaction.
He was risking the money of a client whom it was his professional duty to safeguard with every reasonable precaution; and, moreover, her ownership of money, and her implicit confidence in him, shown not only in her prompt action upon his advice, but also in her extension of credit to him individually, added strong motives of private interest to pro*57fessional obligation... We are, therefore, constrained to hold that the circumstances relied on do not point with sufficient certainty to Hnfty’s knowledge of the defects affecting the note as between Brewer and Slater, either at the time of the delivery to him as collateral security for Mrs. Dann or later when assigned to him in complete ownership. Whilst tending to create suspicion, they fall short of the required proof.
The final contention on behalf of the appellants involves two propositions: (1) That the note, referring on its face to the trust deed, must be read therewith, and the two must be construed together as one instrument; (2) that, so read, Hufty, as express trustee for both parties, could not become an ordinary purchaser of the negotiable note made by one of his cestuis que trust and payable to the other, and must, therefore, be held as standing in the shoes of his indorser subject to all of the equities existing between him and the maker.
It requires no citation of authority to show that a negotiable note secured by mortgage upon land loses none of its attributes by reason of that fact. The mortgage is an incident of the debt and passes with its assignment. The debt evidenced by the note gives character to the mortgage and protects it from the equities between mortgagor and mortgagee on behalf of the bona fide holder of the note for value. The mortgage, with or without power of sale, detracts nothing from the quality of the debt which it secures, though it may add commercial value through its lien. That the note may recite or show upon its margin, which seems the general custom, that it is secured by mortgage or other Hen, cannot affect the doctrine stated.
It may be true that such reference would be sufficient to call attention to any restraining or qualifying words of the mortgage, having special relation to the note and affecting its negotiability, and require the two to be read and interpreted together. But whether true or not is of no- moment here, because there are no words in this trust deed that have the remotest tendency in that direction. As the undoubted power exists to constitute the mortgagee himself a trustee *58to sell tbe security for bis own benefit, and bis assignee would take tbe note unaffected by equities that might bind, bim, we cannot perceive tbe force of tbe argument that would deprive an independent trustee in such an instrument of tbe power to purchase tbe secured note, or limit bis right to claim all the protection afforded a bona -fide bolder for value.
As trustee for sale of tbe security, he is charged with no custody or control of tbe evidence of tbe debt. His duty concerns tbe security alone and is simply to sell in accordance with tbe terms of tbe trust when called upon by tbe bolder of tbe debt after default made in payment. Tbe salutary rule that forbids bis purchasing tbe property conveyed to bim in trust to sell for tbe benefit of others has no application to. bis acquisition of the’note in a transaction with its owner, otherwise free from taint.
Whether, having purchased such a nóte, be may subsequently act as trustee and sell tbe property, involves another and a different question that does not now occur.
Tbe decree appealed from is without error, and will be affirmed, with costs. 'Affirmed.