Court Opinion

ID: 7889215
Source: CourtListenerOpinion
Date Created: 2022-09-08 21:46:45.610983+00
Date Added: 2024-06-11T16:31:51.250988
License: Public Domain

The opinion of the court was delivered by
Johnston, J.:

*231
2 Equitable rule’

*230The findings and judgment of the court leave but little for our determination. Those findings which are challenged are based upon conflicting evidence, and are therefore conclusive on this court. Through the misrepresentation and fraud of third parties, the plaintiffs placed the apparent title in Josie Saunders, who put their deed — valid upon its face — upon record, and subsequently incumbered it with a mortgage. They parted with the legal title, believing the instrument which they had signed was a mortgage; and while they were grossly deceived, they clothed the grantee with the apparent ownership and power of disposition of the land. On the apparent validity of this title, and in good faith, as the findings show, the investment company loaned its money on a mortgage made by the fraudulent grantee. The prior incumbrance, amounting to more than $600, which plaintiffs had given upon the land, was paid by the investment company *231before the Saunders mortgages were accepted by it. The difference between the loan which was discharged and that made by the investment company, which is a little over $600, is the plaintiff’s loss if the judgment is sustained. Who was most to blame, and who should bear the loss? The plaintiffs’ action in negligently allowing the legal title to go to another, with the apparent power to convey and mortgage the land, has been the means by which the investment company was deceived. By their conveyance, the grantee was held out to the world as the owner of the land, and innocent persons were thereby invited to deal with her as such owner. The rule in equity which controls is, that where one of two innocent persons must suffer by the fraud of a third person, he who trusted the third person and placed the means in his hands to commit the wrong must bear the loss. (Jordan v. McNeil, 25 Kas. 459.) In that case it was held that a conveyance obtained through fraud' and deceit is not a nullity, but that a conveyance from the fraudulent grantee to a third person who purchased the property in good faith and for a consideration will be held valid as against the first grantor. In McNeil v. Jordan, 28 Kas. 7, this same doctrine was reaffirmed, and it was held that the grantor of the fraudulent deed must suffer loss rather than an. innocent purchaser or some one who in good faith had obtained a mortgage from the fraudulent grantee. The same subject received consideration in The State v. Matthews, 44 Kas. 596, where it was said that
' ñotic!o"negai i e- iau . “Upon this same principle, it is almost universally held, that whenever an instrument is procured from one person by the fraud or villainy of another, even if such fraud or villainy should amount to a criminal offense, if all the rights which the instrument apparently gives should at that time or afterwards be transferred to another, who should be an innocent and bona fide holder for value, the innocent and bona fide holder could enforce the instrument aga¡nst maher, although the maker might also be an innocent person. In such a case, the maker would be estopped from claiming that the instrument was void as against the innocent bona fide holder.”
*232There is some contention that the deed in question was never in fact signed by the plaintiffs, but that it was a forgery, and therefore absolutely void, and ineffectual to convey title under any circumstances. The record, however, does not sustain the claim. In the plaintiffs’ petition, it appears to be conceded that the instrument obtained for and placed on record by Josie Saunders was the deed executed by the plaintiffs, and it is alleged that it was obtained from them through fraud and deceit. More than that, there is sufficient testimony in the record to sustain the finding made by the court that the deed was actually signed by them, and that it was obtained through a violation of their confidence and by the deception and fraud of Saunders and Groves.
It is further contended, that the investment company cannot be held to have been without knowledge or notice of the fraud practiced upon the plaintiffs. The claim is, that Groves was an agent of the company in procuring the loan, and that he having knowledge of the transaction and of the means by which the title was obtained, the company should be bound to have knowledge of the same facts. It is said that he must be held to bean agent, under the admissions of the pleadings. The petition, after alleging the manner in which the deed was obtained, sets forth the execution of the mortgage to the Guaranty Investment Company, and then avers that “the Guaranty Investment Company acted upon the information, advice, and, in fact, through the agency of said defendant A. F. Groves, and by collusion therewith.” The company denies this averment, but there is no verification of the answer, and it is therefore said that the agency is admitted. There is no averment of an appointment of Groves by the company, nor that it had conferred any authority upon him. It is not such an averment of appointment or authority as requires a verified denial. Neither can we hold, under the testimony and findings, that Groves was the agent of the company in either the acquirement of the title by Josie Saunders or in any transaction by which his knowledge should be binding upon the company. There is testimony to the effect that he was *233the agent and attorney of Josie Saunders throughout all the transaction. As such agent, he prepared and presented the papers upon which the loan was obtained, and these included the appraisers’ and examiners’ reports, such as are returned by the correspondents of the company. The company was in the habit of accepting loans presented by parties living in the city where its general offices were kept, and allowing the commission on the same to them, and that was done in this instance. The testimony, however, is direct and positive that Groves was in no way connected with the company as attorney or agent, and that it had no knowledge whatever of the means by which the title was obtained, nor had it any personal knowledge of the grantee. It simply knew that she presented a written application for a loan through her agent and attorney, and, upon an examination of the abstract, it found she had a perfect record title, and relying upon that it accepted the loan and paid out its money.
There is testimony to sustain the conclusions reached by the trial court, and, under a familiar rule, they cannot be overthrown or disturbed.
The judgment of the district court will therefore be affirmed.
Allen, J., concurring.
Horton, C. J., not sitting.